When I first visited China in 2012 I was fascinated with how surprisingly international the cities of Beijing and Shanghai felt, how different everything in the world of eCommerce was and just just how much opportunity existed for international brands launching into China.
So, roll forward 4 years and here I was again, working for a different British fashion brand, with similarly strong organic demand from China, having undoubtedly learnt a huge amount from my previous experiences, and keen to see just what had changed and how we’d plot our Chinese launch strategy for the Chinese market in 2017.
So here’s my (lucky Chinese) 8 observations after a week spent in Beijing and Shanghai, listening to and observing Chinese consumers (both in usability testing and in public) and speaking to experts and consumers working on the ground in China.
1) Mother & Baby is THE category to target
Marketing research firm Mintel recently reported that the China retail market for mother and baby products grew 256 percent from 2010 to 2015, reaching an estimated $730m last year, driven by increases in income and spending power. And when it comes to buying products that their baby’s consume or that touch the skin of their children Chinese mums have a strong preference for buying from international brands that they feel they can trust more than domestic brands.
With most Chinese mums having just one child and the 2008 baby milk scandal having destroyed the trust of consumers of Chinese baby brands, it’s perhaps no surprise that Chinese mums are particularly precious of their young children and willing to pay more to ensure they are safe. The massive international $17bn cross-border baby milk market is solid evidence of that attitude and even when buying clothes the mums I spoke to said they selected children’s brands based on safety and quality first with style, design and price playing a less important a role, in that order.
Despite their relatively lower household incomes (compared to European consumers) their lack of less price sensitivity and lower competition for Childrenswear products (certainly compared to Womenswear) this category offers a huge opportunity for international brands, especially those that offer something unique in terms of their brand values, quality and design.
2) Cross-border eCommerce is booming
A few years ago a fully localised, translated Chinese website was seen as the only route to launching your eCommerce business in China, with a local warehouse and local operations necessary to support that. As I’ve written about before the rules are changing on that and cross-border shopping is booming (+70% in 2015 and now worth an estimated $10bn) supported by an increased consumer confidence in China shopping from overseas websites and a desire to discover new brands or better prices on international brands already selling in China.
If your target demographic in China understand English and are OK with shopping on English language website (which we found our target audience was) then you’re better investing in first-step localisation of currency, payments and checkout through a Global-e or even Pilibaba style solution rather than translating and building a localised Chinese website. One big benefit of this is that customer expectations are then lower in terms of site speed, navigation and shipping times/costs, which gives you the opportunity to test the water with relatively limited investment and start improving your Chinese proposition once you start to see demand picking up.
Consumers are also more forgiving if your brand offers something unique in the market and will wait 2 weeks to receive your parcel if they really can’t buy anything like that in China – they’ll also pay more of a premium price for your brand. Again this is true of any market in the world but the Chinese consumer is certainly one of the most demanding and savvy out there.
3) Alibaba is dominant, still
Certainly in terms of online shopping and driving the eCommerce growth it’s all about Alibaba, even more so now than before. Taobao (Alibaba’s B2C marketplace) is ubiquitous and shopping on the Taobao app is something most of the Chinese consumers I met and observed do to kill time – browsing and shopping on Taobao has almost become a national leisure activity!
But getting it right as an international brand selling on Tmall (the branded B2C part of Taobao) is still a massive challenge and there’s a huge amount of competition on there. Finding the right partner (as with all channels in China) is especially critical for Tmall as navigating through the shark infested waters of brand re-sellers (official and unofficial) requires a Tmall partner with the skills, budgets and the contacts to get your products/brand to the top of the listings through a combination of paid and ‘earnt’ media and exposure.
Although that sounds similar to the approach you’d take in any market and channel it is, but the rules of Tmall are very different and can change frequently. Still, for international brands Tmall is undoubtedly where the traffic and shoppers are so you absolutely need to be playing in the Ailbaba arena if you want to grow your brand and business in China.
4) WeChat is a potential eCommerce game-changer
WeChat, with a staggering 800m active users, has gone from zero to an essential part of communication in a very short space of time – it really does appear to be changing the face of communication in China, both between consumers and increasingly with the brands they follow.
WeChat in China is not just a message platform like WhatsApp, it’s a web browser, social platform, shopping channel, news channel, online payment, online banking and so much more, all in one app – it’s rapidly becoming the number ome mobile web browser too as consumers use the app as their one-stop shop.
Chinese consumers are interacting with WeChat a phenomenal amount – over 36% of users check the app more than 30x per day! Taking a lift to the 20th floor in Shanghai and pretty much everyone is using WeChat with several conversations/actions by the time the lift reaches floor 20.
Even the most digital-forward brands in China are still figuring out how to use WeChat effectively as a marketing tool and to keep up with customer expectations on the platform. ‘WeChat eCommerce’, served through ‘brand stores’ within the app seem to be gaining popularity but very few brands are driving significant volumes through these stores, yet.
