The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD

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The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
RISK & R E WA R D

The Land of 800 Billionaires:
Finding Cross-Border
Commerce Success in China
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
In the hours leading up to Singles Day 2017, Nicole Kidman, Pharrell Williams
and Maria Sharapova took to a stage in Shanghai for a televised celebration of
consumerism gone wild.
Singles Day in China, also known as Nov. 11, is a day celebrated with a breathtaking display of online buying
in the world’s largest and fastest developing ecommerce economy. In all, Chinese consumers spent $25
billion on Singles Day 2017 on Alibaba alone, according to The Guardian, just a touch more than the annual
gross domestic product of Finland.

It is an eye-popping event, but also a perfect symbol of how baffling it can be for European and U.S. retailers
contemplating the best way to take advantage of the power and momentum of ecommerce in China.

The opportunity is                                   Singles Day Spending on Alibaba
huge. But the road to
                                                30
expanding an EU- or
U.S.-based ecommerce                            25
enterprise to China is
twisting. It is dotted
                          Billions of Dollars

                                                20
with alternate routes
and intersected by                              15
paths that lead to
crushing dead ends.                             10

This ebook will explore        5
the ecommerce
opportunity in China
                                         2013         2014         2015        2016              2017
and the challenges for
                                                                               Source: Alibaba via TechCrunch
a retail enterprise that
needs to line up a new breed of marketing, merchandising, checkout, order management, fulfillment and
customer support to serve the world’s most populous country.

A few things for retailers to keep in mind as they think about a move into China:

First, this is not well-traveled ground. Only in recent years has China become the sort of market that global
retailers today are anxious to figure out. That’s largely because the country owes its status as a prime cross-
border ecommerce opportunity to a few recent developments.

The developments start with the country’s dramatically expanding middle class. The Chinese government’s
decision to relax customs and duty requirements on consumers’ cross-border ecommerce purchases is
another.

On the technology side, the omnipresence of mobile phones in China — and Chinese consumers’ comfort with
using phones and mobile payments for virtually any purchase — play a vital role in the country’s ecommerce
evolution. Closely related is the rise of mega-marketplaces such as those run by Alibaba and JD.com.
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
TIP
                                                                      Find a Chinese partner
                                                                        or be sure to have
                                                                        Mandarin speakers
                                                                      on the ground in China.

                                                                 marketplaces, such as Alibaba’s Tmall
                                                                or JD.com, which can manage marketing
Technology is also driving the creation of service              and the logistics and the other back-end
providers who rely on ingenuity and innovation                   work of selling online.
to help cross-border sellers crack the China code.      ■■      Launch a website in China while working
They offer marketing and localization help; order                with Chinese partners to build the
management; payments and fraud protection;                      front-end and back-end commerce
shipping and customs; regional and last-mile                     infrastructure to serve Chinese
delivery and customer support.                                  consumers.

In short, it’s never been easier for retailers based    Generally speaking, whatever the partnership
in Europe and the United States to sell into China.     arrangement, the idea is to take a page from
But, that doesn’t mean it’s easy.                       the digitally native retailers, merchants who
                                                        build a scalable ecommerce stack, comprising
“There are a lot of little challenges along the way,”   a confederacy of tech partners who manage
 says Garrett Robertson, a senior business analyst      ecommerce operations and who can be
 at Flow, which advises merchants on going              swapped out for more effective alternatives if
 global and coordinates the providers they need         things don’t go right.
 to make the move. “Everybody is still trying to
 figure out the best way to go about it. So there is    The goal is to orchestrate, not operate, which
 no definite answer on what the right way to go is.”    allows a cross-border retailer to focus on the
                                                        core business and on ensuring a friction-free
So, where to begin?                                     buyer experience while the tech partners
                                                        provide the infrastructure to get the job done.
Spoiler alert: The most common key to success
appears to be to avoid going it alone. Retail           If seeking new markets in China sounds like it
success in China requires a partner who knows           comes with a lot to think about, it does. Those
the territory. And when it comes to connecting          who have been there tell the Global Ecommerce
with the right partners, retailers have taken three     Leaders Forum (GELF) that retailers expanding
basic approaches:                                       sales to China should brace themselves for
                                                        frustration, disappointingly slow progress and
■■       llow Chinese consumers to come to
        A                                               a rapidly changing environment in terms of
         them, buying from their domestic U.S. or       consumer behavior and government regulation.
         European websites and enlisting experts
         to help with shipping, duties, taxes and       “This is China,” a section heading of GELF’s 2017
         delivery.                                       report on ecommerce in China reads, “Expect
■■      Open a store on one of the big                  no shortage of challenges.”

