We hope you had a great Dragon Boat Festival. Billions and millions are numbers that we often hear associated with China’s ecommerce market. Whilst impressive figures, for many of us they are just lots of zeros with little context. To bring some perspective to the enormity of online shopping in China, eMarketer have forecast that China will account for 50.7% of ecommerce sales globally in 2017 – more than the rest of the world combined.
Whereas online sales volumes hog the limelight, ecommerce remains very valuable for another important discipline – marketing. Long time Skinny readers will appreciate the importance of this as we’ve been suggesting this for some years now. We also predicted that widespread use of ecommerce as a marketing channel will be one of the big trends for 2017.
But don’t just take our word for it. Earlier this month PwC published the global Total Retail Survey which reinforced the importance of branding and product information on online shopping channels in China. The survey found that 61% of Chinese consumers start their product searches on ecommerce platforms.
The survey also highlighted the importance of integrating other marketing channels. 70% of Chinese consumers use social networks as a source of inspiration for purchases, with 29% of consumers (versus 13% globally) using it to see what brands key opinion leaders are endorsing. Coupled with other tools such as live streaming, China’s ecommerce market is increasingly being driven by content-led experiences, with less focus on price.
Foreign brands trying to compete on price on Tmall or JD are following a dangerous path. Whilst there needs to be an element of consumer gratification from the sense of getting a deal, you will never beat a Chinese vendor on price in the long term. When most local vendors are becoming established they’ll happily live with Ma and Pa or in a bolt hole above their storage locker, eat cheap noodles and not have a network of importers, distributors, sub distributors, TPs (Taobao Partners) and agencies pushing up fixed and variable costs.
This lean ethos will usually remain with Chinese vendors long after they become multi-million dollar companies. Lowering your price too much can not only be ineffective in the long term, but can have devastating effects to your entire ecosystem and image as Australian infant formula brand Bellamy’s discovered. Chinese consumers are increasingly prepared to spend more on quality products online with the portion of high- and middle-end product sales growing by almost 50% since 2012 according to Alibaba. Take Mengniu milk for example: its Deluxe milk is almost twice the price of its plain milk on Tmall, but the pricier packs sell 53% more in volume.
Fortunately the evolution of ecommerce and social marketing, coupled with a more sophisticated consumer means foreign brands can capitalise on the quality of their products, coupled with smart marketing, to have a distinct advantage over the guy munching noodles in a locker. Agencies such as China Skinny can assist with that.
On the subject of the ecommerce opportunity in China, China Skinny’s Mark Tanner will be discussing this at the Global Ecommerce Summit in Barcelona June 12-14. If you are there, please pop by and say hello. Go to Page 2 to see this week’s China news and highlights.