The Fierce Competition in China is Proving To Be a Tough Place for Even Established Names in the E-commerce Sector
Apr 27, 2017

China has always been a lucrative market for the e-commerce business with its 770 million+ working population and their love for shopping online. The real situation, on the other hand, is a little different than what someone inexperienced with the Chinese market might presume. Although it is the biggest e-commerce market in not only Asia but globally as well, it is nothing like any other market in the world. As many big brands batten down the hatches in realisation of this fact, let us take a close look at some of those shutdowns.


Lotte Group Retail has been in China for the last two decades and currently has five shopping malls and 115 supermarkets in the country. However, the group’s first attempt at opening an online mall (Tmall) came to an end this January when sales fell well below expectations during the last quarter of 2016 as compared to Q4 2015. The South Korean MNC had not been seeing too much growth in China recently and as was made evident by the closing of the Tmall, e-commerce wasn’t working for them either.


The prospects of e-commerce are bright in the UK and reliable VPS hosting UK makes sure that even emerging online businesses never have a bad server day. This positive experience at home led ASOS to believe that the company could make it in China as well, and the biggest online fashion retailer in the UK entered China with a bang in 2013. They poured in over a hundred million RMB into the market and developed a sales team, opened its own website as well as a Tmall, and imported the best of the British contemporary style it had to offer. All that effort and optimism came to an end in April 2016, when they decided to close shop and leave China for good, with a loss of 4 million GBP! It was a mix of import taxes, complex Chinese clothing trade regulations, ineffective marketing, and stiff competition from local Chinese competitors that ultimately pushed the huge brand out of China.


Coach, the US luxury brand in handbags launched its first official Tmall in 2015 and closed it down in September 2016! They did give a vague explanation along the lines of “shifting operational strategy,” but it wasn’t really a secret. Just like many other foreign established brands venturing into China, Coach just wasn’t making a profit that justified its Tmall. Coach, however, has not yet left the Chinese online market completely. The company has realised that WeChat is probably the best platform for online businesses in China right now and continues to remain quite active there.

As one can see from the examples above, in spite of China being the largest online retail market in the world, it isn’t a place where a business can enter with pre-conceived notions and zero market research, irrespective of their stature in the outside world. Understanding government regulations, logistics, and the unique Chinese market are some of the aspects of e-commerce that should be thoroughly researched and assessed before entering the nation and its fiercely competitive online market.