The China Social Club

As marketing costs in China grow out of control, social commerce tactics have become a way for e-commerce companies to lower their user acquisition costs.

by Retail Technology

What will the future of retail look like? Look no further than China and social commerce says Elena Gatti, managing director of DACH Azoya

China is the biggest eCommerce market in the world. But not only that, it is also the most exciting, most exotic and fast changing in the world and its consumers are unique in their shopping behavior. 

Since China has only late entered the game of online shopping, consumers have completely skipped the “desktop phase” and gone directly to mobile shopping. And speaking of gaming, Chinese consumers can very easily be engaged in game-like shopping scenarios. This and their affinity to technology and their mobile-first oriented shopping behaviour has given space to new ways of shopping: Social Commerce.

Social Commerce is not exactly new. But Chinese Social Commerce differs quite a bit from what we know in the Western countries. Here, Social Commerce means selling products on social media like Facebook, Instagram or Pinterest. In China, Social Commerce is about engaging the customers to becoming brand ambassadors and sellers themselves. Most of the buyers in China are sellers themselves, recommending products to family and friends, generating content and getting rewarded for their efforts

New concepts

Social commerce is booming in China and seen as the future of ecommerce. Interestingly, it mostly solves one problem: increasingly unaffordable marketing prices. The rate of marketing costs growth is higher than real estate cost growth in Chinese Top-Tier cities and retailers and brands are facing mainly two challenges in the Chinese digital ecommerce landscape: High costs for attracting new customers and difficult retention of existing customers as Chinese shoppers are in general less loyal than Western shoppers. 

To overcome these challenges, merchants are very creative in finding new, innovative and trendy ways to increase organic traffic acquisition.

China’s consumers are very open to adapting new commerce models. The idea is to get customers to attract more customers via social engagement by using different tactics. 

One of the most popular tactics, that also brought huge success to PinDuoDuo, a Chinese ecommerce company that went public at over £22 billion GBP this year, is Group Buying. 

Group Buying encourages existing customers to invite other consumers by forming a group to purchase a product 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.

Another popular tactic is Group Bargain: customers get a product at a lower price through asking other consumers to play a “bargain game” for them. As mentioned, gaming is very popular in China and connecting ecommerce with gaming has proven to be a good way of engaging with consumers.

Chinese consumers are in general very social and so is their shopping behaviour. They often buy what their peers recommend as they trust their word more than for example a brand’s promise. 

Social factor

Therefore, social commerce in China relies on the “social factor” of the Chinese (online) community. Chinese feel and see themselves more as part of a network than a single individual (as in Western countries). 

They feel responsible to give their friends good recommendations and help them by finding the best offers. This behaviour differs a lot from the west where it feels strange to recommend products to somebody else. We fear to “bother” the friend. In China this is not the case, the community is happy to receive recommendations and content.

Social commerce is also much cheaper as it is using the force of the consumers instead of focusing on every single one at a time. I do see great potential in this form of commerce and once international brands and retailers understand this concept they might want to try it in their own countries. 

Not every culture is as social as the Chinese. However, if there is a discount available – even if I must engage with other consumers – this might become an attractive business model, especially for younger generations.  

Social Commerce pinduoduo

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