E-commerce in China is innovating at breakneck speed and scale. This promises huge rewards for intrepid brands, but success isn’t guaranteed. Here’s how to seize the moment.
‘In China, e-commerce is a way of life.’
Jack Ma would know. He’s the billionaire co-founder of the Alibaba Group – a huge e-commerce conglomerate behind powerhouses like B2B Alibaba, B2C Tmall, C2C Taobao and international wholesaler Aliexpress.
Which explains why China is set to overtake the US as the world’s biggest e-commerce market in 2019. Cross-border e-commerce also keeps growing. Online retail imports rose to $16.9 billion in Q4 2018, supported by stronger internet and logistics networks. And new laws brought in this year strengthen protection for consumers and retailers.
It’s not all plain sailing though. China has evolved its own tightly integrated e-commerce ecosystem. Competition is stiff, so you’ll have to adapt to survive. Ready to take on e-commerce in China? Start here.
KNOW YOUR AUDIENCE
Millennials rule e-commerce in China. But don’t tell them that. They prefer to be known as either the post-80s or post-90s generation. And their behaviour will differ depending on which decade they’re from.
Generally though, both groups are young, tech-savvy, with plenty of disposable income. They’re driving sales growth in luxury brands from around the world. In fact, 18- to 30-year-olds are set for a 30% total share of consumption by 2020. But to get their attention, you’ll have to fight for it. Here’s how.
1. DEFINE YOUR DIFFERENCES
Chinese consumers often look abroad for quality. But domestic brands are growing in popularity, particularly among younger consumers. And consumers choosing foreign brands also have new motivations. Older generations emphasized status and wealth. The post-90s generation is prioritizing individuality and relevance to their tastes. 70% say they buy goods to ‘feel different rather than fit in with society’.
So a ‘Made in the UK’ or ‘Made in France’ label is no longer enough. By all means, leverage your brand heritage. But do so in a way that tells a story, captures the imagination and, most importantly, gives the consumer a feeling of heightened social identity.
Ermenegildo Zegna is a great case in point. They expanded from traditional tailoring and suits to sports and streetwear. Their marketing campaigns were based around the theme: ‘There are no standard answers.’ In other words, life isn’t an exam – there is no template. It received a huge response. Consumers created more than 200,000 Weibo posts as they discussed the campaign. Crucially, surveys show they perceive the brand as young and trendy, while maintaining its values as a luxury brand.
2. BUILD YOUR BRAND
Chinese consumers’ awareness of foreign brands is strong, but to convert this into sales you’ll need to connect with them personally. They choose brands that match their personality, values and dynamism. Brand loyalty peaked with Generation X. But 68% of post-90s shoppers rate it as a top purchase reason too – although other factors like design, materials and price are catching up.
3. SHOW AND TELL
You’ll rarely hear ‘less is more’ in China. Compare these two plain white t-shirts on Amazon and Tmall and you’ll notice stark a contrast in how much information is offered. They’re definitely not the only products where this is the case.
This desire for detail stems from a historical position of skepticism about product authenticity and quality. To sell successfully in China, you’ll need to provide just as much info as your domestic rivals.
4. GO MOBILE
Most online users in China never got into using a PC to shop online. Instead, they jumped straight into mobile commerce. 71.7% of mobile devices in China have shopping apps installed – that’s 783 million users.
Any successful marketing strategy will need to include smartphones or your reach will be limited from the get-go.
5. PAY AS YOU GO
Digital wallets like Alipay and WeChat Pay are a big deal in China – they’re used both online and offline. The number of active users is expected to reach 956 million by 2023. Their huge popularity means embracing this payment method can reap real rewards – many apps are available for overseas businesses.
And remember QR codes? They’re still huge in China, as part of the move towards a cashless society. They can be used by companies to provide extra product information, and offer vouchers or discounts. Successfully engaging consumers with QR content is an effective way of marrying online and offline content.
