"What to expect when expanding your ecommerce operations into China"

How big is ecommerce in China?

China is already the world’s second largest retail ecommerce market, and is continuing to grow both in size and speed (1). Sales are predicted to rise by almost 40% in 2015 with further healthy gains projected through to 2018.

Chinese consumers spend more money overseas than any other country in the world (2). The majority of this spending is by Chinese travellers, but affluent Chinese also spend tens of billions online, buying directly from European and American companies. In fact, the foreign origin of goods is one of the drivers of online buying in China.

What is fuelling this ecommerce growth?

One of the key drivers fuelling ecommerce growth within China is the penetration of mobile devices and the way in which these devices are driving internet usage (3). Within Asia-Pacific, China has the region’s largest smartphone audience which is predicted to grow by more than 10% during 2015. Although this growth is slower than the high double digit growth previously seen, this still accounts for a growth of over 50 million users .

China is leaping ahead and embracing mobile commerce, as reflected in developments like the in-app payment capabilities of Tencents WeChat social media platform (WeChat Payment) and the Alipay Wallet mobile app.

What are the common payment types in China?

As illustrated by the graphic, payment cards are the most popular method of payment in China. Many believe that digital wallets such as Alipay and Tenpay dominate digital payments in China. While this is certainly true when C2C market place transactions are included, payment cards remain important in the B2C world. There are two types of payment cards; single branded CUP (China Union Pay) cards, which are mostly debit cards; and dual currency cards that can be used for international purchasing. While initially not too common, credit cards are gradually becoming popular with upwardly mobile online shoppers in China. Many cards have single transaction limits, in addition to daily and monthly limits.

How easy is it to do ecommerce business in China?

There is a common view that the challenges of establishing a business and delivering goods in China are more complex than for other countries, but this is not the case. Those looking to expand ecommerce operations into China may benefit from engaging with third party payment providers, such as Alipay, and Tenpay – this is different to many countries where merchants only need to deal with acquirers.

As with anywhere in the world, it is a matter of having the right information, understanding who to partner with and how to go about doing so, and effectively negotiating cultural and language differences that can help ensure the successful expansion into new markets.

For resources to help with your expansion plans into China, visit:
www.cybersource.co.uk/china.

(1) eMarketer, China eCommerce: The State of the Market 2014, Aug 2014;
(2) Chinese consumers: Doing it their way, The Economist, 25 Jan 2014;
(3) eMarketer, China eCommerce: The State of the Market 2014, Aug 2014;
(4) eMarketer Statistics, Jan 2015.

About Justin Fraser

Justin is Senior Director of Alliances and Enterprise Sales, with responsibility for managing CyberSource’s enterprise sales partnerships in Europe.

Justin has over 15 years’ experience in financial services and payments technologies, with a history of senior level positions in all areas of the payments lifecycle.

About the company

CyberSource, a wholly-owned subsidiary of Visa Inc., is a payment management company. Over 400,000 businesses worldwide use CyberSource and Authorize.Net brand solutions to process online payments, streamline fraud management, and simplify payment security. The company is headquartered in Foster City, CA and maintains offices throughout the world, with regional headquarters in Singapore, Tokyo, Miami, Sao Paulo and Reading, U.K. CyberSource operates in Europe under agreement with Visa Europe. For more information, please visit www.cybersource.co.uk.