Chinese Market: How to Evaluate Demand, Build a Sales Plan, and Calculate Margins
China is a market of fast trends and strict rules. Here, the winner is not the loudest, but the most disciplined. Business works when the entrepreneur sees demand, manages the funnel, and calculates the margin without illusions. This guide shows you how to assess a niche, build a sales plan, and avoid losing profit on hidden costs.
1. How to Evaluate Demand in the Chinese Market
Demand analysis is the filter that eliminates random ideas. Don’t just check “how many people search” but also “how they buy,” “at what price,” and “where exactly.” China is a collection of different markets within one country. First, gather data, then apply emotions. Disciplined analysis saves months and budgets.
1.1. Tools and Data Sources
Baidu Index: Trends in search queries, seasonality, demand map by provinces and cities. Look at the yearly graph to exclude short-term spikes. Check semantic synonyms and slang.
Douyin: Sales videos, engagement metrics, content freshness, product showcase. Strong categories are visible instantly. Videos with live demonstrations usually convert better.
1688.com / Taobao: Wholesale prices, supplier ratings, MOQ, and model variation. This is the base for calculating cost and negotiating positions.
Tmall / JD / Pinduoduo: Retail prices, promotion frequency, review depth, competitor density. Look at top listings and price ranges.
Important! Don’t rely on one source. Combine data from four sources. A mistake in one channel distorts the final model.
1.2. Demand Metrics and Interpretation
Analyze not only the growth of queries but also competition, margin, and market structure. The key metrics to watch are:
Trend angle – the growth rate of sales or interest in keywords over 3-6 months. A positive angle indicates growth; a negative one signals market saturation.
Competitor density – how many active sellers and the share of the top 5 by sales volume. If 70% of the turnover is held by leaders, it will be hard for a new player to enter.
P25–P75 price range – the interval between the lower and upper quartiles of prices. It shows the real competition zone. If the gap is more than 30%, the market is unstable.
Promotion share – the percentage of sales with discounts. If it exceeds 40%, margins fall, and competition shifts to price dumping.
Category growth rate – if sales volume grows by 20% per quarter, the market is lively; if it slows down, look for adjacent niches with higher margins.
Important! Don’t rely on trends from AliExpress. China lives within its ecosystem: Baidu, WeChat, Tmall. Look at local data, not external platforms.
1.3. Seasonality, Regions, and Price Ranges
China follows cycles such as 6.18, 11.11, and the Lunar New Year – during these periods, demand spikes by 3-5 times and then drops sharply after the sales. Plan logistics and budgets to survive post-peak.
Regional differences matter:
Eastern provinces (Shanghai, Zhejiang, Guangdong) quickly embrace new products and are willing to pay for premium goods.
Central and northern regions are more conservative – here, functionality and price matter more.
Divide the price range into three levels: low, median, and premium.
For a safe start, focus on the median: the margin is more stable, and returns are lower.
Premium requires trust and branding, but provides sustainable margins in the long term.
1.4. Quick Mini-Audit of the Niche in 60 Minutes
Write down 10-15 Chinese keywords and check Baidu Index for the year.
Open the Chinese version of TikTok: check fresh videos, engagement, and prices.
On 1688, gather EXW prices, MOQ, and transaction volume leaders.
On Tmall, note the median and frequency of discounts by category.
Summarize your findings: “There’s a trend / there’s a price window / there are factories.” If two out of three are “yes,” proceed to tests. If there’s no trend, look for an adjacent niche.
2. Sales Plan: Channels, Content, Logistics
The sales plan in China is a system, not a calendar. The channel determines the content format, which determines the funnel, and the funnel determines the economics. Change your hypotheses every 30-45 days. Platforms love dynamics and regularity.
2.1. Choosing Platforms and Channel Roles
Douyin: Quick hypothesis testing, short cycles, content-dependent. Good for new brands. Requires videos and live streaming.
Tmall: Trust, average check, harder to start, higher brand requirements. Flagship store strengthens positioning.
JD: Strong logistics and trust in electronics and household appliances. High delivery and service standards.
WeChat Mini Shop: Closed sales, communities, CRM, and retention. Suitable for building loyalty.
Don’t try to launch everything at once. Focus on two channels. Track metrics, compare funnels, and redistribute budgets.
2.3. Content and Funnel: KPIs by Steps
The e-commerce funnel in China is standard: views → clicks → add to cart → purchase → repeat. But the weight of each stage is unique to each category, and each one affects the sales margin. Manage bids through content.
KPI benchmarks for starting:
CTR for videos/cards: 2-5%.
CR click → purchase: 1.5-3.5% without KOL.
CR click → purchase: 3-5% with KOL/KOC.
Repeat purchases: 20-30% in 90 days.
Content dictates conversion and margin. Show real use, benefits in 5-8 seconds, honest reviews. Videos in local aesthetics build trust. Short scenes help hold attention.
2.4. Logistics, SLA, Service, and Returns
Bonded warehouses reduce delivery time to 1-3 days. This significantly affects CR and reviews. Long SLA reduces conversion and inflates returns.
Returns are part of the buying culture. Manage expectations: accurate specs, honest photos, video instructions. Quality control before shipment saves margin and stabilizes category margins. Standardize inspections and checklists.
3. Margin Calculation: Formulas, Examples, and Sensitivity
Margin is not the difference between “bought-sold,” but the remaining amount after all expenses. Calculate by SKU and by channel. Platforms, discounts, and commissions affect the P&L more than you might think, directly impacting business margins. Without a unit-economics panel, decisions are made blindly.
Margin is the difference between revenue and all costs (how much “clean” profit is left from the sale).
Marginability is the ratio of margin to revenue as a percentage (the efficiency of each sale).
Calculate “dirty” and “clean” margins separately. “Dirty” is without marketing, “clean” is with CPA. The clean margin shows true sustainability.
A 30-35% margin is considered “working” for a startup. Keep CPA under control – rising customer acquisition costs quickly eat into profits and reduce project margin. Discount campaigns (6.18, 11.11) can lower the margin by 5-7 percentage points, so it’s crucial to plan coupons and promo budgets in advance.
For scaling, aim for a 38-40% margin and ROMI no lower than 1.5.
3.2. General Trade Model: Example Calculation
Let’s look at the General Trade model – full import with certification, customs clearance, and the possibility to sell the product not only online but also offline through distributors. This route is more complex but provides more stable profit.
In General Trade, costs are higher, but stability is greater: there are no volume limits, and sales channels are broader. Even with a slightly lower margin, the project becomes more resilient to seasonal fluctuations and maintains margin in the long term.
Brands working through General Trade are trusted more by Chinese consumers and partners, especially for offline sales.
Important! Cross-border channels are a quick entry, while General Trade is a long-term strategy. If your goal is to test the niche, start with the cross-border model. If your goal is to establish and grow the brand, move to General Trade after selling 5,000–10,000 units when the business margin is already confirmed and predictable.
3.3. Sensitivity: Discounts, Commission, Currency
A 10% discount disproportionately lowers margin. Recalculate P&L for every promo period. Coupons and flash sales should have caps.
Platform commission depends on category and store status. A 2-3 percentage point difference changes the final figure. Negotiating and status levels save budget.
Account for currency risks in advance. Hedge the exchange rate for large batches. Allow a ±5% price corridor.
Important! For quick checks, use an online or Excel margin calculator. Enter price, costs, and discounts – get margin and profitability.
3.4. How to Increase Margin
Optimize packaging and logistics: Smaller sizes reduce shipping tariffs and directly increase product margin. Combine shipments to save.
Reduce CPA with content: Useful videos and honest reviews last longer. Organic traffic improves ROMI and supports business margin over the long horizon.
Use KOC instead of celebrity KOL: Micro-bloggers are cheaper and more authentic. Their audience trusts recommendations.
Localize production at scale: Assembly in China shortens delivery time and customs duties. It also boosts market trust.
