Chapter 1 - Marketing in Today's Business Milieu, Chapter 11 - Manage Marketing Channels and Points of Customer Interface, Chapter 12 - Promotional Strategy and New Media, Chapter 13 - Advertising; Sales Promotion; and Public Relations, Chapter 14 - Personal Selling and Direct Marketing, Chapter 2 - Elements of Marketing Strategy; Planning; and Competition, Chapter 4 - Understand Business-to-Consumer Markets, Chapter 6 - Segmentation; Target Marketing; Positioning; and CRM, Chapter 7 - Product Strategy and New Product Development
by marketingmanagement4e

E-Commerce in China: Potential Growth Opportunities for U.S. Based Companies

In the past several years U.S. companies are increasingly turning to China to build up their brand and expand operations. Given the explosive growth of e-commerce in China, U.S. based companies see China as a huge future growth platform. The benefit of e-commerce, as mentioned by AdAge, is it allows a company to go into cities before opening a brick-and-mortar store; The consumers can learn and recognize the brand before the company is even present. Chinese consumers have an affinity for Western brands because these brands are perceived to have a higher quality than domestic products.

Although there are enormous opportunities for U.S. brands, there are also significant obstacles with moving into China. One of the main difficulties that U.S. based companies find is that e-commerce is regulated heavily by the Chinese government. In order to combat the biggest challenge, U.S. companies often partner with a company that maintains local presence in China.

A red and yellow Chinese flag featuring Macy’s brand.
Macy’s is launching an e-commerce pilot with Alibaba in China, to help combat its decline in recent earnings. Source: Google Image.

Macy’s recently paired with a Hong Kong-based Fung Retailing Limited to help bring the U.S. department-store chain into China. Some of the first steps to be taken in the joint venture will begin with an e-commerce pilot on Alibaba’s online marketplace, which features foreign brands and merchants that can sell to Chinese consumers. Macys, through the new e-commerce partnership, hopes to make its brand more recognizable to Chinese expats and tourists visiting the U.S.

Johnson & Johnson, one of the most established foreign brands in China, has been present in China since 1985, when it first joined the country’s TV advertising boom. In order to align with other companies, Johnson & Johnson has ramped up their e-commerce presence. 40 percent of Johnson & Johnson’s advertising spending is now digital. In order to capture a larger in audience, Johnson & Johnson has recently announced that it will provide free Wi-Fi coverage in waiting rooms of hospitals, which will build the brand’s fan base on WeChat, an all-purpose app, for Johnson & Johnson baby products.

Gap has been one of several successful U.S. based first-movers into the Chinese market and has continued to build on its presence in China since 2010. When Gap made the decision to move into China, the company simultaneously opened brick-and-mortar stores and began their e-commerce marketing. Gap has built its brand awareness to be in the mid-70th percentile in first-tier cities in China. Furthermore, Gap’s revenue for China, reported in 2013, reached $300 million, just three years after launching in China, and by 2016, the company expects revenue to reach $1 billion.

A city corner in Shanghai, China with a digital GAP billboard.
Gap has not only has a strong e-commerce presence in China but also has brick-and-mortar retail stores. Source: Google Images.

China has embraced e-commerce by overtaking the U.S. to be number one in the global market. China presently has 407.6 million digital buyers whereas the U.S. boasts a fraction of that at 171.8 million digital buyers. Although the economy in China right now has seen some volatility, these U.S. companies are continuing to look to Chinese consumers as a way to expand their reach and gain revenue.

From a marketing management perspective, here are some questions to consider:

  • Research more about what strategies U.S. companies are taking to increase their presence in China.
  • What other obstacles do you think U.S. companies face when utilizing e-commerce in China?
  • Given the recent economic situation in China, do you think companies should still look to China as a way to expand their brand and/or company operations?