Capturing the Chinese
Consumers in the
Changing Digital Era
Jasmine Sun
April 2, 2014
1998
2000
2001
6
Online consumers are evolving – so should brands
Source: SmithStreet Research and Analysis
Premium Luxury
Via official e...
7
Many luxury brands see the importance of developing official e-
commerce platforms now, for branding and expansion purpo...
8
4
5
2
3
1. Tell the story of the brand and logo
2. Bigger font size
3. No need to share with a 3rd party platform
such a...
9
Big and mid-sized auto insurers have been active in developing
e-commerce platforms, viewing it as a key future growth p...
10
More luxury spending happens overseas than in China, and
there is a trend away from Hong Kong to less crowded places
So...
11
Independent travelers to Europe who buy a lot luxury typically
researched online and based on word of mouth to choose h...
12
Internet connection has been fast moving from only PC based to
mobile based - people are no longer offline
Smartphone P...
13
Digital world in China is a localized market and new internet-
based communication tools constantly emerge
2006 2010 20...
14
Strong
Presence
China US, Europe
Active Users
(per month) 272MM 350MM
Price
Free
• $0.99 (iOS)
• $0.99/year for other d...
15
Mobile Apps are becoming more popular among Chinese users but ROI for brands is
low
• Retention rate of apps remains ve...
16
Case: Liberty Insurance – make it easier via mobile APP
Liberty insurance is making efforts to shorten the claims proce...
17
Case: Burberry – target young through digital marketing
• Burberry keeps a very consistent presence across all channels...
18
Case: Bestseller - m-commerce via WeChat
1. E-commerce accounts on Wechat 2. Brick-and-mortar-led Model
• Online supple...
Jasmine Sun 孙雅珏
E-commerce and Retail Expert
Office: +86 (21) 6565-6533*8017
Mobile: +86 139 1618 6537
Email: jasmine.sun@...
Capturing Chinese Consumers in a Changing Digital Era
Capturing Chinese Consumers in a Changing Digital Era
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Capturing Chinese Consumers in a Changing Digital Era

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Speech by Jasmine Sun, E-commerce & Retail Expert in SmithStreet, to help better understanding of consumer behavior in China in such a digital era and and demonstrate how brands can respond to it. Topics like e-commerce strategies to strengthen brand image, current market and consumer trends, how can the luxury industry leverage e-commerce, how and where do consumers spend their money and case studies from various industries like hospitality, retail, luxury and niche products are covered in the slides. More information on http://smithstreetchina.com/

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Capturing Chinese Consumers in a Changing Digital Era

  1. 1. Capturing the Chinese Consumers in the Changing Digital Era Jasmine Sun April 2, 2014
  2. 2. 1998
  3. 3. 2000
  4. 4. 2001
  5. 5. 6 Online consumers are evolving – so should brands Source: SmithStreet Research and Analysis Premium Luxury Via official e-commerce or omni-channel Cheap / Counterfeit products Via mass online market place Accessible Luxury Via official e-commerce Discount / Overseas agency Via multi-brand channels Online Luxury Shopping Experience Curve in China Not seeing official presence online, new consumers are mislead by the counterfeits in terms of brand positioning, pricing and style. Experienced consumers at the forefront are ready to consume accessible luxury online. When they can’t find official channel online, they have to turn to the non-official ones.
