Who Doesn’t Love a Good Underdog Story?
Once upon a time…China suffered from forced colonization, crumbling dynasties, multiple and simultaneous wars, and wide spread optimum addiction among other things. A century of humiliation left the country weak, exhuasted, and seemingly beaten. That’s why China completely shocked the world when, as McKinsey&Company put it, “became the greatest economic growth story in the history of the world”.
Therefore, I decided to give y’all a preview of my class presentation for this week on the topic of Chinese E-Commerce. I conducted research on Chinese Consumption Trends and E-Commerce with my Chinese Economics and Sociology professor while studying abroad in Beijing, China. This is a very high level sample of a semester long project.
Background: China’s Economic Miracle:
Thirty years of constantly rapid growth has now put China as the world’s second largest economy ( first in terms of purchasing power parity). Pushing to become a more consumer-centric economy, China has more than doubled their consumption in the last ten years. Consumption grew from 650 million to 1.4 trillion, growing faster than any other country in absolute terms. Chinese consumers have evolved from “value consumers” focused on basic needs for survival to both “mainstream” and “affluent” consumer with the disposable income to pick and choose consumption products based on factors such as brand prestige and personal preference. And you know where they are choosing to spend the majority of that newly acquitted disposable income…that’s right…online!
Chinese E-Commerce, Full Force:
Describing China as the world’s largest and most dynamic e-commerce market, Mckinsey predicts that by 2016 Chinese e-commerce will be larger than the United States and Europe combined! This is amazing if you think how much the Chinese environment had to develop to even be at the same level these two comparative e-commerce markets and that now China is about to overtake them both combined. This is partly when they say Chinese underwent an unbelievable economic miracle.
Now over 70% of the Chinese market is online. Therefore, if one hopes to succeeded in business in China and remand competitive one needs an online presence.
Understanding China’s Digital Landscape:
Chinese consumers LOVE online shopping. Below are quotes from qualitative interviews that I conducted while studying abroad in Beijing, China.
- “ In China, USA online shopping companies are not necessarily trusted”.
- “I buy things everyday, every day I get deliveries, really. Sometimes I get as many as 8-11 a day”.
- “Sometimes I want to buy overseas things, but the payment methods is not convenient, so I rather use Tmall to get things”.
- “I shop online 70% of the time, offline 30% of the time”.
- “90% of what I buy online I buy on my phone”.
- “Online shopping is a pre-sleep activity. I put things in a basket at night, the next morning if I still like it, I buy everything”.
- “Whenever I have a spare minute, I am on my phone shopping”.
- “ I really like Taobao and Tmall, I have no interest to go on any other websites to shop”.
- “ I even now start to buy my food online”.
An important observation to make when reading these quotes form interview is that Chinese consumer love their Chinese platforms, and they seem to have no interest in using American platforms to facilitate e-commerce. So…let’s take a closer look.
BAT: BAIDU, ALIBABA, TENCENT
Mckinsey states that it is a fundamental mistake to compare Chinese e-commerce and social media platforms such as Baidu, Alibaba, and Tencent to American companies Google, Ebay and Facebook. It is important to emphasize these American companies are not counterparts and equivalents and that they are fundamental different that the Chinese BAT and perform different function in different ways.
Below I include a chart by Mckinsey where I have highlighted the major differences and unique features in the Chinese BAT platforms
Two case study examples which I will present briefly here and elaborate on in my presentation are Burberry and Olay. Both these companies have strategically used Chinese e-commerce to gain a competitive advantage.
- Burberry partners with Alibaba to set up official online Burberry market
- Provides online shoppers with detailed information of quality
- Assure authenticity: combating a prevalent counterfeit market
- Combines “timelessness with technology”
- Burberry sales increase significant not only through online sales, but also in retail stores in China
- Companies such as Louis Vuitton soon followed
- Olay was struggling to find the right market in China
- Partners with Baidu to gather information on Chinese consumer
- Baidu results showed that Chinese woman searched make-up that was associated with maintaining a youthful look
- Olay creates advertising campaign “stay 25 forever” targeted at the Chinese female consumer
- Experienced extreme success and helped gain footing in the Chinese market.
Thoughts on Chinese E-Commerce Moving Forward:
Although Chinese Economic growth has slowed as a whole, Chinese e-commerce continues to gain traction.
In conclusion, Mckinsey states…
- The Chinese consumer will continue to be a crucial and complex player in the world market
- As technology advances and Chinese consumers become richer, it is quite possible that one day the will be the most valuable world consumer
- China continues to be…
“BEST CONSUMER GROWTH STORY IN THE HISTORY OF THE WORLD”
To be continued Thursday…