“Bricks-and-mortar retailing is a mature
business in the US, where consumers have been shopping in malls for decades and continue to do so, augmenting their purchases with occasional forays on the web. Online shopping is dessert in the US, but in China, it is the main course.” Jack Ma, Group founder and Chairman, Alibaba
ONLINEOFFLINE Ofﬂine vs Online Physical
retail is costly to set up. Far too many locations are empty. RMB230.00 Price at Retail Low setup costs, big consumer base. But brand management is critical. RMB90.00Price at Retail Product pricing comparison based on RMB36.00 base cost. Retailer challenges
Bain & Company “China’s Ecommerce
Prize 2013 B2C vs C2C Ecommerce 2008 2009 25% 50% 75% 100% C2c B2c 2010 2011 2012 2013e 2014e 2015e 2016e 0% B2C is catching up quickly with C2C as more brands move onto Tmall and other platforms. But C2C is still incredibly important in cHina.
The Two Major Forces China’s
biggest ecommerce platforms and payment system. second most important social media (weibo) alibaba + WeiboTencent + jd.com China’s second biggest ecommerce platforms and payment system. most important social media (Wechat & QQ)
B2C Platforms tmall and/or jd.com
are almost essential to a comprehensive ecommerce strategy. but, costs of audiences are becoming very high 2013 - Market Share Tmall JD.com Tencent Suning Amazon VIPShop Gome DangDang Yihaodian Vancl 6.3% 5.7% 57.5% tmall 19.3% jd.com iResearch & Alibaba Group 2013
3 beauty & personal 2
apparel, fashion 1 electronics & appliances Most Popular Categories most popular categories of products from overseas; clothing, beauty, baby/infant, digital, household, health Overall / From Overseas
B2C Platforms Horizontal x Vertical
Sites electronics & appliances - Sunning - Gome - JD.com $ luxury - VIPshop - Ihaveu - Xiu apparel, fashion - Vancl - FClub - OKBuy beauty & Cosmetics - Jumei - Lefeng - Lafaso it is important to evaluate b2c platforms based on strength of categories. and (possibly) use specialist shops + mall tmall Jd.com amazon malls General (All Categories)
Repeat Purchase - Top3 Highest
rates of repurchase yihaodian 59% Food, General Okbuy 68% Fashion, Clothing 82% vipshop Fashion, Clothing tmall has the highest percent of consumers using only their site 49% of tmall consumers only use tmall
Key Points on Path to
Purchase Social Media: Creative, brand focused content to build awareness & WOM ...and do promotions Ecommerce: Branded shops on platforms to take advantage of traffic (and intent to purchase). Search: Key in converting interest to sales most transactions take place on branded shops in Tmall.com or Jd.com stand-alone ecommerce shops for brands are much less productive.
Sources of Trafﬁc search is
the most trackable, measurable channel (as last step to hitting a site) but brand (social) contribute to the final click chinausa 5% Other Social Networks Natural Search Paid Search Email Referring Domains Direct 100% 100% 2% 45% 7% 7% 6% 28% 4% 4% 14% 39% 16% 23% Other Social Networks Natural Search Paid Search Referring Domains Direct 53%52% Search Based on data provided by “Benefit Cosmetics” Sample composition
Path to Purchase Key Activities/Media
in China interest level awareness acquisition engagement (Loyalty) First interest Press Releases Social product info Viral videos (Ads) Weibo Info search Search (SEO) Wikis Product reviews Category infographic Baidu Zhidao Shortlist Product infographics Product features/photos Promotions Search (SEM) Baidu/Taobao Make Purchase Customer support Discounts/Promo Tmall/JD.com Show oﬀ Customer support CRM / Q&A UGC Advocacy WeChat
Estee Lauder Case Study To
promote the store opening they offered free shipping during first three days and big discounts on star products. Estee Lauder announced the launch of its Tmall Flagship Store on May 2014 Its the only authorized E-commerce platform except it’s ofﬁcial website in China Day One sales were RMB2.69m. Within 5days, the sales volume reached nearly RMB7.0m (a record for new launch on Tmall) Sales trend from 21~23 May from it’s official flagship store
La Roche-Posay Case Study European
beauty brand La Roche-Posay held a campaign over six weeks in 2013 offering free samples to new customers After signing up and answering a few questions, customers were able to go to nearby shops to pick-up 50mL samples of La Roche-Posay products There were 80,000 participants, and the brand saw a jump in sales of RMB1.0m WeChat ID: larocheposay1975
