China’s entrepreneurs are getting it right. What lessons should global leaders learn from it?
Co-written by Sandrine Zerbib and Aldo Spaanjaars – China veterans and experts of “Dragon Tactics”.
• The coronavirus outbreak has dealt a severe blow to almost every aspect of the Chinese economy, yet Online retail sales have fared much better than brick-and-mortar stores.
• Corona ecommerce innovations accelerate digitization of Chinese society as the outbreak seems to have pushed even the more traditional brands to move online.
• Livestreaming has become the new normal as a marketing tool and brands should move fast to seize on this opportunity while COVID19 lockdowns keep people at home.
A quick reminder of what we are talking about:
Today, China’s e-commerce market is larger than those of France, Germany, Japan, the United Kingdom, and the United States combined. Online retail sales are expected to reach $1.8 trillion by 2022, representing 25% of China’s total retail sales volume.
The China e-commerce landscape is unique not only by its mere size but also because of its business model: the vast majority of transactions occur on a few platforms with the first 2 (Tmall and Jing Dong) taking more than 80% share of the B2C market.
Most platforms are comprehensive ecosystems. Users do not go on Tmall just to purchase anymore. Today the site offers multiple content possibilities, from livestreaming to short videos, Tmall dedicated KOLs and Artificial Reality. Alibaba AR’s experience intertwines the real-world with 3D images that look like something straight out of big budget movies.
Last but not least, these platforms are not marketplaces but true virtual malls. While their size and comprehensive ecosystems enable concentration of traffic, each brand can develop its own environment and entice consumers with its own offerings.
Chinese consumers are connected, mostly via their smartphones. They are always on and are now the true engine of digital China. In fact, Chinese consumers operate as a network – with rapid sharing, transactions, production and consumption. The speed and volume of interactions has been exploding.
This results in massive amounts of data, which in turn enable new services and further enrich the ecosystem of China internet giants. The unlimited bandwidth of 5G will only further accelerate these possibilities.
Meanwhile, the coronavirus outbreak has dealt a severe blow to almost every aspect of China’s economy, from production to employment and to consumption. In the first two months of this year, total retail sales of consumer goods fell 20.5%, according to China’s National Bureau of Statistics.
However, Online retail sales however fared much better than brick-and-mortar as sales fell by only 3%.
Sector analysis shows varying results. As was to be expected, the virus outbreak boosted some areas of Chinese e-commerce, such as online grocery delivery services, and more surprisingly cosmetics. Meanwhile, fashion and apparel sales slowed.
What is more surprising, the economic slowdown has created opportunities for market segments and more traditional brands and merchants that hadn’t previously focused much on e-commerce. And livestreaming has been their method of choice. A few interesting examples:
– On March 8th – International Women’s Day – over 1,000 brands hosted WeChat Mini Program Live-streaming events. Hanguang, a leading Department Store in Beijing sold 20 million RMB of merchandise during their live-stream; Luolai, a home supply store, sold 10 million RMB within 6 hours, with over 1.4 million views.
– Intime’s department stores (owned by Alibaba) have trained their sales associates to live stream from their home.
– Real-estate agents are jumping into live streaming and social media. Apartment tours are moving online. And car dealers are starting to showcase the interiors of luxury cars online.
For merchants across different industries, livestreaming has become an important tool not only to offset the decline in offline business, but also to encourage creativity in marketing and developing (new) customer relationships.
As expected, most of the international brands in China, however, have shown less flexibility than local players and many have struggled to drive online traffic and sales, with a notable exception.
As the Corona crisis continued, more luxury brands started looking for better digital solutions, including e-commerce and “see now, buy now” live-streaming, to offset revenue loss caused by the virus.
The prestigious French label Lanvin, owned by the Chinese group Fosun, that also manage their business in China, joined forces with the high-end e-commerce platform Secoo and online video leader iQiyi to live-stream their Fall/Winter 2020 runway show with the popular “see now, buy now” function and creating virtual reality tours in their recently opened Flagship store on the Bund in Shanghai.
What can leaders outside China learn from this?
Since the outbreak of COVID_19, the use of live-streaming, digital campaigns, and e-commerce have exceeded all expectations in China. This online disruption is shaping how millions of Chinese consumers now shop daily and with it, Chinese society will have taken another step toward digitization.
Analyzing the livestream trend shows consistency with what we know successful Chinese entrepreneurs are good at:
Adapt to change or die attitude
Change is an ongoing constant in the fast-moving China business environment. Many experienced homegrown brands have easily adapted to unexpected situations like the current crisis thanks to solid customer understanding and direct relationships. This openness to change also enabled sales staff to react quickly as the Intime department store example demonstrates.
Chinese companies see value in every crisis and are masters at acting first, thinking about it later. For example, it took Fosun less than 3 weeks to put the entire campaign together including liaising with several platforms, a double-digit number of celebrities and building the digital infrastructure to make it happen.
Although, given the set up in China with concentrated platforms and eco systems to outsiders it seems easier to achieve such results in China, but that is not our opinion. There are plenty of success stories on western platforms too, only not just as many. Point here is to get started quickly and learn forward.
Cosmo Lady, which is the largest underwear and lingerie company in China, has shifted its focus to livestream selling on WeChat. They engaged all employees by creating a sales ranking for every single employee, even including the CEO! Rivalry driving results at its best.
Now is the time to reevaluate, fix gaps, and inspire customers through relevant content, ideas, and actions. In other words, now is the time to prepare your brand for the future. One thing is clear: The world will never be the same and livestreaming is here to stay. Those who understand this and adapt first will come out ahead and stay relevant.
Business success in China – and increasingly outside its borders – is based on a new set of management beliefs and practices which are particularly suited for our rapidly digitizing societies and their inherent increase in scale, speed and complexities.
Some of these practices, we argue, should be an inspiration for Western businesses.
We call them “Dragon Tactics”.