China’s e-commerce Market
The statistics speak for themselves; online retail sales in China reached 5.16 trillion yuan ($752 billion) in 2016, representing a 26.2% growth from 2015—more than double the growth rate of overall retail sales according to China’s National Bureau of Statistics.
This report guaranteed that China’s e-commercial sector would further it’s lead over the US with the growth rate in the orient now four times that seen in the US.
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Now is thus the time to enter this market. Firstly brands must understand the best practices and trends that are shaping how you must tailor your approach in-order-to capture your slice of the pie.
Here’s our rundown of the most prevalent trends in China:
E-Commerce is not a ‘first world phenomenon’
The incredible e-commerce growth in China is being driven by third and fourth tier cities, and for the first time, these cities have surpassed first and second-tier cities. The emerging trend to watch is how rural markets in other parts of emerging Asia will also experience significant e-commerce growth.
China’s GDP has been increasing by 7% year on the year leading to rising levels of wealth in smaller third and fourth-tier cities. Additionally, these cities do not have the physical infrastructure for high-street stores so rely more heavily on e-retail.
Alibaba, China’s e-commerce giant, also is to thank with their investment in delivery infrastructure across the nation facilitating greater access to rural and smaller urban areas.
China are the Leading Digital Innovators
China now sets the bar for innovation in this sector. China’s mobile digital payment systems via WeChat & Alipay are just the tip of the iceberg. The ease and security of e-payment (with mobile apps connected to a users banking) is often cited as a key reason for the rise of e-retail spending. It lends itself to instant, impulsive purchasing at just the swipe of a screen.
These mobile payment systems are accepted online and offline and highly integrated into consumers’ lives making them the go-to payment of choice. Nearly half a billion businesses within China use Alipay and consumers are now even using it overseas when they travel.
Alipay recently launched ‘Pay With Your Face’ allowing you to authenticate payments with a selfie, the perfect solution in Asian nations. Developing convenience and speed of purchase is where hectic, modern China is coming up top.
VR shopping has also exploded with consumers able to explore products digitally via virtual reality simulations. Alibaba showcased a demonstration of the BUY+ virtual store, allowing shoppers to transport themselves to NYC and virtually walk the aisles of the famous Macy’s department store to purchase select items.
E-Commerce in China
The Rise of ‘Social Commerce’: WeChat, Little Red Book & Weibo
We already know that approximately 50% of e-commerce is driven by social media in many parts of Asia. The trend is the ability to purchase directly from social platforms.
Social Media in China now plays a huge part in everyday life. Tencent’s WeChat is leading the way by incorporating stores into their app. This set the tone for a new era of socially lead shopping experiences incorporated into the fabric of social networks.
It is logical, shopping and purchasing are encouraged by being able to share that experience. WeChat stores allow for instant payment through the ‘wallet’ function whilst being connected to official accounts of social interaction through groups, IM & of course sharing details of the purchase.
Other platforms such as ‘Little Red Book’ incorporated group chats and the ability to share purchases within a users network.
Weibo (think China’s Twitter) also has had an impact on Influencers such as ‘Mr. Bags’ building a following of hundreds of thousands around themselves. Weibo posts for brand influencers are now used for direct product promotion & sales, especially as Weibo was purchased by Alibaba. It functions as a conduit for driving traffic to store pages optimized for mobile and formatted for Chinese social networks.
A result of this more socially orientated approach is that brands now offer customer services live via WeChat for shoppers with QR codes even placed on sites to direct users to their official page and instant messaging services. IM services need to be available on the site too but WeChat is the most trusted platform.
Mobile Dominates over Desktop
China’s whole digital landscape is mobile dominated. At the end of 2015, China’s mobile commerce reached RMB 2 trillion (approximately US$289 billion), which is a 2000% increase versus 2012.
2016 forecasts have mobile commerce at approximately two-thirds of desktop sales but looking at the Alibaba’s 2016 Singles Day, an amazing 82% of sales were on mobile devices, which could mean this pace is accelerating much faster than forecast.
The undeniable trend is that mobile commerce will continue to grow inside and outside of China and eventually be the primary way consumers purchase online.
Optimizing store pages for mobile is more important than ever. The huge success of mobile store creators such as Youdian and Youzan emphasize this trend.
