China Skinny worked with Austcham to deliver the the 2018 Westpac Australia-China Business Sentiment Survey which was launched today in Sydney. Arguably the most concerning finding was the poor utilisation of digital platforms. Whilst we found the majority of respondents recognised innovation in technology, media and communications will be the number one trend shaping businesses in China for the next 3-5 years, just 16% currently have a detailed China digital or ecommerce strategy in place.
Chinese consumers and business people are among the world’s most engaged users of digital channels, spending an average of 200 minutes a day on their smartphones. The country’s ecommerce market is larger than the rest of the world combined and worth over $766.5 billion last year – more than 50 times the size of Australia’s online market.
A closer look into which businesses are proactively responding to digital/ecommerce opportunities shows that it can a powerful tool for B2B sectors. We found respondents from some of the least traditional digital industries leveraging online channels to their advantage, from facilitating instant B2B payments via mobile to relationship building. This position was supported by the survey which showed the B2B sector of ‘Professional and Business Services’, to be the most developed in this space, with +6.9% more likely to have a detailed plan in place.
Limited Diversification Of Digital Channels
In addition to the need for more businesses to establish a strategy, the survey also highlighted the importance of Australian businesses expanding their focus beyond WeChat and their own websites, which were the top two channels used to sell their products/services.
On the surface, it was promising to see Australian businesses embracing WeChat as the number one channel used to sell, as social commerce presents significant opportunities for clever social campaigns and advocacy-based sales. However, scratching the surface, the popularity of WeChat and own websites hint to a relatively primitive online strategy and reluctance to invest across multiple channels. Marketing and branding, logistics, warehousing and catering to the size of the market were cited as the biggest challenges for employing and growing ecommerce in China.
Whilst this expanded channel approach is recommended, it is important for businesses to understand that ecommerce in China is hyper-competitive and expensive to enter and maintain, particularly so for Tmall and JD. For many businesses, these two channels still present the significant opportunities – even after cost and competition is considered – yet there are gains to be had across niche and category-specific platforms, such Kaola, Red, Ymatou and VIP.
Extending the channel analysis further, the results suggest that Daigou’s are not being leveraged to their full potential, with just 3.7% of businesses using this channel to sell. Although not relevant for every category, some analysts estimate that Daigou collectively sent as much as US$470 million worth of Australian products to China in 2016 and are contributed significantly to the success of some of Australia’s highest profile products in the market such as Swisse, Blackmores and A2.
Cross-border commerce continues to be one of China’s hottest categories, with the number of ecommerce users who shopped abroad increasing from 34% in 2015 to 64% in 2017. Australian products’ enviable reputation is confirmed as the top origin for food for 44% of shoppers (iResearch). Nevertheless, just 13% of businesses rated cross-border as a top trend, suggesting that this area also represents an under-tapped opportunity for Australian businesses in China.
Looking Beyond Sales
The benefits for brands of a well-developed digital plan stretch far beyond sales. Ecommerce has become a powerful platform for marketing, integration into bricks & mortar and research – the data and behavioural insights derived from just Alibaba and JD boasts a sample of over 750 million consumers.
In the survey, we found businesses such as Metcash leveraging purchase behaviour made online to inform optimum product portfolios to sell offline in lower tier cities. Likewise, architects Woods Bagot use big data to inform optimal design of their mixed-used retail centres.
What Is The Opportunity Cost Of Not Having A Detailed Digital Strategy?
The analysis of the survey data showed there to be clear advantages to having a detailed strategy in place. The 16.2% of businesses with a developed plan were:
The full report contains a trove of interesting findings from challenges, risks and competition to macro influences. The findings deliver a valuable perspective into the overall health and opportunities for Australian businesses in China. They also provide a performance benchmark for any foreign firm trading with China, not just Australian.