According to Dandan Cheng from Sinorbis, “China has both the largest internet population and the largest number of mobile internet users in the world.” Moreover, China is rapidly digitizing various industries and e-commerce is leading the way. In fact, in McKinsey’s 2017 report, they mentioned that about a decade ago, “China accounted for less than one percent of the value of worldwide transactions.” Additionally, McKinsey predicts that China’s e-commerce market is estimated to be larger than those of France, Germany, Japan, the United Kingdom, and the United States combined. Therefore, international retail companies that want to maintain their prime position in China are forced to dramatically revolutionize their web and social media presence and join the “online to offline” revolution.

Obviously, China’s global leadership in ecommerce is impressive. This year alone, McKinsey forecasts online retail sales to grow to $1.5 trillion, representing 25 percent of China’s total retail sales volume. And China’s 855 million digital consumers are pushing the digital economy, transforming the country into a global digital disruptor.

According to McKinsey’s latest survey of Chinese consumers, the following core areas require further attention from marketers:

  1. Digitally-powered physical retail innovation

As stated in the report, in 2014 online retail sales in China have seen unprecedented growth; thus, brands have shifted their expansion strategy focusing on their online presence while brick-and-mortar locations were drastically reduced. However, in 2017, Chinese shoppers have signaled the return to physical stores. Furthermore, McKinsey’s survey shows that a younger generation of shoppers in Tier-1 and Tier-2 cities distinctly favor this trend. In fact, 85 percent of respondents have shopped in physical stores in the past three months, compared to 83 percent in 2017.

McKinsey appreciates that the high-touch physical experience is crucial to the revitalization of the retail sector. And Chinese consumers are merging online and offline channels by shopping at physical stores while making their buying decision based on online reviews and information. Moreover, the number of consumers using mobile devices to research products, ideas, and reviews while shopping in store has reached 63 percent in the past two years. McKinsey says that “with the right in-store experience,” 80 percent of consumers who use smartphones in physical retail spaces to research products end up buying products of the same brand, and over 50 percent will even buy in the brick-and-mortar stores they visit as a showroom.

It’s not unusual that the revival of brick-and-mortar stores is firing up the digitally-powered physical retail innovation. In fact, 43 percent of respondents report that they have experienced such initiatives, compared to 17 percent in 2017. It is worth mentioning that by digitally-powered physical retail innovation, McKinsey implies “omnichannel fulfillment, in-store digitization (also sometimes called phygital, which is a term to describe blending digital experiences with physical ones), and new go-to-market models.”

  1. Social commerce

China is the world’s largest social media market and according to McKinsey, Chinese consumers spend forty-four percent of their time on social media websites. And “the majority of which, 33 percent, is spent on social applications such as WeChat and Weibo’s microblogging service.” An additional 11 percent is spent on short video apps such as Douyin, iQIYI and Tencent Video.

The conversion rate is also impressive, resulting in increased sales and brand awareness. 50 percent of respondents mentioned that they familiarized themselves with a product via social media, while 25 percent acquired products directly through social media channels.

The report emphasizes that peer-to-peer reviews, interaction with KOLs and user generated content have prompted forty percent of respondents to acquire a product they didn’t intend to buy.

  1. Small town youth: Identifying the next pocket of customer growth

As Tier-1 and Tier- 2 markets are becoming increasingly saturated, international brands are starting to focus on smaller towns if they want to achieve their goals for growth. QuestMobile states that “Tier-3 and below cities house 670 million mobile internet users.” And seventy-two percent are younger than 35 years. These young, highly connected and social-savvy consumers represent an incredible opportunity for foreign brands. As living costs are lower in smaller cities, these young buyers enjoy higher disposable incomes. Additionally, as a general rule, they have a more relaxed working schedule (it’s more common to work a 9AM-5PM schedule in smaller cities). Consequently, they have more time for shopping. But despite opportunities, luxury brands still didn’t take full advantage of these valuable resources.

It is worth mentioning that these buyers enjoy distinctive features that separate them from Tier-1 and Tier-2 consumers. Indeed, they shop online but they are less-discount driven than expected. On the other hand, they appreciate “referral programs or endorsement by KOLs/KOCs, and special edition products.”

  1. KOLs and KOCs

According to McKinsey, content marketing fluctuates according to category and brand. Moreover, respondents believe “that content projecting professional knowledge is critical when purchasing imported spirits, mom and baby products, consumer electronics, OTC pharmaceuticals and nutrition products, and home decoration items.” In fact, 70 percent of those aged 55 and over believe that in OTC pharmaceuticals and nutrition products, professional channels were useful when deciding on an acquisition. For the mom and baby products category, only 57 percent see value in professional content, while two-thirds rely on data collected “from vertical websites such as Babytree.”

McKinsey concludes that while professional knowledge is required in particular areas, in others such as beauty and personal care, packaged food, and apparel, user-generated content is still leading. For these industries, optimizing and growing the social media presence on platforms like Weibo, Douyin, and Little Red Book is vital.

  1. Sales events and discounts

McKinsey emphasizes the importance of discount driven sales and it shows how the discount price strategy has fueled growth for the bigger brands while smaller players find it hard to compete with them. But this strategy helps brands generate unprecedented sales. “JD.com generated $29.3 billion GMV (including sales made during a 10-day pre-sale period) during the 618 mid-year shopping festival, up 27 percent on 2018,” according to McKinsey.

If smaller brands want to remain relevant, they need to consider exclusive discounts or some other deal and even more “rational” pricing.

As the digital is driving changes in consumer behavior and competition in the market is intensifying, brands can no longer use the same old strategies, expecting to build a genuine connection with their audience. In fact, creating a global strategy that responds to the needs of consumers’ implies bridging the gap between online and offline channels, moving the available resources around efficiently so that the focus falls on user-generated content, and prioritizing the creation of a more data-driven pricing strategy.





Source link