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What is the Best E-Commerce Strategy For Western Companies in China?

I always enjoy connecting with other Asia technology professionals to share insights on how to best leverage digital media and e-commerce in China. I recently connected with an industry veteran on who asked me, “Which Western companies are getting e-commerce right in China?” This was my response: Online is becoming an increasingly important retail channel in China, considering there were approximately 210 million online shoppers by June of 2012. In my opinion, it is easier for foreign brands to open online stores on Tmall.com (Alibaba’s Taobao mall) at the initial stage given the existing large user base, one-stop services and technology support provided by Alibaba – and most importantly, the trust and existing shopping habits which Chinese consumers have developed through regular shopping on the platform. Given these thoughts and the initial question, I found that there are many global brands that have official stores on Tmall. The following is a list of companies and brands that are successfully operating online stores on Tmall, broken down by industry.

・Computers & Electronics: Microsoft, Samsung, Dell, HP, Nokia, Philips, Sony, Nikon Sports: New Balance, Reebok
・Beauty: Unilever, P&G, Loreal, Neutrogena, Olay, Maybelline, Dove
・Clothing & Accessories: GAP, Esprit, Uniqlo, Wenger
・Auto: Chevrolet
・Health: GNC Additionally, many of these brands, including Samsung and Nokia also have a partnership with other China e-commerce companies. It is really smart to cooperate with local platforms and leverage the local understanding and resources these platforms have to offer.

Another approach to consider is building your own e-commerce platform like Apple or Estee Lauder, which have their own online stores. High-end or luxury products which need to maintain an exclusive distance from average consumers and popular brands might take this approach instead of opening stores on Tmall. Overall, I think this will not be easy given the different online shopping habits I mentioned earlier. Lastly, Chinese online shoppers are price-sensitive, or at least very practical, in their online purchases. As a result, a luxury brand store usually can’t compete with those personal stores on Tmall which sell the same products at much lower prices. After all, Chinese online shoppers are young and not as sophisticated consumers as their peers in developed markets. They are willing to spend 5000RMB (about $790) to buy an iPhone, but not willing to spend 10RMB ($1.50) to buy the latest app.