I interviewed James Eron who discussed eCommerce in China.
It's great speaking with you today, James. I'm looking forward to hearing your views today on ecommerce in China. Before we start, can you provide a brief background of yourself.
So thanks. I'm James Eron. I'ma partner at Kung Fu Data. We are an ecommerce operator and analytics firm. So I myself spend nearly a decade in China working in the data center services and ecommerce space.Previous to that, I was a consultant working in financial services in both China, Japan, and the US. So happy to be here today.
Can you first talk a little bit about what is ecommerce in China?
So ecommerce in China is literally one of the biggest things, biggest industries that's come out of China. The market in China is about 18%. All the B2C, or business to consumer purchases, transaction out of that, upwards of 18% are now done online via the ecommerce platforms.
How about foreigners that want to take advantage of opportunities in China with ecommerce. How can people take advantage of the opportunities?
So when you talk about foreigners, specifically we're talking about foreign brands, non-domestic brands. Many companies, many brands produce in China, but separate from that, we're looking at sales to Chinese consumers. So there are a couple of ways that foreign companies can participate in the China ecommerce market. One of the largest ones is via the Alibaba Tmall platform. So Alibaba itself has upwards of 65% of the market share for large online platforms in China. That compares to about 2% for Amazon in China — one to 2%. And foreign brands can join the Tmall platform if they have a...
First of all, the first way is if they have a domestic entity. You can register as a Tmall domestic site. But many foreign companies do not yet have a presence in China, or at least not beyond manufacturing in China. And so for those companies, you can set up what's called a Tmall global store. It's effectively run through Tmall.hk or Tmall Hong Kong.
And how would the logistics and fulfillment be handled? Are there any significant challenges?
So for the logistics part of it, I get asked this quite often. And actually the logistics part is one of the easiest pieces in the overall selling into China equation because there's many 3PLs, or third party logistics companies. And also, Alibaba itself has its logistics arm called Cainiao which many of these thrid-party logistics companies plug into. So generally, producers or brands in the US and foreign countries will ship to... For Tmall global sites, they will ship into bonded warehouses in the free-trade zone. And then the fulfillment will actually take place from those warehouses to go across into China domestic proper. That's generally how things are moved into the country.
How about marketing and sales? What are some best ways that companies are doing marketing when they'reTmall or other ecommerce platforms?
That's a great question. SoTmall and Taobao JD and VIP, those are all platforms where the actual transaction takes place. It's the conversion. In sales terms, we call that the bottom of the funnel. At the top of the funnel, you have creating the consumer awareness. There's search, and then there's web pages or ecommerce pages that go down, and then finally somebody clicks to buy. So the actual buying occurs on the Tmall and Taobao VIP shop and other platforms.
But in order for that transaction to take place, people have to know about your brand or know that your brand is being sold on that platform. So the question is how do you create awareness. The first way to do that is if you are in the platform itself, you can do keyword optimization. You can buy certain banners or adwords. So those are the things that are done inside the platform. But to even get to the platform, typically, you want to create your out-of-platform marketing, and that occurs on the generic search engines like Baidu. It also occurs on the WeChat channel and the Weixin and Weibo social media channels.
So what we do oftentimes for our customers is we have a...our marketing strategy includes both the online, which is buying keywords inside the platform, and also out-of-platform marketing, which includes social media.
Do you have any final recommendations regarding ecommerce in China?
We always say that understanding the data in the market is very important. So understanding [inaudible 00:06:21] type, how big is your market, how big is your category. So if you're selling cosmetics, for instance, how big is the cosmetics category? How big is your specific subcategory of lipstick?
Then within that category, how many people are buying at your price point. So if your price point is 20 RMB, that's a very different price point than 200 RMB. You want to know how many people are buying your products in that price range because those are your potential customers. So we say understand the market data.
Also, understand what's happening with your brand. How many sales, how many unit sales? What was the sales revenue in RMB for your products on the Tmall or Taobao platform or in China ecommerce?
The third thing we look at is what is your competitive landscape. How many people are selling, first of all, your products? How many people are selling your competitors' products? What are the sales volumes, the unit volumes of that? And how those trends are changing over time? And that includes looking, drilling into competitor stores to understand how those stores are being operated, how many SKUs, what price points, what type of advertising, keywords searches, etc. That there’re using.
Thank you for sharing today, James.
About James Eron
Partner, China eCommerce at Kung Fu Data