This article provides an overview of the potential of the China eCommerce market and outlines some of the key elements that prospective cross-border retailers need to be aware of before entering it.
Chinese customers are heavy users of content, social interaction and research to inform purchases, especially when looking to buy from an international brand. Digital advertising definitely has its place but the keys to success are very different to other, particularly western, markets.
It is well known that Chinese consumers like content-heavy pages, detailing product information through text and images. KMPG data suggests that 84% of online shoppers will only make a purchase if they can see detailed and transparent product information. If a detail of a product comes in different variations, the expectation is that each of these can be seen.
The customer journey to this point can be much more convoluted than in other markets. Social and mobile are key communications channels and the customer is prepared to invest a lot of time in making a purchasing decision.
With or without an international reputation brands should expect very different customer journeys in China. China is a market with issues that customers want to protect themselves against. Fake product and advertising fraud are examples of domestic concern. Potential customers will also want to research a brand, reassure themselves about the final cost of their order before confirming and get a better understanding of customer service. For example, are they able to reach you on the telephone number you supply? They will also expect a merchants website to contain a lot of information about the buying process, what payment types you accept, how taxes are paid, and do you use brands they recognise to fulfil certain services, such as delivery and customer support.
What their peers say about you will have a bearing on their decision as will a comparison between your offering and other brands.
It is not unusual for the first purchase to take many weeks, with multiple touchpoints on the journey. Social, affiliate, search, video and content are all playing key roles in the customer journey and Chinese ad-spend is following these trends.
In common with other developing markets China’s online advertising expenditure has been growing at a phenomenal rate over the past 5 years. As the market starts to mature, the pace of change is slowing but at circa 30% growth in 2016 to USD $40bn, it is substantial.
Figure 1: Digital adspend growth in China - 2012 - 2016
There is still a lot of growth left in terms of consumers coming online, or even increasing their usage of digital communications. This growth in itself will continue to fuel the demand for digital advertising and opportunities for getting in front of them.
Overall, television is dipping in popularity, radio is falling but the rate of decline is slowing due to an increase in car ownership and digital ad spend will account for nearly 60% of the total during 2017 (GroupM, May 2017). eMarketer’s analysis of investment split by channel in 2014 underestimated the total proportion of spend dedicated to digital; indicative of the challenges of forecasting in the Chinese market.
Figure 2: Forecast adspend split by channel, 2013 - 2018 in China
It does illustrate the decline of the other channels fairly closely, and reinforces the importance of digital, whilst also highlighting that the other channels are still worth considering, depending on brand priorities. Outdoor, for example, is a good way to build brand and provide confidence to wary consumers.
Figure 3: Budget allocation by digital marketing channel 2014- 2016 in China
On the digital front, search related investment is still the main priority for most brands, representing 34% of total expenditure. Email marketing faces certain challenges in China. Although the level of investment is low, its use had maintained a steady level. Merchants should be aware of spam controls implemented by the government and a high level of concern amongst consumers.
Key to a successful campaign includes:
Figure 4: Popular Android video streaming apps during March/April 2017 in China
Typical open rates for international merchants / brands are around 7.8% with click-through-rates circa 1% (webpowerasia.com).
Of increasing interest is video. In common with other markets video streaming is increasing rapidly and according to IAB China, 55% of online consumers born in the 90’s have streamed video in the last 24hours. Other sources report that 78% of mobile consumers in China are open to receiving advertising.
Linked with KOL’s, video is a powerful promotional tool and increasingly functionality is built into the apps to allow for transactions to take place. As an indication, Cheetah Labs reported that Android users favoured Tencent Video, iQiyi and Youku. Merchants are advised to work only with the top video service providers (apps). Whilst they can be expensive, they are growing rapidly and can provide good quality traffic. There is a danger that strategy can get misdirected towards the sheer volume of traffic that is available; it is better to focus on relevant, targeted traffic, whether that is from search, email, social or video services.
Reflecting the changing customer journey and multiple touchpoints, Chinese agencies and marketers are choosing to focus on video content and social for mobile devices, 67% and 55% respectively, whilst desktop investment still sees search ranking high. This ongoing investment in search is a recognition in its value for driving traffic whilst the popularity in video investment is probably higher, in part, due to its relative immaturity as a communication channel for most brands. Good video content can also require significant upfront investment.
Leading types of desktop/laptop vs. mobile media in which marketers / media agency professionals in China prefer to invest, Dec 2016 - % of respondents
Figure 5: Marketing channel investment split by mobile/desktop in China
Social platforms are receiving a lot of attention from marketers in the Chinese market. Ranking in the top three for investment priorities, local marketers have seen the growth of its attractiveness to customers first hand. According to Kantar analysis in their reporting during 2016, WeChat is by far the most favoured by users, both in terms of satisfaction and usage.
Figure 6: WeChat position in Chinese social media landscape
The rise of WeChat as a commercial channel is further evidenced by a survey carried out by consultants McKinsey in 2016. It showed that the number of shoppers who had made a purchase through WeChat had doubled over 12 months. In the fashion sector, this represented 32% of their total online expenditure.
WeChat has developed a range of tools that enable branding and advertising to targeted audiences. Estée Lauder, Montblanc and Nike are some of the more famous brands who have successfully used WeChat. Success will depend on a number of factors, including:
Foreign businesses need to engage a local agent (reseller) to be able to set up a WeChat account. Campaigns through Moments can cost non-domestic advertisers $20,000 and banner advertising is only available to Chinese registered businesses. The alternative is to gain their own business licence by registering as a Wholly Foreign Owned Enterprise (WFOE); a process often taking 6 months or more.
This article provides a marketing overview of the China eCommerce market – we have produced a full country guide covering in-depth information on multiple aspects of trading into this territory including logistics, payments, legal framework and marketing.
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