                                                                                  R ISK & R E WA RD R E P ORT   3
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
The Opportunity is Likely
                      Worth the Pain
                                                                                                                             TIP
                                                                                                                   Localize your site to the
                                                                                                                  extent possible, including
                      So, why bother?                                                                            Chinese language, currency,
                                                                                                                      payment options.
                      China’s middle class — think consumer class —
                      numbers 430 million and is expected to hit 780
                      million by the middle of the next decade. Those
                      consumers fueled a $1.15 trillion online market
                      in China last year, according to the Chinese
                      government. And that market is expected to grow
                      to $1.8 trillion by 2022, according to Forrester, at                               “So that’s the good news,” Tsay says.
                      which point it will be larger than ecommerce in the                                “And it ought to be for everybody, including
                      United States, Japan, the UK, France and Germany                                    the European merchants.”
                      combined.
                                                                                                         In fact, it’s good news especially for European
                      Ecommerce growth in China                                                          merchants. Montreal-based retail strategist Carl
                                                                                                         Boutet notes that the European ecommerce
                      1250
                                                                                                         market, particularly if you view it country-by-
Billions of Dollars

                                                                                                         country, is reaching saturation more quickly
                      1000
                                                                                                         than the U.S. market and needs a new source of
                                                                                                         customers.
                       750
                                                                                                         Not only that, but Robertson argues that European
                       500                                                                               merchants are better situated than their U.S.
                                                                                                         counterparts to expand into China because
                                                                                                         European merchants have always had a cross-
                               2014        2015        2016            2017
                                                                                                         border view.
                                                  Source: Alibaba via TechCrunch

                                                                                                         “They know this from day one and cater their
                      “Basically the retail landscape in China has sort
                                                                                                          sites to international consumers, knowing even
                       of leapfrogged the western retail format, in just
                                                                                                          European consumers have varying expectations
                       a matter of years,” says Andy Tsay, a Santa Clara
                                                                                                         — currencies, delivery windows, languages, etc.,”
                       University business professor, who has frequently
                                                                                                          Robertson says. “So it can be easier for them to
                       taught in China.
                                                                                                          expand to other markets because their tech can
                                                                                                          handle it.”
                      Even more important for retailers in the United
                      States and Europe with eyes on China are these                                     Cross-Border Ecommerce Spending in China
                      two facts: Cross-border ecommerce sales in China
                      surpassed $100 billion last year, with the average                                   200
                      cross-border consumer spending $848, according
                                                                                   Billions of Dollars

                      to analysts Frost & Sullivan.                                                        150

                      In fact, nearly one-quarter of Chinese digital                                       100
                      consumers will make cross-border purchases this
                      year, according to eMarketer. That group will swell                                   50
                      to 40 percent by 2020, says Flow’s Robertson,
                      citing Forrester research.
                                                                                                                     2016           2017            2018            2019
                                                                                                                    Source: Chinese Ministry of Commerce via Internet Retailer
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
Who the Consumers Are
  Chinese consumers have demonstrated that they’re ready to embrace the right retailers from outside
  China. Empowered Chinese consumers are hunting for bargains, yes, but more likely they are looking
  to ensure that they buy goods they perceive as higher quality. And, Chinese consumers also buy
  from European and U.S. retailers for assurance that the products they are buying are not counterfeit,
  especially when it comes to luxury brands, health and beauty products and food.

  Those priorities are distinctive, if you look at the rest of the world, according to a survey by PayPal
  of consumers worldwide. Those shoppers said price was the number one reason they bought cross-
  border, followed by free shipping, according to “PayPal Cross-Border Research 2018.” Finding hard-to-
  get items ranked fourth.

