The online boom and vegetables as a model: what are the secrets of e-commerce in China China  is the world leader in online commerce. In 2021, the e-commerce market amounted to $2.78 trillion, which is 50% of the total retail sales in the country. RB

About the expert: Alex Vasiliev, founder of Healthy Eva baby food company, lecturer at the SKOLKOVO School of Management.

Key trends

1. HEALTH. In CHINA, in recent years, there has been a pronounced trend towards the improvement of the nation, which is supported at the state level. People have realized that it is necessary to monitor health and proper nutrition. This trend was further developed by covid-19 . In the future, the Chinese will increasingly refuse products with a high SUGAR content, increasingly opting for products with natural ingredients. The popularity of sporting goods and gadgets for health monitoring will increase.

2. Local brands . Previously, in China, especially in large cities, imported goods were idealized. The foreign origin of the product actually guaranteed its sales. Now the Chinese have become more loyal to local brands. So a foreign supplier should not hope that the country of origin will help to gain a foothold in the market. You need to focus on the uniqueness of the product, build marketing around its special qualities.

3. Imported products . The consumption of imported products is also growing, thanks in part to the recent phenomenon of cross-border e-commerce. Chinese consumers have developed stereotypes about products that can be considered good. If cosmetics - then Korean or Japanese, if food - then from Australia, New Zealand or Europe. Moreover, when choosing clothes or cosmetics, people pay attention to brands. And with regard to food, the region of origin plays a much greater role than brand awareness.

4. Social commerce. A significant part of online purchases are made by the Chinese through social networks, short video services and live broadcasts: social commerce turnover was $449 billion last year, the number of social media users reached 1.1 billion. The boom in online sales has led to an increase in the quality of product content. In China, the model adopted in RUSSIA, the usa or European countries does not work: a product card, a couple of photos and a brief description.

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China as a whole is consuming more and more visual content. Chinese TIKTOK, Douyin users spend an average of 73 minutes a day on the app.

At the same time, social commerce is also growing. Consumers want to receive more information about the product, its origin, and the production process. With the help of video, you can tell more about the product - this is a different level of content delivery.

The growth of the social commerce channel in the food segment is also associated with the health trend. When a product simply lies on a shelf in an offline store, the buyer does not know where it was brought from, how it was grown, whether pesticides were used. Social media makes it possible to show how strawberries grow, what greenhouses look like, how the garden is watered, that the farmer does not use chemicals. People understand where the product they buy comes from.

Cross-border online trading

In 2012, the Chinese government launched a massive cross-border e-commerce project. Specialized zones with bonded warehouses were created and sales of foreign goods via the Internet were allowed in a simplified format. Trading through cross-border zones is limited by two criteria: it is possible to sell only through electronic platforms and only to individuals.

Channel Benefits:

no need to register a legal entity in China; no need to register a trademark in China; no need to certify the product; a minimum set of required documents is required; payments are received directly to the parent company; duty 0% within the allowed limit.

Trading across borders is the easiest way to enter the Chinese market, and many brands prefer this option. In 2021, the turnover of cross-border trade amounted to $56 billion.

Why should you focus on online when entering the Chinese market?

The share of online sales exceeds 50% of total retail sales. This figure is expected to reach 56% by the end of 2022. And for a number of categories, online penetration is 80-85%. This means that there is no point in focusing on the classic shelf. In China, a high level of development of logistics, this is probably not the case anywhere else in the world. Plus high delivery density in e-commerce. All this allows you to optimize logistics costs. Since logistics is cheap, even those categories that are traditionally unsuitable for e-commerce are sold online. For example, to send a pack of cookies worth ₽250 across Russia by courier, you need to pay ₽400. In order for the shipping costs to justify, you need to send eight packs of cookies. The problem is that people don't want to buy that many cookies. But in China, for the delivery of one pack, you need to pay 20% of the cost. Opportunity to enter the online market through a cross-border trade channel. This is the unique advantage of the Chinese market. Key electronic platforms

In China, there are two types of electronic platforms: those that support the cross-border trade format, and local platforms that work with goods registered in the territory of the PRC.

The leaders of cross-border e-com are Alibaba (with Tmall Global and Kaola projects ) and JD.com (with JD Worldwide project ). They support the possibility of trading from a specialized bonded warehouse, to which foreign manufacturers import goods. The leaders of the local market are again Alibaba (with Taobao and Tmall projects ) and JD.com . Another notable player is Pinduoduo . Last year, the platform overtook JD.com in terms of turnover.

Platforms work with different audiences. Tmall focuses on residents of large cities, the middle and upper class. Fashion is well represented on the site - clothes, shoes, accessories, cosmetics. JD.com is more about electronics and technology. The audience is much younger, belongs to the middle and upper class, the focus is on technology products. Pinduoduo is famous for having grown up in peripheral, small towns by Chinese standards. The audience is predominantly the elderly population.

Key social media

A feature of Chinese online is seamless integration between different platforms. Therefore, the site from which the sale is carried out is not always equal to the site on which the brand attracts users. Short video and live streaming services are just such tools to attract customers.

The leaders of livestreaming services, or live broadcasts, is the Taobao Live project (part of the Alibaba group and tightly integrated with the group's platforms). The second player is Douyin . The service allows you to make a purchase both in the application itself and on other platforms. The third player is Kuaishou . Two notable players among short video services are Douyin and Kuaishou . Both applications are widespread not only and not so much in megacities, but also in peripheral cities of the third and fourth echelons. These platforms can give the widest possible coverage to a mass product.

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Heading East

The road to China is open. Online dominates and will continue to dominate here, and cross-border trade makes it easy and without significant investment to try yourself in this market. An important nuance: in the latest sale in honor of the Singles Day (November 11, 2021 - ) on Tmall, 373 brands that appeared on the platform over the past three years were in the lead.

That is, different segments are dominated not by world giants with history, but by new, young, dynamic players. Everyone is equal online, and the one who does his job better has every chance to win his place in the sun.

The level of online penetration in each category is different: somewhere it reached 85%, somewhere - 30%. A company that plans to launch a new product needs to study the proportion of online and offline sales in its category. Somewhere the regiment still dominates. But even if the classic offline is the main sales channel, the online presence of the brand is still mandatory. Retail chains make decisions based on the presence of the company online. If the brand is not online, then it is unlikely to appear on the shelf in the store.

A brand that operates in a category with low online penetration may be tempted not to bet on e-commerce. But tomorrow the situation may change dramatically. In China, just three years ago, the phenomenon of selling vegetables and fruits through short videos arose. And if it seemed like a crazy story then, today the huge FROV market is the fastest growing category in the social commerce channel.