As companies expand B2B and B2C eCommerce outside U.S. borders, there are a number of unique challenges encountered that require each country be analyzed on its own merits for expansion. Rather than look at each individual country, I’ve decided to take a short look at China from which we can gather some insight that can be applied to any country.
I’ve included a chart of ATKearney’s global retail development index, in order to give you a list of countries that might be a useful starting point.
So, let’s take a look at China, since it garners the most media attention. However, from an ROI standpoint, it might make more sense to research the lesser developed countries where the competition is less established unless you have a major brand. And, in China a major brand has definitely not eased entry into that market.
China internet growth is moving at a 9% rate with 40% penetration. Internet Stats. eShopper as a % of internet users is 32% as of a 2012 study.
Desktop users in chart above in Blue.
How do you Compete in China when companies like Amazon and Google have struggled?
Baidu.com, a company founded in Beijing in 2000, now has 78.6% market share, with Google trailing at 16.6%. What happened to eBay? eBay purchased EachNet (a local company) and promptly lost market share from 87% to 0.7%. Taobao became the market leader in 6 months.
eBay failed because they:
1. Did not modify the business model for customers
2. Insisted on global technology standards that decreased page load speeds
3. Overlooked the competition (Groupon entered China when there were already 1000 competitors.
Key takeaways to apply to any market:
1. Adapt your offerings to better befit the social habits of the consumers. Owing to a highly collectivistic culture, Chinese consumers rely heavily on social networks, reviews and recommendations when making a purchase decision. Consequently, Chinese customers are also avid content providers. In fact, Chinese consumers are more social online than U.S. consumers. Thus, companies have to make customer service a top priority, as any bad word of mouth can spread like wildfire and cause more damage than it would in a Western country.
2. Focus on the customer, not just on the information system. Some organizations believe that the key to success in China is superior information technology. Therefore they tend to focus more on system integration than on customer needs. But as our examples demonstrate, meeting customer needs is the most important determinant of success.
3. Speed up your decision-making processes; act fast and react faster. China’s e-commerce companies excel at making rapid, consumer-centric decisions. In China, local market conditions change rapidly. A long reporting chain with personnel at Western headquarters controlling everything is simply not feasible. Decisions have to be made quickly.
4. Consider other forms of market entry. Nowhere is it etched in stone that American organizations must launch Chinese divisions. Given how difficult the competition is, organizations would be wise to consider forming strategic partnerships with local competitors. For example, instead of building an e-commerce channel of their own, several big-name brands — including Gap Inc. and Levi Strauss — have teamed up with Taobao to sell their products online in China. Another form of entry is investing in local companies. Walmart, as part of its online strategy in China, has recently led a consortium of investors in buying a $500 million stake in 360buy.com.
Chart of the Global Retail Index 2013 from AT Kearney.