TIP
Up your mobile and social
game. Chinese consumers live on their
phones and pay close attention to
internet celebrities.

                                                                       That China’s consumers’ motivation
                                                              for cross-border buying is different from the
                                                        world as a whole should come as no big surprise.
                                               GELF’s 2017 report, “Catching the China Ecommerce Wave,”
                                                               repeatedly reinforced that China is distinct.

                   “China is one of the top markets for all of our brands,” the report quoted an unnamed
            U.S. ecommerce leader saying. “The underlying theme is that China is different in every way.”

         The differences in motivation between Chinese cross-border consumers and shoppers in other
        countries is a reminder that no matter where a retailer wants to sell, it’s a fool’s mission to dive in
                                                            without knowing the consumers it’s selling to.

     “Know your customer” is a retail bromide as old as retail. But never is it more important than when a
       merchant is making a move into a new international market. With the continuing rise of the middle
   class, Chinese consumers have shifted from buyers of the need-to-have to buyers of the nice-to-have.

                                                                                      R ISK & R E WA RD R E P ORT   5
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
The change means retailers must pay far more attention to the
consumer experience. Chinese shoppers revel in discovery.
They spend more time when they shop online than do U.S.
and European consumers — averaging 30 minutes a day on
Alibaba’s Taobao marketplace, triple the time U.S. consumers
spend browsing, according to the Boston Consulting Group.
They also prefer more detail in product listings and more
photographs than their American and European counterparts
do.

“In comparison to the U.S., the typical Chinese web site is
 very busy, especially the home page,” an unnamed retail
 executive told GELF for its report. “The detail pages on
 Chinese websites have a lot more info. Images and rich
 media are (important) because of the trust issue.”

The evolution of Chinese consumers has come rapidly
and is spreading from big, tier-one and two cities, like
Shanghai and Beijing, to typically more remote tier-three
and four cities. The trend is being powered by broader
internet penetration and new delivery techniques, such
as package-dropping drones.

In fact, ecommerce as a percentage of total retail in
China rocketed from less than 5 percent in 2010 to
15 percent in 2015, according to calculations by the
Boston Consulting Group.

Chinese consumers have evolved rapidly in other
ways, too. They fully embrace online buying, a
mobile-first lifestyle and a cashless society, where
digital wallets like Alipay and WeChat Pay are used
for even the smallest purchases, including tipping
buskers on the street.

“It’s happening quickly there,” says Tsay, who adds
 that not long ago, China was a cash economy.
“Today mobile payment is widespread,” he
 continues. “Nobody pays with cash, except for
 tourists.”

And a relatively few Chinese consumers
buy on the desktop. By 2020, 74 percent of
Chinese ecommerce will be conducted on
mobile devices, compared to 46 percent in
the United States, according to the Boston
Consulting Group. Furthermore, mobile
purchases will continue to be category
agnostic, BCG says, including everything
from food to luxury automobiles.
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
How Consumers Buy
Hand-in-hand with China’s mobile revolution is the rise of social selling, which has taken China by storm.
Retailers lure buyers with high-production events on Weibo and WeChat featuring Chinese celebrities
hawking fashion lines, cosmetic brands or even hot car models on social media, with an
option for viewers to buy — then and there.

WeChat, a platform that rolls the idea of Twitter, Snap, YouTube, Facebook, PayPal, calling features
and texting all into one, is an emerging powerhouse as a sales channel. eMarketer says 34.6 percent
of Chinese consumers spent four or more hours a day on WeChat in 2016, up from 17.2 percent the
previous year.

Just how powerful is the platform, which has 902 million daily users and is owned by social and gaming
giant Tencent?

Consider Fang Yimin, known as “the Goddess of Shopping,” who pitches for luxury brands
Tiffany & Co., Burberry and Giorgio Armani, according to the web publication Style.
The Style story says Yimin sold 100 $45,500 Mini Coopers on her WeChat blog
recently — in five minutes. That’s nearly a million dollars a minute.

