Tuesday, October 8, 2013

Is Chinese E-Commerce Market still Attractive to Overseas Companies?

As more and more overseas businesses entering China, the world’s second-largest economy, companies are facing to fierce competition. These overseas companies are competing not only with local businesses but also others from all over the world. They are all so eager to have a share of Chinese market, no matter in its traditional market or non-traditional market.

China’s e-commerce market has been booming in past three to five years; however, major U.S. retailers seems unconfident about their future sales in e-commerce market and they starts to rethink their marketing strategy towards it. Macy’s Inc would be one of these major U.S. retailers. The company is one of the largest U.S. – based department store retailer and entered China’s e-commerce market three years ago. In May 2012, Macy’s invested $15 million for the minority stake in Chinese retail company VIPStore Co. with the purpose of selling its private-label brands on the section of luxury site omei.com.

However, Macy’s has put on hold plans to expand the company’s web presence in China this year. More interestingly, the retailer’s executives just told the media that how great their marketing strategy was in last May while scaling back their online operations in China now. In about a year, Macy’s turned its aggressive marketing strategy to conservative one. Unsurprisingly, another U.S. major retailer made the same decision as Macy did – Neiman Marcus. Actually Macy was just following what Neiman Marcus did – shutting down its mainland warehouse and shipping products from U.S. when orders are placed.

Due to the fact that China’s economic growth slows, many overseas companies/investors have to become less aggressive and rethink about their strategies. Take Macy’s for example, the retailer’s original plan was to sell its luxury product lines to China. This means Macy’s will only have a certain number of customers and high risk of controlling its inventory properly. Especially, when the economy starts to grow slow, consumers will become more hesitant about purchasing luxury products. Therefore, I believe that at this stage, putting on hold the online-expansion plan was an appropriate adjustment for Macy’s marketing strategy in China.

1 comment:

  1. The e-comerce business in China is somewhat attractive until such American retailers like Macy adjust its marketing strategy through either discounted sales and to market semi-freindly luxurious products in line, which both would help to yield moderate returns to the retailers' business and in the same time allows for reasonable calibration for its marketing strategy.