Five reasons why China is a role model for digital innovation

China Innovation_Alipay_Ant Financial_Featured Image

In addition to being the world’s largest ecommerce market, China is rapidly establishing itself as a hub for technological innovation around mobile social commerce, omnichannel marketing and virtual reality.

To get a glimpse of what the future of digital marketing looks like, here are five areas where China is already leading the way.

1. The ‘X’ factor

The integration of mobile and on-demand services has fuelled a form of social commerce some in the industry are labeling ‘x’ commerce. It’s being driven out of China by the country’s rapid smartphone adoption rates (more than 600 million people in China access the internet from a mobile phone – 88% of the country’s online population), strong mobile broadband accessibility and innovative mobile payment systems that do not rely on credit cards.

Alibaba started the ball rolling with its C2C and B2C Taobao and Tmall marketplaces, and payment system Alipay, several year’s ago, linking customer and vendor data across platforms, devices, payment and logistics channels.

The big mover and shaker however, is Tencent’s WeChat – known in the Chinese market as Weixin. There are more than 700 million people using this versatile mobile app. The QR code reader embedded within the app allows users to connect with brands in online and offline settings. A wallet capability, linking a WeChat account to a bank account, lets users pay for everything from utility bills to taxis and restaurants in both the online and offline spaces.

2. Social commerce and WeChat

The closed nature of WeChat has proved challenging for brands (a user has to actively seek out and connect with the brand first – a bit like adding them to your network as you would a friend – before communication can begin), but it makes the relationship between brand and consumer that much more authentic and valuable. Using the embedded QR code, employing strategic content marketing strategies and making the most of new technologies and back-end software add-ons, lets brands use a range of strategies to engage consumers in both the online and offline spaces.

What is the secret to WeChat’s success in China? It has evolved with the mobile, connected consumer in mind. Imagine a world where one single app within your phone is your: wallet, your communication tool, your channel for ordering food, plane tickets, movie tickets, hailing (and paying for) a taxi, booking a medical appointment, paying utility bills, sending friends money, sharing photos and stickers, and being able to pay for goods in a physical store by having that same phone scanned at the counter. This is WeChat.

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If the Chinese consumer is on your radar, your brand needs to be on this platform, whether you have an existing presence in China or not.

3. Online and offline, multichannel and omnichannel marketing

Last year, Alibaba defied the odds when its annual 24-hour online shopping bonanza, Singles Day, raked in US$14.3 billion in gross merchandise volume (GMV) – more than Black Friday and Cyber Monday combined. This was a 60% increase on the previous year.

“I never think of this as a day to sell products, this is a day we exchange ideas, this is the day we exchange innovation, invention and creation,” said Jack Ma, executive chairman and founder of Alibaba Group, at the launch of last year’s event on November 11.

China Innovation_Single's Day 2015_Final Countdown_600

Ma is an ideas man. In 2015, Singles Day introduced a number of new initiatives to keep the event fresh. That included working with more than 1,000 retail brands, to encourage footfall to 180,000 bricks-and-mortar stores across 330 cities across China.

High profile retailers included Estée Lauder and Hong Kong-based jewelry chain Chow Tai Fook. These stores offered promotions to smartphone users in the form of rewards, discount e-coupons and click-and-collect options allowing them to buy online and pick up in-store, or online and offline payments through their smartphones for in-store purchases.

These innovative O2O strategies go beyond ecommerce festivals. Smart brands in China are implementing sophisticated and innovative online and offline strategies to capitalize on the Chinese consumer’s mobile-first approach to shopping. Writing for ClickZ recently, Elisa Harca looked at the different ways Chinese supermarkets are using barcodes on in-store products to help customers make more informed purchase decisions by scanning these on their phones. It also opens up more channels for payment and delivery.

Many Chinese consumers still want to see or feel a product before purchasing online. The buyer journey may start online in the research stage, and finish online with the purchase itself, but somewhere in the middle, the offline experience still has a role to play, according to a recent report from PwC.

Omnichannel marketing, when done well, is particularly important for brands targeting the 120 million Chinese who travel overseas each year. Chinese travellers begin interacting with brands in the 4-6 week period before the trip starts. They may then check out the product in-store whether that’s in Rome or Paris or New York. It’s not unusual for them to then purchase the product online from their phones after visiting the store and having it delivered to their home address in China.