  6. 6. 7 Many luxury brands see the importance of developing official e- commerce platforms now, for branding and expansion purposes Source: SmithStreet Research and Analysis
  7. 7. 8 4 5 2 3 1. Tell the story of the brand and logo 2. Bigger font size 3. No need to share with a 3rd party platform such as Weibo 4. Pattern on the sides are too loud compared to the white background 5. A beautiful poster would be better than a product picture on the home page Besides, the website connection is very slow. 1 Brands need to adjust to the different need of merchandizing and user experience demanded by local Chinese consumers Source: SmithStreet Analysis among Shanghai luxury consumers 1 1 1. Local customers expect to have an obvious sign on the top of the home page for customer service, such as telephone numbers or a chat window
  8. 8. 9 Big and mid-sized auto insurers have been active in developing e-commerce platforms, viewing it as a key future growth point First Purchase • convenience of purchasing • strict requirements by 4S dealers Renewals • better pricing • relationship and service provided by the 4S Store First Purchase and Renewals • within personal networks (friends working in insurance corps) • higher levels of service and extra discounts Renewals • lower pricing relative to agent channels • Telephone sales currently dominate the direct channel due to the convenience Renewals • Important information resource • not fully developed yet, more popular among tier 1 and young consumers • viewed as a key future growth point Source: SmithStreet Interviews & Analysis 4S, 76% Agent (Personal Network), 16% Other, 6% Tel, 2% 4S, 28% Agent (Personal Network), 36% Other, 2% Tel, 36% Online, 8% Purchasing Channel for First Purchases %, N = 50 Respondents Purchasing Channels used for Renewals % with past experience at each channel, N = 50 Respondents
  9. 9. 10 More luxury spending happens overseas than in China, and there is a trend away from Hong Kong to less crowded places South East Asia – leisure destination for all cities but not for luxury purchase Europe U.S. Europe and US SH Priority destination due to cheaper price, more options and better service BJ/CD Not an important destination KoreaMainland China Hong Kong Korea SH/CD Not an important destination BJ First option for overseas purchases due to geographic proximity, and cheaper price and smaller crowds than HK Mainland China SH Only for accessories and small jewelry items under RMB 10K BJ /CD Buy a broader selection of items domestically as are less sensitive to price differences Hong Kong SH Only a destination for some fashionistas; most consumers have ‘upgraded’ to shopping the EU or US BJ Switching to Korea for cheaper prices and no crowds CD Complain about the crowds but HK is still the top overseas option for buying luxury Source: SmithStreet Interviews & Analysis Key Overseas Destinations for Buying Luxury
  10. 10. 11 Independent travelers to Europe who buy a lot luxury typically researched online and based on word of mouth to choose hotels • Among different groups of different consumption level, hotel spending doesn’t follow tight while luxury consumption goes up • Booking.com is the most mentioned as the typical channel for reservations, on the wheels of travel agency • Key factors for hotel selection on comparison websites: price, number of stars and convenience to key destinations to ensure value for money Source: SmithStreet In-depth Interviews and Analysis
  11. 11. 12 Internet connection has been fast moving from only PC based to mobile based - people are no longer offline Smartphone Penetration # of Smartphone Users Source: CNNIC; KPCB; CLSA In Less than 5 years, the number of smartphone users has grown by over 33MM, accounting for 72.2% of total web users 38,825 35,558 30,274 23,344 11,760 5,040 72.2% 69.3% 66.2% 60.8% 39.5% 24.0% 2012 Jun 2011 Dec 2010 Dec 2009 Dec 2008 Dec 2007 Dec Total internet users Percent of internet users The growth rate of smartphone penetration in China started to exceed that in US from 2012. This trend is expected to continue in the next few years 0% 10% 20% 30% 40% 50% 60% 2010 2011 2012 2013e 2014e 2015e 2016e China USA Accelerating Smartphone Penetration in China Smartphones as Percent of Mobile Users Smartphone Users in China Thousand
  12. 12. 13 Digital world in China is a localized market and new internet- based communication tools constantly emerge 2006 2010 20112000 PC Based (Imitation) Blogging Real-name Based Microblogging Mobile Based (Innovation) China Global IM Source: SmithStreet Analysis
