China’s online retail market will reach a value of RMB 1.3 trillion ($186 billion) by 2021, according to new forecasts from Mintel.
The research shows that the size of the market has grown nearly 12-fold since 2011 – from RMB 53 billion ($7.7 billion) to RMB 626 billion ($90.9 billion) – with growth expected to slow to a compound 15% a year until 2021.
Mintel found that almost three-quarters of Chinese consumers shop for foreign imported products from domestic shopping websites, and established ‘a clear association’ among Chinese consumers for some products to be more desirable when they’re made overseas.
More than 30% of consumers buy imported food from Taiwan, and 36% buy alcoholic drinks – particularly wine – from France.
Why are foreign exports so popular in China?
There’s little disguising China’s reputation as ‘the knock-off capital of the world’. Traditionally, popular western products would be imitated in the form of local ‘copycat’ brands. But nowadays, the wounds of recent food scandals continue to run deep and undermine consumer confidence. In the most notable example, Chinese-made dairy has never fully repaired its reputation after the tainted milk scandal almost ten years ago that affected a reported 300,000 children. Companies like Yashili and Yili have sought to consolidate by investing in Australian and New Zealand-based dairy production operations, while European companies like Danone have been able to capitalise on favourable brand perception in China. Now the rise in e-commerce is making foreign brands accessible to Chinese consumers, hence Mintel’s prediction of 104% growth over the next four years.
The trend is believed to have picked up pace among younger middle-class consumers, who are more likely to have travelled overseas than previous generations – so much so that the practice of buying products from overseas has been given the Chinese label ‘haitao’.
Matthew Crabbe, director of research for Asia-Pacific for Mintel, explained: “While the haitao market has seen rapid growth over recent years, and should maintain strong growth for the foreseeable future, it is likely to peak soon as a proportion of online retail in China. This does not stop the haitao route to Chinese consumers from offering significant potential market opportunities to foreign brands, but it does mean that haitao is likely to be more relevant to brands looking at initial market entry. Retailers and brands should therefore play to their different country specialities when attempting to differentiate from their competitors.”
According to Mintel, Chinese consumers decide where to buy imported products online based primarily on proof of quality (68%), followed by ability to use third-party payment systems (44%). They also want detailed product information (36%) and Chinese-language customer service (25%).
Nearly four in ten purchasers (39%) said they would like to see a better choice of payment options on overseas online shopping websites. 35% of respondents said they were less confident about the returns policies of foreign websites than they were of domestic online stores.
Crabbe continued: “As well as providing a better and more entertaining experience for Chinese online shoppers of imported foreign products, brands and retailers can improve by providing better practical solutions. Offering better delivery, refund and returns options is a key area where overseas online retail websites can improve, as compared to domestic websites. This does create logistical issues, however, but having links through domestic online retail portals can help combat this.
“When selling foreign products online to Chinese consumers, brands and retailers really need to create a sense of excitement and entertainment about the whole process if they are to stand out in an increasingly competitive market. Simply offering a new product is no longer enough.”
© FoodBev Media Ltd 2018
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