China’s e-commerce boom part II: Haitao at its peak
Global market research company, Mintel, revealed that the Haitao trend is expected to reach its peak, as foreign products that would have previously been imported, are now available in China.
These overseas items are also present on both e-commerce websites and physical outlets, strengthening the O2O marketplace.
With consumers obtaining direct access to their favourite buys, the in-store shopping experience combined with faster delivery times and cost-effective shipping costs is set to diminish the Haitao market in coming years.
“While the Haitao market has seen rapid growth over recent years, and should maintain strong growth for the foreseeable future, it is likely to peak soon as a proportion of online retail in China,” said Matthew Crabbe, Director of Research, Asia-Pacific at Mintel.
Shift in landscape
In the short-term, Chinese brands are predicted to focus on their online presences to encourage cross-border e-commerce and reduce the associated costs and risks with brick-and-mortar openings.
However, in the future, overseas brands are expected to establish local distribution channels to gain market share from keen Chinese cosmetics consumers, signalling a natural end to further Haitao growth.
Haitao will, therefore, prove useful as an initial marketing and business strategy for foreign names to build brand awareness and form part of the familiar cosmetics sector in China.
Adopting this plan long-term becomes less attractive as overseas companies face potential customs policy changes and being pushed out by the competition due to extended shipping times and greater costs.
Practically, utilising shopping sites abroad also creates a language barrier as China’s retail market will opt for familiar and easy to understand Chinese-language information, Chinese-language customer service, or Chinese third-party online payment systems and tools over potentially unknown and perceivably untrustworthy alternatives.
Foreign brands looking to enter and succeed in China’s retail market need to update their offerings, customer service capabilities and platforms to appeal directly to this sector. Product quality and innovation will also need to be closely tailored to the Chinese marketplace to generate support and customer loyalty.
On the one hand, increasing numbers of the Chinese population travel overseas, inviting waves of shoppers looking to explore new brands and products; growing the Haitao market and maintaining its popularity.
However, this is only one niche area within China’s retail market. Mintel reports that the wider online retail sector indicates that the rise in product sales available domestically will overtake Haitao, preventing its expansion opportunities.
“This does not stop the Haitao route to Chinese consumers from offering significant potential market opportunities to foreign brands, but it does mean that Haitao is likely to be more relevant to brands looking at initial market entry,” added Crabbe.
“Retailers and brands should therefore play to their different country specialities when attempting to differentiate from their competitors,” continued Crabbe.