MARKETING IN CHINA
Mehak Chadha, Moey Jia Li, Yeap Su PhingNUS MBA
Online & Offline Retailing in China
AGENDA
● Introduction
● Offline to Online
● Online to Offline
● Omni-Channel
● Summary
The Evolution of Internet in China
● China went online in 1994. Today, 700 million Chinese use the internet.
● Although a latecomer to the information highway, China has made remarkable achievements in the development of internet networks and consumer adoption of digital in just 2 decades.
2000 onwards: The Rise of Internet in China
2000
2011
20032003
20062004
China’s retail market has slowed down, but Internet retail is the fastest-growing major channel
eCommerce has shifted China’s retail landscape
● Rapid adoption of online shopping due to a highly fragmented retail industry. Traditional retail market in China is underdeveloped and scattered. Online shopping meets the ever-growing consumer demand.
● A rapid increase in online penetration. Additionally, Large e-tailers like Tmall and JD.com are actively driving online shopping behaviour.
● More drivers for continuous growth. Rising disposable incomes, urbanization, and improved logistics infrastructures will cause Chinese consumers to continue to migrate from offline to online shopping given eCommerce’s more competitive prices, greater convenience, and broader product selection.
Source: Forrester Research
Offline players have the opportunity to leverage Chinese consumers’ online behavior
Offline Leveraging Online for Success : Stories from China
DISCOVER & RESEARCH DECIDE & TRANSACT REVIEW & ADVOCATE
Bottle Nickname Promotion Customers ordered bottles of Coke with personalized labels on Yihaodian, Chinese online grocery store.Increased Coca-Cola’s active Weibo fans from 5,000 to 150,000 during the promotion. 98% positive reaction to the campaign.
Integrated multichannel strategy Attract online shoppers through targeted ads on
ecommerce websites and on social media. Deliver a consistent experience to both online and offline shoppers, selling the same SKUs at the same price point and, for the most part, with the same promotional activity.
Social CRM strategy Pediatric nutrition and baby care products provider Biostime is using social CRM to interact with customers and to empower its front line. Biostime’s CRM system makes use of its membership program participant data to provide incentives to customers at every stage of the customer journey.
What does it take for offline players to win online?
Prioritize a digital strategy. It’s a must, as consumers and competitors are
going digital. Adopt an integrated platform strategy.
Think partnerships with the ecosystem, as they likely have the right
resources and pricing to serve you. Understand China’s vast network of digital distributors.
Build capabilities, hire and groom talent, realign your organization and set
up the right incentives for your teams.Sources: Bain & Company, McKinsey & Company
Online to Offline: A Regression?
Source: Deloitte, Navigating the Digital Divide (2015)
What does this mean for companies with an e-
model?
Motivation: Greater Customer Value
•Ease of Payment
•Flexible Fulfilment
•Product SupportSource: Deloitte, Navigating the Digital Divide (2015)
•Tactile Experience
•Product Education
•Customer Service
Considerations for Going Offline
Physical Set-up
Location
Product Display
Service
Payment
Fulfil-ment
Product Support
•Data Analytics•Store Design•Staffing and Training•Technological Platforms•Inventory Management•After-Sales Offering
Much more physical and dynamic interaction
Competencies need to be built and/or acquired
Webrooming
What Lies Ahead: Multiple Touchpoints
Showrooming
Source: PwC, Total Retail Survey (2015)
Browse Online, Buy Offline
● Avoid paying for delivery
● Touch and try
● Immediate product receipt
Browse Offline, Buy Online
● Touch and try
● Better prices online
● Delivery preferred
What Lies Ahead: Offline but Better
Source: PwC, Total Retail Survey (2015)
Consumers want more
•engagement•relevance •convenience
Online Leveraging Offline for Success : Stories from China
TRANSACTION POINT EXPERIENCE & DISTRIBUTION LOGISTICS & AFTER-SALES
Touch, Try and TransactEstablished “experience stores” for
consumers to touch and try products.
Consumers can also make and pick up
online orders at these stores.
Driving Online SalesPlanning 1000 offline stores in 3 years, the
online bookstore is looking to drive online sales
through offline promotions at its “cultural
complexes”.
Acquiring Offline PresenceAcquired a fifth of electronics retailer Suning,
with planned investment of 5 billion yuan to
enhance the e-commerce company’s logistics and
after-sales service capabilities.
Getting to Omni-Channel
> Gap between O2O and Omni-Channel> China will be an early adopter
WHAT IS OMNI-CHANNEL?
https://www.youtube.com/watch?v=tullzt1v7pM
EVOLUTION OF OMNI-CHANNEL RETAILING
Brick and Mortar
(pre-90s)
Dot com(90s – early
2000s)
Customer CentricProduct Centric
One way experience
Connected experience
O2O(2000s - present)E.g. Kiosks, social
media, apps, in-store digital display
Omni-Channel(where its headed)
Objective: An optimal blend of
content and commerce by channel and
distribution
Source: PwC (2015)
WHY IS THERE A GAP? 4 CRITICAL ENABLERSAppetite to innovate, embrace smart risk and experiment
LEADERSHIP
Marketing, Retail store, eCommerce, Merchandising
HYBRID EXPERTISE
Branding, ecommerce, PR, retail, merchandising, etc
ORGANIZATION STRUCTURE
COMMUNICATION
Sources: SVP Omni-Channel Marketing Rebecca Minkoff (2015) and Neilsen (2014)
→ No internal culture of continuous improvement (customer feedback)
→ Lack of talented manpower
→ High level of infrastructure requirement
→ 81% Chinese CEOS agree that mobile is a key strategy but only invest in low cost apps (e.g. digitising coupons)
Constant, clear and cross functional
IKEA’S OMNI-CHANNEL STRATEGY“We saw in Russia that things can go wrong when you go too fast. We want to secure the competence and the Ikea culture in markets before building too many stores,” Mikael Ohlsson, Chief Executive
BRICK & MORTAR OFFLINE 2 ONLINE OMNI-CHANNEL
Since 1998. 18 stores in Tier 1 and Tier 2 cities.
China - fastest growing market (18% growth, 10.5b RMB)
Pickup and Order Points (5% of full-sized store)
IKEA.cn eCommerce development in progress
Understand and tailor strategies for Chinese consumer
Invest in logistics facilities and build new fulfilment centres
CHINA WILL BE AN EARLY & FAST ADOPTER
Sources: Digital Dopamine & PWC (2015)
Big brands with big resources are the omni-channel leaders; but China will bring the future into focus
87% XYGeneration
WHY EARLY ADOPTER? CHINESE CONSUMER BEHAVIOURS
China
UK
US
58%
28%
30%
Willingness to share personal info
SUMMARY
• Consumers are moving ahead of retailers. There’s a need to catch up.
• Greater momentum for brick and mortar to online. Online to offline still at a nascent stage.
• Getting to omni-channel will require mindset, time, coordination and resources.
Thank you.