Report CHINA GETS SOCIAL E-commerce marketplaces in China are maturing – and converging with social chat platforms. At the heart of the action is WeChat, but other platforms are having an impact too. What are the challenges for marketers in such a growth area, and how do they ensure their messages cut through? WORDS: FRED ATTEWILL The dizzying growth of e-commerce in China has produced some mind- boggling statistics – and a digital consumer ecosystem that is qualitatively different in substance from its counterpart in the West. China is the world’s largest e-commerce market and, even as it matures rapidly, retains vast potential for continued growth. A report by We Are Social and Hootsuite revealed that, as of January 2018, only 45 per cent of Chinese consumers bought something online during the past month, compared with 63 per cent in Japan, 69 per cent in the US and 78 per cent in the UK – the highest figure for any market. China also lags behind in terms of e-commerce spending per user, with an annual spend of US$858, compared with $1,014 in Japan, and more than $2,000 in the UK. However, when it comes to commerce via social media, China is powering ahead. The annual growth in social media users, at 10 per cent, comfortably outstrips the figures for both the US and the UK. As such, the frenzied digital growth that has overtaken the world’s most populous country has resulted in an e-commerce landscape alien to many overseas observers. The online environment for consumer brands in China is intensely tactical, with a heavy reliance on relatively simple techniques such as promotion and vouchers to grab attention. In contrast to major Western brands, many Chinese companies have invested comparatively little in building brand awareness. Yet, in a hugely competitive and crowded marketplace, the importance of developing a sound strategy to create a stand-out brand is becoming inescapable. Engaging with potential consumers on social media, by creating a compelling campaign and eventually driving e-commerce sales, is regarded as the ultimate goal. The arrival of social commerce This fusion, dubbed social commerce, is perhaps more advanced in China than any other market. What makes Chinese consumers stand apart from their global peers is how social media has permeated their end-to-end consumer journey, which is used to discover new brands and products, write reviews and make purchases. According to PwC’s 2017 Total Retail report, 61 per cent of Chinese e-commerce consumers began their shopping experience with searches on retail site Tmall, while only 39 per cent of Americans did the same with its nearest Western equivalent, Amazon. Whereas in the West it’s common to use e-commerce sites as a final stop to buy products, Chinese consumers are using them to discover products, interact with peers and share information. No site better demonstrates the evolution of Chinese e-commerce than Tencent’s social media app, WeChat, which is so prevalent it is often regarded as a virtual proxy for internet penetration in China. With almost one billion monthly active accounts, it has almost as many users as the population of the European Union and the United States combined. “If you’re looking at China, there is nothing else that comes close to WeChat,” says Jan Willem van Walsum, an associate partner with business development firm AccelerAsia in Singapore. “WeChat is Facebook and WhatsApp and Instagram and Twitter and LinkedIn and Amazon all combined. In that sense, its platform role is far more advanced and extensive than any other channel in the West.” The power of WeChat Unlike Facebook, WeChat is effectively a combination of multiple channels: when it buys a platform it immediately kills off the name and incorporates it under the WeChat brand, whereas Facebook owns multiple separate platforms, such as WhatsApp. This non-siloed approach means it has far greater universal reach, a huge attraction – and challenge – for marketers. Unlike its traditional Chinese e-commerce rivals such as Alibaba’s Taobao and Tmall sites, which allow consumers to search for products and compare pricing across different stores, shops on WeChat are tied to their brand account, effectively creating a closed ecosystem. The advantage of this setup is that stores gain more control over their user experience, but brands also have to work harder for consumers’ attention – for example, by creating eye-catching content. Every post has to count, putting the emphasis on relevance. “A service account of a brand on WeChat is limited to the number of posts – and especially marketing and advertising posts – that are allowed to be put there. They can’t just spam you, that’s not possible,” Van Walsum explains. “It’s a question of what type of opportunities platforms such as WeChat give brands that they didn’t have in the past – to build a personalised relationship with a consumer on a neutral platform.” How are brands exploiting the opportunities offered by cutting-edge social platforms? Van Walsum points to several recent innovative WeChat campaigns that have cut through to consumers. In particular, he highlights the success of the Forbidden City campaign launched by Beijing’s Palace Museum, in collaboration with Tencent, to promote Next Idea, a creativity competition to attract fresh ideas for rejuvenating the iconic cultural destination. Featuring an animated dancing emperor from the Ming dynasty, it went viral within hours and the campaign’s emoji was downloaded 800 million times within two days. Van Walsum cites its witty celebration of China’s history in a country that boasts huge pride in its past as a key reason for its success, as well as a no-fuss interface. “You can share it very easily, and that’s something you see on WeChat a lot. Because you have such a mix of people, if you really want to hit the big numbers it has to be as accessible as possible and really have a low barrier for users to interact.” Another standout example was the Didi City Guide campaign, which used graphic art and vivid storytelling to lure users and present cultural and nightlife offers for top cities in the region. Van Walsum likes it because of its impressive use of design. “It’s interesting because a lot of brands in China think very, very practically, and go for something quick and easy,” he says. “But the campaigns that have impressive graphics actually are effective, and I think brands in China are slowly starting to learn that. This campaign shows that it does make a difference. Good creative doesn’t have to be complex. In fact, good creative really is not complex at all – but in terms of design quality, it is good.” Getting the strategy right The increasing emphasis on good design marks the maturing of the Chinese market, which is ever more saturated with brands trying to stand out, meaning marketers can no longer simply take rising quarterly sales for granted. A traditional ‘build