  13. 13. 14 Strong Presence China US, Europe Active Users (per month) 272MM 350MM Price Free • $0.99 (iOS) • $0.99/year for other devices Social Leisure Entertainment WeChat and WhatsApp dominate different markets, but WeChat is more of a lifestyle than social media app like WhatsApp Source: SmithStreet Analysis; Hongkiat.com; Theverge.com WeChat WhatsApp Text Picture VideoVoice ChatLocationPicture Video Group ChatText Meet strangers (Shake, Drift Bottle) LocationLive Chat (Walkie-talkie) Video Calls Moments Feed Web Chat Public Accounts Group ChatVoice Chat Translation Taxi Reservation Event Organization Price-Check ShoppingNews Feed Music Player & Identification Game
  14. 14. 15 Mobile Apps are becoming more popular among Chinese users but ROI for brands is low • Retention rate of apps remains very low while the required investment is high • Consumers need to find the APPs useful or fun to actively use it – information promotion will not attract them for long Although digital landscape changes fast, best choices are clear Emails was once regarded as the most effective way to drive traffic to e- commerce sites in foreign countries, but this strategy failed in the Chinese market as consumers only use emails for work Source: SmithStreet Interview and Analysis Weibo was once very popular among Chinese netizens, but gradually losing market share to WeChat • Most brands have a Weibo account to engage consumers • International brands do not perform well on Weibo as their content is not localized and strongly restricted by MKT team in domestic countries Online ads is the most popular way to drive traffic to e-commerce sites • Most important places are search engines, commercial ads before videos as well as pop-up ads on popular sites • Requires large marketing investment WeChat is the most popular social media platform in China Currently offers “Public Subscription Account” and “Service Account” for retail brands to engage consumers and develop e-commerce
  15. 15. 16 Case: Liberty Insurance – make it easier via mobile APP Liberty insurance is making efforts to shorten the claims process by omitting paper materials for certain accidents and launching an iTunes app. Source: iTunes; Sina iTunes APP Traditionally, the claims process requires the insurance company to be on site right after the accident happens, which leads to low efficiency and requires a large service team on call. Liberty has published an APP on iTunes in May 2011 which allows iPhone users to send photos before Liberty will decide if an on-site evaluation is needed.
  16. 16. 17 Case: Burberry – target young through digital marketing • Burberry keeps a very consistent presence across all channels: Baidu BrandLink, Weibo Account, Douban Site, and Youku. These platforms provide links to each other, as well as e-commerce sites and WeChat QR code • Its current video applies Chinese factors such as horse-shaped fireworks (also match with Burberry’s own logo), Shanghai night view, and New Year Greeting in Chinese, showing the special efforts the brand makes for Chinese customers “The Chinese consumers usually have 20, 10 or even only 5 years of luxury brand exposure (as opposed to 3 to 4 generations of luxury brand heritage in the west), and average age of luxury consumers is 25 years old who are digital-savvy in China (while in Europe it is 40, in the US it is 50).” -- Chief Strategy Officer at MEC China Source: SmithStreet Interview and Analysis
  17. 17. 18 Case: Bestseller - m-commerce via WeChat 1. E-commerce accounts on Wechat 2. Brick-and-mortar-led Model • Online supplements the missing elements offline o Scan codes in-store to browse product information online o Choose to pick-up at stores or delivery back home o Customers who scan and put products under wish list can have priority to reserve products and receive order free of postal charge • WeChat account can direct traffic to offline Events on the platform to direct consumers shopping at brick-and- mortar 3. Challenges • SA training: application of online technology and online marketing skills, etc. • System safety and stability • Technology development 4. Outlook: One-on-one Service • Private service Once the relationship is established, SA can be client’s personal contact, offering periodic updates and recommendations • Less time-consuming o Consumers can proactively ask opinions from SAs o Consumers can declare purchase purpose, book try-on section in-advance through WeChat. By an App (under development) designed for SAs, they can receive customer demand at anytime to give immediate feedbacks 4 main tabs • All products • New arrivals • Recommendations • Fashion trend Source: SmithStreet Analysis; Fashiontrenddigest.com
  18. 18. Jasmine Sun 孙雅珏 E-commerce and Retail Expert Office: +86 (21) 6565-6533*8017 Mobile: +86 139 1618 6537 Email: jasmine.sun@smithstreetsolutions.com www.smithstreetchina.com info@smithstreetsolutions.com @SmithStreetCN SmithStreet SmithStreet @斯密街中国SmithStreet

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