Over the last decade China has seen its number of internet users growing. More than half of the population are online resulting in the largest e-market the world has ever seen. With more and more brands expanding in China it is becoming harder to increase ones market penetration. Brand’s are becoming more specialized in online-to-offline marketing techniques especially in the high-tier cities.

Embracing online-to-offline services (O2O) is about investing important capital investment in order to cut down  prices long term costs whilst attracting more consumers. Quality O2O services are now an integral part of a Chinese marketing campaign. O2O services are growing especially in the domains of transportation, travel and dining.

The lastest Mckinsey survey is concerned with the tendencies and trends of China’s internet users. It seeks to pin point the interesting ebusiness sectors which are going to emerge and grow as well as the opportunities that will also come with this. The biggest opportunities are in the low-tiers cities as they rapidly continue to develop. Penetration in these locations could not be done without a social media campaign at first. The domestic infrastructure for e-commerce product delivery has improved dramatically in recent years in China.

The McKinsey survey was launched at the start of 2016, around 3 100 people participated. These people are from a host of different places with different income levels. McKinsey was forecasting e-commerce opportunities in China with a focus on online-to-offline services. O2O presents opportunities that no marketer should underestimate. Changes will come in Chinese e-commerce. The changes will be led by potential influx of new customers  from low-tier cities, developments in cross-border shopping and in social media also.

 

Top 5 sectors which will benefit from these developments.

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Chinese love to go online!

At the end of 2010, online shopping in China was already one of the biggest markets in the world. During this year there was a 96.9% increase and the market continued to gain in strengh. Between 2014 and 2015 the value of online retail transaction increased by 33% of the total value of RMB 3 877.3 Billion. Online sales represented around 13% of the total of sales in China. Experts predict that the Chinese Online market will be more important than the United States, Germany, France, United Kingdom and Japan all together in the next 4 years.

 

Chinese Ecommerce market will be bigger in 2020

In order to understand the figures above two main points have to be taken in consideration : Computers & the rise of the Smartphone. China on it’s own, represents 688 million digital users and two-third of them are online shoppers (413 million in 2015). Statistics suggest there will be 750 million Chinese shopping on digital devices within a year. It is crucial to not underestimate the power of the smartphone in China. In 2015, more than half of the users online used their smartphone to buy online. The main smartphone users in 2015 were people between 20 and 29 years old with high incomes and a high level of education (74% of this online shoppers were college graduates). The majority of consumers were male with 57% of this total.

Crossborder opportunities

With the complex set of rules and regulations combined with state influence and much business competition developing your business in China can become a disaster. More and more companies use e-business cross-border services where it is easier to implement a well constructed marketing campaign in order to sell products in China without investing a lot of resources.
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Since the creation of the Free Trade Zone in China, companies benefit from better import procedures and taxes. Today there are approximately 5,000 entry platforms to the Chinese market and each has its own specifics: bulk purchase, social shopping, small brand entry or outlet distribution.
With established platforms like Tmall Global, JD.com, KJT.com, Sasa.com or Ymatou, foreign brands can sell their products directly to consumers, their are better chances to extend your influence. Using E-commerce cross-border platforms in China is a real opportunity. Research needs to be done at the beginning of that process in order to grow familiar with the market and easily penetrate it.

Baby Care sector

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After many sanitary scandals, the Chinese have became more health conscious. Cases include; the gutter oil, an explosive watermelon after abuse of forchlorfenuron, fake mantou formula that is out of date, milk with nitrites, clenbuterol pork, milk with melanine. This all happened and scared Chinese people.

Consumers now know what they do not want and what they want, behaviors and minds changed. Especially with regards to baby care products, the Chinese mothers want the best quality for their baby’s needs. Western baby formula and food products are now seen as a byword for quality.

Chinese love fashion

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With the evolution of the middle and upper classes in China, consumers now need products which are defined by  3 characteristics : Authenticity, a positive buying experience and a good balance between price and quality. That is why they usually are attracted by foreign, quality products. Chinese like products from the United States, Great Britain, Japan, Hong Kong, Canada, Germany, Australia and France also. For example a product « Made in France » is a byword for luxury and superior quality.

Cosmetics market

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Every cosmetic brand knows the importance of the Chinese market, but only a few know the way to lead the chinese market which is 32 billion USD in size while local competitors are almost inexistent. At the same time, e-commerce has grown by 277 billion USD since 2012 and it is still growing at a surprising rate: 25.8%.
Furthermore the markets of second and third tiers cities have a faster growth rate than we find in Beijing and Shanghai. With lower tier cities it is not convenient to expand with real, physical stores, especially for new companies in the market which do have not enough financial clout to invest in real stores in these areas. That is why many choose the e-business solution in order to really penetrate the chinese market without investing in physical locations.