I have always learned to not mix business with politics, so I’ll try to stay away from politics as much as possible here. However, there is a marketing concept that we have been preaching at The George over the last 3 years which can be valuable for any brand thinking of entering the Chinese market. We like to call it
Establishing your business in China is an expensive and long process. The market environment, regulations and operating processes are posing significant entry barriers for foreign companies in China. That’s why many of our clients focus on e-commerce before building an offline business. E-commerce allows them to understand the market, optimise logistics and test the proposition before taking the big step to establish a local presence. This can be a strong entry-strategy, but also needs some attention if we look at the user behaviour on digital channels.
Let me share 3 learnings that will be critical for any company active in the China digital space.
1. China is the most advanced internet market
Whatever you do, be aware that China is the biggest and most mature internet market in the world. Everything that can be delivered will be bought online. On a daily basis I am surprised by the products that are being delivered to our office; Anything from a steaming Caffe Latte (in 15min), office plants, a bag of crisps or a bottle of nice chilled Chardonnay (in under 40min). Call it laziness or progress, but the combination of great e-com platforms, optimised mobile payments and efficient last-mile delivery allow users to order anything, anytime and anywhere. As a new brand you’ll need to be able to live up to this expectation and deliver a great end-to-end experience from day one.
2. Forget about search engines
They say Baidu is the Google-alternative in China. Technically this might be true, but from a usage perspective this is far from reality. In Europe search engines are literally the gateway to the internet. Search is used for product discovery, navigation and education. In China, users are comfortable using search for knowledge gathering, but they turn to their friends and social media Key Opinion Leaders (KOLs) for product discovery. To be successful in China, you’ll need to be focussed on social media and “shareability” of your product and promotion. New concepts can spread incredibly fast when they engage the right audience, but die a slow death when targeting the wrong audience or simply being not attractive enough.
3. The platforms own the market
With >80% of all transactions going through the 2 big players, Alibaba (with Tmall & Taobao) and JD.com it is hard to argue about their significance. This however poses huge challenges for brands to build their own proposition and take ownership of their sales. The platforms are charging high commissions making it often impossible to create a profitable proposition. Only brands that already have a high brand awareness are likely to succeed with a platform-only strategy. Smaller players will need to combine strong targeted social media communication and their own brand website to create this initial awareness. The platforms can in that case still be valuable for driving transactions, but will not be at the center of your strategy.
Beyond these 3 high-level considerations there are many other things to consider before entering China. But don’t let all the talk scare you. Entering China is complex, but has been done before and you shouldn’t get bogged down by the challenges. Most important to realise is that China is a very different business environment and requires some thought and a tailored approach. So let’s have a coffee in Europe or China and discuss how a China First approach can help you succeed!