2017: Trends You Need To Know For Online Retail Success In China
By Don Zhao - Co-founder of Azoya
As the Chinese ecommerce market enters a more stable period, 2017 looks set to be the ideal time for UK online retailers to sell in the country. Don Zhao, co-founder of Azoya, examines key trends in China for the coming year and advises on how to harness them to achieve long-term success.
The market will grow but at a more sustainable pace
2016 marked a significant turning point for China’s ecommerce industry. After two years of rapid and unregulated growth, the Chinese government introduced a series of tax and customs policies aimed at reigning in the sector and making B2C ecommerce and traditional B2B2C bulk trade a more level playing field.
Its strategy is working. Rogue traders (which were either selling counterfeit goods or over-extending themselves) have disappeared and as a result the total volume of cross-border ecommerce transactions has dropped by almost half over the past 12 months.
One of the Chinese government’s most notorious policies in 2016 was the announcement of the ‘Positive List’ in April, which allows limited items including imported cosmetics, baby formula milk, medical equipment and certain food products to enter China via its free trade zones. In November 2016 the government decided to delay the implementation of this policy until the end of 2017 – enabling retailers to continue importing other products into bonded warehouses for the time being.
What does this all mean for online UK retailers planning to export to China in 2017, and beyond? Should they worry about ongoing government interference? In my opinion, no. Policymakers are merely striving to reach a balance between regulation, customs revenue and healthy growth of the industry.
Overseas retailers will just need to adapt their cross-border logistics accordingly. Alternative solutions are available to them, such as drop-shipping, and most importantly, the appetite for Western brands and high-quality products shows no sign of diminishing.
Alibaba will see increasing competition from independent retailers
Alibaba, which offers a platform to sell in China via Tmall Global, is the best-known route available to overseas retailers, but by no means does it have the monopoly. Indeed, many leading brands, such as Coach and Michael Kors, have recently opted for alternative ways to reach Chinese consumers.
This does not come as a surprise. Although Alibaba’s reach is enormous, it is also prohibitively expensive once all costs are factored in. In addition, it has a reputation for selling counterfeit goods as well as genuine brands, which can be damaging to a well-known retailer’s reputation.
European companies including Feelunique and La Redoute have also already seen considerable success by launching their own Chinese websites, which enables them to have complete control over all aspects of their operations, from marketing and merchandising to logistics and customer service. More Western brands are likely to follow suit in the new year.
Social media strategies will need to be savvy
The Chinese may not have Facebook or Twitter as they are blocked by a firewall. However, they are arguably better served by WeChat, which is ubiquitous in China, and provides the ultimate gateway for retailers to reach consumers.
A combination of online browser, messaging app and social media platform under one virtual roof, ‘super app’ WeChat has 700 million users who can access over 10 million internal apps (known as official accounts). It’s also one of the most important multichannel portals for business, both in China and overseas.
Retailers can use their WeChat account for a range of activities, from the promotion of news and special offers to incentivised brand activities, customer engagement, loyalty building and payment. It’s a proven business model and one that overseas retailers need to embrace as its influence increases.
An example of a successful Black Friday WeChat promotion for Bodyguard Apotheke, a German online pharmacy. It shows a post by a well-respected influencer – specialising in mother and baby care – on suitable medicines for babies, which was read 26,142 times and received 2,136 likes.
Microblogging site Weibo is also important to retailers, offering an alternative social media channel for reaching customers. Commonly known as the Chinese Twitter, it grew by a third in 2016 and now has almost three million users, and looks set to continue increasing in popularity this year. It’s another popular platform for online influencers, who are happy to endorse products from reputable retailers.
La Redoute and Feelunique recently partnered with several of China’s key online celebrities, who promoted products to their huge fan bases, and this trend for recommendations from a trusted source should not be overlooked.
Whichever platform a retailer uses, social media activity must be pertinent to the demanding and fickle Chinese customer. Live-streaming video and VR (virtual reality) are taking off in China, and these technologies are likely to shape marketing strategies in 2017. According to Credit Suisse and eMarketer estimates, live-streaming industry revenue in China reached over £3bn in 2016, while VR’s estimated growth over the past 12 months was 458%, making it worth £81 m.
Chinese consumer culture will continue to be a key influencer
Orchestrated shopping bonanzas have become firm fixtures in the Chinese calendar over the past few years. Singles Day (11th November), the world’s biggest shopping day, Double 12 (12th December) and 6.18 (18th June) are the top three Chinese festivals, but Western ones such as Black Friday, Cyber Monday and even Christmas are fast becoming popular.
We recently undertook a survey looking at Chinese perceptions of overseas online shopping holidays. 62% chose Black Friday as their favourite.
Shopping holidays are creating huge opportunities for overseas retailers. They’re competitive and require careful planning to cope with demand, but provide retailers with a chance to reach out to new customers and build loyalty with existing ones.
Mobile will rule
Online shopping came later to China than to the West, and coincided with a huge uptake in smartphones. Mobile commerce accounts for just over half of online sales in China already and as recent figures show smartphones now represent over 90% of new phone sales, this trend looks set to continue. 2016’s Singles Day saw 82% of its sales from mobile, and this figure is likely to rise next time.
Source iiMedia research
WeChat has played an important role in mobile’s rise as the optimum online shopping tool. Not only does it make accessing online retailers so convenient, payment by mobile is simple. Customers need to create a WeChat wallet by linking to a bank card and can then shop with ease.
Successful retailers will go local
For a country the size of China, with a population of nearly 1.4 billion, it may seem daunting to try and create localised strategies, but it can be done and is worth the effort. Generally speaking, eastern and southern coastal regions are more affluent than inland provinces, with Tier 1 cities such as Beijing and Shanghai important targets.
Many consumers have either lived or been educated abroad and are familiar with Western brands, so these areas are good starting points.
Interestingly, there has recently been a notable rise in the number of consumers in Tier 2 cities including Suzhou and Ningbo, where living costs are lower and many people are starting to spend their disposable income on overseas shopping. This is a development worth watching.
While there will undeniably be challenges in China in 2017, opportunities are ripe for overseas retailers that embrace fast moving trends, run bespoke promotional campaigns and put logistics at the core of their business model.