While China’s booming e-commerce market has ushered in exciting opportunities, it also comes with its fair share of risks. Peter Chen, Vice General Manager of TÜV Rheinland Greater China System Division takes a closer look at the risks and the measures being taken to improve China’s e-commerce environment.

According to iResearch, China’s 2014 e-commerce gross merchandise volume (GMV) was CNY 12.3 trillion, up 21.3 per cent on the previous year. Online shopping increased 48.7 per cent in the same year, achieving 10 per cent of total consumer goods retail sales for the first time. Business-to-business (B2B) is currently driving China’s e-commerce market, making up 70 per cent of overall sales, 50 per cent of which are coming via small- and medium-sized enterprises (SMEs).

Shaping the future of e-commerce in China

While the e-commerce boom continues unabated, challenges remain, such as unregulated competition, lack of integrity, unreliable quality, and after-sales and safe-payment problems. Nevertheless, e-commerce is a stated priority for the Chinese Government.

On 4^th May, 2015, the State Council of China issued the Opinions on Vigorous Development of E-Commerce to Accelerate the Cultivation of a New Driving Force in the Economy (Opinions), aimed at encouraging intensive development of the e-commerce market and exploring ways to establish a quality-supervision system for e-commerce products.[1] The Opinions not only point to existing problems, such as inappropriate management modes, an inadequate credit system and market irregularities, but also explicitly targets structural and institutional obstacles to the establishment of a large-scale e-commerce market that operates along both domestic and global rules.

Quality tracking

China’s big e-commerce players are well aware of the need to establish a robust quality-tracking system. Complying with the State Council’s call to regulate e-commerce and provide product-quality guarantees, e-commerce platforms have been developing long-term partnerships with independent third-party testing organisations – for example, Alibaba and GlobalMarket.com have launched Assessed Supplier certification and the Global Manufacturer Certificate (GMC) standards with TÜV Rheinland to improve the quality of manufacturers selling online.

Addressing persisting cross-border e-commerce issues, e-commerce partnering testing organisations are cooperating with the industry’s quality-traceability leaders and insurance agencies to solve the problem of customer confidence in products at the earliest phases. The aim is to ensure qualified products, production compliance and legitimate business practices via three procedures:

• Incoming Quality Control: inspecting the main raw materials of a manufacturer or verifying the existing testing reports.
• Outgoing Quality Control: providing pre-shipment inspection services for the finished products of a manufacturer in accordance with the acceptable quality limit (AQL) standard.
• Continued Quality Control: conducting market sampling surveys on products, based on a specified proportion, and giving an annual validity assessment of quality-traceability systems to the manufacturer on the basis of the sampling results.

With more such quality-driven measures, e-commerce players are expecting to tap into a burgeoning market, but success is not easy and certainly not a given. Despite China’s e-commerce growth, businesses first need to develop a strategy that encompasses a thorough understanding of the target market, understand how consumers evaluate and purchase products and understand best how to influence and direct their online purchases.

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