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China will be the leading economic power for the upcoming decades. It has gone through a digital revolution in commerce that has forced companies to change their ways of doing business to keep up with competing opponents. Western powers need to get acquainted with the consumer habits of the Chinese as well find solutions to the threats e-commerce poses.
The typical Chinese customer
There are multiple different distinguishable groups of consumers in China. These are allocated according to wealth and age. Older customers tend to save more money, whereas younger are more likely to invest in more expensive quality products. The most important consumer group in the next decade will be individuals born in the 80s. This growing consumer group of millennials does not only spend on themselves but they will buy products also for their children and parents, and thus spend more in general. These profiles may change, as by 2022, 54% of the population will belong to the upper middle class with earnings of $16-34 thousand a year. The infographic shows the currently most common customer profiles.
There are some distinctive shopping habits that all these consumer profiles have in common. Compared to Western customers, Chinese tend to be more demanding when it comes to both product quality and service. The background of this phenomenon comes from the untrustworthy markets in China that often commit frauds. Additionally, customers like to bargain. Thus, regardless of the price label, the tendency to be demanding can be seen where Chinese do not buy products unless they have at least some kind of discount. Chinese consumers are also very brand oriented. Luxury brand products are 20% more expensive in China than the global average. To purchase these goods at a reasonable price, they tend to travel to other countries where these products can be found cheaper. Therefore, 82% of Chinese, state shopping to be crucial in their travel plans. To keep up with this rising power, western countries need to learn these consumer habits of the Chinese.
Largest e-commerce in China
Of China’s commerce, 17% happens online compared to the global 12%. Thus, China has the largest e-commerce market, which is the same size as that of the US and Europe combined. All this change from physical stores to online shopping has occurred in the time of only five years, and it keeps growing at twice the rate as the US. Currently, 51% of online sales in China are carried out with mobiles, and this number has been predicted to rise to 74% by 2020. According to Boston Consulting and AliResearch, e-commerce will comprise 42% of growth in private consumption by 2020.
Online shopping in China is very different than in Western countries. Western online shopping happens similarly to the physical shopping experience. Customers compare products of different stores they visited after first visiting each store separately. In China, however, online shopping is made easy with complete online marketplaces. These versatile platforms consist of social media, online shopping, service, banking – everything you need is in one place. Tmall Global and JD Global are key players basing their success on same day delivery strategy. Companies that are part of the ecosystems of these giants enable faster service and delivery, as well as more straightforward implementation.
In WeChat, the most popular social media platform in China, sellers are experimenting with new models of e-commerce. Lightweight mini-programs are embedded into the main app enabling group-buying deals facilitated through chat groups. They exercise the social aspect of shopping in a digital environment. According to Tencent, in a year since launching, 580 000 mini apps were created on the platform serving in the total of 170 million daily active users. “You’ll notice that mini-programs that are suitable for WeChat […] will be able to grow their customer base quickly,” comments, CEO of online fashion company Meili United Group, Chen Qi.
Global Virtual Retail
Chinese Buy+ is the first company to introduce the complete VR shopping experience. It allows customers to have a virtual trip to malls around the world, a walk around, and make a real-time purchase using Alibaba’s payment app. According to Goldman Sachs estimations, VR retail will gain $1.6 billion annually having 32 million users by 2025. It doesn’t come as a surprise that most of the virtual shoppers will come from Asia.
Alibaba also combined both online and offline shopping in Hema stores. All shopping here is done by mobile in the physical store. “I can scan anything in the store and get information about the products, where they’re from, who makes it and what other products go with that,” says Tom Brennan, the managing editor of Alizila, Alibaba Group’s news site. Additionally, customers can order food online and get it delivered in 30 minutes if the delivery location is within 3 kilometers of the store.
Threats to be prepared for
While most of commerce is converting to digital, social scientists are starting to get worried about the loss of the social aspect of customer experiences. Omnichannel technologies could be a key to maintaining the social side of shopping by including the physical store experience into the customer journey. Additionally, relieving news from the research front states that Chinese customers still value the social side as shopping, and it is considered to be the best way to spend time with family.
As e-commerce is China is becoming increasingly predictive, suggestive and easy to use, one needs to also consider the threats it poses. One of these concerns the personality and behaviour of consumers. When shopping becomes fast-paced and exciting, it becomes an addictive game. For example, a Chinese woman embezzled almost 300 000 USD to use on online shopping. Simultaneously, Chinese consumers are becoming increasingly impulsive and spontaneous, which can harm their social relationships and personal economy in the long term. As an example, easy mobile shopping has increased the number of annual shoe purchases from 5-8 to even 25.
With on-going talks about the threats of data privacy, one has to consider who gets the information from Chinese digital platforms. The Chinese government collects data from its inhabitants to use for their social credit system. It classifies for example who gets to buy specific products or travel. WeChat’s idea is that every necessary service needed in modern life is in one single app. Even if the government wouldn’t use all the data including bank details, it doesn’t strike down the possibility of Internet frauds and hacking. Having all the relevant information in one place exposes it simultaneously to everyone able to access it.