8 Successful Strategies for China’s $133bil Ecommerce Market
07.05.2015yelena- Asia: Greater China
Asia: Greater China
August 27, 2014. China’s ecommerce shoppers love buying things online, particularly through marketplaces, browsing price comparison websites, social networks and product reviews before making their purchases "“ and they spend a large amount of their time doing all of this on mobile devices. B2C ecommerce sales in China were estimated to have grown by over 60% in 2013, and are forecast to reach $133 billion in 2014, according to yStats.com. China’s ecommerce market is exploding and also highly competitive. What have been successful strategies in capturing market share? Here, we share eight different and successful market penetration tactics used by both Chinese and international companies to break into the Chinese ecommerce market.
1. Capitalize on special events or dates to target young consumers
According to Alibaba’s official Twitter account, Taobao and Tmall, the company’s two main platforms, grossed over 35 billion RMB ($5.75 billion) in the 24-hour period e-commerce extravaganza on November 11, 2013, surpassing last year’s sales of 19.1 billion RMB ($3.15 billion). Success such as this has been built by targeting China’s massive, tech-savy, and upwardly mobile younger population, in this case by marketing November 11 as “˜Singles Day’, the local version of Valentine’s Day. Successful targeting of China’s younger population is just one instance of local companies leveraging cultural and local know-how to tap into a growing market.
2. Offer free data plans through local telecom operators
To promote “˜Singles Day’ online sales, Chinese companies partnered with mobile carriers and offered free two-month mobile data plans as a gift to customers if they downloaded the company app, knowing that more than 60% of local consumers prefer to use smart phones to browse or buy products online. Additionally, local ecommerce sites sent targeted SMS messages to potential shoppers as early as three months before the day of the sale.
3. Utilize online marketplaces
Uniqlo, the Japanese garment retailer, entered the e-commerce market via Taobao and Tmall online stores, without its own stand-alone China website. Other foreign retailers that have also chosen this route are Gap, Esprit, and Levi’s. Such partnerships offered instant access to hundreds of millions of shoppers and proved to be strategic win for retailers. This market model is increasingly popular and cuts down on hefty marketing expenses by leveraging user posts on social media. On the other hand, leveraging the user base of an existing shopping platform does pose problems, such as strategic concerns over cannibalization between products.
4. Work closely with social media prior to a launch
When Huawei, the Chinese smartphone maker, released its newest model to the China market in July 2014, it partnered with chat apps and other regionally specific social media companies in order to leverage their base of more than 400 million users. Before the release of the phone, the company was able to generate significant buzz with more than half a million users voicing their enthusiasm for the product.
5. Consider a shop offline and buy online model
Suning leveraged digital media and applications to link brick and mortar retail stores with their online counterparts. It used large “˜big-box stores’ to serve as showrooms for consumers to shop for products and buy online later. From 2010 to 2012, the company boasted a compounded annual growth rate of 190% and is now one of the top three B2C independent e-commerce retailers in China. Puma and Apple are other examples of companies that have adopted this strategy.
6. Provide incentives for adoption of your apps
The app, DidiDaChe, which allows users to bid for taxis, has been adopted by millions of cab drivers in China who have been encouraged by the prospect of increased earnings. The challenger in the market is Zuaidi Dache owned by the B2B retailer Alibaba. The success of these apps can be attributed to two factors. The first being, they both leverage unique characteristics of the Chinese internet space, allowing users to make mobile payments from their smartphone to charge for the ride. The second being, the transfer of some of those payments to the drivers, incentivizing adoption.
7. Adopt a “˜freemium’ model
Wechat entered the gaming market at the end of 2012, and saw its free-to-play social games explode in popularity. The company’s success has been attributed to easy access with its “˜freemium’ games model, allowing users to download games at no charge, but offering them the option of making in-game purchases, that allow them to advance in the games or to add upgrades. Easy access and little commitment on the part of the users was what drove the success of Wechat’s gaming endeavor.
8. Offer safety nets for shoppers
Reputation is a key success factor. Companies can replicate models used in western markets to alleviate user concerns, such as generous return policies that come with free return shipping or services that come with satisfaction guarantees. Chinese Internet regulations already require a 7-day free return policy for ecommerce operators, but successful ecommerce players often highlight their return and customer service policies clearly upfront.
Ecommerce in China presents a range of opportunities, as well as problems.
For one, there are a seemingly innumerable number of companies vying to lure Chinese consumers to their online shops. For another, while brand identity remains the key to success in Chinese ecommerce, underdeveloped logistical systems are an ongoing concern for ecommerce companies trying to reach the 700 million Chinese residing outside urban centers.
For those able to make a successful bid in the Chinese ecommerce market, the rewards are plenty. According to Jack Ma, chairman of Alibaba, online sales will eventually make up 30% of all retail consumption in China, an increase of more than four times from the current 2014 level.