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An Overview of China’s E-commerce Environment

November 11, 2016

A complex regulatory framework and a nuanced consumer base make choosing the right market entry model vital for foreign small and medium sized enterprises (SMEs).

Entering China’s e-commerce industry is challenging for U.S. investors, so a coherent strategy is important for investors interested in tapping into this market.

What challenges do U.S. investors face?

  • The Chinese e-commerce industry is designed for the Chinese market and is unfamiliar to foreigners
  • Government’s protectionist policies and behavior prohibit foreigners from establishing e-commerce platforms
  • China is the toughest market in the world due to the high density of domestic competition.
  • Completely different consumers and market landscape
  • IP issues; payment platforms; logistics & supply chain

Outline of a Coherent E-commerce Strategy

Step 1) Consumer Analysis: Determine suitability of product in a new market and identify e-commerce penetration of the target market as well as the usage behavior.

Step 2) Platform Selection: Before using an existing e-commerce platform or creating your own website, you should establish a legal presence in the new market or operate from abroad. And if using an existing platform, it’s necessary to ensure you are using the platform most suited to your company.

Step 3) Shipping & Logistics: Store product in new market or home country and use an e-commerce platform in house logistics or 3PL.

The maturity and fierce competition of the country’s e-commerce sector presents its own challenges for US investors. Chinese shoppers demand fast, affordable, and efficient service.

Stay tuned for more on the state of China’s economy and tips for Doing Business in China. Contact our Global Tax Services Practice for further guidance.

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