Victoria’s Secret looked to create and ride a social media buzz in
China by moving its signature fashion show to Shanghai in 2017.
The event included a star-studded lead-up television special
the day before Singles Day; the fashion show itself, featuring
Victoria’s Secret models, Chinese supermodel Ming Xi,
British pop sensation Harry Styles and Chinese pop
star Jane Zhang. All that was followed by the televised
version of the fashion show later
in November.

And while social media did blow up over the event,
it was also a symbol of what can go wrong in China.
Vanity Fair, Forbes and others noted that megastar
Katy Perry and a number of models were denied
entry by the Chinese government and were
therefore unable to perform as planned. On top
of that, Chinese supermodel Ming Xi tripped and
fell on the catwalk, adding to the missteps with a
literal one of her own.

All of which is a reminder that any retailer looking
to expand into China needs to have a deep
understanding not just of social media, but
of Chinese social media.

“Social media is a huge driver for a lot of these
 brands,” Flow’s Robertson says.
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
What Consumers Want
Yes, China is a gigantic opportunity. But obviously each retailer needs to figure out whether the country
is a big opportunity for them. Retail is made up of verticals and often broken down into categories, such
as apparel, home goods, beauty, electronics, jewelry etc. And each vertical has its own appeal or lack of
it, depending on the market a retailer is targeting.

As a retailer, if you want to figure out whether what you’re selling is what Chinese consumers are
buying, try deconstructing the reasons Chinese consumers say they make cross-border purchases.

                                                                                   TIP
Frost & Sullivan and Azoya Consulting surveyed Chinese
shoppers who buy directly from retailers in other countries.
In descending order, cross-border consumers told the firms
they were:                                                                 Consider whether the
                                                                          products you sell even
■■     Looking for higher quality and more reliable products             make sense for the cross-
■■     Trying to avoid fake or counterfeit products                       border market in China.
■■     Taking advantage of a lower price
■■     Buying products that were not available locally
■■     Curious about trying a new buying channel

As retailers ask themselves how their products line
up with those characteristics, they should also consider what
consultants say. Chinese consumers look to foreign sellers for luxury items from prominent brands.

Why Chinese Consumers Shop Cross-Border

     70%

     60%

     50%

     40%

     30%

     20%

                                                                                                      ,
                         ry                      le                           k
                                                                           Ris s                 lity
                      o T el                l ab          pe
                                                             r                                 a
                    t
                  us nn                va
                                          i
                                                        ea              w
                                                                      Lo Fak
                                                                              e              Qu ble
               rio Cha              t A cally         Ch                                 h er elia
              u
             C w                  o
                                 N Lo                                   of             g
                                                                                     HI ore
                                                                                             R
              Ne                                                                       M

                                                                 Source: Frost & Sullivan Consumer Survey
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
“The Chinese consumer is very aware of luxury                             by grocery purchases, cited by 19 percent of
 and aware of counterfeits,” Robertson says.                              respondents. It’s no coincidence, for instance,
“They want the name brand because they want                               that Kroeger just made a big move into China
 to outshine their friends. They only want to buy                         with online groceries.
 luxury goods from a known luxury retailer. So,
 they only want to buy Gucci from Gucci directly.                         As retailers crack the code on China, it’s wise
 They only want to buy from Louis Vuitton directly,                       to remember that there is no one China — and
 from Neiman Marcus directly, because they know                           therefore no one code. China is a country of 3.8
 that name.”                                                              million square miles, the size of Canada. Nearly
                                                                          1.5 billion people live there in geographies and
Health and beauty products and certain food                               climates as varied as any in the world, speaking
and nutrition items are also highly desirable from                        several languages with hundreds of dialects and
foreign retailers, in part because of past scares                         variations.
involving counterfeit products, including baby
formula.                                                                  “China has Beijing and Shanghai. Each of those
                                                                           markets at any given moment in time could
The Frost & Sullivan survey with Azoya would                               have very different customer demands, just
appear to back that up. Fashion led the way                                based on the climate,” says Jeff Sward, CEO of
when it comes to cross-border purchases, with                              Merchandising Metrics, who recently finished
22 percent of respondents saying they make                                 a year doing retail consulting in China. “The
fashion purchases at least once a month directly                           range of diversity of ethnicity and climate, kind of
from foreign retailers.                                                    puts an exclamation point on how to study that
                                                                           market and how you slice and dice it in terms of
Next was beauty and cosmetics, with 20 percent                             customer profile.”
making monthly purchases, followed closely

