China is the largest e-commerce market globally, generating almost 50 percent of the world’s transactions. According to eMarketer, China’s online retail transactions reached more than 710 million digital buyers, and transactions reached $2.29 trillion in 2020, with forecasts to reach $3.56 trillion by 2024. In 2021, China became the largest market for e-commerce with a revenue of $1.5 trillion, placing it ahead of the United States.
Alibaba’s Taobao and Tmall, (50.8% market share) followed by JD.com (15.9%) and Pinduoduo (13.2%) are the domestic platforms that dominate China’s e-commerce market. Other platforms, including Kaola, Little Red Book (Xiaohongshu), Alibaba, Suning, Dianping, Gome, Vipshop, Yihaodian, Dangdang, Mogujie, and JuMei, comprise a large portion of the market share. Platform selection is currently very dynamic and varies widely depending on the sector, target market, and region of the country.
Instead of establishing a presence in China to sell online, U.S. firms can choose to use cross-border e-commerce to sell products from abroad. China’s cross-border e-commerce imports and exports climbed 15 percent year-on-year to $273 billion in 2021. In the first quarter this year, cross-border e-commerce trade scale hit $60 billion, according to the PRC Ministry of Commerce. U.S. firms can benefit from streamlined Chinese customs procedures through China’s over 100 cross-border e-commerce-integrated pilot zones. Those zones limit Chinese consumers to purchasing up to RMB5,000 ($727) per transaction and no more than RMB26,000 ($3,782) per year. U.S. firms must work with authorized partners to record Chinese customs transactions.
New Antitrust Regulations
In February 2021, China’s State Council introduced the “Antitrust Guidelines for the Platform Economy”. According to the Chinese Government, this action was taken in response to the rise of the digital economy and intended to stop monopolistic behaviors and promote the sustainable and healthy development of online commerce. In April 2021, Alibaba was fined $2.8 billion in fines due to the State Administration of Market Regulation (SAMR) finding the company to have abused its dominant market position.
Significant Shopping Holidays
“Singles Day” in China, November 11th, or 11/11, is the busiest online shopping day of the year. Brands offer discounts and can generate up to 80% of their annual revenue. In 2021, Singles Day spanned over 11 days in response to the pandemic and generated a record-breaking $139.1 billion according to the Chinese Ministry of Commerce.
While Singles Day is the largest of the major shopping holidays in China, it is not the only one. Other major days that spur online shopping sprees and significant sales include Valentine’s Day, 6.18 Mid-Year Shopping Festival, and Chinese New Year, among approximately two dozen others.
Livestreaming is a very popular form of e-commerce in the PRC where Key Opinion Leaders (KOLs) conduct live video broadcasts of themselves while they market different goods to their audiences. The pandemic has led to the rapid advancement and adoption of livestreaming. According to an Ali Research Institute report, livestreaming e-commerce users reached 388 million, accounting for 39.2% of the total Chinese netizens. The top five livestreaming platforms for live shopping are Taobao, JD.com, Douyin (Tiktok), Xiaohongshu (the Little Red Book or RED in English), and Kuaishou, with products ranging from jewelry and cosmetics to cars and real estate.
The greatest advantage of livestreaming e-commerce is its ability to reach a great number of people spread throughout China, especially those outside of major cities. By targeting livestreams to more rural and lower-tier cities, companies can increase brand awareness and expand their audience to all parts of China. U.S. companies interested in exploring social media avenues and working with digital marketing players should work with a local marketing partner to develop a marketing strategy and support its implementation.
Social Media Marketing
Social media is a crucial component of a good marketing strategy in the PRC, particularly important for maximizing brand awareness and attracting consumers. WeChat is China’s most popular mobile social network app, followed by the Twitter-like Weibo, the messaging app QQ, and the short video app Douyin (Tiktok). Other platforms like Xiaohongshu are specially designed to optimize the cross-section of e-commerce and social media.
Social media platforms often use creative ways to facilitate e-commerce. For example, WeChat allows brands to access its 1.2 billion users through creative marketing or “Mini Programs” that allow retailers to feature online stores with third-party payment functions and push messages to introduce new product lines or deliver promotions. KOLs are also key in successful social media e-commerce campaigns as their endorsement via posts on these platforms can generate major sales traffic. However, it is expensive for merchandisers who need to expand the brand awareness in China. This will be a challenge for U.S. SMEs when they start to sell on the e-commerce platforms.
Intellectual Property Rights (e-commerce)
Protecting intellectual property rights on e-commerce platforms is a challenge for U.S. businesses. In 2018, China issued the e-commerce Law, which, according to the Chinese government, is designed to address rampant online infringement of intellectual property (IP) rights. The law included requirements related to “notice-and-takedown” mechanisms for China’s e-commerce platforms. Notice-and-takedown mechanisms allow individuals to request that platforms delist or “takedown” links offering products that infringe on established IP rights. Similar to enforcement offline, companies must register their patent and trademark rights in China to be accepted by e-commerce platforms.
As different platforms have varying procedures for accepting takedown notices, companies must familiarize themselves with takedown procedures for various e-commerce platforms in China. Monitoring e-commerce platforms for infringing goods can be time-consuming, so firms often rely on local agents to monitor China’s large platforms. Nevertheless, because robust business-to-business and business-to-consumer sales occur on China’s e-commerce platforms, an effective IP enforcement strategy should have an online component.China is the largest e-commerce market globally, generating almost 50 percent of the world’s transactions. According to eMarketer, China’s online retail transactions reached more than 710 million digital buyers, and transactions reached $2.29 trillion in 2020, with forecasts to reach $3.56 trillion by 2024. In 2021, China became the largest market for e-commerce with a revenue of $1.5 trillion, placing it ahead of the United States.