E-Commerce Guidance for the Chinese Market - Channels, Logistics, Payment & Social Networks
In this article, which is part of our series on e-commerce guidance for the Chinese market, we explore how the shopping process, channels, payment, logistics and social networks differ from other regions.
Table of Contents
User Experience and Shopping Habits
Because the Chinese e-commerce market is dominated by Tmall.com, Taobao.com, and JD.com, these companies have a tremendous influence on shaping Chinese customers' online shopping habits and expected user experience. Customers become used to their UI layout design, their functionalities, and their internal business processes. Given their dominance, most Chinese customers have used these platforms for several years, setting up a large entry barrier for anyone trying to do something different. That's not to say the experience on these platforms doesn't change. Each company has dedicated technical programmers, product manager, and UI/UX who have been researching and improving users' experiences and monitoring users’ feedback.
Some of the functions described below, like the shopping process, were tried on these big platforms and accepted by customers. For companies who build their e-commerce platform in China, they need to learn and imitate these platforms to succeed.
When e-commerce first began in China, only websites existed. Mobile apps did not exist yet. With the explosion of mobile phones, the focus changed to developing mobile applications. Standard conventions differ slightly in China as the shopping cart, login, wish list, message box, and online chat icons are on the right side of the homepage. By doing so, more space becomes available at the top and bottom of the page for advertisements. Additionally, it is more convenient for users to click on these icons since most people use their right hand when operating their phone or when controlling their computer's mouse. Companies have also provided customers the ability to use their app to scan the QR codes on their website login page to log in, instead of forcing them to input their username and password. These are just some examples. By paying attention to some of these platforms’ adjustments and improvements, you should be in a better position to understand the needs of your customers.
The shopping process on most of the commerce (B2C) platforms in China consist of the following steps:
- Browse products and add products to the shopping cart
- Select the products that you want to buy in the shopping cart
- Fill in the shipping address and invoice information, select the mode of payment and confirm the order
- Submit the order
- Complete the payment
There are two points where China may differentiate from other markets:
- In the second step, the customer could check or uncheck the products in the shopping list. Only the checked products will be added into the ordered items. The unchecked products will remain in the shopping list until the customer buys them next time or deletes them. From the Chinese customers’ perspective, adding products to the shopping list just indicates they have the intention to purchase, but does not mean they will buy it immediately. They are used to adding many products and keeping them in their shopping cart, waiting for some special promotion or another reason before buying them. Re-targeting and cart abandonment strategies that make sense in Europe would need to change in China.
- Order generation and payment are two separate behaviors and should be executed in two different steps. Rarely the customer is expected to fill out the credit card information during the shopping process before submitting the order.
Commerce in China leverages multiple channels as part of the purchase process:
- Traditional offline
- Traditional Point of Sale(POS)
- Mobile POS
- It’s an app installed on a mobile phone or tablet used as an in-store shopping guide to place orders for in-store customers.
- Self-service buying machine
- It’s common to see in public places with large volume of people traffic, like shopping malls, train stations or even inside companies. Customers simply need to input the codes or numbers of the products and pay for them by scanning the QR codes with Alipay or WeChat.
- Self-service through in-store QR codes
- For example, this is widely used in KFC in China. They print the QR codes on an in-store billboard, then encourage in-store customers to scan the QR codes and order by themselves. Customers can see their four digit order numbers are in queue on the big screen in-store, waiting for their food to be prepared.
- Modern online
- Mobile apps
- Website (PC/Mobile)
- Third-party marketplace
- Normally, this referes to Tmall.com, JD.com, Suning.com and others. Because of their large volume of traffic, it’s very common for companies to open a store on those marketplaces instead of building their own e-commerce platform.
- WeChat Official/Subscription Accounts
- Companies can register and open an official/subscription account on WeChat, and then customize the menu to provide different functions. Let’s take the official SAP China WeChat account as an example. It contains the company introduction, employee stories, recruitment information, and our industry solution introduction. Everyone who follows the account can use these functions. Of course, you can also register an account to customize a menu to link to your e-commerce store once followers click the menu.
- WeChat mini programs
- WeChat mini programs are another entrance point on WeChat. Once companies build their mini programs on WeChat, the customers can find them and use them.
Technically, you do not need to build a separate application for each channel as some of the touch points are pointing to the same application. It will depend on your system design. The first three channels are still the main commerce channels that companies choose to build when you look at the whole market. Currently, for WeChat channels, the marketing applications go beyond e-commerce applications.
For offline touchpoints, the traditional POS is still the main channel for placing orders when you look at the whole market. However, companies are choosing to build more flexible applications to make up for the gaps in traditional POS. Additionally, they also need to rebuild and upgrade their traditional POS system because it is considered too outdated for a modern shopping experience.
For online touchpoints, most customers place orders through mobile equipment instead of a PC. This aligns with the fact that more people spend more time on a mobile phone instead of a PC. Nowadays in China, companies prefer the ‘mobile first’ model when building their e-commerce platform. Companies often ask if they should set up their own e-commerce platform or set up a store on a marketplace platform. There is no right answer to this question. The answer will vary from one company to another. If your business is small and you're just starting to build your brand, it might be better to open a store on one of the common marketplaces instead of trying to set up your own e-commerce platform. By using a marketplace, you will immediately get access to greater volume of traffic.
Fast Logistics and Easy to Return / Refund / Exchange
Customers expect your e-commerce platform to provide the same user experience as JD.com or Tmall.com. For example, fast logistics, home delivery options, and great after-sales services.
