dgroup • The Digital Transformation Powerhouse — Key Insights from the INSIDE CHINA SUMMIT

With the INSIDE CHINA SUMMIT from October 24th to October 27th in Shanghai and Hangzhou, we continued our successful annual series of exclusive global digital thought leadership events in the digital hotspot China. We received unique insights into China’s digital landscape from Chinese experts, visited the German Consulate, and organized a top management reception tour at the headquarters of leading e-commerce giant Alibaba. Furthermore, the invitation-only event included a visit at China’s premier social shopping player Meili and at rising start-ups at Hangzhou’s high-tech incubator facility Dream Town. During the exclusive Sino-German Digital Leadership Summit and the International E-Business Expo 2016 our participants had the chance to network with leading Chinese e-commerce companies. After 4 days full of inspiring sessions, impressions and discussions, we now know about latest trends and digital strategies both in China and Germany, how consumer needs and behaviors differ and want to provide some insights and key takeaways from the summit.

China’s market size, strong governmental support and innovation speed allow enormous scalability potential

With 3,8 trillion Yuan GMV per year (2015), China is the leading e-commerce market worldwide. The e-commerce giant Alibaba with an estimated trading volume of over 480 billion USD has transformed into the world’s largest e-commerce company, about twice the size of the combination of Amazon and ebay.

The strong governmental support and promotion of digital start-ups in China is unprecedented in the world. The rapid development of government-sponsored incubators such as Dream Town cause increasingly innovative digital ideas originating in China.

“China has lent their share of the GDP for 100 years and is now taking it back” (Prof. R. May Lee, Dean School of Entrepreneurship and Management, ShanghaiTech at the INSIDE CHINA SUMMIT)

According to Prof. R. May Lee, Dean School of Entrepreneurship and Management at ShanghaiTech University, China will be successfully developed from a copycat stage into an innovation powerhouse in no more than 5 to 10 years. This can be backed by simply looking at the stats: It only takes one or two persons out of thousands to introduce an innovative idea in China. The dimensions allow enormous scalability potential, economies of scale and implementation speed like nowhere else in the world.

Chinese consumption trends: mobile first, cross-border commerce and shopping festivals

Chinese consumers truly live and pay mobile: Almost 700 million mobile users exist with a share of over 80% using their smartphones for shopping (compared to less than 65% in Germany in 2015). Chinese consumers love buying overseas brands and participating in local shopping festivals such as singles day (which generated an unbelievable total of US$ 17,8bn GMV this year). For check-out both online and offline mobile payment is the favorite payment method with a percentage of 94% having used one of the mobile payment providers (predominantly Alipay or WeChat Pay). This makes China the clear leader in mobile payment.

“Fintech is only existing in one country of the world — China” (Zennon Kapron, Founder & Director at Kapronasia at the INSIDE CHINA SUMMIT)

The growing power of digital ecosystems creates platforms with innovative user experiences

The local digital giants Alibaba and Tencent have successfully created unique user experiences with the development of complex digital ecosystems. A barrier-free integration of communication, e-commerce, payments and other services into one single platform create innovative user experiences and meets the diverse consumers’ needs within the ecosystem.

Many industries are taking advantage of this and expanding their activities on digital platforms in China to solve the customer identification and data issue in offline retail. The strong activities of the automotive industry on China’s most popular messaging app WeChat is a good example: More than 90% of the automotive brands maintain a WeChat account and car configuration can be done on the smartphone with a QR code as a result to show to sales staff offline providing an easy-to-apply omnichannel service.

The power of digital platforms can be unleashed and large transformation is possible when no alternatives exist. This is the case with WeDoctor, an online medical healthcare provider and one of several digital companies we visited during our start-up incubator tour in Hangzhou. Their online platform connects patients and doctors for remote therapy and they aim to build virtual hospitals in the future. This business approach is changing the complete medical industry in China!

During our visit to the renowned ShanghaiTech University, a Chinese student explained the successes of digital ecosystems from a customer point of view by presenting the benefits of her favorite apps: Taobao (Famous Chinese B2C e-commerce platform) which offers user-generated content in form of live streaming recommendations of products and Didi Taxi (biggest car hailing service in China who acquired Uber China recently) which now provides private taxi services and designated individual driver services for your own car in addition to regular taxi reservations.

The future of e-commerce: Virtual store for billions, zero stock, 30-minute delivery network in China

In our top management reception and tour at the Alibaba Group headquarters, we learned that the e-commerce giant has ambitious plans: They want to offer a 30-minute delivery network in China and become more international in nature — helping to do business everywhere with a 72-hour delivery network worldwide. Future retail for them means zero stock and a wide application of virtual stores. Another insight they gave us: Alibaba does not aim to build a company larger than 50.000 employees — further growth has to come from automatization.

“At Alibaba, our thinking is not about how to make profit, but how to help our customers” (Julia Zhang, VP Alibaba Group at the INSIDE CHINA SUMMIT)

What are the secret ingredients of the Chinese success stories?

The majority of China’s digital market is focused on its domestic growth at the moment. The global footprint is still relatively small, but there are clear signs for a rapid international expansion: Besides the global delivery network plans, Alibaba has also taking action with the international service expansion of Alipay (Alibaba’s online payment solution platform and probably the most innovative and largest fintech company worldwide) and others like the premier social commerce platform Meili will follow. The rapid development is mainly driven by these success factors:

• The enormous Chinese e-commerce market size, the huge success of digital shopping festivals and strong competition in the digital space allow scalability potential, economies of scale and learning effects like nowhere else in the world
• China has “leapfrogged” the West on Internet innovations: It is the leading global mobile Internet consumption market and mobile is the favorite payment method for Chinese consumers — creating perfect conditions for innovative digital ideas and concepts
• The strong governmental support and rapid development of government-sponsored digital incubators like Dream Town, combined with the speed of execution and innovation creation, will help to transform China into the digital powerhouse of the future
• The development of complex digital ecosystems with a barrier-free integration of several apps and services into one single platform creates innovative user and cross-border commerce experiences, targeted exactly at the needs of digital customers

Digital businesses are disrupting lives everywhere — in the way we communicate, work, play, learn and shop. China, with its enormous dimensions, a flourishing digital start-up ecosystem and unique governmental support is increasingly shaping global digital trends. It is important to understand digital success factors originated in China today to learn what will be important in other markets tomorrow.

“Last year I thought about what we can learn from China. Now I am just wondering about how and too which extend we will be impacted.” (Participant who took part in last year’s and this year’s summit)

A big thank you to our partners and hosts for making this event possible and especially to our sponsors Accenture, Demandware and Web2Asia. If you want to learn more about our INSIDE CHINA SUMMIT or future events targeting digital transformation, please do get in touch.

Carolin Knothe is part of the INSIDE CHINA SUMMIT event team and also Consultant at dgroup who knows the Chinese market and culture from studies and projects in China. Her expertise lies in digital marketing strategy and implementation as well as business model transformation.

Originally published at www.d-group.com.