The internet is a natural place for foreign businesses to look at to expand your business in China with Ecommerce. Even a very small company can become a global influencer just by making their products available online. Before exploring ecommerce as an option for expanding your business into China, however, it is important to look at several of the pros and cons of starting business in China with Ecommerce and what such a decision would bring.
The Pros of Starting Business in China with Ecommerce
1. The shopping process becomes much more convenient.
An effective ecommerce solution allows customers to shop from the comfort of their home or while they’re on the go with a mobile device. Instead of visiting the brick and mortar store and the time investment that takes, it only takes a couple of clicks to purchase the items which are needed.
2. You don’t need to have physical inventory space.
You can sell products online without needing to have the items directly in stock on a store shelf with an ecommerce solution. This gives you a bit more freedom with your inventory costs and may potentially reduce tax liabilities at the end of the year if you run low stock numbers.
3. Even remote customers can access your products.
You might have your business in the city of China, but someone 100 miles away might need what you’ve got. Instead of the time it takes to drive 200 miles round trip to get what they need, the rancher can place an order through your online store and have you ship the product to them. This convenience allows your China business to reach more China prospects that they may not normally be able to reach.
4. It allows a business to offer more choices.
Because you don’t need to run high inventory numbers to make sure products are always in stock, an online store allows you to sell a wider variety of items. This means you can sell items in more sizes, have more color options, or represent more products within a popular manufacturing brand than you would at your physical location.
5. Ecommerce solutions are open 24/7 with 99+% uptime.
This means Chinese consumers can access your store at any time of day that is convenient for them. Instead of rushing to meet the 6pm closing time you’ve got, they can come home from work, have dinner with the family, tuck the kids into bed, and the shop for something that you’ve got. This convenience for the consumer cannot be overstated.
6. Purchases can sometimes happen in real time.
If you’ve got a PDF that people want or an MP3 file that contains some popular music, then you can still give customers the instant gratification of a purchase. They pay for the product and this allows them access to download it directly to their computer. Having transactions in real time is a definite benefit, although fast shipping times, such as Amazon Prime’s free 2 day shipping policy, can also provide the instant gratification customers enjoy.
7. You can develop new vendor relationships.
Because your inventory is online, vendors can see what products you’re offering. They can bid to have you represent them. The new relationships can help a business be able to increase their profit margins without changing their costs and that’s always a good outcome.
8. You can quickly scale up or down based on your personal preferences.
Starting Business in China with Ecommerce lets you add or remove products from your store with just a couple clicks of the mouse. Because there are no physical limitations on space, a business can experiment with new product lines or limit inventory options if sales are sluggish.
9. Communication can be fast and automated.
There are common questions which every business owner gets asked. Instead of needing to physically answer this question repetitively throughout the day, Starting Business in China with Ecommerce allow you to automate the process. You can upload a FAQ page with answers. Automated emails, chat boxes, and contact requests all make it easy to get in touch with you if a customer has a question.
10. Different currencies can be handled automatically.
You can accept multiple currencies and not worry about the exchange rates with ecommerce. You also don’t need to handle a lot of cash or run batch transactions either. Much of the payment process is completely automated.
The Cons of Starting Business in China with Ecommerce
1. It is difficult to give consumers a “personal touch.”
Sociability is reduced in the online shopping process. Instead of striking up a conversation or starting a relationship, most online stores just have customers find what they need, add it to a shopping cart, and then punch in their payment details.
2. It’s easier for customers to compare you to the competition.
This can be a good thing, but for first-time ecommerce businesses, it tends to be more of a negative. If your competitors already have an online store, then there’s a good chance their pricing structure has already been optimized for the internet. Consumers are going to go where they can get the best deal and that might not be your business.
3. There’s no way to try a product before buying a product.
For many customers, what seals the deal on a purchase is their own tangible first-hand experience with it. When shopping online, there is no way to really try out a product. Consumers are left with online reviews, videos, and pictures to see if they believe the value proposition offered by a business will stand up to the test.
4. Everyone needs to have a data connection of some sort.
If Starting Business in China with Ecommerce is going to work, then both the customer and the business involved needs to have access to the internet. Should either connection be interrupted, the likelihood of a purchase happening is virtually zero no matter how good the ecommerce solution might be.
5. It can be difficult to verify a customer’s identity.
Credit card fraud and identity theft are common issues which ecommerce businesses face nearly every day. Sometimes a fraudulent purchase means you lose your product and you lose the payment for your product. Insurance policies can protect you from this somewhat, but any type of insurance has some level of cost associated to it. One way or the other, you’re going to be paying something out.
6. What happens if the data you collected gets hacked?
As many China ecommerce business have proven to us over the last 5 years, a financial data hack can be a very costly venture for a business. If you are collecting payment data for processing and that data is compromised, there may be costly legal obligations that could put your entire business at risk. Investing into stringent security is often necessary, but often costly, and that may make an ecommerce solution for some businesses a non-viable option right now.
7. You can’t always fix a delay.
There will inevitably be a customer who receives a delay in the shipping of the product they’ve purchased. Because you’re using third party shipping companies, their delays become your delays. Every company starting business in China with ecommerce faces this risk. To satisfy upset customers, businesses often offer credits or discounts on future purchases, which can eat into your profitability.
8. If a site goes down, you get zero cash.
There are many elements which go into a website remaining active online. From the hosting provider to the credit card processor to even your shopping cart installation, if anything in that purchasing chain breaks down, there’s a good chance you won’t be making any money at all until the problem gets fixed. Even an outage of just two minutes can cost you a substantial loss.
9. China ICP filing & licensing requirements on Ecommerce business can be time-consuming.
We all know getting the right server to host your website is crucial, but when you want to maximize its hosting capabilities, the physical location of your server matters a lot too. When it comes to China, things get even more complicated because of its strict laws regarding the Internet. China has something it calls the “Great Firewall of China”, which is a nationwide effort by the government of the People’s Republic of China to regulate content from all websites. There is one other strict law enforced by the Chinese government, and it requires every website to have a valid ICP license.
ICP License is short for Internet Content Provider License, carried out by the Ministry of Industry and Information Technology in China, and has been in effect since 2000. Under Chinese law, all websites operating in China are required to get an ICP license, or else it will be blocked.
10. Shipping can add labor strains to your business.
It takes time to package your items to prepare them for shipping. If you’re already short on time, then you’re stuck either hiring help for this process or slowing down your turnaround times and that places a strain on your business.
Starting Business in China with Ecommerce can help you quickly expand into China market. Small businesses can become global enterprises. Opportunities from halfway around the world can make for local profitability. The benefits of being online are clear.
Yet so are the risks. Chargebacks can become a real problem for some businesses. Identity theft, credit card fraud, and hacking activities may all be very costly and could even run a business into bankruptcy under the right circumstances.
There is a lot to gain, but there are also certain risks that must be assumed. These ecommerce pros and cons for foreign business will help you to determine if going China market online is right for you. If so, then get started today so you can take advantage of everything the internet has to offer.
Related reading: 6 Keys to Start Your China Ecommerce Business.