China Is Leading the World into the Future of Shopping

by RetailTechNews

China has the largest and most dynamic e-commerce market in the world. Its consumer online expenditure is estimated to exceed £850bn in 2018, according to a recent report by Frost & Sullivan and Azoya Consulting. That accounts for over 100x that of online sales in the UK (£7.83bn). In this piece, Elena Gatti (pictured below), MD, Azoya, tells RetailTechNews that China’s e-commerce market has evolved into different new commerce models that are reshaping and leading the retail industry into a new era of shopping. This piece aims at giving you a glimpse of where China e-commerce is standing, and what we might be able to learn from it.

‘Social commerce’ is the future of retail

With PinDuoDuo going public at over £22bn, the Chinese company and its concept of ‘social commerce’ suddenly gained people’s attention globally. However, while social commerce in Western countries is pointing at selling directly from brand to consumer on social platforms, in China it has evolved into a general business model of acquiring customers organically through engaging a consumer-to-consumer principle. The strong dominance of WeChat plays a crucial role in this sharing process, though. And its essence is about how to get customers to attract more customers and purchases spontaneously.

How does it work? There are different tactics in place, and one of these tactics that is working extremely well in China is ‘group buying’. Group buying aims at encouraging customers to invite other consumers by forming a group to purchase the products at a lower price. By seeking other buyers to form the group, the customer proactively promotes the products itself; and once a group is formed, the retailer (or brand) has automatically gained more customers. Organically. Chinese consumers are very social and so is their shopping behaviour. They often buy what their peers recommend, as they trust their word more than a brand’s promise, for example. Therefore, social commerce in China relies on the ‘social factor’ of the Chinese online community, for example in sharing and buying products together as a group. Whereas, in the West, social commerce could be translated into ‘selling via social media’.

Other tactics include, for example, a personal affiliate model, where an existing customer gets rewarded when a product is sold through the link he or she shares. This is very similar to social commerce solutions in the West. Influencers use affiliate links to engage with their followers and he or she earns with every purchase by their fans. Another tactic, very popular in China, is ‘group bargain’ – the customer gets products at a lower price through asking other consumers to play a ‘bargain game’ for him or her. Gaming is very popular in China, and connecting e-commerce with gaming has proven to be a good way of engaging with consumers. But this is not all, as many new tactics are being launched on a regular basis. Feelunique, the British beauty e-tailer and pure cross-border player in China, for instance, launched ‘coupon sharing’ activation in its WeChat mini program, offering coupons to the customer only when he or she shares the coupon with others.

Social commerce is booming in China and is seen as the future of e-commerce and retail – given the fact that it solves the problem of the increasingly unaffordable marketing prices, and the ability to expand the customer base to citizens in low-tier cities who tend to not shop that often, but who use social media.

‘New retail’ is the new omnichannel

First introduced in 2016, the concept of ‘new retail’ has grown to be one of the key growth areas in the Chinese retail industry. Among the many innovations, two highlights (for now) are ‘fresh food’ retail and O2O.

Fresh food e-commerce has been a very hot topic in China in recent years, even more so because Alibaba and Tencent, two of China’s big Tech Giants, started battling each other in this sector. In China, nearly 60% of daily consuming goods are sold via supermarkets and marketplaces, while e-commerce only accounts for 7% (as shown in a 2017 report by Bain & Company), which leaves plenty of space for the e-commerce invasion.

The new retail reformation for fresh food covers many aspects ranging from big data-based merchandise strategies to cashless payment. The most outstanding part falls into the so-called concept of O2O (Online to Offline), which meets the demand of the ‘internet generation’ and the requirements of fresh food delivery. Customers order online and get the goods within a very short amount of time; and fresh food paired with an O2O-concept make the perfect combination as the first stop of new retail.

Cross-border e-commerce is becoming demanding

Cross-border e-commerce imports in China reached over USD$220bn in 2017, with an estimated 125 million Chinese consumers purchasing through this channel. While the cross-border e-commerce market is growing bigger and becoming a normal shopping approach for consumers, the market has changed a lot for UK retailers to crack into. Some of the new trends include:

Content is becoming even more crucial: Unlike four to five years ago, when cross-border e-commerce just started in China, today a simple Chinese local-language product page is not enough. Chinese consumers are researching more information about the product before making purchase decisions; and they are also being well educated by content platforms such as RED (Little Red Book) that provide quality information for overseas brands and products. A quality content package includes product images of up to 15 pictures, well-localised language product descriptions and, more importantly, authentic reviews from other customers or, better yet, a KOL (key opinion leader).

Big marketplaces are not the answer for everyone: Asos withdrawing from Tmall was one of the evidences that there’s no one-size-fits-all solution for British retailers. A big marketplace like Tmall,, or Amazon is not necessarily the right answer for your individual ‘China question’. In fact, according to the cross-border e-commerce report by Frost & Sullivan and Azoya Consulting, only 21% of overseas retailers are satisfied with their sales performance in China on marketplaces. In general, focusing on one channel is not enough anymore. The only way to approach the increasingly demanding Chinese consumer is to apply a multi-channel strategy with several touchpoints. A proper strategy should include the consideration of a standalone e-commerce presence, marketplaces as separate channels and, of course, the WeChat ecosystem.

Be aware of popular marketing methods: In China, marketing channels can always turn into sales portals. For example, social commerce as mentioned above or influencer (called KOL in China) commerce, etc. In recent months, the trendiest marketing channels are short-video platforms such as Douyin (‘Tik Tok’ in Europe). Douyin has been trying out its e-commerce function and brands like Michael Kors and Clarins were among the first ones to implement it. It feels as if there are new channels rising on a regular basis, so it is necessary to keep your eyes open on new marketing trends. China is such a huge market that you don’t want to miss out on new trends and possibly become a first mover on new channels and take an advantage out of it.

In general, I would say that China has always been a challenging market. But it is a market worthy of the effort, because there is no other market in the world that is technically as open-minded as China and gives opportunities for international retailers and brands to build a successful business. It just does not happen overnight.

Social Commerce Cosmetics