Winning At E-Commerce in China

Winning At E-Commerce in China

Joey Chan, Vice President, Nielsen China; Marco Tang, Associate Director, Nielsen China; Queenie Gu, Associate Director, Nielsen China

With over 500 million people online, China’s e-commerce industry already offers major opportunities to retailers and is poised for significant development in the years ahead. Currently, 38 percent of Chinese consumers shop online. With a population as large as China’s, this represents huge amounts of commerce, yet the percentage of people buying goods online is far below rates in Europe, the U.S., and even other Asian markets, where online shopping penetration rates can reach upwards of 60-80 percent. Many in China are already preparing for the time when the rest of the population begins to adopt e-commerce. Central planning is underway, warehouses, distribution centers and other logistics are being constructed, and manufacturers and retailers are refining the product lines and assortments. In fact, the China Internet Network Information Center predicts online retail sales could reach 3 trillion Yuan in 2012 (~$475 billion USD). And, trends suggest Chinese e-commerce will only grow from there.

In this ripe environment, retailers planning their Chinese e-commerce strategy have two overarching goals: expand their consumer base, and improve consumer satisfaction and loyalty. China’s online shoppers right now are primarily younger and more educated consumers (with 80% having a college education). For these shoppers, price and convenience rule. For traditional brick-and-mortar retailers, entering the online market expands their potential shopper base by offering more convenient buying opportunities. To truly win in e-commerce, retailers must synergize their online and brick-and-mortar shopping experiences to improve the customer’s experience both online and offline. Flexible shopping and delivery/pick-up options and smart promotions can facilitate sales both online and off, boosting a retailer’s overall bottom line. Satisfied customers with successful online purchases are likely to drive more sales as consumers share positive experiences via social media. A recent Nielsen survey found 85 percent of Chinese consumers regularly use social media to share their experiences with online purchases.

E-Commerce Retail Strategies

As retailers look to synergize their offline and online businesses, the challenge is how to develop successful marketing strategies for the sophisticated Chinese consumer.

  1. Products – Chinese online shoppers are primarily young and educated consumers who are seeking value and convenience, along with particular types of products. Offering unique product assortments online—products unavailable in most offline stores—and giving the consumer multiple convenient options for payment and delivery are likely to resonate with these shoppers.
  2. Price/Cost – While consumers do expect some cost savings online—at least in some categories like apparel and electronics—price is not their only consideration when choosing an online retailer. Favorable reviews from previous customers, product availability/choice, and fast delivery offerings also drive many online purchases in China, so retailers who meet these demands can likely avoid losing out in a price war as long as they maintain a low-cost reputation.
  3. Promotions – Online shopping offers many advantages for precision promotions, giving the retailer opportunities to better reach their potential customers. Combining promotions online and in brick-and-mortar locations can help synergize the two businesses and drive sales.
  4. Communication – E-commerce and online shopping flip the traditional store-to-consumer one-way conversation. Consumers are now searching out retailers’ websites for specific products and learning about goods via social media. Retailers need to engage in this social conversation and interact with China’s tech-savvy consumers who are increasingly open to boosting e-commerce spending.