KNOW YOUR MARKETPLACE
Amazon is easily the world’s leading online marketplace. But it barely makes a dent in China, claiming just 0.7% of the market. Here, Alibaba’s websites are king. They make up 58.2% of total retail e-commerce sales. JD.com is the other big player on 16.3%.
If you’re not active on China’s marketplaces, you’re going nowhere fast. Here’s some advice to get you started. (Don’t forget to read through our global marketplace optimization tips either).
1. BAIDU CAN’T HELP
Until recently, Baidu had a stranglehold on Chinese search. And although rivals have started gaining traction, it’s still hugely dominant. Which means an effective Baidu SEO strategy is essential to raising brand awareness in China.
But it won’t help you with e-commerce in China. Alibaba blocks Baidu’s spider from indexing both Taobao and Tmall – the conglomerate’s consumer-focused sites. Which means these sites won’t appear in Baidu’s search results.
It was a bold move when Alibaba announced this strategy back in 2008 – it’s like Amazon blocking Google. But it paid off. Alibaba’s sites are now the go-to destinations for product search. And they make significant amounts of revenue through online advertising on the sites.
What does this mean for your brand? When it comes to e-commerce in China, don’t focus your SEO and PPC efforts on Baidu. Prioritize optimizing for Alibaba’s marketplaces instead.
2. STAY GLOBAL OR GO LOCAL?
Partnering with a marketplace means a quick start with a trusted Chinese brand. Before you begin, you’ll have a decision to make: sell cross-border or from China? To put that in marketplace terms: Tmall.com or Tmall Global?
Either way, you’ll need to apply to set up shop. But to sell on Tmall.com, you’ll need to have a Chinese business entity and warehouses in China. You also have to comply with China’s regulatory laws – for example, mandatory testing of cosmetics on animals. For obvious reasons, you may not want to go down that road.
Tmall Global is one of the leading Chinese cross-border sites. It doesn’t have the same strict requirements as Tmall.com, which makes it a good place to dip your toe into the waters of Chinese e-commerce. You’ll still need to apply for an account, and it can take time to build brand awareness. But the rewards are worth the effort.
Plus, hot off the press: TMall has just released an English-language website to make the onboarding process easier.
3. OPEN ALL HOURS
Forget the 9-to-5, many Chinese employees work 996. This means 9 am to 9 pm, six days a week.
Because of this, traditional shopping hours are changing. The commute is now a prime time to shop online. Consumers expect instant answers to their questions too, so customer support needs to be available when they need it.
Just look at Alibaba’s Aliwangwang instant messenger. Tmall shoppers and sellers use it heavily for real-time communications. This quality of customer service is driving more and more consumers online – especially in China’s rural areas.
Social media is also a key way for businesses to communicate with customers. Check our advice here to make sure you’re tackling Chinese social media the right way.
4. CELEBRATE RESPONSIBLY
As with the rest of the world, online sales events are very popular.
But forget Black Friday – in China, Singles’ Day is where the money is. In 2017, its sales were double Black Friday and Cyber Monday combined.
Launched by Alibaba in 2009 – a testament to the conglomerate’s e-commerce power – the holiday takes place on 11 November (11/11). Global brands and competitors have also joined in the festivities.
Singles’ Day focuses on treating yourself, but unlike Black Friday it’s not just about all-out discounting. The event can also be used to showcase limited-edition luxury items.
Participation in Singles’ Day is should be a priority for your e-commerce strategy in China. But be responsible. It’s easy to be overwhelmed by unexpected surges in demand if you’re not fully prepared. Don’t choose Singles’ Day as your brand’s launch event. Work up to it during the year so you’re ready to go when November rolls around.
Chinese customers are generally open to trying new brands. But it’s the post-90s consumers who are most happy to experiment. Constant innovation, fresh ideas and a strong marketplace presence are crucial to staying relevant and boosting sales.
Want to find out how your brand can make the most of e-commerce in China? Get in touch – we’d love to hear from you.
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