it and they will come’ approach to engaging with consumers will only work for those brands that already enjoy significant reach. This is particularly true for social commerce sites such as WeChat: if brand awareness among consumers is low, very few will follow a brand’s account and see products, promotions or content. Another key challenge is to not just build affinity, but to drive conversion into sales. The advent, in January 2017, of WeChat mini programs – lightweight apps embedded within WeChat that do not need to be installed – has given online stores new ways to sell products, such as group deals enabled by chat groups, as well as incorporating loyalty schemes. Mini programs also promise a pivotal role for influencers to capitalise much more effectively on their relationship with consumers, who are offered a seamless purchasing experience as WeChat now enables subscription accounts to include links to e-commerce mini programs. “That’s where the role of campaigns comes in,” says Van Walsum. “They should drive consumers to purchase directly within WeChat so you close the loop, and that requires strategy. Doing a fun campaign is great, and spending a ton of money on it is great – you might reach 100 million people – but if only 12 actually buy something, that’s a problem. “If you have your strategy right, you build your brand awareness, and drive intent and conversion. You should be able to achieve more while giving away a lot less money, both in terms of promotion and media spend.” Often, however, firms are liable to confuse brand awareness and conversion. “This is a problem in China,” says Van Walsum, “where we sometimes see briefs that are extremely brand-led, and then at the end they say the KPI is a 50 per cent uplift in online sales in four weeks. That’s not going to work.” One solution is to pursue a parallel strategy incorporating both traditional e-commerce and WeChat engagement. The Adidas Confirmed app, which sells trainers, was repurposed for China and allows consumers to bypass the delays common to some retail sites such as JD and Tmall. But the brand still worked to build affinity in China, where consumer markets, particularly in lower tier cities, remain relatively undeveloped. “The bottom line is brands will increasingly see the need to spend on awareness to really explain to people why they should buy that brand,” said Van Walsum, who argues it is a crucial way to avoid online anonymity. “The example of the bricks-and-mortar flagship store is very much applicable to what you see online, where, if I sell on Tmall or JD, or Amazon for that matter, I have zero control over how I am presented. Building that relationship directly with consumers will be increasingly important, because, essentially, China is still seen very much as a ‘land grab’ market, comprising tons of people who haven’t been reached yet.” Discovering other opportunities Helen Mok, general manager of brand experience agency Jack Morton Worldwide’s Shanghai office, says marketers should remain focused on the goal rather than the medium. “I think social commerce sites are just another channel to deliver brand awareness for consumers who are constantly with their mobile phones. Ultimately, the goal is to convert sales. With a very crowded e-commerce space, brands need to think and spend smartly on building awareness, and some brands that live predominantly on e-commerce sites now use brand experiences to build affinity.” Adidas has again enjoyed great success in China with its Republic of Sports experiential campaign across the mainland, as well as Hong Kong and Taiwan, showcasing its product categories through a programme of live events. Tens of millions of fans live-streamed the extravaganza as Adidas continues its push to become the biggest sports brand in the country. Although WeChat dominates the social commerce space in China, it is by no means the only platform, and Mok highlights difficulties with the platform that mini programs are only now beginning to address. “WeChat is a great platform for daily communication, but when it comes to marketing campaigns, normally it requires users to go to an external site – and it blocks external links for Taobao and Tmall because they are operated by Tencent’s competitor, Alibaba.” One social commerce site that has garnered wide attention is Little Red Book, a community-based e-commerce platform with more than 60 million users, which generates content and offers product reviews, styling and cost tips on products ranging from health and beauty to the fitness and lifestyle sectors. The app is aimed at young, fashionable and active Chinese women, and revolves around making users both consumers and influencers, while its word-of-mouth model saw its sales revenue hit US$150m last year. But even fast-growing organic apps such as Little Red Book come up against some deep-seated challenges that brands must address to fully realise the potential of social commerce. While it may allow brands unparalleled access to specific consumer groups, customer purchase intent may not always be strong and, despite rapid growth, social commerce sites remain in the shadow of JD and Tmall. What social commerce may offer is the ability to build a more complete picture of a brand’s customers, in turn harvesting valuable data on what motivates purchases. However, a perennial problem remains tracking purchasing behaviour on the convoluted social commerce journey. Social commerce is a rapidly developing work in progress, and to fully exploit this avenue and drive meaningful consumer engagement, marketers must develop an understanding of what sites contribute to what part of the ultimate goal of converting engagement into sales. The speed read China is experiencing a boom in social commerce, led by WeChat Consumers in China use social platforms for product discovery Brands use striking visuals to stand out in a competitive marketplace Converting awareness into sales is a challenge for brands Smaller online retailers remain in the shadow of sites such as JD and Tmall FOOD FOR THOUGHT “With a very crowded e-commerce space, brands need to think and spend smartly on building awareness” HELEN MOK, GENERAL MANAGER, JACK MORTON WORLDWIDE cim.co.uk/exchange FOOD FOR THOUGHT Could food be the next major growth area for e-commerce in China? Food delivery start-up Ele.me – currently valued at around US$6 billion and with Alibaba its major investor – is leading the way in the sector, with more competition bound to follow as the market grows. Ele.me has a 55 per cent share of the market in China – its nearest competitor, Meituan Waimai, has 41 per cent – and it has more than 260 million users in 2,000 cities across the country. The company plans to move into more retail categories, and is working with Alibaba to deliver goods straight from the platform, as well as entering more cities and perhaps expand into countries beyond China, too.