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Brands launching in China must consider these 4 gatekeepers

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More than 130 UK brands got involved with China’s Singles' Day shopping festival in 2018. In 2019, expect to see that number increase as British brands find their footing in this new market and invest further to hedge against threats at home from drying up High Street revenues and the threat of Brexit. Selling into China is increasingly inching up the agenda for boards around the UK and Europe.

(Header image: MDLabs)

Chinese retail factfile:

  • Total retail sales for 2017 were over $5,781bn (NBSC)
  • Over 19% of that was online (NBSC), compared to between 17% and 18% in the UK (ONS).
  • For the apparel and footwear sector alone, the total market was worth ~$17.5bn per month from August ‘17 - August ’18 (Statista).
  • Chinese shoppers tend to spend an average 193% more than British counterparts (Rakuten)
  • Shanghai and Beijing alone have a combined ad reach of 38,567,000 people, just through the WeChat platform (eConsultancy)
  • In August ’17, China’s online population was over 750 million and over 95% used mobile devices, spending an average of 3 hours per day on the small screens. (China Internet Network Information Centre)
  • 76% of online shopping transactions were made on mobile devices (Fung)

Major players:

Alibaba

  • Owns and operates AliExpress, Tmall, Taobao, Alibaba, 1688.com, Alibaba Cloud and Ant Financial, representing a variety of C2C/B2C/B2B, regional and global businesses across ecommerce, social commerce, finance and cloud computing.
  • “If current trends continue, Tmall will overtake Walmart to become the world’s largest B2C retailer by 2020.” (Forrester)
  • Q1 18 – $9.9bn revenue, +61% YoY

JD

  • Jingdong, or JD.com. B2C retailer, major Tmall competitor
  • Tencent has a 15% stake
  • $56bn net revenue 2017
  • 8 million active users

Tencent

  • Owns WeChat, a dominant social app
    • “It has payment systems, smart city offerings such as the ability to schedule appointments at a bank, a doctor, pay traffic fines or make visa applications and e-commerce.” (Forrester)
    • Messenger app that broadened out to include vast array of functions
  • Dominant in mobile gaming globally

Weibo

  • Twitter-like social network. As with WeChat, it has expanded and taken on many of the functions of Facebook et al, as these businesses are not operated behind China’s digital wall
  • 313 million monthly active users (What’s on Weibo)

How to enter the Chinese market

The reason for all this detail on these players will become clear very quickly. They’re the gatekeepers to the vast online consumer market in China, and their power means brands and retailers looking to enter that market absolutely have to factor them into their considerations. Launching in China without a solid plan for partnering with one or two of these entities is asking for trouble.

It’s also important for brands to remember that while huge demand for Western products and brands exists in China, consumers aren’t actually as loyal as that demand might imply. Increasingly as more options appear in the market, Chinese shoppers are actually measurably less loyal than their European and British counterparts. That means that brands need to balance the need to partner with sites like JD or Tmall with their need to define and grow a brand identity amongst Chinese consumers.

One way to differentiate and earn more respect and sales from Chinese customers is to carefully address different segments of the market and take the time to understand the differences between urban millennials and slightly older middle aged shoppers in rural areas, for example. JD has done a great job of this as it pilots last-mile innovations like drone deliveries for rural buyers, rather than relying on existing infrastructure which can be substandard and interfere with delivery.

Looking ahead

Expect to see even more brands attempt to break into the Chinese market purely because of the lucrative growth opportunity – and expect to see some high-profile failures as they do. Those who plan a go-to-market strategy with real insight into the Chinese customer will be more likely to achieve lasting success.

Look out also for those gatekeepers to expand their business interests beyond China, particularly towards India and Southeast Asia in the short term, but in the longer term retailers like JD plan to expand their presence in the UK and Europe. JD and Alibaba will not be in the same position of duopolistic strength when operating in Europe, and it will be intriguing to learn how they leverage their economies of scale to gain footholds in already-crowded Western markets.

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