China Daily reported that China is aiming to double the value of e-commerce sales to 18 trillion yuan or ($2.86 trillion) by the end of 2015 to become the clear leader in global e-commerce.
The goal resulted from the 12th 5-Year Plan released on Tuesday by Ministry of Industry and Information Technology, the nation’s top industry regulator.
As China virtually manufacturers everything, they are looking for more ways to sell all of the products. For a long time, China was used by the rest of the world as the cheap manufacturing factory due to its cheap labour pool. But now more sophisticated, Chinese are taking advantage of the internet to move up the value chain and sell directly themselves, cutting out many foreign retailers.
But it’s not as simple as making a product, putting a few pictures online and writing a description and shipping it out. E-commerce for many Chinese brings a different dynamic to business that many are not educated about. Think about all the moving parts that fit together when selling online – Procurement, SEO, SEM, branding, design, packaging, pricing, distribution, click-throughs, ARPU, customer satisfaction, customer loyalty. And that’s not all of it! How many Chinese businesses people are fully equipped to handle this? Not many I believe. People need to be more educated and learn how to be prepared to move online to take full advantage of the power and scale of the internet. But of course time and experience will help too.
Look at some of the most famous names in Chinese e-commerce – DangDang.com, 360Buy, 58.com, Tuan800.com, Lashou.com to name a few. Despite being big and having millions of venture capital investment poured into them, they are all bleeding big money. So much, it threatens their very survival. Some executives argue, they need to spend that much money to attract customers and crush competition but is that really what they should be focusing on? Fair enough, everyone knows it takes time to break-even but if these big e-commerce giants are examples for hopeful smaller e-commerce businesses to make profitable and sustainable businesses, these big companies must figure out away to make profit and stop burning cash for too long. E-commerce companies must find more efficient ways to scale, instead of adding headcount as sales grow. Perhaps e-commerce education should be integrated into the 5-Year Plan.