How is it possible for a paint company to enter the Chinese e-commerce market, and what entry strategy would suit the best?

1. Basic concepts & facts

1.1 Traditional market entry strategies

A market entry strategy is the planned method of delivering goods or services to a new target market and distributing them there (wikipedia.org 2014). Traditional market entry strategies include: direct export, indirect export, counter trade, joint venture, wholly owned operation and etc. (fao.org 2000) While these are widely discussed in various textbooks, they mainly deal with getting the goods produced or transported to the target market, China in our topic; but they do not provide forms to make the goods available online.

1.2 Market entry strategies adopted in e-commerce sector

After studying the successful market entry and continual business operation of Xenon, Tesco, KPN & Hutchison Whampoa Limited (HWL), Christopher P. Holland and Gordon D. Mandry (2012) proposed 4 new market entry strategies which seems more effective and practicable for entering into the online market. They are: Open Web Partnerships, Building An Alliance With An Incumbent, Multi-Brand Attack & Exploit Technology Shift. Open web partnership could be referred as allowing or encouraging other websites to use a company’s certain service in order to attract user attention. Building An Alliance With An Incumbent & Multi-Brand Attack are similar to the traditional market entry mode “joint venture”, but they focus more on sharing and integrating the customer base instead of setting up a new company. The last online market entry strategy discussed is Exploit Technology Shift, it targets at getting adapted to the innovative internet technology earlier than major competitors creating first-mover advantage.

1.3 Online consumer behaviors in China

Before entering into the Chinese e-commerce market, a paint company needs to know how the Chinese online buyers make the actual decision to purchase, here specifically we are referring to the shopping platforms which are visited and used most frequently by the Chinese online buyers.
b2c market share
Figure 1.0 Market share of major B2C online shopping platforms in China in year 2014

From the above figure, we can see that online shopping in China is closely related to two websites: tmall.com owned and operated by Alibaba Group (a China-based online and mobile commerce company in retail and wholesale trade, as well as cloud computing and other services, widely known for claiming the largest US-listed initial public offering in 2014) and JD.com. Since these two websites occupied 80% of the B2C market share in 2014, for a paint company to open up the Chinese e-commerce market, it will mean either competing with the giants or cooperating with them.

2. Discussion

Let’s look at what the market leaders in the paint industry did when entering into the Chinese e-commerce market.

How Dulux entered into the Chinese e-commerce market? Dulux is the world’s largest manufacturer of paints and coatings, Akzo Nobel’s best-known paint brand. It set up its official online shopping in tmall.com with the domain name of “http://dulux.tmall.com/” and jd.com with the domain name of http://duoleshi.jd.com/. But on the company’s official website: http://www.dulux.com.cn/, it does not provide its own online shopping mall and instead direct all online customers to these 2 online flagship stores.

How Jotun entered into the Chinese e-commerce market? Similar to Dulux, Jotun (a Norwegian based global leader of decorative paints and performance coatings) also has its online shopping mall targeting at the Chinese individual consumer operated under tmall.com with the domain name of http://jotun.tmall.com/ but no flagship store in the second largest B2C shopping platform “jd.com”.

3. Conclusion & answers

We can come to any conclusion by making certain supporting discussions and analysis regarding how a new paint company can enter into the Chinese online market. But for most market players, being a fast follower chasing the market leaders is a cost-effective and efficient method to find out the safe and proven way to business success. And obviously the leaders have provided the answer to our question, and it’s concluded that “Building An Alliance With An Incumbent” will be a recommended strategy.

List of Reference:

Christopher P. H. & Gordon D. M. (2012) Online Market Entry Strategy and the Consumer Search Process Manchester Business School, University of Manchester

fao.org 2000 Chapter 7: Market Entry Strategies accessed on 25th Mar 2015 [online] available: http://www.fao.org/docrep/W5973E/w5973e0b.htm

wikipedia.org 2014 Market entry strategy, accessed on 25th Mar 2015 [online] available: http://en.wikipedia.org/wiki/Market_entry_strategy#Strategies

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