Click profit online in China

Updated: 2014-05-26 07:42

By MENG JING (China Daily)

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The ability to reach out to more customers in remote areas of China, where stores are few and the costs of building a physical presence are steep, makes e-commerce a popular choice for Western companies.

Many governments and official organizations in the West are aware of the importance of e-commerce in China. British Prime Minister David Cameron's closed-door meeting with Alibaba founder Jack Ma last year further reinforced the sector's importance in China for overseas companies, particularly those from the UK.

Alibaba's Tmall has already teamed up with several overseas government agencies on special promotions allowing Chinese consumers to buy fresh fruits and other food online, direct from the source.

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In February, it successfully sold tulips online with the Netherlands Consulate-General. In early May, it paired with New Zealand Trade and Enterprise, the country's trade development agency, to ship more than 50,000 pre-ordered oysters and mussels to China within 72 hours of harvesting.

Some experts say that Chinese esteem foreign brands more than local ones. Carrie Yu of PwC Hong Kong says that as consumers in China become more sophisticated, they will increasingly value quality, brand and after-sales service, which extends to fairness in doing business. "This is the big advantage for foreign brands," she says.

However, Zarrella of KPMG China, says that though Chinese people like high-quality products, it does not necessarily mean that they are willing to pay a premium for that.

"They do not like cheap goods anymore, but they do like to bargain. And they tend to do most of their research online to see where is the best place to buy it," he says.

The hunger for high-quality products with reasonable prices has created a new business called Daigou, which means buying via overseas contacts through Taobao or other professional buyer agencies and websites. Daigou agents charge a commission and mail the purchased goods across borders.

The top items on Daigou lists are baby formula and luxury goods. A China luxury goods market study released by Bain & Co in December 2013 found nearly 60 percent of the 1,400 customers interviewed had made at least some luxury purchases through the Daigou market.

Statistics from the China E-commerce Research Center showed that the online Daigou market amounted to 74.4 billion yuan in 2013. The center forecast that the market would exceed 100 billion yuan in 2014. The booming Daigou business is also part of the reason why Alibaba chose to launch an independent website called Tmall Global in February to allow overseas brands and merchants to sell directly to Chinese online shoppers.

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