It’s no secret that China is different and its retail landscape is unlike any in the world. To understand the new world of Chinese retail, it is imperative to understand the information transformation the country has gone through. China went online in 1994. Today, 700 million Chinese use the Internet. Although a latecomer to the information highway, China has made remarkable achievements in the development of Internet networks and consumer adoption of digital in just two decades.
As technology has quickly moved to the center of Chinese consumers’ lives, there have been major transformations even in the Retail landscape. For example, online now represents 10% of total retail sales up from just 2% in 2009. And with B2C eCommerce sales of $440 billion, China has now surpassed the US as the world’s largest eCommerce market. In the world of eCommerce, all eyes are on China. However, to truly understand the online retailing revolution in China, there is a need to understand all the retail channels: Offline, Online and the promising Omni-Channel.
Last semester during my MBA at the National University of Singapore, I took a ‘Marketing in China’ course, where along with my team members Yeap Su Phing, and Moey Jia Li, I analyzed the latest trends in the rapidly evolving Chinese retail channels. This article discusses some of those trends and the implications they will have for marketers in the future.
China’s retail landscape is going through rapid disruption.
There has been rapid adoption of online shopping in China due to a highly fragmented retail industry. Traditional retail market in China is underdeveloped and scattered and online shopping meets the ever- growing consumer demand. Additionally, large e- tailers like Alibaba, Tmall and JD.com are actively driving online shopping behaviour. In fact, there are more drivers that will promote continuous growth in eCommerce. Rising disposable incomes, urbanization, and improved logistics infrastructures will cause Chinese consumers to continue to migrate from offline to online shopping given eCommerce’s more competitive prices, greater convenience, and broader product selection.
So what does this mean for Offline Retail Players?
Offline players have the promising opportunity to leverage Chinese consumers’ online behavior to aid them in their journey to purchase through the stages of Discover & Research, Decide & Transact and finally to Review and Advocate.
For example: Coca-Cola leveraged this opportunity in the Discover & Research phase through a classic bottle nickname promotion. Customers ordered bottles of Coke with personalized labels on Yihaodian, a Chinese online grocery store. They had the opportunity to share these personalized labels on Chinese social networking platforms such as WeChat. This helped Coca-Cola increase their active Weibo fans (Weibo is China’s answer to Twitter) from 5,000 to 150,000 during the promotion and garnered 98% positive reaction to the campaign.
For offline players to be successful in the Chinese market, they must prioritize a digital strategy and adopt an integrated platform strategy. They must think partnerships with ecosystems such as AliPay and WeChat, as they are likely to have the right resources to serve you. Lastly, it’s vital to understand China’s vast network of digital distributors and their own nuances to create the apt marketing message.
Wait, aren’t eCommerce players going ‘brick-and-mortar’?
Yes! Several reputed and established e-Commerce companies from e-Commerce giant Amazon, to Alibaba in China and FlipKart in India are opening physical stores to give their customers a feel of the product that they want to buy. This would also make them stand out in the overflowing online retail space, and would also add credibility to their business. Customers now have the opportunity to walk through the stores, browse the products offered and then book their orders accordingly.
There are several factors online players need to consider including the need to integrate physical and dynamic interaction. This will cater to the consumers who have adopted the trends of Webrooming and Showrooming. The former refers to customers who browse online and shop offline as they avoid paying for delivery and prefer touching and feeling the product. On the other hand, the latter refers to customers who browse offline and then shop online, as they prefer the online prices and would like delivery (potentially as the product is bulky). For example, 60% of Chinese consumers shop in-store because they get to touch, feel and try the merchandise.
In the 2015 Total Retail Survey conducted by PwC, highlighted Chinese consumers’ preference for real-time personalised offers. In September 2014, Baidu launched its ‘Baidu Connect’ service that uses location-based technology and integration with the Baidu Map product to allow brands to attract potential customers via promotions displayed on their smartphone. The use of video walls also stands out as being highly desired; Chinese consumers were four times more likely than their US peers to describe these technologies as improving their in-store experience. The opportunities from using video to create immersive in-store experiences are enormous, for example, to reinforce current advertising campaigns or sponsored events.
So how can both online and offline retail players effectively adopt an Omni-channel strategy?
Watch Video – What is Omni-channel?
Critical gaps exist for this journey to be successful. There is a need for innovative and experimental leaders with hybrid experience in Marketing, Retail and eCommerce. Organizational structures will have to evolve to be more agile and collaborative between different teams and verticals.
While there are these gaps, China will definitely be an early adopter in adoption of an Omni-channel strategy. Why? A whopping 87% of Chinese consumers are digitally enabled. Additionally, 58% of Chinese are willing to share personal information with brands versus a 28% in the UK and 30% in the US, thus empowering retail players to create a customized omni-channel experience for the consumer. 81% of Chinese CEOs agree that mobile-first is a key strategy for Omni-channel success. Lastly, China has demonstrated again and again that they have the potential to create a ‘new normal’ faster than the rest of the world.
Did you like this article? Do you want to know more about Online & Offline Retail in China? Go through our end-of-semester presentation on this topic below.
Internet Retailing in China, Euromonitor, January 2016
Delivering on o2o: How Chinese Retailers can respond to the blurring of online and offline, June 2015
Winning Over Shoppers in China’s “New Normal”, Bain & Company, July 2015
Riding the Digital Retail Wave in China, Bain & Company, December 2014
Five keys to connecting with China’s wired consumers, McKinsey & Company, August 2015
eCommerce Has Shifted China’s Retail Landscape, Forrester Research, November 2014
Navigating the New Digital Divide: Addressing the Evolving Needs of Chinese Consumers, Deloitte, 2015
China’s Connected Consumers, KPMG, 2015