33% of Chinese consumers bought items from international brands on 11.11.2015. So, how can Western brands take advantage of a day which last year saw Alibaba reap over $14bn in sales and has seen 60% year-on-year growth for the past two years?
Let’s look at platforms and strategy.
Six platforms to note
If you don’t know much about Tmall, you can read our beginners’ guide.
The platform is similar to Amazon. Brands can set up store fronts using implementers such as Avenue51, to lessen some of the administrative and logistical burden.
Tmall Global is the most common B2C entry point for international brands, as inventory does not have to be stored locally but can be shipped cross-border. The differences in requirements are shown in the table below.
via CPC Strategy
With 15,000 global companies getting in on the Singles’ Day act in 2015, Tmall saw a significant increase in storefronts.
Success stories include:
- Costco Wholesale has been selling American food products very successfully, particularly nuts.
- British supermarket Sainsbury’s sold products such as tea and porridge oats at a 50% discount.
- Ahold, the Dutch grocery chain, pushed baby products and Dutch honey waffles at a similar discount.
- Tesla sold its Model S on Tmall from October 20 last year, and sold out just before 11.11.
- Luxury retailers such as Burberry have storefronts on Tmall, as well as having a .cn website and offline stores in the country.
- The same goes for many cosmetics brands such as Estée Lauder, and other iconic American brands such as Nike and Apple, as well as retail giants like Zara.
2. Localised websites
Plenty of international brands have Chinese websites, of course.
However, it should be noted that China’s ultra-competitive retail market, and a trend for online to offline retail (O2O), means that success with a .cn website alone is not something to take for granted.
ASOS is a notable example of failed ambition with a Chinese website. The company is an online pureplay, operating in the middle of the market (neither aggressive discounter or luxury) and as such struggled to show sales growth quick enough to justify investment.
Some of the many factors that led to ASOS’s withdrawal can be mitigated somewhat with a soft entry through Tmall.
Examples of successfully localised websites chiefly come from large brands in China such as Nike and Estee Lauder. These brands run voucher campaigns on Singles’ Day, driving people to their websites, as well as hosting discounts (including on Tmall).
3. JD.com and WeChat
Singles’ Day shopping in 2015 was predominately mobile (nearly 70% of sales) and was also influenced by social media, with social commerce a reality within WeChat and QQ.
JD.com capitalised on mobile in particular, thanks to its partnership with Tencent (owner of WeChat and QQ). Advertisements ran in app, offering exclusive coupons.
A whopping 52% of first-time JD.com customers on Singles’ Day came from WeChat and QQ.
JD.com has its roots in electrical goods retailing but is now Alibaba’s main rival and has attracted big players such as Uniqlo. It is also attracting more US fashion brands, as well as courting cosmetics and food brands from Europe.
Aforementioned Western implementers will often set up a JD.com store as well as a Tmall store.
Amazon launched Z.cn in 2014. Its marketshare is fairly low, at around 1.5% in 2015.
However, Amazon is shortly to launch Prime in China, which will give members free cross-border shipping.
Fulfillment centres in the US will use local logistics capability to deliver to consumers in 5-9 days. Amazon’s own Global Shopping Festival runs until December 2 and encompasses Black Friday.
Fairly obviously, those brands with longstanding relationships with Amazon may be keen to test the Chinese Amazon Global Store.
Dealmoon is a popular coupon site (active in the US and China) that many US brands such as Nordstrom and Saks have used to sell direct to Chinese consumers on Singles’ Day.
YDX is a direct import company that offers online storefronts, but notably an online-to-offline capability, placing products in stores.
This platform is more suited for SMEs and smaller brands (that can’t get as many eyeballs on Tmall), which the British Chamber of Commerce website says generated £200,000 sales in its first year (2014).
Four strategies to win
1. Understand pricing
Prices drop by 50% or more on Singles’ Day for a vast range of products, from bulk-bought FMCG to electronics.
But as with Black Friday, many brands will be concerned that offering big discounts isn’t a viable strategy.
Dyson highlights how pricing is evolving, however, and if the product is a good one, consumers are willing to pay.
A spokesperson for Dyson told the British Chamber website that “Dyson’s first participation was last year, and we were overwhelmed by the Chinese appetite for our technology….So for 2016, we have expanded our offering.”
They add “11/11 isn’t just about buying cheap products at crazy prices. The event is maturing and what people are really after is good technology at good value. This gives Dyson an opportunity.”
So, although the Chinese market may have a reputation for going high or going low (luxury or discount), international brands with good quality products need not be afraid.
Having said that, Uniqlo is the most popular clothing brand, and is characterised by quality and price, as well as an offline footprint.
2. Find the right products
Popular categories include clothing and cosmetics. But with the relaxation of the one-child policy, and recent baby product scandals (contaminated baby milk), the infant sector is also lucrative for international retailers in China.
Famously, the demand for an Australian baby milk formula (Bellamy’s Organic) created an increased shortage within Australia. A telling indicator of the scale of Chinese retail (chiefly this was through consumer-to-consumer transactions on Taobao, which is similar to eBay).
4. Understand social and advertising
We have already talked about the impact of WeChat on sales. Social media plays a big part, so brands should look to build a presence here over time (fairly obviously).
Alibaba also has its own ad exchange called Alimama. Brands may seek to use a local agency to get to grips with this sophisticated ad platform.
4. Target young people
Singles’ Day was created for young people. There are more than 400m millennials in China. Tailor your approach accordingly.
Though Alibaba is seeking to make 11.11 a global phenomenon, it remains to be seen whether this will happen.
Irrespective, the size of the opportunity in China (online Singles’ Day sales were roughly equivalent to offline Black Friday sales in the West) is something that many brands have found difficult to ignore over the past two years.
2016 will surely see more Western success.