China is the trendsetter for the digital economy
This is the third in a series of blog posts based on our CEO and Founder’s presentation to one of the world’s leading CPG brands. In the first, we explored how the Smart Consumer is driving new shopping habits; and, in the second, we examined the growing power of the new, socially and environmentally conscious consumer. Here, in the third, we delve into the role – as touched upon in our blog post ‘From China to the Western world’ – played by China as the trendsetter for pioneering and exciting online consumer experiences. eBusiness Institute CEO Luigi Matrone is one of the world’s leading experts on digital transformation, eCommerce, and the digital trends impacting retail. If you would like to see Luigi’s keynote slides in full, please download them here.
The global digital disruptor – China as trendsetter
Today, China is a hotbed of digital disruption threatening to topple Silicon Valley from its throne. Its state-driven innovations in social media – such as the Tencent-owned WeChat, the seamless omnichannel shopping offered by Alibaba, and the pioneering approach to and growth in livestreaming – are entirely changing the way we think about online shopping. Tencent and Alibaba are now in the list of the Top 10 most valuable brands in the world that has historically been so dominated by Western counterparts. With its now vast digital landscape and culture ripe for mobile experimentation, China has shaped a consumer that is well ahead of any other in the world in terms of digital adoption and the demand for the integration of platforms. How did China get there? Where is it going? And can the West hope to follow in its blazing trail?
A smart move
When global recession hit in 2008, China took the bold move of massively investing in its internal capabilities. These investments policies were aimed at driving technological advancement and shaping global standards and norms. China wanted to radically change its reputation as the ‘factory of the world’, producing cheap, low quality goods with low-paid labour. The ‘Made in China 2025’ strategy aimed to flip that on its head by driving the country towards producing the higher value products and services. Made in China 2025 also listed 10 key industries the government was determined China should become a world leader in. These included future-thinking technology like Artificial Intelligence, machine learning, IoT and – in a real upturn for the books – green energy and green vehicles. The dovetailing ‘Internet Plus’ strategy planned to transform, modernise and equip traditional industries so that they could be readied and future-proofed for the modern economy. Huge investment in digital infrastructure gave people in large cities access to 100 Mbps internet connections and 98 per cent of the population the ability to reach broadband. Enormous funds were provided for R&D to promote business development and innovation, and decrease China’s dependency on non-domestic technology innovation. China, as a result, now has the highest number of internet users in the world (more than India and the USA combined), and has propelled itself to within striking distance of Beijing’s goal of hitting a R&D expenditure-to-GDP ratio of 2.5 percent by 2020.
Staggering mobile internet usage
Between 2008 and 2018, the number of internet users in China has grown exponentially from 298 million to 855 million. China has a staggering 778 million mobile internet users, meaning that 90% of internet users are using smartphones or tablets to access the internet. In other words, the internet in China is truly mobile. More than half of Chinese people – 598 million – are digital buyers; and that figure is set to grow to 61% of its enormous population by 2021.
Exciting online shopping experiences that capture consumers
We’ve seen that Alibaba and Tencent – both holding companies that specialise in internet-related services and products, technology and eCommerce – have truly rocked the boat globally.
With 1 billion – yes, 1 billion – monthly users across China and South East Asia, Tencent-owned WeChat is the omnipresent app that allows you to do pretty much everything all in one place. From chatting to paying bills, playing games, buying train tickets, accessing government services and, of course, shopping, you can do it all seamlessly on WeChat, without having to switch to another app. It’s all-encompassing in a way that no Western app is, or possibly could be, for reasons we will explore. Alibaba’s Taobao, meanwhile, is a hugely dominant force in Chinese and South Asian eCommerce that has been likened to Amazon. The difference being that Taobao offers a far more exciting omni-shopper experience that successfully connects the region’s businesses, celebrities and everyday people. It does this through offering vibrant content, creative layouts, hot deals, convenience and functionality like social media feeds and livestreams that combine to thrill and truly ‘lock in’ the consumer’s focus. Other notable examples include Tencent’s QQ – a comprehensive platform with chat forums, music streaming, emails, and instant messaging – and Alibaba’s Tmall, the eRetailer dedicated to providing a premium shopping experience.
