The Retail Sun Rising in the East

by Digital Europe

Posted on 08-15-2019

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 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: Digital Transformation, Customer Experience, retail, UK, UK Exclusive, Digital EMEA