The Retail Sun Rising in the East
by Scott Rigby
posted on 07-17-2019
China is a retail powerhouse that is far outpacing the innovation we’re seeing in the West –whether it be the adoption of social commerce, live-streaming sales channels, facial-recognition payments systems, car vending machines or endless aisles in rural corner stores. But what does it mean for multinational corporations throughout Asia and the Western hemisphere that are keen to enter this burgeoning market?
Throughout the past decade, China has become a leading global force in several areas of the digital economy. About a decade ago, it accounted for less than 1 per cent of the value of transactions worldwide, but that share is now more than 40 per cent. The value of China’s e-commerce transactions is today estimated to be larger than the value of those of France, Germany, Japan, the United Kingdom and the United States combined.
Let’s think about this from the point of view of an executive team.
CEOs — Partner fast, act fast
Let’s start with the CEO. First, the CEO needs to recognise that the market is getting far more competitive and the need to act is growing. The graph below summarises this, revealing how local brand power in China is eclipsing multinational brands.
Source: brandZ, Kantar Millward Brown
But there are lessons to be learned from the international brands that have found huge success in China. Industry connections, particularly with Baidu, Alibaba and Tencent are crucial, due to the influence and commercial power these brands wield in the market. Starbucks’s partnership with Alibaba, Walmart’s partnership with Tencent and Netflix’s partnership with Baidu are successful examples.
Another winning strategy for multinationals expanding into China is keeping a customer-centric approach. Consumers in China’s metropolitan areas are more tech-savvy and demanding – and more likely to embrace new digital technologies – than their counterparts in mature markets. In a market of some 1.3 billion consumers, CEOs who keep a customer-centric mindset while building their business in China will have the best chance of growing their customer base.
CMOs — Get Social
If you’re a CMO, China’s marketing landscape can be difficult to navigate unless you are working with a local agency or you have local resources. For example, a common Western approach to building your brand would be to start by creating a website, stretching to mobile apps, then social media and other channels.
In China it’s the reverse – almost all brands start by building their presence in social media channels with social commerce capabilities, such as like Pinduoduo and JD.com. Only then would a local Chinese brand feel the need to build owned properties, if at all. CMOs should understand that the Chinese shopping journey begins in a social channel – so allow consumers to build a relationship with your brand on social media.
Understanding your audience is another crucial aspect of success in China, and there’s more to this than inappropriate messaging or cultural gaffes. Local brands have an audience understanding that surpasses that of Western brands, mainly because they know the power of different social media platforms and are keyed in to any emerging channels that local audiences flock to quickly. For example, Xiaohongshu is an advanced e-commerce platform with more than 200 million registered users who are predominately Gen Z women.
CMOs will need a clear audience segmentation strategy and channel understanding to engage authentically with the right consumers.
CIOs — Scale the wall
One of the basic pillars of retail success in China is the ability to engage Chinese customers through digital channels. However, you can’t necessarily expect the technology a multinational uses in the rest of the world will work in China, and for one very good reason: the Great Firewall of China.
Any technology that has real-time application to your customer experience that sits outside this firewall will deliver sub-optimal performance within China. There are only a small number of customer-experience technology companies that have taken a place behind the firewall, and Adobe is one of them.
Using a technology partner that’s established in China has many benefits. It allows consistent and efficient data flows throughout your technology stacks, making it easier for your teams to identify opportunities and trends regarding audience behaviour quickly.
The data and content you have supporting the online experience will also be safely delivered without the substantial lag suffered by providers outside the firewall, whose customers often leave for a brand with a more responsive site.
The best time is now
There is a famous Chinese proverb: “Zhòng zhí shù mù de zuì jiā shí jiān shì 20 nián qián. Xiàn zài shì dì èr gè zuì hǎo de shí jiān”, which means “The best time to plant a tree was 20 years ago. The second-best time is now”. It’s time for multinational businesses to embrace China as an opportunity as there is no stopping the sun rising in the East.
Topics: Retail, Corporate Marketer, Digital Transformation, APAC