About a year ago, commercetools co-founder and CEO, Dirk Hoerig, announced the company’s intention to enter the Chinese market. His reasoning was simple: As the largest eCommerce market in the world, China is a natural fit for our products. And, as he laid out recently in a LinkedIn post, more importantly, “Our customers with plans to build operations in China are eager to tap into the region’s passionate consumer base, and those with existing operations are in need of a true composable commerce platform to help them stay nimble as local consumer needs continue to evolve.”
All one needs to do is review current statistics to confirm the power of the Chinese market:
Chinese consumers accounted for 52% of the total global eCommerce transactions made in 2022.
The country generated 2 trillion USD total GMV of eCommerce transactions in 2022, the largest volume of any single county.
Digital sales accounted for 27.2% of total retail sales in China in 2022, a growth rate of over 80% in six years.
In many ways, the country’s robust market can be attributed to the widening middle-class sector — in just 10 years, China’s upper middle class has swelled from 14% to 54% of the population. Dirk Weckerlei, Vice President of Business Development Greater China and Japan at commercetools, explained this has had far-reaching effects on the Chinese economy and society. “It’s fueled domestic consumption contributing to China's transition from mainly being considered an export-oriented country to a much larger domestic market. The middle class has become the key driver of consumer spending — and the shift is happening as we speak.
He also pointed out that this growth has also made it more difficult for businesses to scale. “In the past, the robustness of China’s complex, disparate multichannel environment made scalability challenging, and this used to be solved by adding manpower resources. Today, with rising wages and the beginning of what seems to be the beginning of an affordable resources deficiency, businesses are turning to technology to support scalability. By doing so, they can leverage this same technology to consolidate the multichannel environment into a single, streamlined omnichannel solution.”
Preparing to enter the market was a daunting task that Dirk W. has been singularly focused on for over a year. He spent months and months on research, meeting with customers and having endless discussions with Chinese nationals, our partners and partner prospects who are already supporting eCommerce clients in the country, launching commercetools Composable Commerce for China in May 2023. The product is unlike any other currently available in the market, delivering the same robust functionality and features commercetools is known for while also addressing China’s stringent governmental requirements, as well as the unique shopping behaviors and preferred buying processes of its consumers.
What makes the Chinese market unique?
Our team learned a lot about how the commerce system works in China over the past year. Here are just a few of the most interesting tidbits of knowledge they gained.
“Key opinion leaders” (KOLs) drive sales — These are powerful marketing influencers that have cultivated a specific following because they’re viewed as trustworthy experts. They are much more important in the Chinese commerce system than similar influencers are in the West.
Customer funnel vs. traffic funnel — Instead of the ad-based traffic funnel of the West, which requires that brands promote to the masses to convert sales, in China, brands can download information on their social media followers, turning them into prospects you can nurture directly.
Digital payments dominate — Traditional credit cards are virtually non-existent in China. Everyone pays with a digital wallet. WeChat, Alipay and UnionPay are most widely used, but it's important to note that not every payment system works in every city.
QR codes are everywhere — They’re used for everything — advertising, payments, product information, etc. — as a bridge between online and offline information. Even the homeless have QR codes to inspire charitable giving.
Dirk pointed out that while the majority of commercetools' customers already sell in China and attribute a significant amount of their revenue to the market, thus far, it’s required operating a completely separate local business disconnected from the global organization. So, to convince our customers to go with commercetools in China, “We have to win over their Chinese organizations and show that we understand how the Chinese market works and the unique challenges it poses — and how we are uniquely able to solve them.”
The multiple marketplaces and social platforms which are the foundation for how the majority of Chinese consumers shop — including WeChat, TMall, JD.com and Douyin (TikTok) — are fully siloed and don’t share data. This has made it necessary for businesses to create bespoke solutions for each channel, with each requiring its own unique integration and licenses that must be individually maintained. According to Marc Stracuzza, Director of Portfolio Strategy at commercetools, “Essentially, it's a giant system of inefficiency that grew out of this multiple-channel need without a solution that could handle it.”
Marc explained that what commercetools Composable Commerce for China does is, “Provide a proven enterprise SaaS commerce solution that is secure, PIPL-compliant and can integrate all these bespoke solutions and put them on a common backend.”
Instead of having to do business differently in China versus the rest of the world, it enables businesses to have a single, global solution. “It's performant, scalable and supports all the channels. It offers a centralized data layer so that when you make one change in our backend, it can propagate to all channels through the integration layer, eliminating the need to make the changes individually on each one. It's optimizing the experience and enabling the robust set of customer experiences that we offer the rest of the world.”
Marc said the standard product is a great fit for businesses that currently have a presence in China, as they have both the China-specific knowledge and the local network needed to lead implementation. However, due to the fact that the country doesn’t have a robust partner ecosystem, commercetools recognized the difficulty of customers that are new to the market will face, as they don’t have an understanding of the unique complexities and don’t know how to find China-based ISVs that can help them.
To serve this audience, commercetools is also offering a FastTrack product that combines Composable Commerce for China with a pre-composed unification solution. “We’re simplifying the entry into the market by giving customers direct access to a composable, omnichannel-enabled, China-ready solution that includes everything they need to accelerate time to market.”
To deliver FastTrack to customers, commercetools has partnered with ChatLabs, a software company that specializes in connecting global tech platforms to China. Michel Tjoeng, co-founder and Senior Vice President of Sales and Marketing of the company said the goal was to create a solution that was cheaper, better and faster for new customers to enter the Chinese market. “You discover quickly that consumer behavior is very, very different, so we’ve templated storefronts, channel integrations, social commerce and a set of APIs that is complementary to the APIs that commercetools already provide, therefore saving a ton of development effort off the bat.”
Michel stressed that because of the siloed, multichannel commerce system that exists in China, the benefits of the composable approach and MACH® technology are particularly appealing to global brands. “The value of a single, unified MACH-based backend that can power all these channels, recognize the customer regardless of where they're coming from and update prices across social media, websites and marketplaces all in one go — that's really what they’re looking for.”
Contact us to start exploring how commercetools Composable Commerce for China can expand your footprint, attract new customers and generate additional revenue.