Mobile shopping.

As online sales in China aim to surpass $1 trillion, a survey conducted by Frost & Sullivan in partnership with retail strategy firm Azoya Consulting found that just 20 percent of foreign and U.S. retailers feel they are adequately penetrating the market — which is a struggle as many brands see China as a “lucrative” place to do business.

“Over 80 percent of surveyed U.S. and foreign retailers see China as a lucrative market, as affluent Chinese consumers seek quality products from overseas,” authors of the report said. “However, only 20 percent of retailers feel confident in their capability to succeed in China’s e-commerce market.”

The survey polled retailers with annual sales of more than $50 million, the company said in a statement adding that 36 percent of the respondents had sales of more than $1 billion.

Mark Dougan, consulting director for the Asia-Pacific region at Frost & Sullivan, described the report as the first to examine, on a global level, the “Chinese cross-border e-commerce market from both consumer and retailer perspectives.”

“By understanding consumers’ behavior and needs, and retailers’ current situation, the report provides new insights and strategic guidance for international retailers who want to succeed in the online shopping market in China,” Dougan said adding that there are over 500 million online shoppers in China and that the market is set to surpass $1 trillion in online sales this year.

“In recent years, China has experienced a 40 percent annual growth rate in the value online shopping,” researchers of the firm said.

Don Zhao, cofounder of Azoya International, said the results of the survey show that retailers are “looking beyond” online marketplaces when developing long-term strategies for selling online in China.

“To build a brand that Chinese consumers trust, which commands a healthy profit margin and repeat buyers, retailers need to approach customers through multiple touch points,” Zhao explained. “The key channel should be within retailers’ control, accompanied by supplementary platforms. More and more retailers are establishing standalone websites as the core of their strategies, as these sites directly connect retailers with Chinese consumers who desire foreign brands, while empowering retailers with flexibility and control over their business.”

Some of the key findings of the report showed that Chinese shop cross-border as a way to access higher-quality goods while lowering the “risk of counterfeits.” The poll found that 22 percent of online shoppers sought fashion products followed by 20 percent for beauty and cosmetics and 15 percent for “mom and baby” goods.

By region, 72 percent of Chinese online shoppers prefer to buy from brands in Japan while 60 percent gravitated to South Korea and 55 percent sought retailers and brands from the U.S.

Regarding average expenditures, women spend $976 on average per year on online goods that are cross-border sourced, which is 20 percent more than men. “Women are more likely to use an overseas supplier’s stand-alone direct-to-consumer web site (21 percent versus 18 percent of men),” researchers said adding that factors influencing cross-border purchases “include Chinese consumers’ expectations of a range of payment options and efficient web site performance for a seamless customer experience.”

The research also showed that among retailers, 37 percent said they “feel satisfied” with their online sales in China in using a “global e-commerce vendor” while 31 percent “feel satisfied with their standalone online store and 21 percent feel satisfied with sales through online marketplaces, such as those owned by Chinese giants Alibaba and JD.com.”

The authors of the report noted that online marketplaces’ “crowding, intense price competition, margin-eroding commissions and high upfront costs have led more foreign retailers to create standalone Chinese websites to gain direct customer access, greater control and higher net margins.”

By way of solution to succeed in China, researchers said in the report that international retailers and brands “should focus on basic e-commerce capabilities, including efficient digital marketing, local logistics networks, a range of payment options, Chinese language customer service and content.”

They also urged companies to implement “a robust social media strategy, including partnerships with influencers or key opinion leaders, and understanding market trends to reach and engage Chinese consumers.”

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