China’s E-commerce Opportunities
Topics: Business Opportunities, China, Ecommerce, General Business, Internet Marketing, Retailing
When I was in Hong Kong this summer, a lot of people asked me if I will try to setup some sort of presence in China for my ecommerce company. And I will always tell them no.
Here’re the problems I see associated with doing ecommerce in China or Hong Kong at this moment (in order of importance):
1. Lack of supporting industries - the supporting industries of ecommerce is pretty well developed in North America and in Europe. E-commerce’s supporting industries include shopping cart system, fulfillment centers, payment processors, inventory management, marketing venues… Without these supporting industries, enterprises have to build these infrastructures or programs from ground up, and it is very costly to do. I’ll elaborate more on this point later.
2. Problem with financial infrastructure and logistics - do you know it is STILL a pain in the back to pay online using credit card or Paypal in China? It is even harder for them to take out money from Paypal, not to mention the exuberant fees. This alone can deter a lot of online shopping activites. Besides, the postal service and logistics are far behind in China than in North America. If you think USPS is bad? Think again. Some areas in China don’t even have roads or addresses.
3. Can they afford spending that much yet? - While there’re more and more high income families and a surge in the no. of middle income households, the spending ability in China is still relatively low compared with Europe, N. America, Australia, Japan, and Korea. The avg. income are about USD$500/month. Without the kind of profit margin we achieve elsewhere, it is hard to justify going into China.
4. New Rich Mentallity - Many people tries to bring up the point that, “But there’re more and more rich Chinese families”. That is true. But you have you understand that because they are new rich, they prefer going OUT to shop to show their wealth, NOT hiding at home and purchase things online.
5. Denser Population - The population of China is concentrated in the coastal area, in particular the higher income group. With denser population and denser cities, offline shopping is often preferred with more convenience and wide enough selection of choices.
6. Internet is about widening, not narrowing - another problem with setting up an ecommerce website in China is that you’re limiting yourself with Chinese reading population. When I setup a website in English, not only am I selling to all native English speakers but everyone else from other countries who are able to read English. O and the cost of setting up a web presence is the same everywhere.
Now I’m not saying that ecommerce is not going to be a huge business opportunity in China sometime down the road, but at least not now, and not for the next 3-4 years to come.
Another question I get a lot is - “So why can’t you be the first one to solve those problems? That’s what an entreprenuer does.” I’ll explain to you in my next post why I believe it is no longer beneficial to be the market pioneer in the digital age.
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