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E-commerce and digital strategies key to gaining profitability edge in China

17 April, 2018

New research has revealed Australian companies doing business in China that have a detailed e-commerce strategy are 12% more profitable than those without.

 

The research also found that despite a lack of transparency in China’s regulatory environment nearly 80% of businesses are optimistic about their China operations over the next year.

 

Westpac partnered with the Australian Chamber of Commerce in Shanghai (AustCham Shanghai) to undertake the 2018 Westpac Australia-China Business Sentiment Survey (the Survey). Analysis for the survey was undertaken by China Skinny.

 

More than 160 Australian businesses reported on the opportunities, challenges and risks facing their China business in 2018. The Survey provides an insight into the current health of the Australia-China trade relationship, and features case studies from leading Australian brands in the China market, including Blackmores, Metcash, Sanitarium and Woods Bagot.

 

Businesses have identified innovations in technology as the number one trend impacting their business in China over the next 3-5 years, yet only 16% reported to have a detailed China e-commerce strategy in place. Those who did were found to be 12% more profitable than the average.

 

Key findings from the 2018 Australia-China Business Sentiment Survey

Sentiment, Profitability and Investment

  • 78% reported a positive sentiment for their China operations over the next 12 months
  • 83% reported a positive sentiment for their China operations over the next 5 years
  • 79% forecast profitability for 2018, compared to 66% in 2017
  • 51% forecast an increase in their China investment for 2018, compared to 45% in 2017

E-commerce

  • The number 1 trend for the next 3-5 years is “Innovations in Technology, Media and Communications”
  • 58% regard China to be leading or more advanced in technology compared to other global markets
  • Only 16% have a detailed China e-commerce strategy in place
  • Those businesses with a detailed China e-commerce strategy were found to be 12% more profitable than the average

Regulatory Environment

  • 36% regard the regulatory environment to have hindered their organisation's growth in China
  • 58% regard China’s regulatory environment as not transparent, and 27% reported that this lack of transparency hinders business
  • 55% have benefitted in some form from the China-Australia Free Trade Agreement
  • 43% report China’s Belt and Road Initiative to be a positive driver for their China strategy

 

The outlook amongst Australian businesses in China is overwhelmingly positive, both on a short and long-term basis, due to growth and profit increases experienced by most businesses year-on-year. The report sets a benchmark for Australian organisations, with 78% of businesses reporting a positive 12 month outlook. Pleasingly, this increases to 83% on a five year outlook. Respondents mainly attributed this positivity to the quality of their product, brand reputation and the client relationships established.  

 

The Survey makes clear that e-commerce is and will remain a key driver for growth in the Chinese market. Interestingly, the Survey found that only 16% of Australian businesses have a detailed China e-commerce strategy in place – a figure that is expected to rise in coming years as the trade relationship continues to mature. Australian brands are aware of the opportunity, highlighting “innovations in technology, media and communication” as the number one trend to impact their business in China over the next 3-5 years.

 

Westpac General Manager, Asia Pacific, Michael Correa said: “We’re seeing an exciting dynamic where Australian businesses’ growing confidence in the Chinese market is met by an increasing need for the adoption of tailored e-commerce strategies and sophisticated data analytics. China is the #1 e-commerce marketplace in the world1. Last year it was anticipated to account for around half of the world’s e-commerce sales and 56 times the size of Australia’s online market.2

 

“This report reflects our continued commitment to providing our customers with deep local market insights, and connecting Australian businesses to the important Australia-China corridor.”

 

The Survey also explored China’s regulatory environment, revealing that 36% regard it to have hindered their organisation's growth in China. Despite the regulatory environment continuing to challenge some businesses, other sectors have experienced positive regulatory changes in the past year which have provided more confidence for Australian brands.

 

Results indicated that implementation of macro-economic initiatives such as the China-Australia Free Trade Agreement and the Belt and Road Initiative have had positive impacts for many Australian businesses. Under the China-Australia Free Trade Agreement (ChAFTA) 96% of Australia's goods exports to China are now eligible to enter duty-free or with preferential access.

 

Chairman of the AustCham Shanghai Board, Craig Aldous said: “The Report provides valuable insight into the health of Australia-China business relations – and the results indicate that we should be very optimistic about the trade relationship moving forward. As the peak body for Australian business in China we are confident that the Report will assist businesses to grow in this dynamic market”.

 

The Survey Report will be launched at an event in Sydney later today, followed by events over the next two weeks in Melbourne and Shanghai.

 

1PWC report, E-commerce in China. Total Retail 2017 https://www.pwccn.com/en/retail-and-consumer/publications/total-retail-2017-china/total-retail-survey-2017-china-cut.pdf

2 eMarketer 2017 – E-commerce data