3 Key Trends Emerging From the Growth of Digital Retail in China

China is the world's second largest retail market, with e-commerce growth at 84 percent year-over-year. Consider these three trends and what they mean for brands.

According to figures from the Fung Business Intelligence Centre, China is now officially the world’s second largest retail market, and is expected to take the top spot from the U.S. within the next five years. Such significant growth is bound to have ramifications for the evolution of retail in China as a whole and e-commerce in particular, which has seen a massive 84 percent growth year-over-year. So what are the key trends emerging from this burgeoning market and how can brands exploit them?

1. Mobile Is Becoming the Most Important Digital Sales Channel

Growth in sales via mobile has driven the impressive overall e-commerce figures, with a 181 percent year-over-year increase in transactions – understandably, as it’s the channel of choice for Chinese consumers who might not otherwise have access to either physical stores or the Internet via desktop. But it’s no longer just about accessibility – the major e-commerce players such as Tencent, Alibaba and, most recently, Baidu, have all recognized the potential of the channel and used their size, reputation, and brand equity to develop mobile payment systems that are trusted by their customers and offer a secure, simple, and speedy way to pay for online goods.

What this means for brands: While mobile has always been a vital part of brand strategy for retailers with interests in China, they now need to acknowledge its importance by adopting a “mobile first” approach to their business plans. That means focusing on when, where, and how their customers access products via mobile, which platforms they use (iOS? Android?) and how they prefer to pay, ensuring business objectives include integration of all key channels via mobile, to guarantee supply chain integrity, seamless delivery of stock and ease of payment. This will allow retailers to access some of the $5billion+ in mobile transactions processed each year – a figure which is only likely to get bigger.

2. “Rural” Will Be Just as Important as “Urban”

While consumers in tier one and two cities are still responsible for the majority of digital retail sales, the most significant growth is coming from rural tier three and four territories. Ongoing investment in these areas has led to a steady increase in amounts of disposable income, and while they still lag behind urban levels, this, coupled with the influx of commerce-ready smartphones, has encouraged online spending in China’s more remote cities.

What this means for brands: The key message here is that retailers will be missing out on a significant revenue stream if they focus all of their attention on the more westernized urban areas of China. While it might be a step outside their comfort zone (it’s far easier to market products to consumers who are already brand-aware and used to western retailers’ content and style), it will add value to brands’ bottom lines if they research rural consumers’ behavior and preferences. For example, they shop less frequently than their urban counterparts, but when they do decide to buy, they tend to spend more. Analysis of their shopping patterns will allow for strategic online placement of promotions, deals, and offers to coincide with the buying cycle.

3. Domestic Brands Are Expanding While International Brands Are Becoming More Focused

Now that an increasing number of Western retailers are establishing themselves as viable brands in China, domestic retailers are upping their game when it comes to competition. They are looking to expand their presence, either by physical growth or more relevant to digital retail, by differentiating themselves through specialization and a focus on promotion through social networks. As part of this, they are making a concerted effort to understand customer needs so that they can hone their product offerings and online presence to meet their requirements. Conversely, in response to increasingly competitive market forces and the shopper’s desire for top quality goods at bargain prices, a number of international retailers are turning their focus inwards in an attempt to sharpen their price points, “localize” their business (rather than simply impose western strategies on an eastern market) and use this to offer a more compelling and relevant digital experience.

What this means for brands: It’s evident that retailers that chose not to heed advice about getting to know the local market and adapting their approach to suit customers in China is now having to re-evaluate their strategies. In the future, brands will need to pay specific attention to the way domestic retailers are behaving, learn from them and incorporate relevant approaches and activities into their business plans if they want to continue to compete in an increasingly active market.

Subscribe to get your daily business insights

Whitepapers

US Mobile Streaming Behavior
Whitepaper | Mobile

US Mobile Streaming Behavior

5y

US Mobile Streaming Behavior

Streaming has become a staple of US media-viewing habits. Streaming video, however, still comes with a variety of pesky frustrations that viewers are ...

View resource
Winning the Data Game: Digital Analytics Tactics for Media Groups
Whitepaper | Analyzing Customer Data

Winning the Data Game: Digital Analytics Tactics for Media Groups

5y

Winning the Data Game: Digital Analytics Tactics f...

Data is the lifeblood of so many companies today. You need more of it, all of which at higher quality, and all the meanwhile being compliant with data...

View resource
Learning to win the talent war: how digital marketing can develop its people
Whitepaper | Digital Marketing

Learning to win the talent war: how digital marketing can develop its peopl...

2y

Learning to win the talent war: how digital market...

This report documents the findings of a Fireside chat held by ClickZ in the first quarter of 2022. It provides expert insight on how companies can ret...

View resource
Engagement To Empowerment - Winning in Today's Experience Economy
Report | Digital Transformation

Engagement To Empowerment - Winning in Today's Experience Economy

1m

Engagement To Empowerment - Winning in Today's Exp...

Customers decide fast, influenced by only 2.5 touchpoints – globally! Make sure your brand shines in those critical moments. Read More...

View resource