The smashing introduction of Alibaba in Wall Street and the burst of Xiaomi into the world’s top 3 smartphone manufacturers recently highlighted the development of China in the field of Internet and technologies. But behind the success of these companies lies a market reality: Chinese consumers are super-connected and super-mobile.
A few figures:
- 648 million Chinese access the Internet, representing over one in five netizens in the world (Chine Nouvelle Agency, January 2015)
- Internet access in China is primarily via mobile, 527 million connect with a smartphone or tablet (Agence Chine Nouvelle, juillet 2014).
- China is the No.1 e-commerce market in the world (emarketer). 8 in 10 netizens purchase online (GlobalWebIndex 2014) and 4 in 10 use a mobile payment solution (China Internet Network Center), no country matches this except South Korea. During the recent “Double 11”, the celebration of singles and its huge internet promotions on November 11th, 42% of online purchases were conducted on mobile.
- China is the only country where time spent watching online TV, mainly on mobile, is equivalent to the time spent on a TV set (Global Web Index 2014, among online pop.). In terms of time spent on social media, the country is on par with the US and Japan (BCG 2014).
- In Shanghai, people can connect to WIFI in 3800 buses and 10000 cabs travelling the city. In the subway’s tunnel, they can watch advertising displayed on hundreds of meter long digital screens that adapt to the speed of the trains to project a stable image from outside.
- Companies follow the movement of this connected society. As an example Mercedes organizes flash operations on WeChat and Weibo yielding hundreds of vehicles sales within a few hours each, and Unilever now devotes 40% of its advertising investment to digital in China as compared to 10 % to 20% in other countries.
Yan, a young executive in a foreign company in Chengdu, summarizes the way the middle class apprehends connection: “I do everything on my smartphone. I chat with my boyfriend, my friends and my colleagues, I organize my evenings and week-end parties, I pay for my rent, my bills, the taxi, I buy my food, beauty products, I split the restaurant bill with my friends, I transfer money to my family… I like shopping but with me department stores are going empty: I buy everything on my mobile.”
Why such an infatuation for digital? Why such an advance from consumers who, for the most part, have not yet reached the level of income, education and equipment of Western countries?
Factors are multiple:
- First of all, the jump in usage. Chinese people have never really had landline telephones at home. They leapfrogged from having no communication tools to mobile phones, on to smartphones very quickly. Untied by the inertia of an old system, they embraced new usages swiftly.
- Geographic coverage: in secondary cities – often populated with millions of inhabitants – where many brands do not yet have a presence, digital offers access to consumption to those who would otherwise stay away from it, and for corporations it is a good way to develop without investing too much in distribution. It’s these secondary cities that currently drive the growth of ecommerce.
- Sociological context: rural exodus towards cities separating families, isolation of the Only Child, limited confidence in the media controlled by the government, all of these encourage the usage of social media and connected ways of communication.
- Market offering: local mobile phone brands such as Huawei and Xiaomi have been able to offer the low cost products able to boost smartphone penetration and usage; on their side, key internet players have developed business models that push services driving consumer assuage rather than just advertising. WeChat is a good example with its clean interface (so different from Facebook’s ad-overload) and services (payment, taxi reservation, movie tickets, etc.) that are integrated into everyone’s daily life. Or the “view & buy” partnership between Alibaba and Youku that will soon enable consumers to purchase by clicking on products that appear in videos (the shirt of the singer, the shoes of the actress, the lamp in the corner..).
- Solutions: popular and efficient payment systems such as Alipay by Alibaba or TenPay by Tencent, consumer reassuring Cash on Delivery (COD) system, and very low delivery fees if any, also contribute greatly to the explosion of e-commerce.
- The above reinforced by an unbelievable attraction, curiosity, and ability to adopt new technologies amongst the young and intermediate consumer generations.
All of these contribute to making the Chinese citizen a forensic online, mobile consumer. In this (however communist!) country emerges a new consumer, who no longer “goes shopping” but rather is, via a smartphone, on permanent purchase mode. This is both a huge opportunity and a huge challenge for Western brands.
Article written by Christophe Jourdain – Initially published in French in Siècle Digital