Thinking of entering China’s e-commerce market? Get a map or get a big surprise
23 May 2020 | Tas Walter
People always attribute language and culture as the most significant challenges when doing business with China, not always so.
When doing business in western nations, almost every single Chinese professional you cross paths with is well versed in the English and western culture. Yet chaos seems to be a common and reoccurring theme.
The crux of your problem may not lie in communication, but a fundamentally different approach to one issue: planning.
If you are anyone like a typical business owner or a trained management professional working in the western business context, you wouldn’t be a stranger to ‘planning.’
Set your target, have a strategy, assemble a team, and charge ahead once you are sure-footed. Tweaks and adjustments might be necessary on the way. Still, generally, people believe the business race is marathon is won by the slow and steady.
Fast paced China
Enter the Chinese e-commerce operators. They’ve tried to emulate western managerial styles, but don’t have the luxury of time, or indeed the need for perfect planning.
China’s media and e-commerce systems are much more vertically integrated, meaning companies, like Alibaba, control more big data and more consumer touchpoint information that at any given time in the world of business.
With the enormous insights they generate from real-time data, they feel less need for watertight long-term plans.
But big data is not unique to China e-commerce companies, so what gives?
Another contributing factor is the potentially huge first-mover advantage. Most businesses selling on Chinese e-commerce platforms are not disruptors or innovators – their strong suit is market accessibility.
Over the past decades, one of China’s key growth engines is in building channels – be it physical infrastructure or digital commerce – that connect the sellers to buyers.
Profits are built on first mover advantage and they diminish quickly once competitors arrive on the scene.
Success in sales becomes a sprint, whoever reaches consumers first wins the day, so the priority of this gigantic machine is mobilized, first and foremost, to secure a win in the speed race.
It’s a giant a field
Western businesses new to China typically think of it as a vast consumer market with enormous spending capacity. They often forget what’s driving that market, China’s huge workforce.
Human resource is expensive in the west, it’s a resource Chinese business has in abundance – at a fraction of the cost.
Compared to the west, the relative cost of squandering management and worker time on inefficient processes in China is negligible. Moreover, even if decisions are made at the 11th hour, a team is always at hand to implement the new plans.
In this respect, China’s e-commerce giants have an added luxury in their ability to attract top university graduate and poach talent from elsewhere in the market.
The quick and the dead
Big-data visibility, fast eroding first-mover advantage and the availability of inexpensive human capital that can be mobilized quickly. In China they are the building blocks of a system that favours speed over planning.
Despite the economic slowdown brought on by COVID-19, consumption remains the biggest driver of China’s economic growth, with retail sales in 2019 totalling 40 Trillion Yuan (A$8.5 trillion).
Meanwhile, many western companies in the Chinese market seem to always running behind their Chinese partners or are frustrated by their chaotic approach to business.
That different attitude towards planning can drive a wedge between western business and their Chinese partners without them ever realizing the cause of the problem.
While it’s no easy fix, being aware of it will save you valuable time and frustrations. Furthermore it could be a valuable lesson in achieving long-term success in the China market.