They also provide click and collect option, although this is not popular in China. The reason is that the shipping service is quite fast and convenient. Also, there are too many people and too much traffic in big cities. Therefore, it can take longer to pick up your packages.
For companies to provide fast logistics and great after-sales service, they might face the following challenges:
- If your warehouse doesn't cover China as a whole, customers outside of your area might not receive the same shipping experience
- It’s not easy to provide smooth after-sales service across all channels. Special categories are more complex.
Let's look deeper into the first challenge.
Based on the report of the national post office in 2017, it states:
The distance between origin and destination (km)
The average total delivery time (hours)
1000 ~ 2000 km
2000 ~ 3000 km
≥ 3000 km
- For the above report, it does not contain the self-built logistics of an e-commerce platform, like Jdwl.com.
- For special categories, like fresh food, it requires much faster comparing to normal categories. For example, the ‘Hema(盒马)’ app is growing rapidly and has been establishing more than 90 offline stores in China. Shopping in-store is self-service. You scan the barcode in front of the checkout counter by yourself and pay through the app directly. It provides a delivery service within three kilometers when you buy online, and you can receive your goods within an hour. It allows you to select your delivery time slot, every 30 minutes on the same day.
- Most e-commerce orders are generated from the eastern part of China, which is usually within 1000 km as listed in the table above.
Considering the information above:
- It’s better to choose two days as your average delivery time for your commerce platform to provide competitive user experience.
- Set up your warehouse from north to south and near to the east.
- Collaborate with third party logistics. It’s unrealistic to build your own delivery team, and the third party logistics services are very mature in China. For more details, see the next section.
For the second challenge, it depends on where your company is in terms of digitalization. We recommend that you implement your IT strategy step by step. If you don’t have an e-commerce platform, build one first and then focus on it to build your foundation through one channel. Then, move on to another channel. Re-think your internal business processes and transform your internal organization to provide a good user experience on after-sales service across channels. More details on customer care can be found in another one of our articles.
Third-Party Logistics (3PL)
China is currently the leader in logistics, accounting for 40% of the world's shipments. It has been the leader since it took the first position from the United States, in 2014. The number of packages shipped in 2016 was more than 30 billion, and this was expected to reach 50+ billion in 2018. A majority of shipments originate in east China. 70% of shipments are generated in connection to e-commerce.
The market leaders are Sf-express.com and Cainiao.com which combine for an 80% market share in China. Cainiao.com was established under the Alibaba Group to unite several logistics companies like Zto.com, Sto.com, Yto.com, and Yundaex.com.
What about Jdwl.com? Strictly speaking, Jdwl.com, which belongs to the JD Group, is not a third party logistics company. Originally, it was the self-built logistic of JD.com. It is well known for its fast shipping speed when you buy products on JD.com that are also shipped by JD.com. You can choose the exact delivery time by the hour. It is quite common to place an order in the morning and receive your product in the afternoon. If you place an order in the afternoon, you will receive your package the following morning. Many customers buy on JD.com also because of their logistics ability.
Recently, JD logistics business was split up into smaller businesses to become a new standard service to the public. It is expected to become a strong competitor to Sf-express.com and Cainiao.com.
When developing a commerce solution, it’s common to integrate your e-commerce platform with any of the 3PLs to provide a good user experience. Typically, this is done for courier services. Some companies will use their warehouse services instead of setting up their own. Once an order is placed, the customer can query the details of their order. They can check where their package is, and once the package moves from one place to another, the website or app will show a new logistics record.
Online payment is key to the success of an e-commerce platform. Unlike other countries, credit card payments are not as common in China. Instead, mobile payments enjoy widespread adoption. Alipay, WeChat, and UnionPay are the most popular payment gateways in China. One or more are integrated by almost every e-commerce (B2C) platform. Alipay is a sub-company and is one of the products that belongs to the Alibaba Group. WeChat is the most popular messaging application with payment functionality. It belongs to the Tencent Group. UnionPay integrates with almost every banking system, which provides an additional option if a customer doesn’t have an Alipay or WeChat account.
For refund scenarios, the common payment gateways also provide open APIs to integrate into your application to provide refunds to customers automatically. Additionally, you don’t have to integrate the popular payment gateways one by one by yourself. Some third-party companies have already completed the system integration and have packaged it into a separate standard interface. More and more sellers prefer to integrate directly with these third-party companies to save the integration costs.
Mobile payments are not only just for online but are also widely used offline, as we discussed in the "Channels" section above.
Social Login and Social Network Sharing
Integrating with popular social networks can drive more customers to your application. Further, it can make the user login more convenient without requiring registration. In China, WeChat, QQ, and Weibo are the most popular and commonly used social networks. Almost everyone in China that has a connected device has at least one account among these three products. All of them provide open APIs, to easily integrate with your website or app.
- WeChat and QQ are products owned by Tencent Group. WeChat is a mobile messaging application which is similar to WhatsApp, Line, Facebook, and Instagram. Although it is typically used on mobile devices, it also has a PC version. It has over 1 billion users.
- QQ is a messaging application that has been actively developed since 1999. Before WeChat, QQ was the biggest messaging application. Compared to WeChat, QQ’s main users are from the younger generations, normally born in the 1990s or later. It also has both mobile and desktop options.
- Weibo is more like Twitter and has almost 500 million users.
Aside from these three popular social network platforms, some websites or apps also choose to use Taobao.com or Alipay to do their social login integration. This is because both of these platforms can draw from huge user bases.
This article is one article in a series about e-commerce in China. If you're interested in learning more, we encourage you to look at the other articles in this series. The introduction can be found here.