Looking Beyond Alibaba for Sales in China
Last week Alibaba hosted their first conference outside of China – Gateway 17 in Detroit. China Skinny was there.
Jack Ma has long had a personal dream of cracking the US and with plenty of cash in the coffers, Alibaba was out to dazzle the audience. Jack Ma was joined by Martha Stewart, Lisa Ling, Charlie Rose and robots, backed up with an arsenal of big statistics and some sage advice to entice more American businesses to export to China.
The focus of Gateway 17 was to sell the Alibaba dream, yet exporters would be wise to consider the multitude of other options when planning a market entry into China. For big brands, a presence on Alibaba is an essential hygiene factor for both sales and marketing. Marketing on Alibaba's platforms is becoming more powerful with new tools such as the Uni Marketing system offering features such as personalised and targeted communications.
Whilst there are great success stories on Tmall and Tmall Global, the platforms aren't right for every brand. It is not cheap to set up and operate, and new stores are competing with over 10 million other vendors who are often well established. Smaller brands may also have difficulty being accepted by Alibaba.
Alibaba has a finely tuned sales machine attracting foreign brands to its platforms. It has set up offices across North America, Europe and Australasia, has shiny campus tours for visiting delegations and now hosts overseas events to woo Western brands to its cross border channels. Yet with all the good news stories, there are some cautionary factors. For example, Tmall Global's sales drive saw the number of brands selling on the platform grow 169% last year, with sales growing just 30% - a similar rate to ecommerce overall. In short, there are many more foreign brands competing for a smaller piece of pie.
Cross border commerce is also much more fragmented than Mainland based commerce. Alibaba commands around 80% of overall ecommerce sales in China and 57% of B2C commerce. Whereas Tmall Global accounts for just 18.9% of the cross border market and Taobao Global 15.4%.
There are a host of smaller cross border platforms that are often more targeted to specific segments such as food, wine, cosmetics, mum & baby, health and fashion. They may only have 10 or 20 million shoppers, but they are generally qualified for your segment, often more affluent, and the competition is less fierce.
Alibaba is China's most popular ecommerce platform and a great option for many brands, however China is a large market with a number of online and offline sales channels, so take some time to consider them. Agencies like China Skinny can help you work through your options.
Here are this week's news and highlights for China:
Chinese Consumers
China's Smaller Cities Fuelling a $9.7 Trillion Consumer Market: China's tier-3 and lower cities will fuel a $9.7 trillion consumption market by 2030, according to Morgan Stanley - more than double that of Japan. The lower-tier cities make up 59% of the nation's nominal gross domestic product and 70% of the urban population. Per capita disposable income for urban households in small cities is set to double to US$8,261 in 2030, which would be 64% of big city levels compared to 55% last year and 45% in 2006. This will further drive demand for most goods and services.
Three Golden Rules of Brand-Building in China: Two conflicting factors motivate Chinese consumers: They want to project their status, but they also want to protect their economic and social interests. To best address this brands should 1. Maximize public consumption; 2. Externalize the payoff; and 3. Provide reassurance.
Chinese Consumers More Positive About Ads: 76% of Chinese are interested in brands which target them with relevant content. The global average is 78%. However 63% are interested in personalised, individually targeted ads, compared to 55% globally according to Kantar. 79% of sampled adults in China felt advertising is a good way for brands to communicate with them versus a global average of just 51%.
Digital China
Top Takeaways from Alibaba’s Gateway ’17: China Skinny was in Detroit at Alibaba's first conference outside of China. Key takeouts, the big names there, tech on display and the general feeling from the floor. For those who attended Gateway ’17 or are considering China here are our suggested next steps.
Alibaba Launches Data-Driven Marketing Tools To Target Chinese Consumers: Alibaba’s new Uni Marketing system analyses live data from Chinese consumers across Alibaba’s vast ecosystem. The information can provide brands insights into Chinese consumer behaviour and, in turn, brands can use this data to segment audiences to personalise targeted communications.
China's Authorities Tighten Noose Around Online Video Content: Beijing has shut down online video services on three popular Chinese media sites: Weibo, ACFUN and news portal iFeng.com in a swift action that unleashed financial shockwaves and posed a firm warning to the country's online video industry: clean up, or close down.
This Company Helps Luxury Brand Improve CRM with AI-Powered Chatbots: AI-powered chatbots are replacing membership cards on WeChat - they engage customers in conversation, handle routine questions, send out personalized messages, and recommend products based on their purchase history.
Food & Beverage
The Hottest New Craze in Shanghai, a Two-Hour Queue for Tea with Whipped Cream: The event of queueing for a pricey cup of tea is as much about the experience and status as the drink itself.
‘Out of Home’ Consumption Market in China Thrives as Country’s FMCG Market Continues Along Two Different Trajectories: Food purchased for in-home meal preparation grew by 3% annually from 2013 to 2016, whereas food delivery rose by 44% and dining out grew by 10% over the same period according to Bain.
China Needs Patience to Fight Costly War Against Soil Pollution: Government: China could be facing a clean-up bill as high as ¥1 trillion ($146.39 billion) to clean up its soil pollution, with the cost of cleaning up one mu (0.066 hectares) of polluted farmland as much as ¥20,000 ($2,928.86). According to the last nationwide survey published in 2013, about 50 million mu (3.33 million hectares) of China's farmland - an area the size of Belgium - was too polluted to grow crops.
Health & Beauty
Chinese Police Seize Over 1 Million Fake Cosmetics: Reporters have exposed a police bust of a Zhejiang factory running a fake cosmetics operation worth an estimated ¥100 million ($14.6 million). Police seized 1 million fake cosmetics products and 4 million partially-complete products branded to look like products from L’Oréal, Shiseido and other reputable brands.
Entertainment
Economic Watch: Entertainment, Media Propel China's Economic Shift: China's entertainment and media industries are forecast to rise 8.3% annually until 2021, around double global average of 4.2% according to PWC. It has become one of the driving forces of consumption which contributed 77.2% of economic growth in Q1, up from 64.6% in 2016. PWC also forecasts that China will use 86 million virtual reality headsets within five years, versus 68 million in the US. VR content revenue is picked to hit US$3.6 billion in China by 2021 with over half coming from video and 46% from gaming.
Sports
Leading Chinese Sportswear Company Capitalizing On Consumer's Shift To Premiumisation: Anta Sports is the only domestic sportswear company that gained market share in the Chinese market in the past five years; driven by its focus on premiumisation and investments on future growth. The company operated 9,668 retail stores at the end of 2016 which account for 89% of sales. It plans to increase store count to at least 10,000 stores by the end of this year.
Investments & Property
Shanghai Backs Down on Converted-Housing Crackdown: Shanghai has made a U-turn on regulations that would have seen owners of apartments converted from commercial buildings sitting on uninhabitable homes and worthless assets. This is the latest in a series of measures imposed by Shanghai authorities to try to defuse soaring house prices which jumped 31.7% year-on-year in December. Although the pace of gains has slowed this year, prices in April were still 15.4% higher than a year earlier.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
