How do Chinese and US online retailers differ? [Quora]

This question originally appeared on Quora, and the answers that follow were provided by Ben Chiang, Adventure Capitalist, Zach Brown, a Texan in China, and Grady Ha, marketing and strategy consultant.

Ben Chiang

Ben Chiang, Adventure Capitalist

I’d highlight three major characteristics:

1. Market dominance

Taobao/affiliates have dominated Chinese e-commerce since it began. Taobao is a C2C eBay-like site, T-Mall is a B2C Amazon-like site, and Alipay is a PayPal-like payment service. They have had 70 to 100 percent market share since their inception. Only recently have other sites emerged, such as 360Buy (which has raised well over $1 billion in private capital) in general B2C, as well as vertical or specialized sites focusing on cosmetics/bags/lingerie/kids in direct B2C, flash sales, subscription, or group-buy sales.

2. Delivery expectations

Because of significant investments, mostly by 360Buy and Taobao, Chinese consumers have been trained to expect next-day or even same-day delivery for their e-commerce purchases. Amazon’s CFO recently came out to say they don’t see any way to get to one-day delivery anytime soon [1]. When I think about how Prime/2-day delivery was an inflection point in my own e-commerce buying habits, one-day is even better.

3. They have everything

Seriously. You can find some cool stuff in the long-tail through eBay, Etsy, etc. in the States, but as the majority of the world’s consumer trinkets are made in China, it makes sense that everything you’d want is on there. We recently ordered twenty scratch-n-sniff belts on Taobao for $12, fake Jeremy Lin jerseys for $15 each (rip off!!), then thirty sunglasses for a bachelor party for $15, and finally three inflatable sharks for $7. It makes costume and theme parties that much more fun/easier/cheaper.

Zach Brown

Zach Brown, a Texan in China

1. As Ben mentioned, the express delivery process is one area of difference and probably the most significant of any between the two markets. I work with KuaiDi companies often, and it is firstly awesome, and secondly something that could never exist in the US or most western developed countries. It’s basically cheap labor and strength in numbers drives that industry. Quality is a huge issue though, as the large SF Express and a few smaller others are the only ones not franchised.

2. Consumer preference and product usage varies between US and China (or any other country for that matter), so the product mix and styles you see a brand in US selling may be very different from what that same brand is selling online in China.

3. TMalls B2C Platform has a low cost of entry and huge market reach for businesses, so you can see many foreign brands entering the China market on an e-commerce platform only for their first year or two until they decide to go home or invest more.

4. Security in the US is much further along than China. Whether that is due to actual IT solutions or rather a much smaller number of scam attempts in the US, I am not sure – I would guess both though.

5. Tmall is set up to allow each brand to really differentiate their selling platform. Ebay does not do that as well, and I am not sure there is a comparable platform in the US.

6. Payment terms and payment methods.

Grady Ha

Grady Ha, Marketing and strategy consultant

I’m going to jot down a few quick thoughts, as we actually work very closely in this space. Most of the Chinese eCommerce activity is seen through aggregator sites such as TaoBao, Taobao Mall (T-Mall), 360Buy, etc. Aside from the points already made, keep in mind a few more significant differentiators (and this is comparing via B2C aggregator sites such as Amazon and Ebay and does not touch upon B2B, or backend logistics that may involve warehousing, IT platform integration, etc.)

1. Store and Platforms: TaoBao is essentially a China domestic copy of eBay that serves as an aggregator of C2C (Consumer to Consumer) goods. This is where individuals can set up shops using predesignated shop templates, see who browses (and some other basic tracking analytics), maintain and fulfill orders, and send them out based on local distribution/logistic networks that are only limited by physical proximity of the destination to the warehouse (we’ll get to that later). This is mostly where you will see ‘mom-and-pop’ stores as well as distributors of copied goods.

T-Mall, or Taobao Mall, serves as an aggregator of factory/brand authorized goods that require additional verification and has much more stringent regulations in order to ensure authenticity of goods and enhance trust among consumers. This is where most Chinese consumers will go if they wanted better quality of goods backed by brand authorized distributors.

Major differentiators here include a relatively good search algorithm (although it is lacking in cross-shopping/selling features), goods that are tailored to the Chinese consumer (which includes a wide variety of products and product lines that would contribute to point 3 that Ben made), and what I perceive to be a major integration of social messaging/instant messaging utilizing WanWan/QQ for customer support before/during/after the shopping process.

2. Distribution: Here is where it gets very interesting. I won’t get into the specifics about SKU distribution, or product line decisions and warehousing – but logistics and distribution is a whole different animal as compared to the U.S. In the U.S., essentially both customers and shippers have three major options (USPS, UPS, and Fedex). All of them have varying degrees of shipping speed, tracking, and drop-off/pick-up options. In China, despite recent attempts at standardization and consolidation of logistics, there are still a multitude of companies that operate via motorcycles/courier networks that can deliver with relative speed accuracy. That is to say, you live next to where the product is actually being shipped out.

Despite all the touting about one-day or same day shipping, if you don’t live in a city that has a warehouse where the product is coming out from and where the courier can pick up relatively soon/effortless, you’ll get the product within a few days to a few weeks. I witnessed first hand as the coordination between shipper and logistics company was a cross-calling mess as we tried to ship a product by calling the logistics hub, and the hub called the delivery driver (who physically had to come to the warehouse and pick up the item) – and in the middle of all this it requires coordination by all parties just to have the item shipped outbound. If the warehouse was located farther away from the city, or if you lived in a more remote area, the product will simply take an extraordinary longer period of time to arrive (without an accurate tracking mechanism to boot).

3. Trust: Trust means both trust in the website itself, products, and payment platforms. Recently with Alipay, it’s become much better as consumers load credits onto their Alipay account, which makes Alipay (or other payment platforms) serve as the middle man, and therefore take on some of the inherent risk. Previously, direct transactions by credit card weren’t regulated by industry security standards and simply served to dissuade consumers from shopping online, and requiring a COD option, as handing physical cash (or returning the item directly if the consumer was dissatisfied) felt more secure than sending financial information electronically.

T-mall additionally provided an aggregator of verified distributors that sold goods that consumers can be sure of. Due to the availability of counterfeit goods, Chinese consumers are simply more wary and concerned about if they are really getting what they pay for.

There are a huge amount of counterfeit sites that sell counterfeit goods. Even on T-mall/TaoBao, we are seeing stores set up by unauthorized retailers (which T-Mall subsequently takes down) that erode consumer trust.

This article originally appeared on Tech in Asia and was published with permission.



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