China is a tough market for Western brands to crack. But with Chinese ecommerce sales surpassing $1.1 trillion in 2017 and representing about half of all retail ecommerce sales worldwide, cracking it is an increasingly valuable — if not vital — pursuit for global brands.
Entering any new international market often feels daunting. As the world’s largest ecommerce market, China can seem even more challenging. After all, when entering China, it’s imperative for online businesses not only to manage basic marketing tasks like building awareness, understanding the competitive environment and gaining distribution but also to negotiate complex business rules, payment gateways and possibly unfamiliar cultural norms. Marketing technologies and solutions are absolutely critical, but so too are teams that understand the market.
When it comes to China, there are so many elements to consider: Fapiao, WeChat, Local Language Support… the list goes on and on. So how can partnerships help your brand to make the leap into the country leading the way in global ecommerce?
The Power of Partnerships
When it comes to China, partnerships are everywhere, and brands are now forming multiple partnerships to create an online ecosystem. Marketing technologies are playing a critical role in enabling partnerships and helping brands capitalize on these benefits:
- A pay-for-performance partnership model reduces risk. Partner marketing arrangements greatly reduce the risks associated with entering a new market because they are performance-driven. For brands, the level of risk for both partner marketing as a channel and more specifically partnerships in China is low, which is why more and more brands are taking up the opportunities partnerships present. Across Asia, partners are driving up to 30 percent of online sales for brands, because in-market partners have an innate understanding of what will work in their markets. By establishing direct relationships with partners in China, marketers can work with those companies to test and refine approaches, without squandering major investments. Cost drop even further when a strong martech infrastructure helps streamline the process.
- Local partners provide instant distribution and awareness. Establishing one’s own distribution network in a market as big as China can be challenging and expensive, and for marketers brand awareness in a new market is no easy task. Partnerships give your brand an instant mechanism through which products can be promoted. Instead of struggling for significant brick and mortar distribution, for example, marketers can identify and collaborate with large partners that can get products in front of millions of consumers. With 730 million internet users in China today, that opportunity is the biggest in the world.
- You can drive sales before you’ve established a customer base. Many Chinese partners have large existing member bases and a rich understanding of the customers in their market. One of China’s largest partners, Fanli, currently has 140 million registered users! This can help marketers to connect with the right customers to drive initial sales. Further, trusted Chinese publishers and communities can give shoppers an extra reason to believe in a product enough to give it a try.
- The partner community in China is growing fast. Historically, the affiliate and partner market in China has been less developed than in some Western markets like the U.S. and Australia. But that is changing quickly. Large players such as SMZDM, Fanli and Linkhaito are already well-established within China’s partner market, and more players emerge seemingly every day. This comes down to China’s rapid growth in ecommerce, particularly when compared to the U.S. and UK, and explains why the level of VC investment from brands such as Alibaba and Tencent is quickly increasing.
- You benefit from the media spend of your partners. When you’re entering a new market, it’s difficult to know where to invest your marketing dollars, particularly across digital channels. However, partners are already managing large media budgets, driving your future customers to their website. Instead of taking the time to figure out where to spend your digital dollars, invest more into your partners, for example with increased commissions, and piggy-back off their media spend, securing yourself the customers you want, with a much lower cost involved.
- Martech tools reduce the risks and complexity of partnering in China. Technology platforms can go a long way toward streamlining the process of building and maintaining partnerships in China. A few of the ways that martech can help include automating repetitive tasks, ensuring compliance with complex rules and processes, facilitating better data sharing and collaboration, and, ideally, offering pre-established means for managing payments in the region.
Making Partnerships Work for Everyone
While partners can be an incredibly powerful tool for market entry, Chinese partners expect certain things in return.
First on your list should be identifying and implementing a means to deliver timely partner payments. With any partnership arrangement, brands must be prepared to seamlessly transmit payments to partners before things kick into full gear. In China, this can be especially challenging because China operates on its own government-driven Fapiao payments system. You need to work with martech technology that makes Fapiao payments in China every day — who has done the costly and time-consuming work of establishing an official business entity in the market — as this is a compulsory payment process, set by the Chinese government.
Further, to get the most benefit from your partners, you need to capitalize on their expertise. The more direct and collaborative you can make your relationship with these businesses, the more likely you are to succeed. You need to connect regularly and listen to their ideas so that you can formulate programs and tactics that will resonate in the market. One of the ways to help with this is to have people on the ground, or work with brands that do. Using Mandarin speakers, or working with others that have this resource, will allow you to be more effective in managing direct relationships, and ultimately more successful.
Entering the Chinese ecommerce arena isn’t easy, but it’s well worth the effort. Smart partnerships represent a logical first step. By preparing up front and ensuring that you form mutually beneficial partnerships, you can ensure that your Chinese partners work harder and smarter for your brand.