A Simple Guide to Understand E-Commerce in Asia

With over USD $900 Billion in sales in the e-commerce market, Asia is the largest e-commerce market worldwide. That's why we created this simple guide for you to understand how the Chinese e-commerce ecosystem works.

Let’s start by mentioning a couple of facts about Asia’s market:

-Asia’s market represents 47% of all global e-commerce sales
-Tmall and JD represent over 80% market share
-90% of the population from tier 1 cities are active on WeChat
-Asia’s online shopping population is about 437 Million
-60% of Internet users shop online in Asia
-20% of chinese consumers purchase goods abroad

A notable trend is the strong preference of many Chinese online shoppers to buy from overseas brands and retailers through cross-border online shopping - known as haitao or CBEC (cross-border E-commerce). Simply, it involves a Chinese consumer placing an order online with an overseas based online retailer, who imports the product into Asia.

Typically, overseas brands and retailers have sold cross-border into Asia through online marketplaces offered by Asia’s E-commerce giants, such as Alibaba and JD.com. While this is the best-known model, there is no “one size fits all” approach for brands and retailers.

Now that you a know a little bit more about the growth and scale of the Chinese market, let’s review the routes to market by considering the main (3) channels through which a company can introduce their product with in this unique market.

First, there are the 2 mainstream online malls:Tmall and JD.

Tmall Global: www.tmall.hk

• Generates revenue by recruiting brands to create seller accounts on its online marketplace. Tmall then receives commission from all retailer sales and requires them to pay an annual service fee for their account.
• Tmall does not provide logistics or marketing services but instead relies on third-party service providers
• Created by Jack Ma (co-founder and executive chairman of Alibaba Group)
• Owned by Alibaba Group (a Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate)
• Launched in 2014
• Chinese website for business-to-consumer (B2C) online retail, spun off from Taobao
• The most famous online mall in Asia
• Sells imported merchandise only via foreign merchants’ stores hosted on Tmall’s website
• Alipay is an online payment gateway owned by Alibaba Group and the preferred payment solution for transactions on Tmall.com
• Pioneered “Singles’ Day” as an online shopping festival
• As of February 2018, it has over 500 million monthly active users (it’s one of the world's biggest e-commerce websites)
• Every single day, 200 million people shop on Alibaba’s mobile sites and it sold $550 billion worth of merchandise in its last fiscal year

• JD generates revenue by recruiting merchants to create retail accounts and also by selling advertising and logistics services to those merchants. JD then sells and delivers retailers’ products at a higher price margin to generate profit, but does not require sellers to pay annual service fees for their account
• While Tmall is the leading online marketplace, JD boasts the best-in-class logistics infrastructure for merchants by establishing strategic logistics investments and partnerships
• JD’s logistics infrastructure allows them to offer same-day and two-day deliveries
• JD has established partnerships with Walmart Asia, Ebay, and ZestFinance to create a more consumer-friendly experience that also encourages consumers to continue shopping on their website
• Founded by Liu Qiangdong and launched in 1998
• One of the two largest B2C online retailers in Asia by transaction volume and revenue
• The largest competitor to Tmall Global and Asia’s second largest online mall
• Dominates in home appliances and consumer electronic goods
• As of the first quarter of 2018, the platform has 301.8 million active users

Increasingly, Chinese cross-border shoppers are looking beyond marketplaces, and are shopping on retailer or brand owner standalone direct-to-consumer (D2C) online stores, which offer them a greater level of personal engagement and a more authentic online shopping experience.

Second, we have the Hypermarkets (including Kaola, Metro, Carrefour, Trust-mart, Mart, RT-Mart, Yonghui, Renrenle Hualian, and VIP): Wide range of tightly integrated transactional and relational services in one place. +60% of users in Asia access WeChat +10 times every day.

• Different than online malls, the hypermarket model is based on B2B2C
• Hypermarkets buy wholesale from overseas suppliers and charge them at a mark-up for online customers
• Expansive online retail marketplaces carrying a wide range of products under one shopfront, including full groceries lines and general merchandise
• A lot of brands utilize hypermarkets to conduct flash sales

Last, but not least is a mobile application. But, this is not your average app, WeChat is a Chinese multi-purpose messaging, social media and mobile payment app.

Unlike JD and Tmall, WeChat does not provide a fully-featured e-commerce platform. Therefore, brands can use the help of a professional software company to integrate an e-commerce platform onto their WeChat Official Account. With this, brand owners can turn WeChat into a social e-commerce channel for their brand. Most notably, WeChat does not take commission or profit margins from products sold on its platform.

• Developed by Tencent
• Launched in 2011 as a messaging app, then quickly expanded its functionality to include marketing, social media, and shopping.
• Recently the platform reached 1 billion monthly active users, making it the largest social network on the planet
• With WeChat you can: pay your bills, compare prices, send text and voice messages, track deliveries, order food, rsvp a table, send a postcard, buy products from brand online stores, talk for free with friends across countries, scan QR codes, play games, share moments, etc.
• Brands can leverage WeChat as a B2C communication tool to have direct interactions with consumers and promote their products in Asia.
• 90% of the population from tier 1 cities are active on WeChat, and 86% of the population from tier 2 cities are active on WeChat.

If you want to see a demo about our WeChat Store platform, Click here

Overall, these are the three most popular ways to enter the Chinese e-commerce market. Through online malls like Tmall and JD, hypermarkets, and WeChat, a brand can introduce products into the Chinese market. Of the three platforms, WeChat offers the most affordable entry into the Chinese market given its lower cost, phased scalability, B2C communication tools, brand control over customer engagement, and early return on investment (ROI) for sales.

The complexities and challenges involved in selling into Asia mean the “one size fits all” approach to cross-border ecommerce is no longer appropriate to meet all market demands. As seen in the images below, selling products through cross-border ecommerce provides an upgraded business model from the traditional retail business model; thus, the more sales channels you have the more revenue you will receive. However, among these different ecommerce channels, platforms — like WeChat — that allow you to directly operate your own shopfront are the most important ones to establish a presence on first. As a result, individual retailers and brand owners need to carefully determine which platform is likely to work best for them.

ACTTAO offers cross-border Asia WeChat eCommerce platforms, marketing & promotions, sales agent distribution networks, logistics, and customer support services to US and European merchants or brands. We are WeChat Certified, AliPay Certified & Sell2Asia Approved. We have worked with over 300 clients, successfully achieving business growth and competitive opportunities through internet technology. Research shows 92% of all ACTTAO client projects achieve revenue increases, of which 45% double, and 18% subsequently triple in size.