28 October 2016
Online orders currently account for more than 10% of China's total retail sales, and the ratio is expected to rise further in the coming years.
Online orders currently account for more than 10% of China's total retail sales, and the ratio is expected to rise further in the coming years.

Why internet is a better route for SMEs to tap the China market

Hong Kong’s small and medium enterprises face a constant dilemma: How can the firms, which often have limited resources, effectively tap the huge mainland market?

One basic question is whether they should open physical shops in China or set up online stores to cater to the consumers there.

E-commerce channels and traditional shops both have some advantages as well as weaknesses.

For instance, set-up cost is usually lower for online stores and it also takes less time to launch such operations. An e-shopping operation is also less restrained by time and geography.

But brick-and-mortar shops often offer better user experience, as customers can touch and feel the products before making a decision.

For SMEs, Ron Lee, senior sales manager at software house Kingdee, suggests that e-commerce would suit them better because the cost and time required for establishing the operations would be less.

The strategy also provides more flexibility as companies can test the waters before committing more resources.

Now, should SMEs use large third-party platforms or build their own websites? Again because of cost concern, selling through the former would be a better option, Lee said during a recent seminar at the Hong Kong Productivity Council.

In designing their online storefronts and promotion campaigns, SMEs should at least be aware of two things, Lee said.

First, the number of mobile phone surfers already exceeds that of PC surfers.

Also, it is predicted that the iPhone alone could overtake personal computer sales by the end of the year.

That means smartphone users represent a much more promising, faster-growing target audience.

In fact, online sales already account for more than 10 percent of China’s total retail sales. The number of e-shoppers in the country is now estimated at 360 million and the growth clip of e-shopping done through smartphones far exceeds that of e-shopping on PCs.

Citing research, Lee said online shoppers have three main characteristics: They are more receptive to new things, they tend to purchase small ticket items on the internet and they are more impulsive shoppers.

Based on this, SMEs can assess whether their products would be suitable for selling online.

Another research endeavor tried to figure out the major reasons why some people are reluctant to shop on the internet. The survey showed that the number one concern is payment security.

Customers will also be discouraged if online shopping procedure is too cumbersome and they also worry about reliability of the shop.

SMEs planning to get into online sales should take heed of these general concerns.

Software clearly cannot solve all the problems that SMEs will face in China. But the right software will at least smooth the operations and make life easier, for both the SMEs and their customers.

To maximize their exposure, SMEs typically open shops in a number of e-commerce sites like Taobao, and Amazon.

Kingdee is offering software systems that help them centralize orders from different platforms into one place, so that the back-end executives of the e-commerce shops can see at a glance the overall order situation.

The system also picks the best logistics partners based on their proximity to the delivery address.

To help enhance e-shoppers’ experience, Kingdee also designs apps allowing them to search for products, place orders and check the order status.

But of course, Hong Kong’s SMEs will still have the daunting job of figuring out what mainland China customers want and what sort of marketing channels can reach them effectively.

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EJ Insight writer

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