China is the largest e-commerce market in the world. Industry experts state that Chinese consumers will cover about half of the global luxury market by 2025, with a purchasing power of +6.4 billion USD. Now, given this enormous potential, the fact that many international companies see this market as an attractive option for expanding their business oversea does not surprise us at all. Moreover, reaching +1.4 billion Chinese consumers does play to many.
Nevertheless, China is not an easy market to approach and to deal with. So, let’s take a dive into the analysis of the most common challenges that foreign companies have to face when trying to step into the Chinese market.
1. The Chinese Cultural Challenge
China is one of the big emerging markets whose political, traditional, and business cultures greatly differ from the Western ones. In fact, language and cultural barriers still act as one of the biggest challenges that foreign companies face in China. Also, the linguistic-cultural distance between the Western world and China is quite often significantly underestimated: it is not enough to understand the differences between such different realities, but it is also necessary to know how to accept, respect and apply them. That is why local culture knowledge is a key aspect to take in consideration before developing a successful marketing strategy in China. To avoid miscommunication, it is important to adopt a cross-cultural kind of communication plan and rely on trusted local partners which can bridge Chinese and Western cultural differences.
2. The Competitiveness Challenge
Having a quality product is not enough to sell in China. On the one hand, Chinese consumers, named as the largest users of the internet both for acquiring information and for purchasing, tend to prefer a product for its popularity rather than for its characteristics. On the other hand, China’s market is viciously competitive. Competition comes from other international companies but from “national champions” as well, making it more difficult and costly for foreign brands to reach and retain Chinese customers. For these reasons it is important to build a solid Brand Identity by giving visibility and recognition to your brand. Being present in the Chinese digital landscape (characterized by different channels from those we are used to in the West) is a good start for sure. Therefore, brands must be willing to completely reshape their marketing strategies and adapt them to the needs of the Chinese market.
3. Managing Chinese E-Commerce
As we already said, China is the largest e-commerce market in the world. With 1.4 billion Chinese consumers, we can say that in China there is a customer for any product in the world. The challenge here is to find the right distribution channels to reach them and to learn how to manage these channels, for example by integrating customized product sheets in line with the tastes of the Chinese audience. In fact, as with other digital sectors, the Chinese e-commerce scenario is complex and interesting, other than very different from what we’re used to in the West.
E-commerce in China is dominated by marketplaces and social commerce. Many consumers in China start their customer journey on marketplaces such as Taobao or Tmall, led by their discovery-oriented approach, where they browse and explore new products. Moreover, marketplaces are interconnected with social networks to give the consumers a seamless shopping experience.
4. Be Ready to Bear China Market’s Entry Cost
Entering the Chinese market is not a low-cost process. Indeed, starting and running a successful business in China can be surprisingly expensive for foreign companies. Just think that, to open and manage a flagship store on one of the main Chinese marketplaces, an initial investment of thousands of euros is required (plus sales commissions, logistics costs and adv costs).
Despite all these challenges, many international brands are established in the market today, some with a greater presence, others in a more limited way. The key to success is to keep your brand identity while being flexible enough to adapt an omni-channel strategy that integrates marketing and online sales activities to China’s unique business, media, and consumer culture. Having a reliable local partner would be invaluable to guide you along the way and help you avoid unnecessary mistakes.
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