The reason for this is that China’s commerce and cultural norms are vastly different from those in the West.
Brands that have successfully launched in multiple Western countries may think they know what they are doing when launching in China. It’s just another country, right?
Unfortunately not. For many reasons, China is unique. Because of these quirks, entering its market requires special attention from Western brands to stand a chance of being successful.
To help brand marketers start to think about how to enter China, Econsultancy is publishing quarterly China reports to cover the digital players, trends, and insights about the country.
Below are a few key points from our first report, The China Digital Report, Q1 2016.
China has the largest single-country presence on the internet
It is well-known that China has the largest population of any country on earth, but what may not be so obvious is that China now has the largest population on the internet.
According to Internet Live Stats, China now has over 720m internet users which is more than 20% of the global total.
The nearest competing country is India which, with 462m users, has less than two-thirds of the Chinese internet population.
In third place is the US which now makes up less than 10% of internet users, globally.
China’s lead in internet population size is significant as we can now expect digital innovations, especially regarding scale, to originate in China and flow westwards.
This is happening already, to some extent, with WeChat (see below).
China’s online population is still growing
Another thing to keep in mind when considering China’s presence on the internet is that only around 50% of the Chinese population is online.
That is, there are a lot of people in the country who are not yet ‘digital’ at all.
Compare this with the US and other Western nations who achieved that level in the early 2000s and seem to be peaking at around 85-90% penetration.
In other words, China’s influence on the internet is on the rise and the Western domination of the internet may be coming to an end.
This is important for brand marketers to note because as more Chinese come online, the Chinese market will only rise in importance and sophistication.
Western firms, therefore, need to acknowledge that China’s digital economy is now on par with the West and, in some cases, may even be ahead.
It’s prudent, then, for brands to become familiar with how Chinese firms operate in their own market now to prepare for the future.
WeChat is the runaway success story
Many Western sites are blocked by the Great Firewall of China (see our previous China post for details) which means that China has its own version of many digital services.
One service in particular, the social network WeChat, has been more successful than all of the others.
WeChat has enjoyed growth rates of around 50% year-over-year in 2014 and 2015 after blistering triple-digit year-over-year growth in 2012 and 2013.
One reason for this growth is that WeChat continuously innovates its core product, offering new ways for users to integrate the app into their daily lives.
Though it isn’t the largest social network in China (QQ has more monthly active users) WeChat is the fastest-growing social network and the most dominant, culturally.
In brief, if your brand is interested in breaking into China, start by researching what you can do on WeChat.
Baidu is the 800-pound gorilla of search and more
When reviewing the relative size of search engines in China by visitors, it seems that China has multiple, competing search engines each with significant market share.
But when search engines are measured by revenue, a very different picture emerges.
Clealy Baidu is the search leader in China with more than six times the market share of its largest competitor, Google China.
Another thing to note is that Baidu has an even greater cultural presence in China than Google does in the West.
Besides search and other services like maps also offered by Google, Baidu also operates China’s most popular encyclopedia, an ecommerce platform, a gaming platform, and even a food delivery service.
According to Andrew Ng, Baidu’s chief scientist in Silicon Valley, these additional services exist because, unlike in the West, other companies had not built them.
He states in a recent interview:
In the US, we search for a movie ticket and Google or Bing could send you to Fandango and off you go. In China, that website we could send you to, it doesn’t exist. We [Baidu] have to build it ourselves.
So for brands who are looking to launch services in China, be sure to check that the market isn’t already served by Baidu or another Chinese heavyweight company.
Google and China… it’s complicated
Google has a complicated and interesting history with China. Until 2010, Google China was one of the most popular sites in China and had a 29% market share, according to research firm Analysys International.
Following a disagreement with the Chinese government about censoring search results in 2010, though, Google effectively pulled out of China.
What happened next is slightly confusing. Google relocated to Hong Kong (which, yes, is still China) and has 79% search market share there, according to StatCounter.
This is possible because Hong Kong effectively has a different government than the one in mainland China.
Google.cn, as per the image above, redirects all users to Google.com.hk.
Reports indicate that Google search results are not being censored in Hong Kong and that Google China still has significant revenue from Hong Kong, though still far short of what it was six years ago.
To add to this confusing story, it seems that Google will re-enter mainland China in 2016.
The company will only offer the Google app store, Google Play, and will not link to its international Google Play site.
Instead, the company aims to consolidate the hundreds of independent Android app stores that have proliferated since it left nearly six years ago.
China offers many benefits for brands who are able to crack the market, but doing so is proving to be quite difficult for many Western companies.
To get started, it helps to know that the internet has now reached critical mass in China, that different companies dominate search and social there, and that there are other quirks which are not obvious from a Western perspective.
Econsultancy subscribers can read more about China in The China Digital Report, Q1 2016 and look forward to quarterly updates later this year.