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Given the sheer size of China’s economy and the all-encompassing power of its communist government, it’s easy to think of it as a place where speed and innovation might be stifled.
However the very opposite is true according to Ogilvy & Mather's head of digital in APAC Barney Loehnis, who gave one of the keynote talks at Econsultancy’s Future of Digital Marketing event.
Loehnis who has been working in Asia for eight years, describes the working environment as “brutal”.
"It’s not more advanced out there per se, but the momentum and speed of growth is astounding," he said.
To give a better understanding of how the digital landscape is developing in China, Loehnis broke his talk into three areas of focus: the people, the platforms and the players.
Here are some of the highlights...
Loehnis said that to understand digital in China you have to understand the people.
The nation has undergone massive social and economic change in the past 20 years, which has created huge pressures for the population.
Some stats that show the speed of change:
- In 1990 there were 100,000 privately owned cars in China, but there are now 70m.
- In the last three years China has used more cement than the US did in the entire 20th century.
- In 1999 there were 7,000kms of highway in China. There are now more than 75,000kms, which is more than in the entire US.
- 12m people migrate to the cities each year, and China now has more than 20 cities with a population of 10m.
All this has contributed to huge social pressures on Chinese citizens:
Loehnis suggested that emotional separation underpins much of what’s happening in the country.
Migration to cities often involves leaving children in the care of their grandparents. The result is that one-in-three children is now brought up away from their parents, and older generations are no longer able to rely on their children to look after them in their twilight years.
By 2050 30% of the population will aged over 60, putting huge strain on the healthcare system and forcing people to choose whether to care for their older relatives or use the money to pay for their child’s schooling.
With 17m babies born every year competition for university places and jobs is intense.
Chinese culture dictates that people must strive to secure the best education, salary and social standing, however this obviously isn’t possible.
In recent years there has been a backlash in the form of the Diaosi movement of non-conformity, which is a sub-culture that allows people to define success on their own terms.
Chinese society is massively corrupt, which has led to a number of high profile scandals in recent years.
These have included counterfeit medicines, poisoned baby milk and the small matter of 20,000 dead pigs that were found floating down the Yangtze River.
So it’s no wonder that the Chinese people have trust issues with traditional news sources, causing more and more people to look online for answers.
The internet empowers people to find out more information, expose things they see as wrong and speak to their peers.
Ecommerce also plays a part in this according to Loehnis.
Tmall is incredibly liberating for people, as they can access a huge range of products from a massive range of brands. The same goes for Taobao – it provides an opportunity for escapism, as people can forget about realities of life by heading online and browsing all these different stores."
Digital allows people to feel that they are a part of the growing success story in China.
The internet is now the dominant medium for marketers in China, and apparently most brands can’t afford TV anyway.
Loehnis said that a national TV campaign in China costs $20m and probably has to be bought a year in advance. This forces Western brands to diversify.
Marketers also have to reimagine adverts around local values, as the Chinese associate Britain with Mr Bean, not the prestige of British Airways.
Looking at how Chinese use digital, one third of time online (34%) is spent using online, predominately in streaming long form content.
A further 16% is spent on social networks (e.g. WeChat, Weibo and Renren), followed by 10% on ecommerce.
Ecommerce in China is dominated by Alibaba, which owns Tmall and Taobao. In 2013 Taobao’s GMV reached USD$1.63trn, which is about half of the UK’s GDP.
Much of the company’s success is down to its huge express delivery network, which means that customers in big cities can get pretty much any product they want delivered the same day.
China’s tech scene is dominated by Baidu, Alibaba and Tencent, also known as BAT.
Until recently they could broadly be categorized as search, ecommerce and social respectively, but each has been branching out and acquiring companies in other industries.
Tencent's origins are in video games, making money selling the games themselves as well as virtual goods.
It also own social platforms QQ, Qzone and WeChat, the latter of which people use roughly 100 times per day for messaging, voice chat and group chat.
WeChat is also being developed into a full service channel, offering ecommerce and the ability to book a taxi or check-in to a flight.
Luxury brands have also noticed that when Chinese women walk into their stores they take a picture and circulate to their ‘devil group’ on WeChat, which is their closest five or so friends, asking for permission to buy the product.
The challenge for brands is working out how to interrupt WeChat users as they’re checking in?
Alibaba began life as a B2B website, but now also has C2C marketplace Taobao and B2C site Tmall.
Alibaba's Tmall store
C2C ecommerce is worth $199bn annually in China, of which Taobao accounts for roughly 90%.
Similarly, Alibaba’s Tmall accounts for around 50% of the country's $107bn B2C ecommerce market.
Alibaba also has a strong presence in online payments with Alipay and Yu’abao, and is now moving into banking by creating ways for people to borrow money.
Wrapping up his talk, Loehnis reiterated the high levels of agility and innovation that characterise Chinese tech companies.
Chinese marketers are tougher than their Western counterparts and have a real eye for where the money leads. This is important for ecommerce as they produce merchandise and accessories around brands that local people love, and that builds a whole system in which people can engage.
But despite having incredible vision and a fast-moving economy, at heart China is battling with traditional values meaning it’s still quite rough and not everything works.
As epitomised by this image: