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How to Sell Online in China

August 02, 2010 by David C. Michael and Yvonne Zhou
August 02, 2010

To many multinationals, digital China is the mother of all untapped markets. At 384 million as of 2009, China already has more Internet users than the U.S. and Japan combined. Just as important is the intensity with which Chinese are connected—an average of 2.7 hours online each day. That translates to Chinese eyeballs glued to e-commerce sites, blogs, mobile applications, and games for 1 billion hours each day, twice as many as in the U.S.

So far, many Western companies have been caught flat-footed. Savvy Chinese Internet companies like Tencent (700:HK), Alibaba.com (1688:HK), and Sohu (SOHU) are running circles around Western Internet giants, utterly dominating a fast-growing, $37 billion consumer e-commerce industry. Many foreign consumer-product and services companies are missing out, too. At a time when tens of millions of Chinese each year are newly embracing online shopping, it is essential to move beyond traditional television and outdoor advertising.

The good news for foreign companies is that the game is still early. China's online population is projected to reach 650 million in five years as the Web penetrates deep into the interior. The percentage shopping online is expected to surge from 9 percent in 2009 to 19 percent in 2012. And digital activities still nascent in China such as social networking, mobile broadband services, and online advertising are poised for explosive growth.

To succeed, multinationals must shed assumptions that have worked well in the West. Instead, they must carefully study the idiosyncrasies of Internet use in China and the online impulses of its digital consumers.

A version of this piece first appeared in Bloomberg Businessweek, on August 2, 2010.
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