Percentage of Consumers Who Buy Specific Products Cross-Border

25%

20%

 15%

 10%

 5%

                     s              &                                 y                    re
                 nic            are          h&                Ba
                                                                  b
                                                                                        isu         ce
                                                                                                       ry           &                 n
             tro             ew    re    ealt ion          &                          Le           o             uty tics        shio
            c              us itu       H trit         m                                        Gr             a
                                                                                                             Be sme           Fa
        Ele              Ho Furn         Nu         Mo                         t s&
                                                                            or                                Co
                                                                          Sp
                                                                                                 Source: Frost & Sullivan Consumer Survey

The Chinese consumer is very aware
of luxury and aware of counterfeits...”
                                                                                                            R ISK & R E WA RD R E P ORT   9
The Land of 800 Billionaires: Finding Cross-Border Commerce Success in China - RISK & REWARD
TIP
                                                                        Determine which
                                                                      channel or channels
How to Meet Consumer Needs                                           make the most sense
                                                                     given your resources,
                                                                      timelines, goals and
Once a retail enterprise understands the                            prospective customers.
consumer it is going to be selling to, it needs to
decide just how it’s going to sell. Some of the
world’s large retailers, including Macy’s, Walmart,
Marks & Spencer, Galeries Lafayette, Louis
Vuitton and Gucci, went all-in on China in recent
years, taking an omnichannel approach with
mixed success.                                        Again, the three main paths to cross-border
                                                      commerce in China are:
Macy’s is rethinking its China strategy, having
ended a partnership with the Fung Group               ■■      Selling into China from the retailer’s main
and pulled out of physical stores. Walmart is                 domestic site.
a major investor in JD.com and is involved in         ■■     Opening a store on one of the major
several commerce partnerships in the country.                  marketplaces run by Alibaba, JD.com
Marks & Spencer closed its Chinese brick-and-                 or a number of smaller players.
mortar stores in 2016 and then pulled out of          ■■      Moving into China with a localized
the ecommerce market in China a year later.                    website and operation.
Galeries Lafayette recently expanded from pure
ecommerce to omnichannel in the country. Louis        And the fact is, many retailers use a combination
Vuitton has closed eight stores in China, but         of strategies to broaden their reach in China and
says its China future looks bright. And Gucci is      to learn what works and what doesn’t.
being held up as a leader in deploying social
media to drive sales in China.                        Perhaps the simplest way into China is for a
                                                      retailer to sell from its existing domestic site.
But building a full-on omnichannel retail empire      There are challenges: Chinese consumers need
in China is expensive and high risk, which leaves     a reason to come to a retailer’s site and they
other foreign retailers taking a lighter, test-and-   need a way to find it. Shipping requires some
learn approach.                                       gymnastics, sometimes including a reshipper
                                                      that bundles individual orders, and agreements
                                                      with last-mile delivery companies in China.
And there are payments, taxes and fraud to           Internet Retailer found that 100 of the U.S.-
consider. The overwhelming popularity of AliPay      dominated IR 1000 retailers have a presence on
and WeChat Pay makes them must-haves for             Alibaba’s Tmall, for instance. And GELF found
those selling into China. Taxes and duties can       that nearly 35 percent of the retailers it surveyed
either be handled by the shipping company            sold via a Chinese marketplace.
when the package reaches Chinese customs or
a merchant can require the end customer to pay,      And why not? Online giants Alibaba and
meaning a trip to pick up the package and pay        JD.com accounted for more than 80 percent of
the fees — not a great customer experience.          ecommerce sales in China last year.

