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10:27 pm ET
Dec 22, 2014

Alibaba

Western Brands Learn Some Hard Chinese E-Commerce Lessons

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  • By
  • Kathy Chu
An employee walks pass the logo of Alibaba Group at the company’s headquarters in Hangzhou, China, on Nov. 11.
Zuma Press

Western brands are learning a hard lesson as they dip their toes into Chinese e-commerce: There’s no shortcut into China.

Kyle Berner, the founder of Raleigh, N.C.-based sandal maker Feelgoodz, had hopes of rapidly building his customer base when he began selling on Alibaba Group Holding Ltd.’s mainland Tmall shopping platform in April 2012.

But six months after listing on the site, only 50 pairs of his eco-friendly sandals had been sold and sales “fell off from there,” according to Mr. Berner.

“The challenge really is what to do once you’ve gotten onto that site,” he said. “That’s what we need to overcome.”

The promise of Chinese e-commerce is hard to ignore: China passed the U.S. as the largest online retail sales market in the world by dollars spent last year, with Chinese Internet users growing 8.5% to nearly 620 million, according to Chinese and U.S. government data.

Yet harnessing the spending of China’s netizens has proven more challenging than many foreign brands expected. Growing competition, along with Chinese consumers’ discount-seeking mentality, is leading some foreign brands to rethink selling online in China.

“You have no idea of how many emails we receive that they think they can just open a shop and sell,” said David Matthieu, founder of Beijing-based Daxue Consulting. “The Chinese consumer is very difficult” to understand.

Some e-commerce advisers are now asking foreign brands to show they’re serious about investing time and money into building up sales online in China.

Frank Lavin, founder of Export Now, which helps Western brands set up on Alibaba’s platforms, said he’s begun recommending that brands with no physical presence in China spend at least $10,000 a month on marketing if they want to sell online.

“That’s the lesson we learned in the first year, they just put (the product online) and nothing happened,” said Mr. Lavin, a former U.S. undersecretary of commerce for international trade. “Distribution is no substitution for marketing.”

A common mistake foreign brands make is putting their 10 top-selling products in the U.S. online in China and assuming these goods will sell just as well, according to Scot Wingo, chief executive of ChannelAdvisor, a software provider that helps retailers set up on multiple e-commerce platforms. He recommends that retailers differentiate themselves by providing unique products to shoppers, rather than the same offering as hundreds of other merchants online.

Even if foreign companies do everything right, it could take a year or more to get traction online in China, some e-commerce consultants warn.

“There’s no magic trick to go from zero to $100 million in sales,” said Lac Tran, executive vice president of global e-commerce at Web2Asia, an advisory firm. “We’re very open to telling them that they need to look into a 12-month process before they see some sort of returns.”

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