The Seven main modes of e-commerce in China
By Penno Chen(Target China)
04 Feb 2017
1. M2C mode(manufacture to consumers)
Typical website: Tmall global, as an open platform that invites international brands for settlement purposes.
Obtains the advantages of deep trust from users, due to the retailers are required to own overseas retail qualification and authorization therefore products directly mail from overseas as well as the provision of local refund & exchange service. However, the disadvantages are that the characteristics are mainly third-party operation that requires high cost and weak control of brand management. This is still in the process of improvement.
2. B2C mode(business to consumers)
Typical website: JD, Jumei, Mia
Obtains the advantages of direct participation in the supply chain, logistics warehousing business process, high sales flow and good timeliness. The usual B2C website will also apply “direct mail + flash purchase sale” and other activity modes to complement SKU’s richness and to ease supply chain’s pressure.
Disadvantages are the limitation of categories. This mode at the moment is mainly focused on popular and standard products. In various areas commodity inspection customs are independent, products that may travel through depends on the limitation of different area’s local policy. Guangzhou is an example which does not permit the entry of health care and cosmetic products. Disadvantage also includes financial pressure and this is due to a large amount of capital needed to obtain upstream supply chain, enhance the logistics clearance time, build warehousing in the bonded area, price competition and finally subsidise users and improve refinancing. Capital refusion plays an important role in this situation. At the current stage, people who obtain capital, flow and decision-making ability of resources begins to intervene. This mode has basically developed a threshold and is not suitable for start-up enterprises to easily enter.
Below discusses extremely popular maternal products, such as Mia.
Maternal product has the advantages of easily winning the market size of cross-border E-business because of its large demand, and high frequency. The majority of maternal ecommerces wish to decrease the supply chain, build the brand, obtain trust flows and expand to other high-margin or spot category, dilute the concept of imported goods in future.
Disadvantages are that maternal product categories have its own particularity. China’s consumer only admits to certain popular brands and are certain to read the origin of the product before purchase. Popular brandings such as Kao, China are not able to directly sign the contract for product supplies. Maternal e-commerces at current stage are using composite supply chain to ensure product supplies.
Due to this, upstream supply chain becomes unstable, pricing becomes basically transparent as well as no margins. Currently, the majority of ecommerce owners uses maternal category as the essential category to attract the conversion flow. On the other hand side, innovating enterprises are gradually decreasing the ratio of maternal products or travel in other paths, starting different direction with different competition.
3. C2C mode: Overseas buyer system
Typical website: G.Taobao, YMatou, Haimi, Jiemi.
From the positive perspective, C2C mode is a more liked and stable mode, building the width of the supply chain and options. Until now the development of ecommerce, regardless to the import or outport, online or offline, its essence is still commercial retail and consumer awareness. From the industrial economy to information economy, few changes of the commercial retail are consumer dominance, producer diversification and brokers information. However, commodity core competitiveness has become a personality need and emotional satisfaction.
In this mobile web period, the direct segmentation of the crowd in its similar population obtains a great degree of similarity in the choice of goods and spending power and the influence and connection between people are magnified. The flow is fragmented by the population of 1980 and 1990’s values and lifestyle decisions. The generation population has the demand spending logic of ecommerce recommending products meeting their demand as well as their usual purchase and this leads to the need of improvements of ecommerces. Next, facing the high richness of current commodity, saving decision in cost becomes extremely important——Don’t make me think. However, economic mode C2C can promote users to precipitate in spiritual social dimension, buyers can build brands by their own strong fashion sense and influence to obtain recognition and share of value also to build personal trust mechanism.
However, C2C mode surely also obtains certain disadvantages and this includes traditional mode of profit earning through advertisement and rebate, poor control in service experience, personal Daigou(second person purchase) obtains legal also policy risks and buyer’s platform only has the conversion rate less than 2%. In the early stage, how to obtain flow, increase conversion, esblish the effectiveness from overseas Taobao’s fashion brand and balance the scale growth of user to buyers are all difficult obstacles.
4. B2B2C(Business to Business to Consumers)
Typical website: Haituncun
Haituncun as an example, trader/suppliers docking the front of ecommerces backstage. Such as users place order through Mia, Haituncun directly delivers the product to the user and the product will not travel through Mia. Cross-border supply chain service provider process mailing through bonded mode and cooperate with of cross-border ecommerce platforms and provide product supply, the platform then provides user orders to service providers and directly mail the product to users. The majority of these service providers will additionally provide supply chain financing services. The advantage is convenience and no inventory pressure, however, the disadvantage is B2B2C uses the name of cross-border ecommerce to process trading actions, can not reach upon C-side users also are difficult in maintaining long-term value.
5. Overseas direct mailing ecommerce
Typical website: Amazon
Advantages are it obtains worldwide quality supply chains, logistic system and rich SKU, however, the disadvantages are cross-border ecommerces will still need strong conversion marketing ability within the border and need to obtain certain understanding toward the demand of native consumers. It is to be considered whether Amazon obtains the ability to enter China’s native market.
6. Rebate consumption guide/ substitute operation
Typical website: Momoso, Haimao
Technical is one of the forms, examples include Momoso, Haimao. These technical platforms automatically collect overseas main ecommerce website SKU, automatic translation, analytic semantics and provide a large amount of Chinese SKU supporting customer order. This is the very first model of cross-border ecommerce platform.
Another form is Chinese official website substitute operation, directly sign cooperation with overseas ecommerce business and operate the Chinese official website on behalf of them.
Both formations obtain early stage advantage including easy enter, low cost, solves the issue of information flow, rich SKU and easy to research. However, the disadvantage is long-term lack of core competitiveness, real-time update of inventory prices and obtains high technical requirements. Metao and other companies who originally established with this purpose are constantly making transformations.
7. Content sharing/ Community information
Typical website: Red Book
The content leads to consumption forming natural conversion. Advantages are natural overseas brand cultivation base, the flow then is brought to the welfare agency for trading purposes, however, requires strong supply chain ability for long-term operation.