As one of the world’s largest retail markets, China continues to surprise with its rapid transformation and strong growth. According to the National Bureau of Statistics of China, in the first 10 months of 2022, total retail sales of consumers goods was RMB 36 billion (US$5 billion). This was a 0.6% increase year-on-year, all these amid the challenges of COVID-19.
Largely driven by its 1.4 billion population, and the fast adoption of new technologies, China’s retail landscape is constantly evolving. The country has the largest e-commerce market in the world, with more than one billion internet users, as well as innovative offline retail modes.
Chinese consumer behaviour and demand typically vary from those elsewhere in the world, and China retailers operate innovative business models to meet this need. Here are five things China’s FMCG retailers do differently:
1) Social commerce
Big names like Tmall and JD operate on a search-based model, and they currently account for the majority of China’s e-commerce market. However, newer retailers are differentiating themselves by offering products and services catered to specific consumer groups.
For example, Douyin (TikTok) is a short video sharing platform and a social commerce app where users can buy products that brands and influencers feature through short video recommendations or livestreaming. With more than 600 million daily active users, who are mostly younger customers (aged 18 to 39) from tier 1 and 2 cities, Douyin targets China’s fast-rising affluent class.
Another social e-commerce platform, Pinduoduo pioneered the group buying movement in China. Customers typically form a group which allows them to receive discounts from suppliers. Starting out as an agriculture-focused platform selling fruits and vegetables, it now sells all categories ranging from home appliances to electronics, and has more than 750 million monthly active users.
Xiaohongshu (Little Red Book) is another social commerce platform with more than 150 million monthly active users. The core of Xiaohongshu is that anyone can share their lifestyles and stories about the products they use through pictures or short videos, making it a truly UGC (user-generated content) platform. More Chinese customers look for product reviews here before making final decisions.
These newer e-commerce platforms focus on interactive and social shopping experiences online, building a community of like-minded customers.
2) Selling techniques
Unique selling experiences like livestreaming and invisible selling can engage and retain the younger customer better. Although livestreaming is not novel, it is becoming a powerful social media and marketing tool in China and this function is available in almost every Chinese social and eCommerce app, including Taobao, Douyin, Xiaohongshu, etc. China’s popular livestreaming influencer Austin Li (Li Jia Qi) once generated more than US$145 million in sales on Alibaba during the Singles’ Day (11.11) shopping festival. A typical livestream session comprises of key opinion leaders (KOL) promoting, selling and sometimes using brand products, while customers watch and interact with the KOL. Now, there is even a combination of both livestreaming and e-commerce, called live commerce, where livestreaming channels can be embedded into e-commerce platforms, allowing stores to sell directly to customers.
Invisible selling is typically a video featuring ordinary people doing ordinary things such as cooking or painting. Unlike live streaming, the individual does not make any brand recommendations or product endorsements. Consumers watch the video and then are hooked to buy the products solely based on the lifestyle or activity portrayed in the video.
3) Seamless online experience
Given the fast adoption of technology, China is no stranger to digital retail. Where many countries are still accepting online payment through cards only, China is one step ahead.
Online payment platforms such as Alipay and WeChat Pay are on almost every smartphone in China. Alipay allows users to pay for any product or service on Alibaba’s retail network of Taobao, Tmall, and other online businesses across China. Similarly, Tencent’s WeChat Pay is integrated with many external platforms and stores. This digital wallet service also allows brands to develop sub-applications within the WeChat ecosystem, where users can buy directly from a brand’s WeChat account. To make the whole experience even more seamless, users can make a purchase at any point of their online experience which can include chatting with friends, browsing and, even when playing games.
4) New retail
Despite the increasing growth of e-commerce, China recognises that traditional retail is not dead. ‘New Retail’ is a concept coined by Jack Ma, founder of Alibaba, which promises to merge online and offline retail experiences, to give consumers a unique and convenient shopping experience. ‘New Retail’ offers a seamless shopping experience, by integrating e-commerce into physical stores.
Hema is one example of Alibaba’s New Retail strategy. The prerequisite is to download the Hema mobile app. With the app, customers can shop by scanning the QR codes of items in the store, and pay using Alipay. The QR codes offer more than just price tags, they also include additional information such as when the item was delivered to the store (for freshness), nutritional information, customer reviews, recipes as well as delivery options should the customer choose delivery. The speciality also appears for fresh seafood, as customers can choose to either have them cooked and dine in Hema, or have it delivered raw or cooked within 30 mins.
Even before the COVID-19 pandemic, China had already embraced fast delivery driven by its large e-commerce demand. If Chinese consumers had their way, they might want everything to be delivered.
China can deliver faster and at a lower cost than retailers elsewhere in the world. Take for example, Missfresh, an on-demand online grocer, which makes an average delivery time of 36 minutes. This is done through a network of Distributed Mini-Warehouses (DMWs). Missfresh built these 350 square meters DMWs with different temperature zones to house pantry staples to frozen produce. Some even have water tanks to house live seafood. The DMWs are within one to three kilometers of most communities in tier 1 and 2 cities it serves, allowing for fast delivery.
China’s retail marketplace is transforming, and at a faster pace than ever before. It is changing the way the Chinese consumer shops. Given the sheer size of China’s marketplace and its rapid transformation, there has never been a better time for international brands to engage the Chinese consumer. Our team of experts can help, contact us today!