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Are you really prepared for China’s e-commerce market?


China e-commerce-02

The explosive growth of China’s e-commerce market is making more and more Western brands eager to enter China via e-commerce. However, despite its tremendous potential, the Chinese e-commerce market is now highly competitive. E-commerce in China may not be the ideal choice for every brand.

Before you jump into planning how to set up your e-commerce presence in China, it is better to take a step backwards and think about how well your business is positioned for the current market.

In general, brands need to at least be prepared for two challenges: 1) what makes you stand out from the current e-commerce market competitors (including both local and international players)? and 2) how can you effectively brand yourself and engage customers?

American department store chain and online retailer Neiman Marcus is a good example here. Neiman Marcus took its first step into the Chinese market via e-commerce in March 2012. The company made the move by investing $28 million in Chinese fashion website Glamour Sales, and then launched its own site in 2012 to sell full-price, current-season fashion products to Chinese customers. In September 2012, Neiman Marcus’ CEO Karen Katz expressed her belief in the “big opportunity” and “tremendous potential of the luxury consumer” in China.

Unfortunately, less than half a year after launching its Chinese website, the company scaled back its operations, laying off half of its Chinese staff and shutting down its Chinese warehouse. Neiman Marcus quickly discovered that its brand recognition in the U.S. market did not translate to China. When news broke of the company’s decision to cut back in China, China’s microbloggers had little to say. A Sina Weibo blogger remarked that “this online store is closing? I never even knew it existed.” Neiman Marcus selected its product offering without any significant experience designing products to the specific tastes of Chinese consumers. Yet even if consumers were interested in the products, without brand recognition or exclusive products, Neiman Marcus faced an uphill battle charging full price for its products online.

The key takeaway from this case study is brands and retailers need to be prepared to make a long-term investment to build their brand organically – a strong brand name in the US or Europe may not translate to a successful go-to-market strategy in China’s e-commerce market. Even more importantly, brands and retailers need to be flexible to tailor their product offering and online shopping experience to the unique needs of China’s digital consumers.

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