This is where WeChat’s QR code technology can allow overseas brands to connect with Chinese travellers whether they are in China or not. A brand like the UK’s Cambridge Satchel Company for example, has already begun trialing the presence of QR codes in its London stores to connect with Chinese consumers. When a Chinese consumer scans the store’s QR code, Cambridge Satchel Company can continue to engage with the consumer upon their return to China.

Brands can now also open a store on WeChat or use an official account on the platform as part of a dedicated ecommerce strategy. Moleskine and Coach are two international brands already using WeChat for ecommerce, while KLM uses it for CRM.

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4. Ecommerce

China’s economy may be slowing, but some believe this will result in an even bigger boom for the country’s already burgeoning e-commerce sector as Chinese consumers look for ways to spend their money more wisely.

“People still have money but are looking to spend it in a smarter way,” Ohad Hecht, chief operating officer, Emarsys, told ClickZ in March.

China is currently home to 668 million Internet users and has more social media users than the US and the EU combined. According to Mark Millar from the Hong Kong Polytechnic University, and author of Global Supply Chain Ecosystems, China has 413 million online shoppers. This is expected to hit 750 million by 2020. Retailers are you taking notice!

Millar was presenting at our digital conference Shift in London. He says China’s online retail sector is currently worth US$672 billion, and will reach US$1.5 trillion within the next two years.

Another of Millar’s staggering figures: there are still more than 500 million people in China who are yet to come online. As the Chinese government actively pushes its Internet Plus policy (which combines everything from cloud computing, mobile, infrastructure, and manufacturing, into traditional business as an engine for its economy) we can expect to see this new group of consumers coming online sooner, rather than later. Many of these new consumers will come from China’s hinterland where ecommerce is giving China’s rural communities access to the same goods and services available to their city cousins.

This is where domestic ecommerce platforms and cross-border ecommerce channels are giving foreign brands opportunities to test the waters for their products in China without having to register a legal entity there.

5. Technology and Innovation

The evolution of the PC, the Internet and the mobile phone may have originated, and been centered in the U.S. and Silicon Valley, but a lot of it, especially with the mobile phone, is starting to move towards China, says Alvin Wang Graylin, China regional president of VR at HTC.

He points to companies like Tencent (WeChat) and Alibaba (parent company of ecommerce platforms Taobao and Tmall and the developer of Alipay), which lead in a lot of ways in terms of how digital marketing and digital payments should be done.

In addition, Chinese consumers have leap-frogged a number of Western innovations, especially in their adoption of mobile. And Graylin predicts, the virtual reality (VR) space will be next. He believes China’s big gaming community and Chinese consumers’ openness to new innovations will see the technology being adopted and optimized at a greater speed than anywhere else in the world.

There are historical reasons why China hasn’t been ready to lead in innovative technologies in the past, but all that is changing, as the country finds itself in a place of economic and political stability. There is more money for investment for core R&D, and China also benefits from its ability to manufacture high-volume, high quality products at low costs. It also has a flourishing startup scene, a large talent pool of skilled workers and strong support from the Chinese government.

“There are more digital consumers in China than anywhere else, there are more people buying on ecommerce than anywhere else. There are a lot of market places where China is already the leader or will soon be the leader, and digital marketing is going to be one of those,” says Graylin.

Conclusion

Earlier this year, Harca wrote about the very different reception in the West to Microsoft’s chatbot Tay, versus the popularity in China of AI influencer, Xiaobing.

The contrast between the two cultures demonstrates poignantly the openness in which Chinese consumers embrace technology and innovation. Here in Asia it is quite normal to be friends with a robot, interact with one, and tell them: “I love you”.

China Innovation_Xiaobing_300

China’s mobile-first consumers and their openness towards adopting new technologies is helping to drive the country from one of imitation, to innovation.

A measure of China’s growing innovation might be to look at China’s three biggest internet and technology companies – Tencent, Alibaba and Baidu which continue to rank on Millward Brown’s Brandz Top 100 Most Valuable Global Brands list – this year coming in at numbers 11, 18 and 29 respectively. The other brand to watch is Chinese ecommerce platform JD.com which made the list for the first time at number 99.

*Are you joining us at ClickZ Live Shanghai, September 19-21? We have a fantastic line up of key industry figures including HTC’s Alvin Wang Graylin, Tencent’s Jeff Kwek and JD.com’s Joey Bian. For the full agenda, speakers list and ticket information, visit our event website here

**Featured image: Alibaba’s Alipay / Ant Financial Group

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