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Gold rush 4.0: E-commerce in China

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Many companies from Europe have already dared to enter the Chinese market. This is understandable as there is undoubtedly huge potential here. Especially the e-commerce market is developing rapidly and is triggering a veritable gold rush among foreign companies. However, entering the Chinese market is a complex challenge that is difficult to accomplish without a knowledgeable partner. What are the characteristics of the Chinese e-commerce market, and how can Western companies best take on the challenge of entering it?

The e-commerce market in China is booming: more than 730 million people use the Internet on a daily basis and practically all the time. In fact, these days the Chinese already spend significantly more time with digital media than with offline media. It therefore comes as no surprise that the Middle Kingdom is home to the world’s largest market for online commerce, with a turnover of almost twice as much as the US. In 2017 alone, the Chinese e-commerce market grew by around 24 percent.

In view of these impressive numbers, the motto for Western companies should be “Go east”. But, even with all justifiable euphoria, there are many things to keep in mind if the entering of the new market should be crowned a success.

BAT instead of GAFA
The channels through which consumers in China must be reached are very different from those in the Western world. Because Google, Apple, Facebook and Amazon (GAFA) have little market share. As a result, previously acquired know-how is not applicable in China. Other players are leading here: Baidu, Alibaba and Tencent (BAT). The major e-commerce platforms Taobao (Alibaba) and Jingdong (Tencent) together cover approximately 90 percent of the total market and together with WeChat form the two key ecosystems in digital China.

WeChat, a mix of Facebook and WhatsApp, is the dominating social media app and also part of the Tencent empire. Users can carry out the classic social media activities using WeChat. In addition, it is also possible to pay, for example, electricity or restaurant bills via the app. Thanks to WeChat, the country is on its way to emancipating itself from cash.

Add to that Baidu, which is comparable to Google. Originally a pure search engine, the company is currently evolving. For example, a strong focus is placed on modern technologies such as Artificial Intelligence. As a result, Baidu will continue to hold its strong market position in the future.

A recent phenomenon are video platforms, where users present themselves in 10 or 15-second long clips, or even live-streaming portals. They are especially popular with Millennials and Generation Z at the moment. The potential of these media is immense: While famous influencers in Europe have viewers with figures in the five-digit range, their Chinese counterparts sometimes reach more than 20 million viewers.

The smartphone as the key to the Chinese e-commerce market
Not only the channels used to reach consumers, the medium through which consumers are addressed must be optimized for Chinese needs as well. For example, a digital marketing strategy targeting desktop PCs will miss the target. The reason: Unlike in Western countries, not every household in China owns a PC. The smartphone however is used much more intensely and for far more activities than comparatively in Europe. Here, an opportunity for businesses to effectively reach millions of potential customers with a simple app arises. Because experience shows: the Chinese are tech-minded, open to new ideas and eager to experiment. If an app offers a useful or entertaining service, it can spread instantly. Concerns about data protection or privacy, however, have played no role so far.

Another important current development that Western companies should keep in mind when planning to enter the Chinese market, is the increasing merging of the online and offline world. This is progressing rapidly, which affects trade in both worlds. For example, in supermarkets from the Hema chain, customers can either shop directly or scan items via a smartphone app. This triggers an order process, which is usually completed on the same day with the delivery of the order at home. Hema is owned by Alibaba, which intends to further expand its leading market position through this innovative concept.

“One-Size-Fits-All” does not work – it’s not possible without insider knowledge
It is definitely time for Western companies to take the step into the Chinese market. Those who pass, risk missing an opportunity that will likely not come back on this scale.

Because Chinese consumers prefer to shop online, the focus must be on the e-commerce market. For this to succeed, choosing a reliable partner is of utmost importance. He has to be on the ground at all times and work with local forces – that’s the only way to stay connected in an extremely dynamic environment. At the same time, such a partner needs to know the wishes and expectations of Western companies.

The core problem: Many large foreign companies make the mistake of assuming that, when they target China, a certain level of brand awareness already exists in the market. Strategies based on this assumption are usually doomed to fail, because they do not take cultural differences into account. The one-size-fits-all principle does not work in China – if you want to succeed here, you have to adapt your brand to the Chinese market. The other way around will not work. It is absolutely essential to draw on first-hand expertise. Only those who have successfully carried out campaigns in Asia before will succeed in supporting a company entering the rapidly expanding Chinese market.


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Pascal Duriez, CEO APAC & Strategic Committee member

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