Decoding the e-commerce landscape in China and Japan

THE global rise of e-commerce has enabled many businesses, including small and medium-sized enterprises (SMEs), to recognise the opportunity to attract customers thousands of kilometres away from their hometowns. While many have become “born-global” retailers thanks to e-commerce, the challenges that foreign brands face when entering major markets such as China and Japan should not be underestimated.

China and Japan each have mature cross-border e-commerce ecosystems. These two are the most strategically important e-commerce markets in the Asia-Pacific region and are arguably among the most complex. Most global merchants are keen to tap into the opportunities these top markets represent. However, understanding local market nuances is crucial for success.

Many foreign brands may incorrectly presume that language is the biggest challenge to building a successful e-business in each market. This is a misconception. To build a sustainable business model, overseas merchants, especially SMEs, need to grasp the unique digital landscape and consumer preferences in each mega market.

Getting the fundamentals right

Like a traditional business entering a new market, foreign e-retailers also need to understand the target market’s digital landscape and formulate their business strategy accordingly. For instance, in China, consumers are unevenly distributed across the country. East and South China account for over 50 per cent of cross-border e-commerce consumers, with around 30 per cent located in the four major cities: Beijing, Shanghai, Guangzhou, and Shenzhen. Instead of trying to cover the entire market, foreign e-retailers should prioritise metropolitan areas first and explore the best times to expand to other areas in the country.

Promising markets with a huge number of consumers also mean keen competition, especially from incumbent local brands. Foreign brands need to understand where the biggest competition lies, and which sectors are underserved, to make accurate evaluations. For example, in Japan, the fashion industry is highly competitive, with many sectors where Japanese brands lead globally.

Many international brands might assume that US-based international platforms and marketplaces such as Amazon and eBay are effective channels. However, these platforms may not be as popular as their indigenous counterparts in each market. Taobao and JD Worldwide in China, and Rakuten in Japan, are more popular channels.

Understanding unique local consumer preferences

Consumer appetites vary in different markets, and mega markets such as China and Japan have their own patterns. For instance, the hottest e-commerce seasons in China are Singles Day (Nov 11) and Couples Day (Dec 12); in Japan, there are peak shopping seasons over the New Year, mid-year, and year-end. International e-commerce merchants need to plan their marketing campaigns in advance for these important periods.

A tailored marketing strategy is critical to engage consumers and address their unique appetites. Foreign companies need to ensure they establish a presence on top local social channels in each market instead of relying on international pages. Brands eyeing the Chinese market need to establish their presence on WeChat and TikTok and become familiar with promotions via livestreaming. While penetration of US-based social media such as Facebook and Instagram is relatively better in Japan, setting up local channels may also be necessary to better engage consumers in targeted markets, for instance via Line in Japan.

Local payment systems are also a crucial point to address in the customer journey. International credit cards may not be as common or convenient in these markets. WeChat Pay and Alipay dominate the China market, and many consumers do not own any international credit card. In Japan, credit cards are the dominant payment tool and the JCB card is more popular than others. Foreign businesses must set up their channels to provide popular payment options for local consumers.

Digital channels lower the barriers to market entry, but the best business strategies are underpinned by smart, local market insights. Finding new customers in international markets is a smart approach for SMEs aiming to drive revenue growth, but the strategy needs to be supported by a reliable partner in overseas markets.

The writer is senior vice-president, marketing and customer experience, Asia-Pacific, at FedEx Express