Singles’ Day (11/11) is upon us once again.
For those not yet aware of it, Singles’ Day is China’s annual ecommerce day which yielded $17.8 billion in gross sales in 2016. (As a reference, Cyber Monday in the US only grossed a measly $3.45 billion that year).
With sales figures like that, it’s clear that ecommerce in China is now mainstream, and massive. And, because of its size, every global brand is trying to be a part of it.
The problem that many Western brands face when trying to do so, though, is that China has a very different digital landscape than the West and, in many ways, Chinese companies are ahead digitally.
So how can Western brands catch up with Chinese competition and tap into its vast ecommerce market?
Well, it’s complicated, so Econsultancy recently asked Kestrel Lee, former Creative Director for George P Johnson in China, to offer advice to marketers in Singapore on the topic. Below is a summary of Kestrel’s main points on what Western brands interested in participating in ecommerce in China need to understand.
1) Ecommerce in China is very different from ecommerce in the West
First off, Western brands need to know that China has different digital service providers than the West. Google and Facebook are blocked in China and the big ecommerce players are Tmall and JD, not Amazon.
But besides that, Western brands must realize that China has a highly integrated mobile payments infrastructure, far beyond anything available in the West. Chinese consumers can pay for virtually anything through their existing mobile payment services, which is most likely to be WeChat.
This means that in order to be a part of the Chinese ecommerce market, Western brands have to understand in great detail how Chinese consumers buy products and think carefully how they can be part of that process.
If Western brands try to ‘go it alone’ or think that they can redirect consumers to a Western-style web form payment screen, then they will likely fail in China (see Econsultancy’s overview of ASOS’s experience in China).
2) Ecommerce in China is socially driven, not search and ad-driven
Another key difference in China is the importance of ‘s-commerce’ or commerce that happens due to social media.
While s-commerce is starting to take off in the West, payments are not yet well-integrated into social platforms and so Chinese brands are clearly ahead in this area as well.
Western brands are therefore advised to look at how Chinese brands focus less on advertising and instead create experiences which persistently engage customers and achieve top-of-mind recall.
A diagram recently published by the Boston Consulting Group illustrates the difference between a Western online journey (search and ad-driven) and one in China (socially driven).
Western brands need to think carefully about how they can position themselves to be a part of this socially-driven buyer’s journey.
3) There is no ‘middle-tier’ economy in China
Chinese consumers are either incredibly price-sensitive and will go with the cheapest option or they are looking to buy something premium to enhance their status. The concept of a middle-tier ‘value, yet quality’ product does not exist in China, says Kestrel.
And as global companies do not, most likely, stand a chance of competing on the low end against Chinese suppliers, it means that Western products must aim to be considered as high-end or premium.
The good news is that, according to Nielsen China, more than half (56%) of Chinese consumers buy premium products (20% over the average price) in order to feel successful or show their success to others.
The bad news, however, is that Chinese consumers now have a wide range of options for spending their increasing wealth on status-driven purchases.
“Luxury brands are now competing with a plastic surgeon and the luxury travel agent. For a similar price, [they] can have a Louis Vuitton handbag, a facelift or a trip to the Maldives” says Erwan Rambourg, head of HSBC’s Global Consumer & Retail Equity Research.
4) Chinese consumers buy into culture before they buy products
Western consumers follow brands, whereas Chinese consumers follow people who follow brands.
So there is little point in brands trying to advertise using fake consumers, says Kestrel. Instead, Western brands need to engage real people in China and integrate themselves into the everyday lives of consumers.
To do so, according to Kestrel, they should ask themselves about the 3 C’s of s-commerce:
- Currency: How does your brand give users social currency and recognition so that they will look good by amplifying your brand
- Culture: How does your brand embed itself to your users’ daily lifestyles so they will keep interacting with you?
- Commerce: How does your brand socialize and ‘gamify’ offers, so that they will share them with their friends?
One example of a brand who followed these principles recently was Unilever, who recently introduced its Sunlight detergent brand in China.
Instead of using mass advertising to do so, Unilever produced content which started a conversation about the roles of husbands and wives with regards to house cleaning. This conversation was amplified by influencers (“Key Opinion Leaders” or KOLs in China) and ended up increasing organic traffic to its online store by 300%.
Watch a short case study of the campaign here:
5) Western brands should look to start a movement
Adding on to the Unilever example, Kestrel said that brands wishing to enter the Chinese market would be wise to forgo technical gimmicks and instead look to see how they can start a ‘movement’.
By this, he said, brands need a ‘first follower’ in China to localize and lend authenticity to the brand. This can be a Key Opinion Leader (KOL), but they should be chosen carefully to avoid looking fake.
Without this, brands simply appear to be talking about themselves through advertising and they will never have the social currency which allows their message to spread on the many social commerce platforms.
But with this ‘first follower’, the brand message can be made more real, the target audience obvious, and a movement around the brand can get started.
For a deeper, and amusing, overview of what starting a movement means, Kestrel referred the audience to the Derek Sivers TED talk on the topic.
A word of thanks
Econsultancy would like to thank Kestrel Lee, former Creative Director for George P Johnson in China (and now Econsultancy’s Principal Analyst and Consultant for Great China) for his excellent presentation on what Western brands need to know before they try to enter China’s ecommerce market.
We’d also like to thank all of the marketers who attended the presentation and helped with this post by asking many intelligent questions.
We hope to see you all at future Econsultancy events!