Shifting consumer habits in China show an increased preference toward cross-border e-commerce.
As the nation's economy has strengthened and its middle class grown over the past few decades, Chinese consumers have indulged in luxury goods. Although this particular fascination isn't as strong as it once was, these individuals still enjoy shopping internationally. International online retailers should note that China could be a lucrative market for them and make sure they offer the payment solutions these shoppers prefer.
China's appetite for luxury goods shifts
According to the 2015 China Luxury Market Study conducted by Bain and Company, the nation's luxury sales fell 2 percent last year, totaling $113 billion yuan. Instead, shoppers directed their interests outward, spending more in destinations like Japan, South Korea, Europe and Australia. In fact, luxury spending in Japan alone rose over 200 percent.
This increase in international shopping activity likely stemmed from the fact that Chinese citizens took 32 percent more overseas trips in 2015 than they had in 2014. They also began relying less on Daigou, personal shoppers who buy luxury products and mail them to Chinese customers, opting to patronize international websites instead. Overall, customers spent online $48 billion yuan last year.
Chinese e-commerce payments expected to grow
Analysts predict this trend in e-commerce will continue to grow over time. Research by eMarketer found over 15 percent of Chinese shoppers are expected to spend money overseas this year, with sales expected to reach roughly $85.8 billion. In terms of individual purchases, each cross-border buyer will spend an average of $473.26. Over all, it would be a 42 percent increase from the previous year. By 2020, a quarter of China's population – 291.8 million people – are projected to engage in cross-border e-commerce payments.
eMarketer credits this rise to many factors. For one, Chinese internet marketplaces like Alibaba have recently opened their doors to foreign vendors, allowing international companies to sell directly to online shoppers. Overseas companies tend to offer more variety and higher-quality products, so luxury shoppers are increasingly looking outside their borders as opposed to choosing local vendors.
"While the new cross-border ecommerce tax implemented in April this year negatively affects some categories of goods, the demand for foreign goods via the cross-border e-commerce channel is still expected to remain strong due to better prices compared to offline retailers, perceived quality and better variety," explained Sheleen Shum, one of eMarketer's forecasting analysts.
Favored payment solutions in China
International merchants should work with a payment processing company that specializes in cross-border transactions if they hope to break into the Chinese market. It's also a good idea to have a general understanding of popular payment solutions in China.
According to Entrepreneur, online merchants should make sure their payment processor accepts UnionPay credit cards, as these are one of the primary electronic payment methods of Chinese consumers. In addition, locals also enjoy cash on delivery, so retailers should choose a partner that handles both online and offline payments.
Overall, China looks to be a great resource for businesses hoping to expand overseas. Business leaders should keep an eye on this market and consider how advertising and website localization can best reach these customers.
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