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Time to trade in the ‘Great Mall of China’

25th March 2017
shopping market in china at night

Brexit, the fear of a declining domestic market and Amazon’s impending move into Australia are just some of the factors driving China market entry to the top of retailers’ wishlists.

I’ve recently returned from a trip to Hong Kong and mainland China; and as the market there is moving so quickly, I thought it was worth providing a round-up of some up-to-date market statistics.

The dominant Tmall marketplace should still be the first channel for any brand wanting reach and exposure in China, with around 56% of the total market. JD.com (around 22% of the market) should also be considered, along with a direct online offer in China, to reinforce the brand proposition.

Historically, direct to consumer (D2C) has been more of a brand play than a significant revenue driver, but is now a serious opportunity. And WeChat is the game-changer for that. Nearly 72% of all online sales in China are via mobile, says eMarketer.

Margins have been a challenge, as marketplaces have generally been discount driven. However, trustworthiness and customer service are becoming more important.

52% of Chinese consumers say they are loyal to companies with excellent customer support, compared to 44% who are swayed by special promotions, according to recent KPMG research. And the Chinese Government has cracked down on counterfeit products to prop up local market confidence in buying products domestically.

There are several key trading peaks in online. Singles Day is the most well-known, and the single biggest online trading day in China, generating $17.8 billion sales in 2016 (bigger than Brazil’s projected ecommerce sales for the whole of 2016). 82% of the sales were made on a mobile device, and 27% of sales were with international brands.

Double 12 Day is another big ecommerce day, and the Autumn moon festival in mid-September is another important holiday for small gift giving.

Propensity to buy online is higher in China than the West. 49% of Chinese consumers have purchased products online at least two to three times in the past 12 months, compared to 31% in Western Europe and 32% in the US.

In contrast to the West, food and grocery is one of the most popular categories of products purchased online. Women’s apparel, electronics and men’s apparel all also have relatively high online penetration rates.

Chinese consumers are heavily influenced by their peers (and key opinion leaders) with 22.2% buying a product their friend owns, compared to 8.2% in the UK. They are three times more likely to share a review or opinion about an online purchase compared to UK consumers.

Payment barriers are coming down too. Chinese consumers are less concerned about cash on delivery, with only 9.7% preferring this method in 2016 compared to 22.1% in 2015. Credit cards are the top payment method at 78.8%, followed by Alipay at 72.2%. WeChat at 34.6% is the leading mobile payment method.

Despite the challenges, the sheer scale of the market makes it worthwhile to test the opportunity. A client of Practicology sold more than a million pairs of sneakers on Singles Day alone!

And with 70% buying online because they trust global brands more than smaller or local brands, there may never have been a better time for UK retailers to add China to their roadmap.

 

This article was published by RetailWeek on 27th March 2017. Read it again here.

The article has also been reproduced on LinkedIn. Like and share it here.

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