Why SMEs Should Miss the Chinese 3rd Party
- September 25th, 2015
- in Best Practice
Ever gone a long way, through a lot of trouble, for a party where you didn’t really know anyone? It takes courage and social skills to go from feeling lost, to making connections and enjoying yourself.
It also takes courage and skill to make it on any Chinese 3rd party platform you care to name. Not as much courage and skill (or budget, or time) as diving into traditional physical China retail. Ecommerce growth feeds off its own ability to reduce costs and barriers to entry, while increasing efficiencies of scale.
But this article, and guide to follow, are for the SME that wants to dip a toe into China’s rising ecommerce tide, without said toe getting bitten off, trademarked, and sold as American pork knuckle under a Chinese brand.
This is for the SME that has an appreciation for the potential of the China market, a growing commitment to taking prudent steps towards a presence there, but not the bandwidth for major commitment, nor the budget to outsource skills to an agency. Or perhaps the budget, but with a correct skepticism of the ROI an agency can drive in China for an SME.
With this the case, it’s almost impossible to recommend a Chinese third party ecommerce platform. To start with, the big two, Tmall and JD, are China ecommerce Hollywood.
Sure, you’re hot stuff, and Chinese audiences would love you, if you could get in front of them. But China ecommerce Hollywood is packed with surgically enhanced 10s, who have slick agents hooking them into opportunities and avoiding pitfalls you’ll have to learn the hard way. And like Hollywood, there is a dark underbelly that can cause the unwary real harm.
Bet you didn’t know there’s a non-sanctioned Alibaba after-market for the phony initial sales essential to getting you a good rating on Tmall, so that real customers have a number and comments to look at. No sales/comments, no rating. No rating/comments, no sales.
That unsanctioned after-market also offers protection services. Say you’re doing well and an unscrupulous competitor decides to destroy you by having some “customers” leave bad ratings and reviews. Ey, there’s some people in Hangzhou who can make that problem go away for ya – for a price.
If your author’s body is discovered, it wasn’t a suicide!
Don’t hate the ecommerce players – hate the game. Alibaba can no more control the dregs of its glory than Facebook can prevent affiliate scammers from flogging fake diet pills.
COSTS DON”T STOP AFTER YOU JOIN THE PARTY
In short, no third party is in business to turn their platforms into profit centers for naïve, corn-fed SMEs. The game’s about supplying bottomless Chinese consumer demand as profitably and efficiently as possible.
That means you do your own planning and strategy, your own marketing, your own customer service, your own logistics.
Scratch that – JD will actually train you to use its ad platform, if you care to visit HQ. They also have logistics service. But to its credit, JD will also tell you that without skilled Chinese staffers to execute, and/or a hot enough brand to generate some volume in the short to mid-term, neither service will be of much avail to the SME described above.
Notice we haven’t even gone into the set up fees, surety deposit, and processing procedures necessary to participate on a Chinese third party site. Those are all Googleable, real costs that take the third party approach farther and farther away from the ideal of low risk and scalable.
Less Googleable are the costs of driving targeted traffic to your store page, converting with promotions, great delivery terms, stellar customer service, all while leaving a profit margin that justifies ever having gotten into this horse race.
AGENCIES ARE ABOUT WHAT’S BILLABLE, NOT SCALABLE
Certainly agencies and other partners can help with the known unknowns – store set up, advertising, integration, and the like. A golden fleece to anyone who can Google a competent agency that will assist in a manner that makes it a scalable, low-commitment move for an SME, though.
Even the humble agency that isn’t paying a small fortune for rent and executive salaries is trying to get there. That overhead can only be covered by marked up client services. Ironic that the meager salaries of the Chinese agency employees who are actually delivering the service are a fraction of the total bill.
Bottom line: letting an agency handle the heavy lifting can be the best business case scenario, and even lucrative, but is almost certainly not a scalable, toe-dipping exercise for the SME. A good agency can turn a $1m in China budget into $10m, for an MNC with an established brand.
Can an agency turn even $10,000 into $100,000? For a brand little to unknown in China? Why do you think all the digital marketing case studies on LinkedIn are about Dove chocolate and Nike?
SO NO AGENCIES, AND NO THIRD PARTY?
OK, the award for a third party most approaching a scalable, low-commitment approach to China ecommerce must certainly go to Amazon.cn.
Amazon.cn is dedicated to spoon-feeding western companies who join its third party, helping you with not just logistics, but also pricing, sales targets, promotions. The helpfulness, responsiveness, and all-around international gold standard service available in English from Amazon.cn for western companies does much to palliate its <3% market share, in comparison to Tmall’s 50% market share, sink-or-swim-like-Phelps model.
“Phew. So Amazon.cn is our magic bullet, right?” No folks, no. Set up fees and import restrictions apply. They’ll take the advertising out of your hands, across their somewhat modest ecosystem to offline events, but a starter package runs six figures…RMB.
However, learning curve is half the battle of scalability, and no big third party is going to help you learn like Amazon.cn’s truly dedicated staff. If you’re skewed heavily to the ‘M’ side of ‘SME’, so that you have both budget and bandwidth for a solid commitment to China, you can depend on Amazon not to throw curveballs, hide fine print, or otherwise leave you lost and helpless on the wrong side of the Great Firewall.
SO WHAT ABOUT CROSS BORDER?
A great question – kudos if you’ve read this far and thought it. Coming up next….