Chinese consumers increasingly turn to mobile for their shopping

13 March 2018 Consultancy.asia

China continues to see the number of online sales grow, amounting to almost 15% of the total share of revenues in 2015. The country has seen mobile commerce leapfrog online channels, with around half of all digital transactions performed through a smartphone.

Chinese consumers are continuing to move their buying into the online environment. The Boston Consulting Group’s recent analysis explores the extent of wider changes in e-commerce across global markets, with a focus on Chinese consumers.

The report highlights the online retail boom in China between 2010 and 2015, up from around 3% of total sales to close to 15%. In total, around $750 billion is sold through online channels in the country, representing more than the US and UK markets combined – the former of which has around a 10% online sales share, and the latter, close to 15%.

E-commerce exploded in china

Other Asian countries however have been slower to adopt online shopping, with India, Malaysia and Thailand all below or well below 5% of total sales. Japan comes in at around 7.5% while South Korea is the top performer, at around 16% - although the total market is considerably smaller than that of China.

One of the major reasons for the massive rise in online shopping in China is the country’s relatively new relationship with shopping. Customers – whose wealth has rocketed in recent years – are not as keenly set on the brick and mortar experience. The Chinese market is also projected to see further strong growth on the back of an expanding middle class – including “an expected influx of hundreds of millions of new customers, many from smaller cities and rural areas, many who have yet to go online”. 

Chinese consumers have not merely skipped the physical shopping experience, the country is also increasingly leapfrogging online shopping for mobile shopping experiences. Data for 2015 shows m-commerce at around 51% of total e-commerce spending in China, compared to 33% in the US. The firm’s projections are that by 2020 around three quarters of online shopping will be performed through mobile devices in China, compared to less than half in the US.

Mobile commerce

The study also shows that various categories may become bastions of online sales, in a country which is already comfortable purchasing “everything from organic foods to luxury cars online”, with around 15 categories, from snacks to financial services, projected to attract an at least 40% rate of sales via online channels. In comparison, only five categories, including mainstays such clothing and books, are predicted to reach the same level of online purchasing penetration in the US.

Aside from the rapid shift to enablers of online sales, such as smartphone proliferation and income level rises, the country also has a highly integrated digital ecosystem. Digital commerce is offered through massive, and multipurpose, platforms, such as Baidu, Alibaba and Tencent. The report states; “In China, news sites, games, videos, and ecommerce are all interconnected in the major online hubs, with click-to-buy product placements and quick links to payment options.”

Alibaba for example, which raised an astronomical $25 billion odd through its initial public offering in 2014, provides digital commerce through its Taobao and Tmall platforms (75%-80% market share) electronic payments through Alipay – with more than 450 million active subscribers and an approximate 50% market share – China’s biggest social media platform Sina Weibo with a 400 million monthly users, and an estimated 20% share of video streaming through Youku and Tdou.

China’s digital ecosystem

Millennials rising

Further supporting the rapid growth of China’s ecommerce market is the country’s young, eager and savvy shopping demographic, with typical Chinese teenagers said to be able to name 20 cosmetics brands in comparison to the 14 recalled by their US teen counterparts, and 42% of Chinese youth expressing the need to buy more things in comparison to the 36% in the US.

A recent report by Big Four professional services firm KPMG in conjunction with Chinese online luxury and fashion retailer Mei.com predicted that Millennials would overtake other demographics as China’s biggest consumer retail spenders within five years, while an analysis by management consulting firm Bain & Company found that Gen Y was the main driver behind the country’s strong rebound in luxury goods sales.

Excessive technology can be counter-productive in new retail, says S.POINT

05 April 2019 Consultancy.asia

Technological advancements have in recent years opened the door to ‘new retail’ – but an overreliance on technology can be counter-productive for retailers, argues Steven Jiang, Managing Partner of Shanghai-based innovation consultancy S.POINT.

Moving beyond just a buzz-word, the ‘new retail’ business model has outright boomed in recent years, most notably driven by Chinese e-commerce giant Alibaba. Striving for the seamless integration of offline and online shopping channels, together with a mesh of big data, logistics, marketing and distribution, the emergence of new retail has been undoubtedly enabled by rapidly evolving intelligent technologies.

But, as Steven Jiang, Managing Partner and Vice President of Shanghai-based product innovation consultancy S.POINT notes, not all enterprises have the strong technological genes of Alibaba. Jiang contends as such that enterprises in the new retail space can have a tendency to over-rely on technology, with its excessive application and misapprehension of the space producing effects counter to intentions.

“Developers with a misunderstanding of new retail are over-dependent on technology and believe that technology changes and solves everything, which is an extreme obsession with technology,” states Jiang. Rather, new retailers should as a starting point consider scenarios across the shopping and buying life-cycle and the combination of human and technological elements to create a seamless customer experience.Excessive technology can be counter-productive in new retail, says S.Point“New retail should pay particular attention to the sense of balance to connect technology with customers to create a better experience – as the application of excessive technology leaves no room for the development of the relationship with customers,” says Jiang. “The key lies in the insight into customer scenarios, and only by understanding and extending scenarios for their consumers can organisations have the chance of winning new retail opportunities.”

An MBA graduate from the MIT Sloan School of Management and former consumer and industrial goods consultant with Booz & Company, Jiang was a founding member of the China Industrial Design Institute and now serves as Managing Director for S.Point, a 1997-founded Chinese consultancy and Cordence Worldwide member with offerings in consumer research, product definition & design, product delivery, go-to-market strategy, and innovation capacity building among other provisions.

With respect to his contentions on new retail, Jiang points to the modern self-serving vending machines that have emerged in the past few years, which are very advanced in terms of technology but haven’t been entirely successful – separated as they are from consumer scenarios. “Consumers will not approach technology proactively,” he says. “Only when technology is made close to customers’ needs can it find its market.”

Noting that the center of shopping has shifted from the merchandise in traditional retail to customers in new retail, Jiang concludes: “Enterprises hoping to grasp new retail should understand traditional retail from the heart – i.e. consumers see the product first, then recognise the brand, and compare prices in the end. If consumers cannot see the product or understand the product it will be very difficult to push sales . . . the key to new retail lies in creating new and more scenarios to increase the value of the merchandise.”