As with any global expansion, fraud protection is    Opening a shop on Alibaba’s Tmall or JD.com
a concern, given that merchants are selling into     turns much of the operational work over to
a market of unknown customers with unknown           those third parties. The marketplace handles
purchasing histories. China has a thriving online    the retailer’s website, ordering back end and
fraud industry, according to Experian, which said    fulfillment. A retailer’s inventory can be stored
China led the world in overseas fraud attacks last   duty-free in a free-trade zone in China. When
year.                                                the products are shipped, they are treated the
                                                     same as if the Chinese consumer bought them
It’s important, then, that merchants from the        overseas and carried them home personally,
United States and Europe find a fraud protection     which generally reduces the tax and duty due
provider that uses a large, global transaction       on the foreign product.
database and machine learning to spot fraud
patterns in geographies that a particular            As with Amazon, turning to a marketplace also
merchant hasn’t yet established any history with.    means you lose a certain amount of control
                                                     over your operations and miss out on valuable
As for fulfillment and last-mile delivery issues,    consumer data. There have also been some
a host of companies, including Pitney Bowes,         murky disputes between marketplace sellers
eShopWorld, Flow and others will take on the         and the marketplaces they sell on involving
work of getting the goods to customers buying        pressure for exclusive deals and retaliation,
across borders.                                      according to CNBC.

The Chinese government has also made things          Selling on a marketplace isn’t necessarily cheap,
slightly easier for cross-border sellers in recent   either. Alibaba’s Tmall, for instance, charges a
years, treating small online purchases from          deposit that can run from $15,000 to $40,000.
foreign websites as “personal” purchases by          There are fees that can run into the tens of
Chinese residents. That reduces fees and red         thousands for building product feeds and
tape and makes the transactions, from the            for marketing and customer acquisition.
consumer’s perspective, much like a standard
domestic order.

That said, turning to one of China’s established
marketplaces is by far the most popular
approach, with about 65 percent of cross-border
                                                                      TIP
                                                               Be transparent about
ecommerce being conducted there,
according to estimates.                                        any fees for shipping
                                                            or taxes that will be added
                                                           to an item’s price, including
                                                             import fees a consumer
                                                             might be responsible for.

                                                                               R ISK & R E WA RD R E P ORT   11
But it is a way into the Chinese market, which            It’s possible, if a brand is big enough and well-
can seem mystifying to outsiders.                         known enough, for a retailer to set up its own
                                                          online-only operation in China.
“I hate to oversimplify like this, but why fight
  them? Just join them,” Sward, of Merchandising          “People do it all the time,” Robertson says. “A
 Metrics, says. “You’re already going to be in             lot of those luxury brands do it all themselves.
 intense competition. But to get a human being             They do it all in house or they have development
 away from one of its default websites I think is a        agencies that are solely focused on each of
 huge challenge.”                                          those different websites that they maintain.”

Those who have opened marketplace shops                   But even the biggest brands tend to connect
point out that it is not a set-it-and-forget-it option.   with a Chinese partner — a Chinese retailer,
Some suggest having a Chinese staff or at                 a Chinese investor or a global ecommerce
least a dedicated staffer in China who speaks             consultancy — to ensure success.
fluent Mandarin in order to keep on top
business operations.                                      Luxury designer Louis Vuitton, for example,
                                                          has weathered economic and social storms
“I think it makes it easier if you have somebody          in China since the 1990s by working closely
 on the ground that’s able to lead you in the right       with the country’s digital giants. In 2012, it was
 direction” says Flow’s Robertson, who meant the          among the first foreign luxury brands to launch a
 advice for retailers no matter the Chinese sales         WeChat account, tapping into consumers’ daily
 channels they chose.                                     lives, according to Jing Daily.

                                                          It has collaborated with Baidu, “the Google
                                                          of China” on innovative digital advertising
                                                          campaigns and an AI-driven tool that suggests
                                                          fragrances based on a customer’s facial features.

                                                               Early on, the retailer offered a click-and-
                                                                 collect service. It has more recently
                                                                   expanded its ecommerce fulfillment to
                                                                     26 new cities and seen a 14 percent
                                                                      increase in visits to its site, Jing
                                                                        Daily says.

