Jack Ma recently spoke in Detroit, Michigan and attracted a ton of American business owners to tap into the Chinese market. Americans have always dreamed to sell to the booming Chinese market – the challenge always is how!
Today, we will share some tips and strategies on how you can leverage the power of Alibaba’s e-commerce tools to crack into the market.
My Email Box After Alibaba’s USA Speech
Because I love blogging and sharing, I get plenty of interesting emails from readers – one to highlight is below after Jack Ma of Alibaba spoke in America:
HI MichaelHope you’re doing well.
I read this article and wanted to know what you think about it.
From what I understand, the concept of advising US companies on entering the Chinese consumer market seems to be becoming more attractive recently. The trends being that manufacturing in China is becoming relatively more expensive, Chinese middle class grows, and more competition in the US market from saturation of Chinese-made products.
Are you seeing more interest from US companies who want to expand to China?
Read the article mentioned here.
How I Think of the Current Market Challenge
While I do wish it was as easy to sell in Chinese e-commerce as it is to open an Amazon Seller Central account and leverage their FBA program – it is far from being that plug and play for third party sellers.
My reply to the email goes as follows:
Thanks for thinking of me! I agree with the end of the article saying Ma and Alibaba making more money off the SME’s fees so they want more of them. It is extremely hard to sell in Chinese e-commerce like Frank Lavin from exportnow.com said in the article – and Alibaba doesn’t seem to have a way to help these western companies – at least they didn’t mention it how do they get the products to China?I think they are also a little bit concerns amazon.cn has a cross border ecommerce option = I’m writing now for Alibaba ‘s new contributor platform and they tell me they are trying to go more international I think it is just part of the PR strategy to build alibaba’s global brand awareness.
though i hope i’m just bitter and wrong! But the article doesn’t say how these SMEs can tap into it…. its not like creating a seller central account and listing as far as i know
But how can we even get a quick tap into the Chinese market? Ok, I am not sure if Alibaba shared it at their event – but today I’ll try my best to give you the steps to get started to crack the Chinese e-commerce market, in today’s environment.
First Question – To Open a Chinese Company or Not?
To sell to China, will you want to have the customers pay you directly, or will you leverage third party distributors and platforms?
On this blog we have discussed cross-border e-commerce into China. There is the budding network of Free Trade Zones (FTZ) where you can ship goods there first, and then the customs is handled by the fulfillment center there.
Or, you can open a cross-border ship with solutions like WalkTheChat for an English interface (or leverage many of the local Chinese language only versions as well).
The question really is – where will you put the products, and who is going to pay the tax. I see 3 scenarios for B2C e-commerce into China
A) Sell direct from USA to the Chinese customer – and they need to worry about the taxes. You can use a cross-border payment solution like Alipay (an Alibaba company) or Tenpay (a Tencent company, part of the Wechat network). They would receive the funds and then pay out to you in your foreign country’s bank account.
B) Leverage a free trade zone (FTZ) – these fairly new free trade zones are setup to be a “buffer” for you to mail the products there, you import them legally, and then they are shipped to the customer (and the customer pays the tax).
C) You import them first into China- this is the traditional way, and long term way. You pay the import taxes first, and then sell to the customers for your end price. We have another in-depth blog post on 3 ways of importing B2B into China.
Get An Account on an E-commerce Marketplace
Next big step is your e-commerce distribution model in China. Since this article is about Alibaba – they have 2 main e-commerce platforms for China:
Taobao – the “eBay” of China – basically anyone can create an account and sell (B or C – business, or consumer) similar to the EBay model of anyone can list their new or used products for sale.
Tmall – closer to Amazon style, B2C. To be a seller, you need to prove you’re a business, you have rights to sell that brand of product, and have a security deposit to protect the buyers. Bit more of a challenge to open up here, but of course this means it is trusted more by Chinese customers.
And then there is a massive competitor to Alibaba, JD.com which is growing fast and also has a global program for overseas companies. We will cover that in future articles.
Opening an account on any of these marketplaces will take some time. Because of the Chinese landscape, trust is very low for new sellers. So this means marketplaces (gatekeepers) need to show the market they can trust their platform and want to vet you with a lot of documentation.
This is where I hope Alibaba can simplify the process for overseas companies. In Jack Ma’s speech, they highlighted some current overseas sellers having good luck selling in China, hopefully we can update this article with strategies from those companies.
Do Chinese Marketing To Attract Customers
Now, for the big elephant in the room! So let’s say you made the investments and decisions on how you will fulfill your products in the Chinese market, and then go through the application process of opening up various e-commerce marketplace accounts. Now, you need to get eyeballs on your listings and them opening up their e-wallets.
Many readers who contact me have this dream that there are billions of Chinese consumers, so just listing it up will drive massive customers, even just 1% of the billion I’ll be rich.
This is where I see differences with selling on Amazon FBA. Chinese marketplaces need paid marketing campaigns to get your product listings shown. From as far back as 2010 I remember the big push from Taobao to get sellers to pay to have their listings rank in the search results. And it has only increased. To get found in these e-commerce marketplaces you need to pay per click.
Yet, many Amazon FBA sellers will say to themselves – that is where Amazon is going too. More and more Amazon FBA sellers need to pay per click to get their listings in front of Amazon customers. So that model is how it has been in China for so many years.
Here is another thing to keep in mind – Chinese want to buy famous American products. You need to have a brand. Chinese consumers spend a decent amount of time researching the products before they buy – and they want those products they sell to be the best of the best.
This is where I learned some things in the writeup from Alibaba’s speech in America. Jack said that Chinese consumers are less big-brand conscious and willing and able to buy smaller and up and coming brands from foreign SMEs. If this is true, and I am learning as well here – that is the magic sauce for foreign SME brands to really make some money in China.
For years, I have seen Chinese buyers only want to buy the biggest brands they can find. So let’s hope this is true, and then we can all make some money in the Chinese market.
One last thing about Chinese marketing – because there are a billion customers, there are also a “billion” competitors. It gets very noisy, very fast, to a Chinese consumer, so you need to be creative (or have a big marketing budget) to stand out from the rest.