Control returns: Transparent descriptions and inspections reduce losses. A couple of percentage points in reduced returns make a significant difference.
4. Sales Forecast and 90-Day Plan
Plan in cycles. China is a market of quick iterations. Set ROMI and GM% goals, not just turnover. Adjust hypotheses every two weeks.
Common Mistakes by Beginners
Entering without analysis: Decisions based on intuition don’t work: trends last 2-3 months. Demand check via Baidu saves money and time. Analyze data before starting – the market punishes haste.
Overestimating the effect of foreignness: Chinese consumers don’t buy “foreign,” but useful and adapted. Packaging translation is not localization; it’s important to present the product in local aesthetics.
Not studying the tax regime: Entering the wrong cross-border list or category consumes profit. Correctly choosing the regime saves tens of thousands of yuan.
Confusing procurement and cost: EXW is just the base. Add delivery, taxes, commissions, returns – the final cost is 15-20% higher. Real costs are formed after calculating logistics and services.
Ignoring platform commissions: Commissions, coupons, and fulfillment can account for up to 25% of the price. If not accounted for, the business will be unprofitable.
Engaging in price dumping: Low prices destroy positioning and provoke counterfeits. It's better to keep a median segment and work on value – speed, service, quality of packaging.
Saving on content: Without videos and reviews, the product won’t be noticed. China buys with its eyes: good content is an investment, not an expense.
Not testing hypotheses: Sticking to one strategy for months is a mistake. Algorithms love movement: update creatives every 2 weeks. The Chinese consumer quickly gets tired of repetitive offers.
Not controlling returns: In China, returns are a standard practice. Check quality before shipping and describe the product honestly. A slight inaccuracy in the description causes mistrust. Reducing returns by a couple of percentage points directly increases profitability.
Not planning cash flow: During sale periods (6.18, 11.11), demand spikes and then drops sharply. Without cash reserves, you may end up with unsold stock. Plan inventory considering seasonal spikes and logistics. Having working capital gives flexibility and protects against cash flow gaps.
Checklists Before Launch
Demand and Niche Analytics:
Trend on Baidu Index and semantic synonyms.
Freshness of content and engagement.
EXW prices, MOQ, transaction volume on 1688.
Median price and discount frequency on Tmall/JD.
Economics and Pricing:
Full cost calculation by SKU and channel.
Discount range, coupon ceiling, CR threshold.
ROMI by traffic source, target CPA.
Currency assumptions and price corridor ±5%.
Logistics and Service:
SLA from bonded warehouse, reserve routes.
Quality inspection and packaging standards.
Return policy, exchange process, and support.
Inventory plan for 6.18, 11.11, Lunar New Year.
Legal Parameters:
Import regime: cross-border channel or General Trade.
Category restrictions and certification requirements.
Contracts with suppliers, penalties, claims control.
Confidentiality, labeling, instructions in Chinese.
FAQ on Entering the Chinese Market
Can I start without an office in China?
Yes, through cross-border channels. It’s important to comply with the positive list and category rules. Test demand first, then scale.
Which platforms to choose at the start?
Combine Douyin and Tmall Global. The first gives quick traffic, and the second provides trust. Compare funnels and redistribute budgets.
What margin is considered workable?
A clean margin of 35-45% is comfortable. Below 30% is risky with rising CPA and discounts. Allow a buffer for promo periods.
How long until stable sales?
Typically 6-10 weeks with active tests. Faster in categories with clear benefits and short decision cycles.
Is certification necessary?
For CBEC, basic platform requirements are often enough. For General Trade, full certification and labeling are mandatory. Check the category specifics in advance.
How to reduce returns?
Honest descriptions, video instructions, quality control, and clear packaging. Reducing returns by 2-3% directly increases project margin.
Conclusion
Success in the Chinese market is the sum of three skills: seeing demand, building a sales plan, and calculating margin. Act cyclically, make data-driven decisions, don’t skimp on content and packaging. Strong discipline wins even in saturated categories. Those who manage economics and speed will secure long-term success.