                                                                          Babyhaven, a California-based
                                                                           seller of baby products, has
                                                                            doubled-down on China.
                                                                            After starting out by shipping
                                                                             orders to China from its U.S.
                                                                             warehouses, it eventually
                                                                             set up a store on Alibaba’s
                                                                            Tmall. Ultimately, Babyhaven
                                                                            decided to launch its own
                                                                            Chinese website with the
                                                                            help of Shenzhen-based
                                                                           Azoya International, which
                                                                          specializes in Chinese expansion.
                                                                        Babyhaven now ships its orders
                                                                       from warehouses in China,
                                                                     reducing costs and improving the
                                                                    customer experience it provides.
It’s important, then, that merchants from
                                    the United States and Europe find a fraud
                                  protection provider that uses a large, global
                                            transaction database and machine
                                              learning to spot fraud patterns...”

“We hope that by the end of 2018, we will constantly see between 300 and 500 sales a day on the
 Chinese site,” Babyhaven CEO Jason Becker told Chain Store Age, comparing the figure to the as
 many as 6,000 orders a day it processes domestically.

Working with a cross-border agency like Azoya or Flow means retailers can off-load the ecommerce
operations that make commerce go. Handling those details as a retailer can otherwise be daunting to
say the least.

“For a smaller, lesser-known retailer, that’s a huge investment to make,” says Flow’s Robertson. “What
 we do and what we’ve seen work, is we offer localized language and payment and shipping carriers.”

An agency well-grounded in China can round up Chinese digital agencies, shippers, payment
gateways security firms and fraud protection providers, and advise retailers on any regulatory,
economic or political considerations.

They can make sure that prices are in local currency and that consumers are able to pay with Alipay,
WeChat and China Union, not only for convenience, but to build trust with consumers by offering
experiences that are familiar.

“Working with those local partners to ensure the smoothest transaction for that customer makes it a lot
 easier for the customer,” Robertson says, which in turns increases the lifetime value of that customer.

                                                                                 R ISK & R E WA RD R E P ORT   13
If you’re thinking about China,
consider these six tips:

 1
     Start at the beginning: Is China even right for your enterprise and the products you sell?
     Chinese consumers look to cross-border sellers for luxury brands, food products, health
     and beauty items and goods they cannot buy domestically. And of course, like shoppers
     everywhere, consumers in China like a good deal. If you can win on price, that might
     be reason enough, though you might one day be undersold. You don’t want to enter a race
     to the bottom.

 2   Consider how you want to go into China: Selling from a domestic website in your home
     country that Chinese consumers visit? On one of the major Chinese marketplaces? By setting
     up a website and fulfillment operation in China? Does it make sense to use more than one
     sales channel?

     Localize your site to the extent possible: You want customers to be comfortable shopping your
 3
     sites. A Chinese language site with an abundance of descriptions and photos is ideal. Display
     prices in local currency and and include Chinese payment options, such as Alipay and
     WeChat Pay.

 4
     Find a partner and/or build a China-based staff: Even with Chinese consultants or experts
     advising you, it’s wise to have a team or team members who speak Mandarin in order to keep
     up with the fast pace of consumer demand and ecommerce in general.

     Up you mobile game: Chinese consumers live on their mobile devices even more so than most
 5
     of the rest of the world. Your mobile experience has to be top-notch if you don’t want to risk
     losing customers for good.

     Be transparent in pricing when it comes to taxes and duties. Ideally, reflect the costs on your
 6
     sites. Sending goods to China and leaving the payment of taxes and any required duties to
     customers is a recipe for a bad customer experience, which never ends well.

     Source: Garrett Robertson of Flow and Signifyd reporting
Signifyd, the world’s largest provider
                                                           of guaranteed fraud protection, enables
                                                          online retailers to provide a friction-free
                                                         buying experience for their customers.

                                                     Signifyd leverages big data, machine
                                                    learning and domain expertise to provide
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                                                    fraud on approved orders that later turn
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                                                         This effectively shifts the liability for
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                                                            them to increase sales and open
                                                              new markets while reducing risk.
                                                               Signifyd counts among its customers
                                                                  a number of companies on the
                                                                     Fortune 1000 and Internet
                                                                        Retailer Top 500 lists.

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