China is the largest e-commerce market in the world, and about 50% of global online transactions occur within the country. E-commerce in China can be challenging to navigate because of its size, pace and constant evolving consumer trends. My goal of this article is to give an high-level overview of e-commerce in China by touching the following areas:
- Brief history of e-commerce in China and growth in internet users
- Customer journey and characteristics of Chinese consumer
- Marketplaces and Social Commerce
- Mobile-commerce as a backbone of e-commerce
- KOLs and KOCs
E-commerce in China first emerged in the 1990’s, but started to boom in the early 2000 with Alibaba paving the way. Alibaba has in many ways kick-started the e-commerce “wave” in China and has led to a competitive landscape which today drives innovation and global retail trends.
The amount of internet users in China has grown rapidly over the last decade, and has today reached over 900 million internet users:
To understand e-commerce in China, we need to look into the customer journey. Chinese consumers tend to be discovery-oriented when it comes to shopping, meaning they like to explore products before the buy. On average, Chinese consumers have about 8 ‘touchpoints’ with the brand, compared to just 4 for the Western consumer. A touchpoint is any time a consumer comes in contact with your brand–before, during, or after they purchase something from the brand. Chinese consumers tend to rely on recommendations and product reviews and use sources of inspiration.
The Western consumer is more search-oriented compared to the Chinese consumer. Western consumers tend to search for a specific product in mind, while Chinese consumers prefer browsing, learning more about the product and look into product reviews. The customer journey in China usually starts and ends on a marketplace such as Taobao, that is interconnected with the social platforms. Moreover, Chinese consumers tend to search directly on e-commerce platforms for products, rather than using a search engine. This makes it essential for brands to have presence on the major platforms. To further understand the dynamics behind e-commerce in China, we also need to look at what characterises the Chinese consumer.
What characterises the Chinese consumer?
The keywords listed above are motivation factors that successful e-commerce companies in China have ingrained in their business model, which drive sales and customer engagement. The Chinese consumers are not alike any others, and because of their digital maturity and curiosity to try new things, they are pushing companies in testing new concepts and stay innovative to reach a bigger target audience.
E-commerce in China is dominated by marketplaces and social commerce.
Marketplace: is a “digital shopping mall” where you can access a wide range of products on the same platform. Many consumers in China start their customer journey on a marketplace such as Taobao or Tmall where they browse and explore new products. Moreover, marketplaces are interconnected with social networks to give the consumers a seamless shopping experience. Some of the most common marketplaces in China are operated by the e-commerce giant Alibaba. They operate several marketplaces which are tailored to different target groups. For example, Tmall is their Business-to-consumer (B2C) domestic platform tailored to Chinese companies and consumers, while Tmall Global is tailored to foreign companies that want to sell to Chinese consumers. Lazada is Alibabas platform tailored to the Southeast-Asian market. Aliexpress is Alibabas C2C and B2C platform connecting sellers in China with European buyers. In the table below, the different marketplaces by Alibaba are shown:
JD.com, Alibabas rival, also operates its own marketplaces. Read more about the power of marketplaces here: https://digovation.com/2020/05/13/the-power-of-marketplaces-in-china/
Social Commerce: means buying and selling directly in social networks. Social commerce has become a way for Chinese shoppers to connect with each other and brands. It’s engaging, it creates a sense of community and gives the consumers a better understanding of the product with recommendations and reviews easy accessible. The most common social commerce app/platform is WeChat. WeChat is owned by Tencent (one of the largest tech and gaming companies in the world). WeChat is a social media platform that integrates different functionalities and social elements into the app. Xiaohongshu is a place to look for product reviews and Pinduoduo is an app for bulk-buying by creating a shopping-team to receive a better deal on a product. These are all social commerce apps that engage, inform and entice the consumers in their shopping journey.
Marketplaces and social commerce integrate the following elements in the shopping experience:
Platforms are a place to share, hang out which creates a sense of community, Its about exploring and discovering, livestreaming helps connect the users closer to the brand and short videos inform the customers. These four components help drive sales and increase engagement.
Over 95% of all e-commerce activity in China is happening on smartphone. E-commerce in China is all about “mobile-first”, where apps and mobile payment are closely interconnected. Furthermore, a seamless customer experience is a result of established digital ecosystems where everything flows seamless between channels and platforms. M-commerce (mobile commerce) is the buying and selling of goods and services through wireless handheld devices such as smartphones and tablets” (source: wikipedia). As marketplaces and social commerce are dominating places to buy for the Chinese consumer, there are also two dominating ways to pay: Alipay (owned by Alibaba), and WeChat Pay (owned by Tencent). Together, these payment methods have over 90% market share. These payment methods are integrated in every app, platform and also connects the online world with the offline (physical stores) through dynamic QR codes for payment.
The biggest online shopping day in China is Singles Day, happening every year 11th of November. It is four times the size of Cyber Monday and Black Friday. Last year, Alibaba generated over 38 billion (USD) in sales in only 24 hours. During this day, platforms integrate all the social components, like livestreaming and Key Opinion Leaders (influencers), to engage with the consumers.
Key Opinion Leaders (KOLs) and Key Opinion Consumers (KOCs) are central in the e-commerce landscape in China, as they are connecting brands with consumers. During the big shopping festivals in China, like Singles day, KOLs are everywhere to be seen through livestreaming. Key Opinion Leaders have many followers and have already established trust among a big user group. They can be compared to influences in the West. Key Opinion Consumers are different as they do not have have as many followers as KOLs, but are instead brand ambassadors to promote products. KOCs can be brands own loyal customers and they are expert in their field. Its personalized, engaging and creates an entertaining element in the shopping experience.
E-commerce in China is much more than just shopping. It is evolving around entertainment, and social elements are enticing and engaging the consumer in their shopping journey. The e-commerce space is rapidly developing, as Chinese consumers are tech-savvy, curious and like to try new things. My advise is to look to China for the future of retail and e-commerce. The growing middle class in China will have an increased impact of the development of goods and services on the global market.
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Sources:
business.cornell.edu
jingdaily.com
Digovation 
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