What is Driving China’s E-Commerce Success?

In 2016 Chinese consumers spent a jaw-dropping $935 billion online – that’s more than the US and the UK put together! The first six months of 2017 has seen China’s online retail sales record 33.4% year-on-year growth, totalling over $510 billion.

Some of China’s largest e-commerce companies, including Alibaba, JD.comMeituan and Tencent are modelling new frontiers, investing in fresh food e-commerce, tapping into rural areas with drones and advancing into offline stores.

The expansion of online-to-offline (O2O) is a “new retail” trend that China is seeing. In fact, China’s largest e-commerce company Alibaba got together with Boston Consulting Group to write a series of papers titled The New Retail: Lessons from China for the West that unpicks how China’s digital marketplace has evolved compared to the rest of the world.

What’s interesting is to see how vastly different China’s digital marketplace, technology platforms, and online behaviours have progressed compared to the western world. Exploring these differences can provide a peek into the future of retail and offer valuable insights to companies around the globe. Here are some key insights from the papers.

Discovery

Unlike shoppers in the western world who discover products through browsing an online platform like Amazon or directly via a retailers’ website, Chinese shoppers prefer to shop online as if they were browsing a shopping mall with their family and friends. So brands in China usually opt to set up their stores on well-established platforms like Alibaba.com or JD.com instead of operating their own websites, giving them an opportunity to be part of the customers’ shopping journey of discovery. Chinese consumers log into their favourite shopping platform and glance through the latest trends and receive real-time recommendations as well.

Personalisation is the other part of the discovery journey in China. While western merchants make product recommendations based on buying and search history, e-commerce companies like Alibaba go deeper than that, utilising social interaction, geolocation, data analytics and artificial intelligence to a high level. For example, Alibaba celebrated Qixi or “China’s Valentine’s Day” with the release of quirky maps locating where people go on dates and where singles in Chinese cities live.

Seamless One Click Sales

Platform integrations in China have enabled Chinese shoppers to discover brands and products through an increasingly diverse range of channels – think gaming, news, social media and the now popular live streaming where internet celebrities down to the rural farmer market themselves, which are all connected to e-commerce sites.

A good example of this is apps Taobao and WeChat, which have added more and more e-commerce features turning them into super apps that allow consumers to communicate, entertain themselves and shop all in one app, enabling a seamless path from discovery to purchase.

Content 

Live streaming is driving the online shopping boom in China. Online retailers are teaming up with celebrities and key influencers, steaming live videos on apps like WeChat and platforms like Alibaba and JD.com. An example of this is rural farmers using live streaming on customer-to-customer platform Taobao, to sell their pear and kumquats during the Chinese New Year.

china e-commerce success
An Italian chef uses locally sourced ingredients to cook during a live stream on Taobao in Youxi, Fujian province. Xinhua.

Experimentation and technology driven content initiatives is not only going a long way to engage online shoppers in China, but also to increase conversions. Tmall has created its mirror app that enables shoppers to try on over 2,000 shades of makeup from brands including Bobbi Brown and L’Oreal. Shoppers can also share photos with friends and family and purchase products through the app as well.

C2B Business Model

Not only is China forging the O2O business model, it’s turning the classic B2C (business-to-consumer) business model on its head, creating the C2B (consumer-to-business) model, one where consumers add value to businesses by harnessing their insights. An abundance of data insights that come from Chinese shoppers’ social media behaviour, following trends and events are enabling Chinese merchants to give consumers what they want, at the right time.

The enormous pool of online shoppers in China warrants this business model, providing strong and valuable insights that makes it easier to predict trends. The C2B model is also successful in China due to the country’s approach to speed and agility in e-commerce and production. For example, the entire process of creating and releasing a new product in China occurs within a matter of weeks as opposed to months in the western world. China also benefits from the geographical proximately of manufacturing sites as well, significantly reducing shipment time that challenges the western world.

 

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