WeChat is becoming a one to one marketing medium – imagine sending out an email to your 1m+ database and getting instant questions back from thousands of your customers. That’s what’s happening today on WeChat with marketing ping messages replacing brand email and customers expecting instant answers – not the 8 hour email response we can fall back on in Europe.
5) Mobile is everything
If China was a mobile first-market when I visited in 2012 it’s now becoming a mobile-only market, with Chinese consumers glued to their phones and using them for all aspects of their lives even more than other markets. Of course you need a slick mobile site/app to be successful in China but even then it seems that the vast majority of mobile usage is on just two apps; WeChat and Taobao – why use any other app when you can do anything you want or buy anything you need from these two apps?
Interestingly Chinese mobile sites/apps are so much quicker than international ones, inadvertently optimised for mobile by being more text-based and less image-heavy compared to your average European mobile site. The users we tested even said they wouldn’t even consider shopping the mobile sites of international brands, instead preferring to do the opposite of what they usually do with domestic sites and shop the desktop site.
6) Offline (fashion) retail is struggling
This appears to be especially true in the mid to high end with very few customers seeming to be in the designer stores in the glitzy shopping malls I visited in Beijing and Shanghai and even fewer buying.
With total retail growing at a relatively sluggish 10% (versus the +56% eCommerce growth in 2015) and a whopping 4,000 shopping malls in China (3x as many as in the whole of the US) clearly something has to give, with many international retailers I spoke to planning to close several stores in China and invest more heavily in eCommerce.
Such is the confidence in and familiarity with shopping online in China that expensive, flagship retail stores in China look like nothing more than expensive adverts, with consumers I spoke to saying they always check prices on their phones when shopping in stores and many not even bothering to visit stores in the first place, knowing they can find the same products for less online even if that means shopping cross-border from the brands’ official English language website.
7) eCommerce marketing is maturing
For all of the break-neck growth in eCommerce in China in recent years, I’m sure most people will agree that there was always an underlying lack of sophistication around areas like digital marketing and customer relationships in China – why worry about retaining customers when you’re struggling just to keep up with demand and why use expensive digital marketing software (that is unlikely to work on the Chinese market anyway) when you can just throw (cheap) resource (i.e. people) at a campaign in order to optimise it.
I’m told that is now starting to change: programmatic advertising and software-led optimisation are now becoming a lot more mainstream, even if plenty of companies are still managing campaigns off excel spreadsheets with rooms full of bright graduates crunching the numbers.
I’m also told too that the relationship brands have with customers is now becoming a key differentiator as the online growth naturally slows and customers demand more from the brands they shop with online. Customers want authenticity more than anything else, a brand they can trust and a brand story that builds trust and helps a brand stand out – most international brands have a strong story and brand that help them stand out from the competition – now that story becoming a much more important part of the customer journey online.
CRM and improvement of the end to end customer journey is something brands in China are now starting to seriously invest in and understand, whereas before it hardly got a mention.
8) International sites are VERY slow & content is often blocked
Sitting with a cold beer on a rooftop bar in Beijing or walking through the tree-lined streets of the French Concession in Shanghai it feels like you could be in any major European city, in fact you can almost forget that access to information is severely restricted. For me it was a minor irritation that I couldn’t use Google Maps to get around or access some of my usual websites and pages, but for people living in China it’s still very much a reality that their internet access and new information is restricted. Although most savvy consumers use VPNs to navigate around the issue they do get frustrated by the poor mobile experience and the inconsistency of a VPN connection.
In terms of business this access to information doesn’t make a huge difference (unless you’re Google of course) but the famous Great Firewall of China does have a big impact on the speed of your website (if it’s hosted outside of China) and is something you’ll need to address, even if you have the most sought-after brand that can only be bought through your website. You also need an business entity in China to register an official brand WeChat account, which is also a potential barrier if you’re planning to start building your Chinese presence from overseas.
In conclusion…
So a week after I returned home I’ve come away still very much intrigued and fascinated by what is undoubtedly the most exciting eCommerce market in the world.
It’s still a country of contrasts and contradictions – all is often not quite what it seems on the outside, but you really do need to spend time on the ground experiencing first hand just what makes Chinese consumers tick and seeing just how quickly things change.
I’m still absolutely convinced though that the opportunity is enormous in China with the right brand, the right partners and the right strategy in place. I’m also excited to be launching into the Childrenswear market (compared to the far more price-driven and competitive Womenswear market) which has undoubted potential for international brands offering quality and style at an affordable price.
I’m quietly confident of our prospects in China and very much looking forward to mapping out and delivering our strategy to bring our brand to thousands of new customers in China in 2017.
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