The Coronavirus outbreak that first developed in Wuhan and quickly spread to the entire country has triggered a range of disruptive consequences for the supply chain of a multitude of domestic and foreign companies in China, also generating significant change in terms of consumers’ behaviour and preferences.
An army of delivery men, riding their scooter through the empty avenues of China’s megacities to deliver warm meals, hand sanitizers and masks have become the iconic image of an entire nation during Coronavirus outbreak.
Given the unfortunate circumstances, delivery men have been the only link with the outside world for many Chinese who have been forced to residential lockdown in their apartments for weeks.
While China is already an established leader within the field of digital economy, the outbreak has represented a fertile ground to even further accelerate the transition from traditional retail to e-commerce platforms, whereas the push has been supported by automated delivery, use of artificial intelligence and robotics.
Critical to contain virus contagion is the ability to limit movement and contact between people. In response, we have seen companies implementing new delivery models and contactless services to reach out their customers.
JD, China’s leading e-commerce company, has implemented delivery solutions that involves drones. Where a physical delivery is not possible, being remote countryside or cities particularly exposed to coronavirus contagion risk, consumers have indeed been reached through drone delivery.
Drones have been used also for other reasons. Xinhua News Agency, the biggest and most influential media organization in China, has shown videos of drones that thanks to thermal imaging technology equipment, were able to detect people with fever from the air.
In order to enhance contactless services, a hospital in Wuhan has built a “unmanned self-service grocery store” that allows the medical staff to purchase their daily necessities at any time while processing their payment through a mobile payment app at the full self-service cashier, hence reducing to zero any human intervention. The self-cashier system in the store is provided by China’s tech-giant Alibaba.
Delivery robots have been used to carry food from door-to-door to hotel residents in Hangzhou, China to people being quarantined after traveling on a flight with patients thought to be infected by coronavirus, Reuters reported.
Also Baidu, China’s leader in driverless technology, has deployed a range of unstaffed vehicles for various uses in the epidemic area.
Chinese tech, retail, food and delivery companies have shown a strong ability to rely on technology to quickly adapt to new consumers’ behavior to overcome this period of economic and social distress. Not only Millennials and urban consumers are engaged in e-commerce shopping. The health crisis could indeed lead to new patterns of online consumption based on changes in users’ age, locations and other demographics.
The epidemic is indeed much likely to represent a substantial push for an even faster growth in China’s digital economy, reaching out new market segments such as elder people and rural residents.
Online trade in China is the most mature in the world. Successful brands in China have been able to create an ecosystem that mixes web related sales with physical stores. All of this has been made possible thanks to a successful integration of (i) artificial intelligence, (ii) consumer data collection and (iii) increased mobile payment adoption rate.
Big players like Alipay and WeChat Pay have now been adopted widely by shopkeepers, restaurateurs and consumers. In a country where credit cards have never been widely adopted, businesses are moving directly from cash to payment apps.
According to Statista Digital Market Outlook, in 2019, user penetration in the mobile point-of-sale segment in China was equal to 35%, far above if compared to advanced economies from the West (9% for the US and 6.5% for the UK).
Yet, the overall annual transactions value per user is still higher in the US (equal to USD 2,994) and in the UK (equal to USD 2,465), whereas Chinese users spend online an average of USD 1,163 a year. If we combine this information together, this means that the average Chinese online platforms’ user spends less than the half of the yearly amount of Americans and Brits, but the mobile payment adoption rate in China is up to 5 times the one of UK and US.
Data confirm that mobile payment platforms remain the most favuorable purchasing channel for Chinese consumers, hence delivering a great opportunity for western brands aiming at exploiting the vast Chinese market.
How to take advantage of the Chinese online ecosystem
The current health crisis could represent a push for western brands, that should now more than ever consider to further enhance their online presence in China in order to achieve equity brand growth and increased exposure to the final consumers.
However, the Chinese big consumer base can result being a double-edged sword: brands risk to get “diluted” by the vast purchasing options that Chinese consumers now have. Target specific consumer groups, increasing precision and lowering acquisition costs are key goals for brands willing to overcome the challenges of a crowded digital market and survive long-term.
The Chinese market is complex and multi-faceted. It is key for foreign investors to develop a clear digital strategy on how to best position brands and use digital channels efficiently to reach and sell to the target audience.
Foreign investors should approach the digital world by carefully considering the following three major digital communication channels:
(i) sale through e-commerce platforms (i.e Tmall / Taobao);
(ii) sale through social media platforms (i.e Wechat / Xiaohongshu);
(iii) sale through a proprietary website with Chinese domain.
Every communication channel entails different opportunities, risks and costs.
Comparison factors such as accessibility; existing frictions and integration with other platforms, data ownership, management and exposure of viewers traffic, digital marketing tools availability, etc. should be included in the equation when drafting the most suitable marketing strategy to put in place.
The right business model may be achieved by actually combining more online and offline market platforms, resulting into an efficient implementation of a “omnichannel model”, the integration of online and in-person purchasing that ensures a unified experience at every touch point with the brand.
Within a competitive e-commerce market, standing out from the crowd is the key to success. Relevant for western brands is to create a dynamic online ecosystem able to keep followers entertained through creative and engaging content. This is made possible by integrating marketing campaigns, livestreaming activities, media placement and engagement of influencers.
WeChat for example, has become a high versatile platform where western brands can develop their own personalized WeChat shop and operate with cross-border payments. Hence, even if the foreign brand does not yet have a registered company in China, you can start selling within a few weeks.
Foreign brands can also leverage on dedicated import e-comm platforms such as kaola.com and VIP.com. Goods cam be shipped to their fulfilment warehouses in Fujian FTZ or Hong Kong and they will take care of the distribution.
What Fidinam is able to offer to clients
Fidinam, in cooperation with trusted partners specialized in the provision of digital solutions for foreign brands, is able to prepare feasibility study comprising of (1) Competitors Analysis, (2) E-Commerce platforms benchmark comparison and (3) Tailor-made Business Plan.
Based on client’s specific investment criteria such as (i) investment period and budget; (ii) sales and growth expectations, (iii) customer coverage expectation, (iv) product’s characteristics, we provide our clients with a tailor-made business plan providing advice on how to integrate e-commerce platforms with other e-commerce platforms or offline retail solutions efficiently. We will deliver revenue tables modelled after the investment criteria yielding an approximation of cost and performance according to different digital marketing models. The cost analysis will be comprising of an overview of (i) platform set-up costs; (ii) platform management costs; (iii) marketing activities costs; (iv) creative/social engagement campaigns cost; (v) livestreaming activities and (vi) ads placement costs.
Fidinam is able to provide 360 degrees operational support to clients thanks to expertise developed in the field of corporate structuring, logistic coordination, Accounting best practice, traditional- and/or virtual bank account opening, tax planning and trademark registration.