With a population of 1.344 Billion, and the fastest growing economy in the world, the window of opportunity for e-merchants in the Chinese market has to be a common fantasy.
China has fast become the second biggest e-tail market in the world, next to the US, with $210 billion as estimated Ecommerce revenue for 2012.
In contrast to the US’s model which is dominated by online stores as breakaways from their retail brick-and-mortar originals, the Chinese market is dominated by e-tail in the virtual marketplace in which retailers of all sizes, individuals selling products/services and manufacturers, go to market through online storefronts on “megasites” like Tmall, PaiPai and Taobao. Feeding into this structure is a network of third-party providers who intervene with payment services, IT support, delivery services, design etc.
According to a McKinsey Quarterly article, with easy access to factory production, Chinese E-businesses are moving into the international market with competitive pricing. This is something that merchants outside of China should be aware of but also, by which we should be inspired because, economic development as a result of the growth in e-tailing, is expanding the window opportunity for players inside and outside China. And this will only continue to grow, with warm invitations for possibility and success.
According to a recent survey, transactions through third-party systems in China in H1 of 2013 are 66% of the value of all transactions in 2012 with the number at $1.13 trillion. Data also shows that bank point-of-sale and online payment businesses are the largest within the third-party sector and account for 97.39% of transactions. China Union Pay is number one with 46.3% market-share, Alipay is second with 17.8% and China Payment and Remittance Service, third with 6.2% market-share – a typically dominated industry for China as one might expect.
The challenge for foreign merchants is mostly, at a processing level, with payment restraints and the need to withdraw fund from China, making the procedure very difficult. The average Chinese consumer pays for goods and services using a China Union Pay debit card, issued by local Chinese banks nationwide (above 800 million cards). Unlike the access that we have to MasterCard and Visa, it is very difficult to be able to process a China Union Pay card which poses an obvious challenge to online merchants eager to leverage the potential that has been clearly outlined.
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With many elements at play including industry type, an expansion of this discussion and the payment possibilities available for foreign merchants will be addressed in a future Payment Magnates insight.
Further interesting facts about Chinese ecommerce in the below infographic from GO-Globe
Infographic by- GO-Globe.com
Chinese flag image courtesy of Wikimedia commons