12th of April, 2016

4 Reasons Why It’s The Time To Take A Slice of China’s eComm Pie

Michelle Bourke
By , CEO - Artlivemedia

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2014 was the last year that US could claim to be the worlds largest economic power. In 2015, it returned to the period of power it has held for most of human history. We need to look at China, not as a rising power, but as a returning power. And when it comes to eCommerce, the story is no different.

As the founder of China’s largest eCommerce marketplace, Jack Marr says, “In America there’s Walmart, there’s Kmart, retailers are everywhere so eCommerce is just like a desert. In China, eCommerce is the main course”.

Australia is geographically perfectly positioned to be at the centre of this shift in global wealth and focus. In fact, China is already Australia’s single largest two way trading partner – double the number of trades to Japan which is the next closest on the list. 19% of Australian businesses identify China as the top export country.

So here’s why the time is now:

1. It’s getting easier – particularly for goods exports

Tmall is like China’s version of eBay…but it’s a lot bigger. T-mall and Taobao which are consumer marketplace sites actually have more sales than eBay and Amazon combined. And they have over 400 million active users (source: Maggie Zhou: Deputy General Manager of the Cross Border B2C Division, Alibaba Group).

In fact, Alibaba just last year launched Tmall Global which is a program that now allows companies outside of China to open a Tmall store without having to be a legal Chinese entity, have a corporate bank account in China or even have to hold inventory in China.

On top of that, according to Star Trak’s Group General Manager International, Charles Thompson, Australia Post have launched their own site on TMall and they’ve been trialling placements for their clients there. They have just opened a program to Australian businesses to list on the Australia Post store. Their strategy is to have a halo effect from more well know brands to trickle down to less well known players.

Alibaba itself is helping Australian brands too. When flagship Aussie stores like Natures Way, Jurlique, Freedom Furniture and Penfolds launched, $10m worth of product was sold in 46 minutes. Tmall even has an Australian country pavilion (check it out at australia.tmall.com), and in the first 2 days they sold out of 7000 units of evening primrose oil!

2. The demand exists:

Even though less than 10% of Australian businesses do business in China, there is a real demand in the Chinese market for international products.

In fact 33% of all Chinese buyers actually buy international products. Australian products like health and skincare, baby food, food and wine, clothing and accessories are particularly popular. Wine is a really big hit and is expected to grow from AU$2b to $12b over the coming 4 years.

But it’s not just about the products, they’re interested in services too. In particular, knowledge and expertise around aged care, regulations, services to the home, facility construction and administration.

3. The opportunity is only going to get bigger

There are two big reasons for this:

a) More people are earning more money:
Almost 300 million people are considered middle class in China so that means disposable incomes of between $12,000 and $46,000 australian dollars a year. By 2030, 326 million new Chinese people will have joined the middle class so there will be more people will more dollars to spend.

b) Better infrastructure:
In Australia, more than 90% of us have internet access but in China, only 47% of the total population (600m people) do. This percentage is higher (72%) in urban areas.

The Chinese government plans to have 80% of the entire population connected to the internet by 2020. That means 30 million more Chinese customers will go online to shop each year. That’s more than the entire population of Australia as a new potential customer base, every single year! Hard to comprehend right?

As a result of this new user base, ecommerce is growing at 51% per annum and 70% of China’s internet users shop online. In fact way back in 2009, China’s eCommerce sales surpassed the US and by 2018 will overtake US and Europe combined.

4. It’s more profitable:

The CHAFTA (China Australia Free Trade Agreement) was signed in late 2015 and what that means for Australian business is that by 2020 most trade with China from Australia will be tariff free.

If you want to know more about steps to crack the Chinese market – read our article on that here

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