How to Start Your E-Commerce Business in China
China is a lucrative market for foreign investors. The market trends are forecasted and therefore the products’ demands are taken into account accordingly by the local businesses. Foreign competitors looking for the window of opportunity are keen to become a key player in the markets of China.
E-commerce business in China has been flourishing for more than a decade now, this brings in the tough guns for foreign brands. Do you want to know the secret behind the explosive growth of e-commerce business in China? Thanks to its middle-class consumers, and their pockets full of disposable income, local brands have created a risk-free platform for their local audience.
Do you think you have what it takes to enter the e-commerce business in China? If yes, then you will need this guide to establish a strong understanding of the dos and don’ts you need to take care of before starting the e-commerce business.
Tax-free Purchases
Are you looking for a tax-free amount? If you are dealing with a transaction that costs 5,000 RMB, the new limit will be 26000 RMB (annually). If you purchase the products within this limit, then you are free from any charge on import tariffs.
This stimulates the opportunity to make bulk purchases and only 70% of tax will be collected at the usual rate.
Daigou is Forbidden
Long gone are the days when a seller used to buy a product outside of China at a cheaper rate and brought it back into the Chinese market for the selling purpose. This practice is known as Daigou. Although it was extremely common especially for the Chinese way of luxurious spending, once the government put hold on to, it there was no way to break the law. The Chinese government is bent on cracking these lawbreakers down. This created a monopoly in the e-commerce market, so this is good news for the foreign businesses that are looking to compete in China.
You can sell your original products for the price they are worth.
Get Your E-commerce License in China
You need to get your hands on the license at the first chance you can get. It all depends on how fast you get to actively participate and become a legal e-commerce business entity in China.
So if you are sure to advance towards e-commerce in the Chinese market, then you need two things to acquire first;
ICP Beian. It is a standard ICP License for a host website.
ICP Commercial. The holder of this license will be eligible to accept online payments. Usually, it is meant for online stores selling goods and services. Online marketplaces like Taobao, Alibaba, and others were inclined to get the license for their websites and online shopping carts. Even the Chinese version of Amazon, JD.com, asked their merchants to provide the ICP Commercial license.
Protect the Ip (Intellectual Property)
Brand-stealing is a rear house of terror for e-commerce businesses. It’s easy to copy the products, which is why it’s been a huge problem for the Chinese government. New legal actions had kept this issue in the highlight, which paved a road for success for foreign companies like Lego to experience a new Chinese market.
This also brings forth another perspective: brand consciousness. Chinese consumers do not easily trust a foreign brand, so if a company replicates an existing product, then chances are your brand quality will be compromised.
License Requirements
The Chinese government has taken measures to protect the IP. So the companies that fail to protect their IPs are penalized by the government.
Another crucial step is obtaining an official business license to conduct the e-commerce business. As mentioned above, the license requirement is compulsory which means all foreign companies must obtain it. The only way to acquire a Chinese business license is by “setting up a Wholly Foreign Owned Entity (WFOE)”. It means the company will come under the banner as a Chinese registered company owned by foreign investors.
These days, the most common type of WFOE are;
- Trading
- Consulting
- Manufacturing
Protect the E-commerce Business
The first step is already covered, i.e., protecting the IP. Once a company obtains a Chinese business license, they need to have a registered trademark as well. This extra measure was taken by the government to provide safeguards to the companies with a registered trademark in China.
In case a foreign company fails to register its trademark before its competitors, they have to purchase it at more than par value from the opportunists. Several new entrepreneurs had to face this dilemma, so to avoid this scenario make an advance entry for the trademark.
Don’t Forget Branding
Brand logo, brand name, and the product itself are the key selling points. When you are building your e-commerce business empire, remember that brand loyalty means a lot to the consumer. So when you decide for a name, make sure it is easy to remember, have an appealing logo according to your target market.
But in case if you are just expanding the already established business in China, you can improvise with the original name for the target niche. Localizing the contents of e-commerce business like a brand name or even logo grabs the attention of the public.
Be a Unicorn in the Midst of All the Santa Claus!
Marketing methodologies are somewhat the same for every business, the way those tactics are used, and at what precise time creates a difference in the market for the brand. So in a nutshell, prepare a unique selling proposition for the audience, an idea or product, which differentiates you from the rest of e-commerce businesses in China. Gain clarity by asking the right questions and when required do take help from Chinese localization services too to ensure your brand tastes the success.
