China’s ecommerce market has exploded in the past year, and it’s become the fastest-growing consumer-to-business market in the world.
But it’s been hard for online sellers to gain traction in the country, and that’s a problem for those who want to do business there.
“China is the most complicated country for people to set up shop in,” says David Koehn, a professor at the Business School at the University of Waterloo in Canada.
“I think a lot of the confusion has been because there’s so much of a lack of knowledge of how to operate in China, and so much confusion about what the law is.”
In the past few months, there have been some notable wins for online commerce in China.
In November, the country announced a pilot program to allow online retailers to operate within a 24-hour-long window in a bid to boost sales.
This was a big win for China’s online shoppers, who now have the option to shop anywhere in the nation.
A month later, the government announced it would make it easier for online merchants to open branches across China.
Now, a single Chinese online store can open an account in just a few hours, and more than 90% of its sales are now done through the platform.
This means that the number of people looking to set shop in China has more than doubled.
But for those looking to expand their business outside the country and take advantage of new markets, things are a bit more difficult.
As of January, China’s government has said that online retailers are not allowed to open accounts outside the People’s Republic of China (PRC).
That means it’s very difficult for companies to set-up shop in other countries.
Koehm says that while China has a large number of foreign brands that are selling their products in the U.S., that doesn’t mean that Chinese consumers are necessarily buying from those brands.
“If a foreign company doesn’t sell in China and the Chinese people are still buying from the American brands, I think that would create a bit of a negative impact for that company,” he says.
“It would be hard for them to compete.”
If the government does loosen up its rules on online retailers, it could also make it harder for the likes of Amazon to continue to thrive in China as it has in the rest of the world, because Chinese authorities are now considering a range of new measures to crack down on the country’s online shopping industry.
The government has also introduced a new tax system that will be implemented in the first half of 2018, which will see online retailers subject to a 10% sales tax on their purchases.
Kuehn says that this new tax, which is expected to be in place for some time, could have a knock-on effect for Chinese online sellers.
“They’re going to be penalized more if they are doing business in the PRC,” he said.
“That’s a real risk for their business.”
China has seen a significant increase in the number and volume of online retailers since the PRCs first opened up.
“There is a lot more money being moved into the online shopping market, and a lot less being moved out of China,” says Koehler.
“The market is being dominated by one company, Amazon.com.
This is a very big problem, and China is the only country in the region where it’s not.”
Koehl said that while the country is slowly opening up to other countries, it is still a difficult market to operate.
“You’re not going to find people in China who will actually buy from Amazon.
If you are going to buy from China, it’s going to cost more,” he explains.
“We’re seeing a lot fewer Chinese people buying from Amazon in the marketplace.”