Shopping Experience more Important than Pricing
According to a recent Kantar Retail study, Chinese consumers’ primary motivation for shopping online has moved from “price, assortment and convenience” to “quality, value, service & experience”. Chinese consumers are looking for a richer ‘top-of-the-funnel experience, and this user experience trend will definitely flow out of China.
This heightens the importance of developing a quality consumer shopping funnel with a smooth, intuitive shopping experience rated the most important factor in China. You have on average 6-8 seconds to retain an online customer, the page must be built with the Chinese end consumer in mind with an emphasis placed on product presentation, selection, page design, navigation and call to action.
How is the Chinese market evolving and how will this affect international brands? The situation now is very different from last year.
Tmall Competition is High
Tmall competition is at an all-time high, Tmall and indeed ‘Tmall Global’ are becoming increasingly competitive and saturated. Big players can dominate here but it’s certainly not a ‘magic bullet’ if your brand has little reputation or visibility in China. A whopping 15% of international brands have thus far left the platform this year. I would argue this is not a reflection on the potential of China’s market rather that Tmall is a very expensive option with 1 Million RMB required for a basic set up before the stock value has even been calculated.
‘Tmall Global’ has stagnated whilst Tmall is a fiercely competitive and expensive option, for many international brands there are other, more intelligent and cost-effective methods to employ when entering this market.
Weibo Purchased by Alibaba
China’s ‘Twitter’ has been purchased by Alibaba, another sign of the times that social media and e-retail cannot be differentiated. A trend is that it will be used more as an exclusive Tmall / Taobao platform for product promotion & branding. Branding is everything in China with Weibo one of the key sites for highly valued influencers to post about the brands they represent.
Weibo has reportedly launched a new set of rules limiting influencers from posting links to e-commerce sites not owned by the Alibaba group. It also restricts links to WeChat, other external links and influencers from promoting more than one brand. There may well be page weight penalties when it comes to driving traffic away from Alibaba’s services.
The ramifications of this are wide-ranging, WeChat cross-promotion will certainly be more limited but it will assist brands on Taobao & Taobao Global whose posts with external links to product pages will still be endorsed (they are part of the Alibaba empire). This is the constantly changeable China, you have to be flexible as the Taobao Global Store becomes more viable again.
The Rise of ‘Taobao World/Global’ Stores
For brands, Tmall was typically the number one option but there has been a growing problem, 80% of the brands applying to Tmall last year were rejected, typically due to a lack of branding and awareness in the Chinese market. This has led to the rise of Taobao Global stores with many brands shifting onto Alibaba’s other key cross-border platform. These are customizable stores and offer much better ROI for new market entrants in terms of achieving sales in a cost-effective way. Taobao Global saw a 40% increase in international brand stores.
This has also opened up the opportunity for ‘Daigous’ or personal re-sellers to buy products at wholesale and re-distribute to their network and customer base, all via Taobao.
Taobao’s reputation has also been steadily improving with a big clamp down on counterfeit products and shady sellers. Indeed Taobao closed down over 2500 distributors on the platform due to poor quality practices. This type of cleansing and increased policing has led the way for more international brands to set up shop here and further increase the reputation of the platform.
JD increase their Market Reach and Target Audience
JD have typically focused on electronics and appliances and have typically held a 20% market share vs Alibaba’s 80%. This year they are making in-roads and investments into different sectors of the e-commerce market in a bid to improve their audience reach.
They launched a grocery store ‘Fresh’ after the acquisition of Yihaodian http://fresh.jd.com and have set up sub-divisions in hotel booking (http://hotel.jd.com/ ), travel (http://trip.jd.com/) and ticketing (http://jipiao.jd.com/)). This is a competitive sector in China but JD’s success in this arena based on their brand name remains to be seen.
WeChat Store: The New Way to do Business
The palpable excitement here is that WeChat has begun experimenting with a more advanced search function on the app, currently the search function does not pick up official stores, marketing the store to drive traffic is therefore the number one priority. If stores could be found based on keyword searches the levels of traffic could potentially increase greatly.
Even as it is, the WeChat store is a clever, nifty sales platform that integrates sales into social media, it allows for further engagement with consumers and encourages impulse purchasing through instant payment via WeChat’s ‘e-wallet’ service.
It is relatively cost-effective to set up and start selling but also to connect with Daigous, personal re-sellers who can be incentivized to drive traffic to your store. Developing a store in the right format is key.
What are the solutions for Brands in China?
This is the most important question, you have to adopt an intelligent strategy to stand out from the crowd in this lucrative, yet fiercely competitive arena. Here are some key tips from our experience working with a host of brands.