WeChat ID: xiaomijiedatuan Play games
to win further discounts Products are available for one day only at select times (12:00 - 14:00 - 16:00...) with a quota at each time Authorized ebooks for free download - Between 10am - 10pm Accessories Xiaomi Case Study Xiaomi (China’s Apple) have built a brand which is very price competitive AND fashionable by employing a set of games, incentive and sales - while becoming a brand almost 100% built online Instead of starting with higher prices and gradually lowering them (at end of sales cycle), they launch with what would be a ﬁnal sales price (utilizing ﬂash sales and games to sellout in days, rather than months)
Xiaomi Case Study Xiaomi held
a “snap-up” campaign inside of QZone on March, 2014 for its new RedMi Note (Table) & phone With 600m MAU, QZone is a large social medium, and also allows for precise targeting Following a detailed (& entertaining) process, 15 million participants signed up to participate 419,000 secured “reservations” for the “snap- up” event 100,000 RedMi Notes were sold, 200,000 RedMi phones (a sellout) Mar 15: Signup on QZone Mar 19: Play for a “reservation” Mar 26: Play to “snap-up”
SmartCar Case Study Smart created
a “snap-up” campaign in WeChat for it’s special edition “Smart BoConcept” Between April 14 and April 21st at 8am, 6,677 customers paid a deposit of RMB999 for the car 388 cars were then sold in 3 minutes after 10am on April 21st 1. Fill in personal info, and pay for a deposit of 999RMB from 14~21, April, 2014. 2. Participate in Snap-up on 21, April
KPMG - China’s Connected Consumers,
Feb 2014 Online Purchase Drivers Better Deals, Less Expensive Its Quicker Than Store Access to Global Products Easier to Compare Better Range, Variety Uniqueness Popular, Famous Brands Recommended By Others High Quality, Long Durability Comfort of Shopping at Home 10% 20% 30% 40% 60% 70% 80% 90% 100%50% For Luxury Purchases
INVESTTRIAL SALES SYSTEMS PRODUCT CONSUMER
INSIGHTS BRAND ADAPTATION Brand Entry Framework Regular container shipments to China. Investment into online awareness building. Enrollment of early adopters and online influencers. Fulfillment & logistics systems installed. PROMOTIONS test invest
Trial sales Small scale, promotional
sales Sold from overseas (HK) Thru Woyola.com, Tmall.hk Drop shipped Observe existing sales Already being sold thru Taobao (C2C) Being sold thru global, vertical sites Are you selling in China already? Are you a highly social brand? Do you have great stories/content? - Which precede the brand entry? Enroll early adopters as advocates? Brand Entry Framework consumer insights Focus Groups, Surveys Thru social media (WeChat) Data/feedback from trial sales Direct response to products already sold Competitor evaluation (ﬁeld study) Outline of existing marketing, pricing Consumer/competitor mix Who are your customers? What are they buying now? Judging from trial sales, whats the job to be done with your product? brand adaptation Find the right positioning Fashionable vs Functional Diﬀerentiated vs Commoditized Premium vs Price Market Leader vs Challenger vs Marginal Merchandising & marketing plan Brand, product naming Product selection/mix Strategy x creatives x channels What kind of brand can/should you be in China? Positioning, pricing?
Brand Entry Framework systems Fulﬁllment
model Home market - China - Local distribution Customs, regulatory process Taxes, repatriation ... Labeling Integrate customer service Online service & CRM systems Returns management Ecommerce Brand “own” site? Detailed capabilities Payment systems products Moving operation to scale Larger scale shipments Additional distribution (oﬄine?) Partnerships & resellers Wider product mix Including customized products for China Based on user feedback promotions Implement marketing eﬀorts/tactics Social - search - display Brand & promotional (sales) Digital marketing assets Create full set of local assets... Social presence, Baidu Zhidao, Blogs Content creation What level of investment will you make? - Opportunity for big share in category? - Speed essential? - Success with trial sales?