The power of livestreaming and Key Opinion Leaders
Chinese brands have harnessed the power of, and even combined, livestreaming and KOL (Key Opinion Leader) to great commercial effect. When fully integrated, they are a highly effective means of marrying offline shopping experience with online purchasing, and have proved highly successful when it comes to demonstrating products and driving immediate sales.
The combination would typically involve a KOL (effectively, an influencer) demonstrating a product on a livestream and responding to questions from a digital audience. The stream takes place in real-time within the eCommerce platforms, enabling followers to purchase items they see immediately within the same app. One startling example is the Tmall livestream featuring actress Zhao Liying appearing alongside beauty KOL Deng Haowen to conduct makeup and skincare routine tutorials for beauty brand, Pure and Mild. This winning combination of KOLs and livestream created mass engagement to the mind-boggling tune of 32.6 million interactions.
China doesn’t share the West’s privacy concerns
There is a unique aspect of the Chinese digital culture that sets it apart from the Western world – namely, that privacy is an alien concept to Chinese society.
That matters a great deal when it comes to consumer behaviours and the omnipresence of technology. The Western reaction to the news of the invasive facial recognition, surveillance and monitoring now so prevalent in China was inevitable. To a society shaped by Orwell’s 1984 and the paranoid sci-fi movies inspired by Asimov and Philip K. Dick, the very existence of such technology – let alone the very thought of it being used in London, New York, Barcelona or Rome – could only be considered an absolute affront to Western concepts of individualism and freedom. In China, conversely, there is very little in the way of societal resistance to the growing presence of facial recognition and brain-scanning helmets that allow employers to evaluate how hard employees are working. This acceptance allows China to further experiment with consumer behaviours. There are some further characteristics of Chinese consumers that make them a very advanced proposition in relation to Westerners.
Other telling characteristics of the Chinese online consumer
Chinese users proactively use social media for recommendations making platforms like WeChat powerful tools for initiating online purchases. A McKinsey study found that half of Chinese digital consumers use social media for product research or to get recommendations, while more than 31 per cent of WeChat users initiated purchases on the platform. Chinese users are also very demanding when it comes to convenience-focused solutions, with mobile devices acting as the gateway. In 2018, mobile payments in China amounted to $24 trillion – 160 times the US figure. Brands and retailers in China must therefore create frictionless experiences and remove any barriers that may be considered disruptive to a seamless consumer experience. Capitalising on this, Alibaba (originally an online-only player) opened Hema, a chain of retail outlets across China. Here, customers can use their phone to scan the barcode of any item in the store to learn about the product’s source, nutritional information and price.
WeChat, meanwhile, offers users its WeChat payment service offered by WeChat to give users the convenience of completing end-to-end mobile purchasing transactions without leaving the WeChat ecosystem or having to download separate forms or browsers.
In conclusion – the West has much to learn from China
China is streets ahead of the West when it comes to online shopping experiences. It has forged a remarkably innovative digital culture and a new breed of consumer that is well ahead of any other in terms of digital adoption and demand for integration of platforms that provide seamless, convenient and exhilarating shopping experiences. There is, therefore, so much for Western brands to admire and learn from. And, if it can do so, exciting times lie ahead. In the fourth article in this series, we take a closer look into how the Subscription Economy is transforming consumer behaviours.
This article was written and created by the eBusiness Institute Team. Our team of experts can help you understand and make the most of the consumer trends explored in this article to drive business success. If you’re interested in learning more and benefiting from our extensive expert insights, please contact us. At the eBusiness Institute, we have extensive experience of working with numerous brands on their digital transformation. We understand the importance of an optimised consumer experience to drive your brand’s sales online and offline. Contact us to learn more about how we can help you.
Download the CPG Trends Slides – Part 3
If you want to download the slides from the presentation this article is based on, please fill out the form below:
 https://www.merics.org/en/papers-on-china/chinas-digital-rise  https://www.statista.com/statistics/265140/number-of-internet-users-in-china/