China’s retail sector doesn’t exactly follow the Western playbook – remember, it’s a huge, mountainous land mass that has made landlines less easy and more expensive to implement.
Throw a gigantic smartphone market and cheap data bundles into the mix, and it is clear why mobile is very much the default. In fact, out of the 800 million or so people who have internet access in China, nearly 98% are on mobile (with smartphone ownership set to a grow an extra 23% by 2022).
Now, if you also consider the country’s oft-referenced proliferating middle class – many of whom are increasingly interested in owning luxury brands – you have a sizeable population of empowered, demanding, mobile-first consumers.
In other words, we’re seeing the ultimate example of 'living commerce' – where the line between living and buying is blurred, where consumers make purchase decisions 24/7, everywhere, and expect everything now.
Whereas in the past Chinese consumers trudged around multiple stores that each sell one product, today the one-stop-shop is a must. And creating a space that allows someone to sit at home and browse everything at their own convenience is crucial. Chinese retailers are demanding to know how they can build their services around the consumer.
So, what exactly are they doing about it?
A new retail revolution has begun to emerge over the past couple of years, with mobile retail sales projected to increase by 76% by 2020. And while Alibaba has cemented itself as China’s number-one eCommerce player, it’s becoming increasingly tricky for other players to operate successfully – Japanese department store chain Takashimaya posted a closing-down notice in June, while Carrefour recently sold 80% of its business to Suning, a subsidiary of Alibaba.
Meanwhile, eCommerce has continued to chip away at traditional retailing; it was estimated gross merchandising volume would reach 37% in 2019 of total retail sales, but growth has slowed to 27%.
The natural response, as in most other markets, has been to mine social media to acquire new customers – notably influencer marketing and the use of Key Opinion Leaders (KOL).
And why not turn to KOLs? After all, they come with a readily curated, personalised and loyal social media following who are already scrolling. Got a new pair of sneakers to sell? Why not send a free pair to a sports KOL and let them tell their thousands, if not millions of followers, how great the product is?
Fine in theory, but this approach is not without its drawbacks – fake followers, fluctuating prices and a lack of control over the KOL’s output (i.e. they post what they want, how they want, when they want – remember they need to stick to their brand as much as you do yours) to name just a few.
One strategy businesses are turning to address this - while continuing to maximise their brand reach - is the introduction of Key Opinion Convertors (KOCs). KOCs are everyday people who, among their network of contacts, have garnered a higher level of trust based on their content creation speciality in niche area. Geometry China’s MarTech division has gathered over 45,000 KOCs into a singular Influencer Commerce Marketing (ICM) platform, owned by Geometry itself. They can be deployed for the purpose of brand communication and sales conversion across 500+ Chinese cities, within a 24 hours turnaround where necessary.
Early this year, Geometry China rolled out a new campaign for a major international eCommerce retail chain with a KOC-oriented campaign. Using a small number of KOLs in conjunction with 1,000 KOCs who validate these key influencers’ opinions, the campaign promoted running as part of a healthy lifestyle advocated by the brand.
The result? Nearly two-and-a-half million campaign views over 25 days with zero media spend, an 115% increase in brand owned Weibo account traffic, an 80% increase in brand owned WeChat account traffic and increased 40% traffic to Brand Tmall store. The key to success is offline knowledge combined with online commerce, thanks to KOCs and the way they are managed through ICM platform.
The approach to retail in China has changed massively. And rather than continue to apply the Western playbook to the Chinese market, global brands need to accept that things are done differently and at a huge scale, addressing the audience of 802 million internet users (about 200 million of which are digital natives).
And as online retail continues to evolve and grow, we can continue to see new knock-on effects – on the one hand we see an emerging class of empowered gig-economy delivery drivers transforming the labour market, on the other hand we see a significant recycling challenge posed by all the leftover packaging.
But as consumers continue to force unprecedented (and sometimes unpredictable) new ways of operating in the market, retailers must adapt to the fact that life in China is increasingly defined by just one thing – change.
5 tips for brands that want to thrive in this New Retail Revolution
1. Be there. No matter what, brands must be a part of this.
2. Learn. Study what each ecosystem is doing and how it fits best into the brand’s business objectives. The best way to understand which approach works best for your brand is to take a test drive.
3. Be efficient. Head to where the market is growing – in China for example this is the lower tier cities, and on mobile. It’s more efficient and cost-effective than building physical assets.
4. Experiment. Get to know the potential of the ecosystem and how it can help your brand advance its objectives.
5. Move fast. In China consumers prefer speed to perfection. And in China’s rapidly changing market, it’s easier to correct a mistake than to make up for lost time.