The Biggest Day before Christmas

If you are asked what is the biggest day before Christmas, you might say “Sinterklaas” if you are Dutch. But if you ask this question in China, I guarantee that the only answer you get will be ‘Double Eleven’ (I am sure you already know when it is celebrated). ‘11.11’ must feel themselves the most pathetic date in the whole year, after all four “1”s do not manage to make themselves two couples. Therefore, Chinese also name it the “Singles Day”. On that day, all single people should go shopping to treat themselves and all couples should buy something for their partners to celebrate for not being singles. If we don’t consider the ones with complicated relationships, you can imagine how much benefit that one day can bring to the market.

The Double Eleven of last year has just passed. Let’s take a glance at the big data. The transaction volume of Tmall (an online shopping website owned by Alibaba) on 11th November 2017 reached CNY 10 billion (EUR 1.3 billion) within 3 minutes. The total transaction volume of Tmall for that day amounted to CNY 168.2 billion (EUR 21.84 billion) with 1.48 billion transactions, which means that in average each Chinese has concluded more than one transaction on Tmall. Tmall is of course not the only winner. Another online shopping website JD.com achieved CNY 127.1 billion (EUR 16.5 billion). According to the transaction record, people from 225 states have contributed to this shopping carnival. The whole online transaction volume of this year is much higher, that is CNY 253.97 billion (EUR 32.9 billion).

This data shows an increasing trend. The total sum of transactions on Tmall on 11th November 2016 was over CNY 120.748 billion.

In America, there is also a popular shopping events called ‘Black Friday’, the online transactions volume of which was about EUR 1.69 billion in 2016. The transactions volume of Tmall of the 2016 Double Eleven was 9 times more than the whole online transactions volume of that year in America. As the data shows, the purchasing power in the Chinese market is unimaginable and will be even more in the future.

 

Double Eleven has gained a big recognition in the West. However, there are more “shopping carnivals” in China during the year and none of them should be ignored, for example the “JD 618”, “9.9 Wine Festival”, “Double Twelve” etc. According to the statistics, the total online sales in 2016 amounted to 5.16 trillion (EUR 670 billion). As you can see, Double Eleven is not just an one-time event, but a conception which promotes the e-commerce in China and makes it a long-term profitable and continuously developing business mode. 

What do all these figures mean?  What can we do to participate in the Chinese market and become one of the winners?

The blooming of the e-commerce in China has been providing many valuable chances for international companies to enter the Chinese market. For example, compared with the traditional way of retail, online retail is much more flexible with faster and easier entry and lower cost in management for retailers. As to manufacturers or wholesalers, it is also wise to be connected with the participants. China is experiencing a transition from an export-led economy to a consumption-led economy, where the enormous consumption power as shown in the above statistics creates tremendous needs. Another positive fact is that overseas products have in general a high reputation in the Chinese market and have thus relatively high competitiveness in China.

Although establishing an online webshop in China seems to have many advantages in its flexibility and registration procedure, several legal problems are still worth attention.

  1. China has enforced Administrative Measures for Online Trading since 15th March 2014, which clarified and specified a number of online trading regulations. According to article 7 of it, a business registration is necessary and many online shopping platforms have strict requirements over the identity of sellers, e.g. Tmall Global and JD worldwide. The lack of a business registration may result in ‘unlicensed business activities’.
  2. The Measures have also enhanced the protection of buyers, for example the buyers have the right to ask for invoices, to return the goods within 7 days after receiving etc. These rules should always be born in mind for sellers.
  3. Online selling shall also abide by the Anti-Unfair Competition Law, Law on the Protection of Consumers' Rights and Interests, Product Quality Law and a big number of other laws relevant to the products and operation approaches.
  4. Trademark registration during online transactions is important because it can protect the rights of the traders to use the brand and name in China. Because trademark in china is based on first come first serve principle, it is very important to register the trademark as soon as possible or even before entering China. There are quite a few cases where others including your business partner or competitor register it before you, which will eventually lead to legal disputes or even penalties. Besides, copyright and patent protection are never less stricter than traditional retail. Relevant registrations are also recommended before entering China.
  5. Taxation is never an outdated topic in e-commerce. Depending on industry and operation mode, taxation for enterprises is different. Particular type of businesses enjoys tax cuts or tax preference.  

What does Kneppelhout & Korthals do? Kneppelhout has more than 10 years’ experience in Asia especially in China. We have professional Chinese lawyers who have been helping international companies enter into the Chinese market for years. We provide all necessary legal advice and service to prepare the international companies to start business in China, including assisting our clients with the establishment of WFOE, trademark registration, tax advice etc.

Double Eleven of last year has just passed. But you still have enough time to prepare for the next one!

For more information you can contact Joost Vrancken Peeters at jvp@kneppelhout.nl or +31620210657 or Lin Li at lli@kneppelhout.nl or +3164278 1299.