Focus on the most requested business sectors
It is often anti-productive to tackle an overt niche market, rather tailor and cater your product to existing demand in Mainland China. This is especially true here where the efforts required to be visible are multiplied in a more complex marketplace. Focus your efforts on one of the leading sectors of the Chinese e-commerce, such as ready-to-wear, cosmetics or high- tech products and carve out your USP here.
Propose short delivery times
Chinese consumers are accustomed to receiving their parcels quickly. Many online shops even offer same-day delivery, as long as you live in one of the large, well-served cities. Ensure you offer the quickest delivery time possible and to be assured to work with a trusted partner carrier. Speed is everything in hectic, modern China (including being first to market).
Understand the habits and customs of the country
Each country has its own culture and habits which in turn affects purchasing behaviors. So while the Americans have their “Black Friday”, the Chinese consumerist madness is fully expressed on November 11, a day where we celebrate ‘singles day’. This is the day of all records for online sales: the total amount of purchases made by the Chinese during this one day has exceeded $ 10 billion last year.
Branding is King for E-Commerce in China
Branding is everything in China, the Chinese buy brands. This is a society fixated on the status and how they are perceived, the number one way to denote this is through purchasing choices. As previously stated some 80% of brands were refused by Tmall, why? Because they lacked brand awareness.
To develop a brand you need to create a ‘buzz’ on the right social media channels with quality content, build up your following and ensure you are featured in e-media sources. Ranking highly on Baidu (China’s Google) and having influential Chinese figures reference you is a strong way to create an impact.
Evidently, this requires a large budget so for some brands a multi-tiered approach is required where they build on each aspect overtime with a long-term campaign designed to manage their status and reputation.
E-Commerce in China
Invest in Mobile Devices for E-Commerce in China
More than one Chinese user in two has a cell phone and 315 million buys on the internet – that’s twice as much as the Japanese and it’s 6 times the number of the UK online purchasers. It is estimated that 7 out of 10 online purchases are now made on mobile, thanks to the pivotal role of social media (more information here). All commerce activity has to be optimized for mobile in China, there is no question.
Offer a Simplified Payment Process
Over 60% of Chinese say that their online purchases are driven by simplicity. Be sure to present clear information and really high-quality images with a clear call to actions set up to drive consumers the right way along an intuitive lead funnel. Highlight the secure nature of the payment and utilize the payment methods Chinese netizens trust, like Alipay or WeChat pay.
Optimize Your Presence on Baidu
With a 75% market share, maximizing your ranking on Baidu, the Chinese Google, is a must for any business or brand thinking to tackle Chinese e-commerce (You can learn more about SEO on Baidu here).
It is integral to develop your visibility on China’s portal to the web through optimization techniques in terms of both buildings your Chinese website/e-commerce store as well as building backlinks, releasing quality content and having third parties reference you. Hosting your site in China on a local server is also instrumental to the speed of load time and therefore ranking on Baidu.
Baidu SEO is a long-term solution as ranking highly allows you to reduce Baidu ad spend.
Ads in China
Ads also need to be targeted at the right demographics for your product. PPC (Pay Per Click) advertising on Baidu needs to be based on specific keyword searches to drive the most qualified traffic to your store. Display ads are less popular in China so you will have to utilize paid links.
The ad needs to be constructed in the right way with quality ad copywriting optimized for the first line of Mandarin Characters. Then you need to ensure that targeted traffic based on keywords is being driven to the most relevant landing pages to increase the likelihood of purchases and further product browsing.
KOL’s / Influencers
There are a whole set of influencers online in China who have built large followings around themselves. These ‘Opinion Leaders’ can be recruited to represent your brand and post content on product releases, new lines and favorable sentiment about the brand.
The most important strategy is to curate quality posts, monitor and access the posts for feedback and interested consumers. Influencers cannot be expected to also act as a customer service figure, you pay for access to their community and must monitor this closely yourself. Some influencers are better for branding whilst others to focus on sales. Links to your online stores can be embedded into posts.
Any E-Commerce Project in China?
In conclusion, the solution for e-commerce in China is to understand current trends, the state of the market and how you can then tap into its vast potential with intelligent strategy. We are a specialist digital agency focused on e-commerce, we can help you break into this market with a focus on ROI through branding and sales.
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- Contact our team of experts for more information and to discuss your project.