Every day this year, an average of more than 120,000 new Chinese consumers signed up to the Internet. Most of them on their smartphones, and many of them using it to run a big part of their lives.
Growth in internet users coupled with an evermore online savvy population has contributed to an impressive rise of Chinese who are active online. In the past year, 18% more consumers shopped on Alibaba platforms, 65% more bought on JD and Weibo’s active social media users surged by 36%. Yet the most interesting growth story is the convergence of commerce and social media on WeChat.
Although WeChat sales are small relative to traditional ecommerce channels, its growth potential is enormous. Every official and personal account has the ability to sell to their followers and friends. This has prompted tens of millions of enterprising WeChat users to try and pry a few bucks out of their WeChat networks – a subtle version of Amway if you like.
There are now more than five times more stores on WeChat than there are on Taobao, Tmall and JD combined. Although individuals make up the majority of stores, brands such as Dior – who don’t even have their own ecommerce store yet – are dipping their toes into social commerce. WeChat’s all-in-one nature is creating a whole new level of commerce-related sharing opportunities that is unrivalled globally.
On top of trading products on WeChat, app usage rates for services such as ride sharing, food delivery, cinema, massage booking and health, to name a few, are among the highest globally.
The phenomenal uptake and usage rates of smartphone commerce has been driven by massive sweeteners – for example Meituan Dianping was estimated to have provided ¥58 billion ($9 billion) worth of discounts and subsidies for restaurants and movies in 2015. Such incentives have been enabled by countless sums of investment cash utilised to grow users, often with little regard for profits. Last year over $20 billion dollars was invested in Chinese internet businesses – quadruple that of 2012.
A result of the investments are some significant mergers and consolidations, including ride hailing apps Didi-Kuaidi-Uber, group buying and food apps Meituan-Dianping, classified ads Ganji-58.com and online travel Ctrip-Qunar. The mergers have created virtual monopolies and, by proxy, less incentives to subsidise and discount. The most recent example is the Didi-Uber merger which has seen a typical ride that cost ¥8 in May, now costing ¥13.
Fewer subsidies may slightly slow down the adoption rate of many apps, but Chinese consumers will continue their deeply-embedded habits of using smartphone apps in most facets of life. Brands should factor this into their marketing strategies and creative tactics as a powerful way to engage Chinese consumers. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.