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.