MarketingConference CoverageMythbusting China’s E-Commerce Sector

Mythbusting China's E-Commerce Sector

In her address at ClickZ Live Hong Kong, WPP China head Bessie Lee debunks the big myths of China 's e-commerce landscape.

Alibaba has put the Chinese e-commerce scene on the global map, but foreign brands have much to understand if they want online success in China, says Bessie Lee, founder and chief executive (CEO) of withinlink and CEO, WPP China.

China’s e-commerce industry is the biggest in the world, worth US $458 billion in 2014, contributing 19 percent of the country’s GDP, according to research from Kantar Group.

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*Source: Kantar Research

czlhk-bessie-lee-ecommerce-gdp-slide-2-500

“E-commerce is a very mature industry in China,” says Lee. “Not only are the platforms mature, but the backend, the logistics, the payment systems, and the security systems are all very well established,” she said.

Added to that, Chinese consumers have already passed the hurdle of whether they should be making transactions online, with decisions now geared towards which platforms give the best and most genuine product ranges.

By 2020, China’s Internet population, or netizens, will reach more than 80 percent penetration, with 70 percent of them buying on e-commerce.

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*Kantar research

For brands wanting to come into China and set up e-commerce platforms, “you are going to need an interesting and unique angle, otherwise you will just be like many other platforms in the market,” Lee said.

And while B2C in particular has a promising future ahead, Lee says misconceptions of the Chinese e-commerce scene, perpetuated by foreign media, are creating obstacles in the ways foreign brands are engaging this channel in China.

She outlined her top five myths around China’s burgeoning e-commerce scene.

Myth #1: Taobao is Another Amazon

While Amazon is a closed platform – everything from the warehousing to the logistics and after sales service are operated and owned by Amazon – Alibaba’s Taobao is completely different.

Taobao owns the platform and the payment system in the back end, but does not own any of the stores, or logistics or warehousing.

“With C2C, anyone can go online and go to Taobao.com and open their own store,” says Lee. “You only need to use their payment system and your customers only have to use the payment system to buy your product.”

Tmall.com is Alibaba’s B2C model, which allows any brand owner, or brand distributor or wholesaler to open a store, but again, Alibaba does not own the store.

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*Courtesy Bessie Lee

Levels of transparency also differentiate the two e-commerce giants. Product pages on Taobao or Tmall for example, show the average monthly number of purchases for each one. A large number of sales would therefore indicate the item is safe, Lee said.

The page also shows customer after-sales reviews. In the example below, more than 30,000 reviews are available and can also include photos.

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*Image Courtesy Bessie Lee

“This level of transparency is now a given,” Lee said, and if it’s not given, customers will become suspicious.

Myth #2: Young Shoppers Only

In China, the demographic that has grown up with e-commerce is now in its 30s, Lee said.

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*Image Courtesy Bessie Lee

“We are talking about adults in middle management, and in another five years they will be in senior management. So it’s not a young generation thing,” says Lee. “It’s pretty much everybody around you doing it.”

Myth #3: Everything Online in China is Cheap

Lee says more and more genuine brands are being sold online, and they offer consumers a more trusted experience. As a result, Chinese customers are now willing to pay more and to change their transaction behavior from traditional retail to access more genuine product.

Annual spend per Chinese online consumer in 2014 was US $1,256, up from US $515 in 2010. Lee anticipates that will leap to US $1,610 by the end of this year. “This is not small money to the majority Chinese consumer,” Lee said.

Myth 4: Fake Goods Abound

Lee says that while fake goods being packaged and sold as genuine goods on C2C remains an issue in China, it is less of a concern on B2C. With the growing trend of B2B2C, fake goods are becoming even more irrelevant. Transparency practices are also making it easier to distinguish what is fake and what is genuine, Lee said.

Cross-Border Trading

Recent government initiatives in China to support and encourage cross-border trading – such as a cross-border trading park in Hangzhou and the Shanghai Free Trade Zone – are also helping to curb fake goods.

“You now no longer have to come to China to set up an e-commerce platform. You can leverage this to set up your own cross-border setup to ship and trade directly to the Chinese consumer,” Lee said.

Myth 5: Big Name Brand Guarantees Success

Top ranking online products in China are not necessarily western brands or multi nationals, says Lee. One trend in China, for example, is for lesser-known brands to advertise on the pages of well-known brands, where high monthly average sales numbers can be a serious incentive to the Chinese consumer.

3 Squirrels is one such homegrown brand that has positioned itself as China’s number one nut seller. “They are not an international brand; they are not even backed by an international brand. They are just a young company coming out of Guangzhou,” Lee said.

Lee’s advice to brands looking at entering the Chinese market is to get out and practice e-commerce in China. “You have to buy online and you have to experience what it’s like to buy on Taobao,” she says.

She also advises brands to rethink team structure. “In China, [e-commerce] should be set up with its own team that incorporates marketing, sales, CRM, PR and event activation under the same team,” she adds.

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