Market entry: E-Commerce Website in China

27Jul2012

Starting an E-Commerce company in China

To start a business in China may be complicated, but China is perfect for both e-commerce (you can produce for cheap and sell at high prices in the same country) and for e-business (everyone speaks the same language, and nobody outside can copy your new idea because of the language barrier). To set up an e-commerce website in China, one has to follow the following steps. If you want to set up an e-commerce or manage a forum in China, you will have to apply for ICP licences of different kinds and some may be more difficult to get than others. Most of these licences require a Chinese citizen or a Chinese corporate entity. Taobao may be a good platform to water-test the market.

Steps to creating an E-Commerce company

The first step is to understand China and that it is not just one market. There are a multitude of differing consumer preferences and income levels in different locations within the country.
Buy a market report or hire a consulting company. Although if done in large enough extent this can offer good insights, it is often extremely expensive and the answers are not completely concrete.
Start up a company in HK and get a virtual office in China (phone number and address). Companies such as Regus or Servcorp offer this, and new companies like iQubator complement these services with virtual assistant services depending on your needs.
Move to mainland China. Send a representative over or hire someone local in China to do the required research. This is often much cheaper than doing it from overseas because of the cost of living and salaries and it also offers a much better insight. This can be done either the traditional way through local consulting companies and serviced offices, or through one-stop-shop companies that offer you toolboxes to do it yourself. An example is the HK and Shanghai based iQubator that offers an incubation-like service.
Build your guanxi (business network) in China and get a deeper understanding of the Chinese market.
After about 3-6 months of research, network development and trials, it is time to launch the company in China. Many people think a representative office is the first step. Actually, through tool-box companies, or business support offices, you get much more than a RO can offer at lower costs and risk, since you can cancel the contract at any time. The best way to go is a WFOE, Wholly Foreign Owned Enterprise.
Choose your registration agent. This can either be the company that you have conducted the research and trials with, or hire more people through the company to assist you. Normal cost for a WFOE registration ranges from 5,000 Euro for a consulting company to 15,000 Euro for a manufacturing company. The minimum investment needed also varies between 50,000 Euro to 1 Million Euro, depending on the type of business license but also on what other licenses you would like to apply for later. You just need to pay 20% of the capital during the registration and you pay the rest over a set time period for up to two years. An important thing to keep in mind is that it takes 3-6 months to register a company (compared to 1-7 days in HK) and it takes even longer to shut it down.
Once your company is registered and you have your own offices, you should have at least 3-5 employees. If necessary, you can still outsource the operational services such as HR and accounting for a monthly fee. When you receive your business license you can officially begin business in China in your own name. You do still need to wait a while for your tax license and special accounting computer and invoice machine from the government before you can issue fapiao (tax invoice). The fapiao is often the main reason to choose a business support office that can also help you with these kind of issues, since most local businesses will not wish to do business with you unless you can offer fapiao.
Promotion of your website

Promote your website around the different website is very important to get traffic. You should work on your SEO, search engine optimization, to let your website appear on your “”product name keywords”. At the begiining , use SEM campaign can be very usefull, specially to get your first visitors. SEM (search Engine Marketing) can be done with Baidu PPC, or Display.

Social Media is also a powerfull tool to let Chinese Netizens know your website, your brand and discover your product.

80% of Chinese shopper are using Social media or online chating, and 60% of them already shared on microblog what they already bought. More information about promotion of ecommerce website on this website