Decision Tree for Brands Build
- Sell - Retain Social Focused Search Focused Does your product satisfy a need or a want? Is your product fashionable or functional? More of a Need - Functional More of a Want - Fashionable Price Brand Do you compete on price or brand? Are you a market leader, challenger or outside competitor? Own Ecom Site Platform Ecommerce (Tmall...) awareness acquisition loyalty Loyalty: by price or product/ brand quality? Can you generate “organic” word of mouth? UGC User-get -user Promos Direct Marketing Discounting Rewards Is the quality gap between your product and local signiﬁcant? Do you have compelling, related stories, images to share? No investment in brand = price/promo competition.
Brand vs Sales Growth strategy
- balance sales brand Price/promotional focused Need for short-term results Strategic imperative to capture market share Luxury/premium product Can take a five-year perspective Strategic imperative to maintain brand Consistent with global approach? Critical to have price, brand parity across markets BUT The middle can be challenging place to be in China.
The problem to be solved.
China is a difficult market to summarize. Its a massive market ...but only pockets of it are developed and huge sections are a work in progress. its a two-speed market with some of the most advanced outcomes in the world ...and some very early stage issues. Its middle class is much less affluent and, much more price sensitive than EU/US. A two-speed market
There are pockets of incredible
advancement (where premium/ quality is prized) but the vast majority of consumers in China are behind (very price sensitive). Beijing Hangzhou Shanghai Shenzhen Chengdu T3-4 City T3-4 City Advanced Behind Sources: BCG & CASS Advanced vs Behind Uneven consumer landscape
beijing 28.7m shanghai 20.5mChongQing 10.9m
shenzhen 14.2m guangzhou 11.9m shandong peninsula 21.6m xi’an 10.7m That’s Bigger Than Portugal That’s Bigger Than Australia That’s Bigger Than Two Sweden’s Mega-cities in China are quickly growing to be bigger than whole countries (and not just small countries!). The opportunities long-term are incredible! Source: EIU 2014 City Populations by 2020 Mega-city projections
Rising Spending Power 60-80,000 40-60,000
20-40,000 10-20,000 012345678 60-80,000 40-60,000 20-40,000 10-20,000 0 1 2 4 5 6 7 8 10 11 1212345678 People Millions RMB/mo RMB/mo RMB/mo RMB/mo Beĳing Shanghai Chongqing But brands must pick the right spots 2000 2011
The problem to be solved.
Rules to Branding China There are no fixed rules, not yet. Digital (social) media rule. An informational approach goes a long way. Apply a universal logic to user motivations (especially youth). The average consumer is very, very adaptable. “Face” does matter. Public goods are more important than private goods. Play the long-game (don’t rush success).
Total social media users top
550m 2007-2014 social media (monthly) unique visitors Source: iResearch 100 200 300 400 500 2007 2008 2009 2010 2011 2012 2013 88%penetration 000,000 Us: 67% 2014 600
25 online per week hours5%
26% 28% 9% 5%8% 18% News Other Ecommerce Games Search Online Video Social Media Source: iUsertracker, Mar 2012 Social Media is capturing audience attention 78% mobile 69% Desktop 47% laptop
us vs China user time
0 25 50 75 100 Email Search Shopping Online Banking Travel Booking Recruitment Online Payments Friends (SNS) Education Selling Forums Blogging Gaming Instant Messaging Video News Music %ofUsage Source: eMarketer 2012
Uniqlo Homepage of Tmall Flagship
Store Location-based ﬂagship store, which supports city shifting to ﬁnd your location. Weather Forecast Categories Go to Fitting Room Showcase Pre &After - sales service
Uniqlo List by UT Themes
List by Banners/Campaigns Promotions Hot Searching Keywords Homepage of Tmall Flagship Store List of products
A list of all categories,
like “Cute”, “ Lady”, “Mature”, “Leisure”, etc. Uniqlo Online Fitting Room Float window where you can change model. shoes, T-shirts, colour…You can share it to other social networks as well. An online ﬁtting room where you can match & mix from all kinds of clothes, and share it to your social networks.