When I moved to China in 2013, I did not know what to expect. I quickly discovered that Shanghai, a city with 24 million people, 5 times the population of my entire country, had much to offer. After working and studying in Shanghai for 3 years, I can not stop talking about my experiences there. Everytime I am back in Shanghai, new innovative concepts have rised and every aspect of commerce has become a bit more seamless.
In this article, I want to continue my thoughts from my article “The Next Generation of Retail – Five innovative companies to follow in the coming years” –https://digovation.com/2020/05/08/the-next-generation-of-retail-five-innovative-companies-to-follow-in-the-coming-years/, but now explore how China has an increased global impact as they are paving the way for new retail, with their ability to foster innovation. The government is pushing the start-up community by supporting and incentivising innovative ideas.
The country with over 1,1 billion people has been transformed over the last decade from being known for mass-production of cheap goods, to be leading new trends through innovation and efficiency. This is also a part of Chinas strategic plan “Made in China 2025” – a plan issued by Chinese premier Li Keqiang where the aim is to move away from being the worlds “factory” and move to producing higher value products and services (Wikipedia, Made in China 2025). Everything moves fast in China, and if you don’t have a dynamic and agile business model, its really hard to succeed. We are experiencing shifts in many industries around the world, and China is a big reason why this is happening. A middle-class with increased purchasing power is expected to reach 550 million people by the end of 2022.
The preferences of Chinese consumers will have an increased impact on the development of goods and services, also on the global market.
Many people have heard about the BAT companies, an acronym for the tech giants Baidu, Alibaba and Tencent. These companies are competing for the next big ‘thing’ and they are all aggressive in investing in promising and upcoming companies. In this article, I will focus on some of the world’s most innovative companies that are less known to people in the West, and for some of them the BAT also plays a complementary role. The following companies have experienced significant growth over the past few years.
- Meituan Dianping – Online group buying services including food delivery and movies
- ByteDance (Tiktok, Douyin) – Short video sharing app
- Pinduoduo – A group buying platform with great discounts
China has gone from creating cheap goods with “copy cat” as their brand image to leveraging their production sites locally to bring up innovative ideas of high quality in a time efficient matter.
FastCompany’s ranking for 2019 (https://www.fastcompany.com/most-innovative-companies/2019) of the worlds most innovative companies has been released and number one is a Chinese company, Meituan Dianping. Meituan Dianping develops and operates a platform providing retail and online group buying services. Meituan Dianping was actually two separate companies before they merged in 2015. Meituan with their focus on food delivery and Dianping on movies. The interesting fact is that before they merged, the two rivals Alibaba and Tencent had their stakes in each of the company. Alibaba in Meituan and Tencent in Dianping. After their merge, Alibaba sold off most of their stocks in Meituan to focus on their own local service guide platform Koubei. Alibaba has now merged Koubei with Ele.me, their food delivery business to be able to compete with Meituan Dianping.
Meituan Dianping is a super-app that covers many user needs and by connecting travel and lifestyle services all within just one app, they are able to cross-sell. The convenience of operating within the app makes the whole experience great, engaging and seamless. Meituan Dianping offers instant food delivery – where the average order takes about 35 minutes.
They are able to connect online transactions with offline logistics into a system. Meituan Dianping has developed a real time AI system called “Super Brain” to track efficiency and make better predictions for deliveries. This intelligent AI system uses in-depth sensing to track workers efficiency down to seconds. The “Super Brain” platform also monitors traffic conditions and unexpected obstacles. By using delivery drivers as an important data source they are able to improve the delivery time. Their movements from warehouse to the consumer are being tracked carefully and then analyzed. The Super Brain system improves accuracy day-by-day as machine learning ‘learn’ how to better perform specific tasks.
Another company that has captured many headlines in China is Pinduoduo, an ecommerce platform focusing on group sales and bulk purchasing by integrating social components. Pinduoduo is backed by Tencent, and is competing with the giants Alibaba and JD.com.
Pinduoduo relies on bulk purchasing which allows them to keep the price lower. Pinduoduo shares product information on the social platforms Wechat and QQ and let the users invite friends and family to form a shopping team. This way, their bulk purchasing makes the price per item lower as the total volume increases. Pinduoduo eliminates layers in the value chain, as they ship goods directly from the manufacturer. Pinduoduo is also relying on AI to push the right products to the right users. Based on users purchasing history and product popularity, Pinduoduo presents these to the user to personlize their shopping experience.
Bytedance, TikTok (Douyin)
ByteDance, another Chinese company on the list of innovative companies by “Fast Company”. ByteDance is a technology company that uses artificial intelligence to connect people and information. ByteDance offers a series of content platforms. TikTok is one of these content platforms, which allows the users to share short videoes, mainly music and dance. TikTok was founded in 2016 by Bytedance and has more than 800 million users across 150 countries.
TikTok has had great success also outside of Chna. This stands out as many other Chinese giants have tried international expansion without success. Wechat, Chinas ‘super-app”, did not succeed their global expansion. “TikTok is a content platform first, then a social platform, which is different from WeChat,” said Xie Pu, founder of tech website Techie Crab. “Music and dance is an international language,” he added. TikTok uses AI to recommend personlized content that match with the users behaviour and preferences.
Meituan Dianping, Pinduoduo and ByteDance are all successfull companies, but they have not succeeded over night. Their success is based on several factors, and some of them are:
1) Willingness to go through trial and error process. Experiment and test the market – what’s working?
2) Leverage the power of AI – all of these companies leverage the benefits from AI to achieve efficiency, better predictions and lower cost, which has a great impact on the user satisfaction
3) Focus on customer convenience with the use of “super app” ecosystem. This easily open opportunities for cross-selling as the user never has to leave the app.
4) Quickly respond to trends by having an agile business model that adapts quickly to the consumer needs
China has already proven that their “Made in China” strategic plan is working. China aims to become the global leader in Artificial Intelligence by 2030. The global impact China has on new technology is obvious, and this enormous country is worth watching in the coming years. By leveraging their ‘production power’ locally to develop high value products and services allow companies to present products and services quickly to the consumer, and make sure they stay relevant.