More than Fireworks: Single’s Day & the continued growth of business opportunities in China
It used to be just an average day on everyone’s calendar: November 11th or 11/11, a date that got its nickname through looking like four lonely “single bachelors”. Every year since 2009, as this day approaches, large and small brand marketers begin to get nervous and hundreds of millions of consumers start to get excited, as Chinese people know that it’s time for the annual shopping spree to commence.
From Single’s Day on one e-commerce market place, to becoming a China national-wide shopping festival, and then the rest of the world, the spectacle of this commercial-oriented holiday has epitomised the rise of China’s e-commerce.
This year Single’s Day will celebrate its 10th anniversary. The transaction volume last year rocketed from RMB 0.5 billion to RMB 168.2 billion (approximately US$ 24.414 billion), with only 27 brands to 140,000 brands participating in more than 250 countries and regions (including 60,000 international brands). Single’s Day outstrips similar off-line shopping moments and sales, such as the US Black Friday (2017.11.1–11.24, total sales of 38.31 billion US dollars).
In China, e-commerce has penetrated into multiple segments, regions and categories, and is further supported by Chinese national policy that “expands domestic demand”. In November, in addition to the E-Commerce Festival, there is another big event: China International Import Expo (CIIE) in Shanghai on November 5–10th, with the ambition of opening doors to the Chinese market and share China’s business opportunities with the world. Until now, more than 2,800 companies from more than 130 countries and regions have confirmed to participate in the Expo. It is expected that there will be more than 150,000 domestic and foreign buyers, its scale indicating the Chinese Government’s intentions.
Let’s take a look at a few numbers to further understand the scale of the business opportunities in the market today.
There are about 300 “cities”, 2,856 “counties”, 41,658 “townships” and 662,238 “villages” in China.. In addition to the super cities such as Bei-Shang-Guang-Shen (including Beijng, Shanghai, Guangzhou and Shenzhen, 4 mega cities together), in many of the second, third and fourth-tier cities in China, urbanization has not yet reached saturation and will continue to develop. This is a trillion-yen market opportunity which is yet to be leveraged by foreign brands.
Those who know how to seize this opportunity have already tasted success. Pinduoduo Inc. (Nastaq:PDD), a shopping platform whose major targets are consumers from 3rd to 4th tier cities, may be criticized by some people as a “regressive and low-end” but its success has helped its founder Huang Wei be ranked 13th on the Hurun China List 2018. With a wealth value of 95 billion yuan, he has become the fastest entrepreneur in history to reach 100 billion in wealth.
The potential of the Chinese market is ripe for creative and agile businesses. However, multi-national brands often don not understand the complexity within the market, especially when sometimes market entry requires the businesses operational model to be fit for the Chinese market. Take the apparel industry as an example. National-wide brands often want to control a brand’s look and feel by unifying the style of clothes and the in-store display. However, Chinese consumers have very different preferences towards style, in Shanghai, customers like a more elegant style and in Chengdu, customers prefer a romantic style. If a business’ head quarter doesn’t have a quick and lean operation model to respond to these needs, then the company will lose the business opportunity.
The Chinese e-commerce ecosystem is complex, and the battle to plan for Single’s Day begins in September — requiring close cooperation between manufacturers, distributors, marketing agencies and e-commerce market places, including product offering planning, creative design, communication content, promotion and pre-sales or after-sales services. To make Single’s Day more than a sales moment, and into a long, lasting campaign, well-prepared marketers approach the day with a highly culturally relevant strategy.
When overseas brands enter the Chinese market, the development of local brand strategy and experience is still the most important factor. Brands need to find common ground with their consumers by using segmentation tools. China is a very fragmented market with high degree of information asymmetry. For example, New Balance has entered every day lives in Shanghai. However, in a fourth-tier city, you may find 3 to 4 similar “New Balance” stores, that are selling counterfeit goods. Consumers find it hard to distinguish which is the true brand. Since this market segment is a huge driving force for a brand’s continued growth, the brand needs to formulate a strategy from addressing local insights to implementing a brand experience that can really land in consumers’ minds.
At the same time, young people use smartphones and travel to share and discover brands. It is not uncommon that foreign beauty bloggers post new products to their blogs, followed by countless Chinese WeChat public accounts or other microbloggers reposting and forwarding the same message with beauty cross-border e-commerce providers promising the goods. After paying agent commission and shipping fee, consumers get the same product the following week.
In China, brand owners may be surprised that their consumer profile is so different from other places in the world. For example, the generation born after 00s in China has already begun to get to know luxury brands. They may not be able to afford leather bags, clothes or jewelry, but they can enjoy the feeling of possessing a luxury product as easy as buying something as simple as a Chanel lipstick.
In addition to the localisation of a brand strategy, there is still a lot of work to consider when entering the Chinese market. Here are some top tips based on Isobar’s past experience:
Tip 1: Holistic thinking framework
Isobar China’s Brand Commerce Consulting Team has developed a holistic framework to give direction to the tasks required for a brand to enter China. This is a framework that is standard across all categories, with different emphasis and different granularity added depending on the category. For example, new brands need to establish a social media presence such as Weibo WeChat and translate content available in the other countries. The brand needs to research into China consumers and their distinct characteristics and different POVs toward the same topics.
Tip 2: Experience-led innovation
Be patient and invest in authentic Chinese experiences. Take KFC as an example, which has been in the Chinese market for more than 31 years. Their success stories in China have long been a classic case of studying textbooks. They broke boundaries again and again by being highly relevant to Chinese consumers. In terms of expanding stores, they packed tightly with the development of Chinese commercial real estate format, and decided to define themselves not only as fried chicken and Western-style meals, but also good partners for every meal for Chinese people. In recent years, there have been numerous examples of different offerings and marketing activities that have enabled the brand to get closer to consumers — Green KFC, ordering through Baidu AI with different Mandarin dialects, ice cream made by robotic arms, collaborating with Japanese hot comic IP — they constantly re-invent their product offerings and marketing activities with most up-to-date trends in order to translate the brand offering into amazing experiences.
Tip 3: Organisational design, process, and cultural engagement
After connecting customers with various brand contact points, brands may often neglect that “behind-the-scenes operations” is also important to provide consumers with a consistent service. This includes organisation design, delegation, matrix definition (or OKR) and brand culture engagement. What kind of decision can be authorised to the frontend marketer? What is the risk-control mechanism? Are employees getting compensation by following the process or are they rewarded by achieving a SMART goal? Agile project management or old school waterfall? Is global leadership the commander or supporter?
In China, people switch their online social discussions from work to the company’s IM, WeChat, Ali’s DingDing, and various social platforms every day. It is difficult but key for new brands to manage the use of the linear process to check and approve.
So, defining the Chinese brand values, brand purpose and company culture is perhaps the most critical thing in China market entry. These need to be deeply rooted in the company, including within the company and with the marketing partners.
Cecilia Huang, Senior Vice President of Brand Commerce Consultancy, Isobar China Group & Ivy Wen, Consultant, Isobar China Group