How Brands adapt to Chinese E-Commerce Boom

In the realm of computerized retailing, everyone's eyes are on China. Even as overall retail sales development slows, alongside the rest of China's economy, B2C online sales on the planet's largest computerized marketplace are developing at a yearly rate of 25%. Based on Bain and Friends analysis, B2C online retail in China will grow three times faster than overall retail, and by 2018 portion of aggregate online sales will come from Tier-3 cities and below. Penetration continues to increase for online shopping's core categories, such as consumer electronics, which registered a 20% penetration rate. In any case, new categories are making strides, as well. In groceries, one of the fastest-developing categories, penetration is currently 3%.

The greater part of this is supported by a populace that eagerly embraces online and mobile commerce and a leading-edge, cost-effective infrastructure for payments and delivery. For example, thanks to heavy investment by logistics players, a retailer presently can deliver merchandise to the greater part of Tier 1– 3 cities inside two days and to the rest of the nation inside four days.

As this infrastructure evolves, so do China's consumers. To understand how customer behavior is transforming, we partnered with advanced consumer information technology organization AdMaster. Among the most essential trends to emerge: Consumers are rapidly influencing the leap to mobile to retail. China has already become the world's largest online marketplace; this year it might lead the world in mobile commerce sales. Our analysis found that completely 80% of Chinese consumers who purchased online last year made no less than one purchase from a smartphone; 20% are weekly mobile shoppers. That is the reason companies like Suning and Walmart have invested to offer mobile apps that make it easy for customers to browse and purchase from their phones.

Another vital discovering: Price remains the essential consideration in categories like books and consumer electronics, as indicated by observations made by Kung Fu Information, an e-commerce information analytics firm. Be that as it may, in categories such as apparel and cosmetics, stores offering assurance in quality and authenticity can capture more sales, even with higher prices. Also, as in the physical world, computerized shoppers in China are not easily convinced to purchase. More than half of all customers consult online sources before purchasing, regardless of whether they purchase online or in a physical store. Furthermore, nearly 80% of customers surveyed gave reviews following a purchase online last year, either as scores or written comments. China's online shoppers have relatively little regard for scored ratings, we learned, however are exceedingly influenced by written comments posted by other consumers. The more online reviews an item receives, the higher the sales. What's more, customers value other customers' opinions over authority organization messages.Social media currently has become a basic customer engagement channel.

Retailers and brands are discovering that triumphant in this environment requires an expansive view of consumer engagement and consumer information. Simply put, it's more than just the transaction. The computerized journey begins when a customer goes online to discover and research products. It continues when the customer decides to purchase and makes the transaction. It wraps up when customers return online to share their experience. As China's e-commerce market evolves, the most successful retailers and brands will be those that invest to engage with customers at all three stages of this journey. They'll design marketing innovations that redefine the Discover and Research stage, omnichannel distribution approaches that better enable the Decide and Transact stage, and customer relationship management (CRM) solutions that spur repeat purchases and customer support, in what we call the Review and Advocate stage.

In the course of our work we've identified companies that are making enormous strides or vital experiments in no less than one step of the journey, disrupting a current business model with advanced innovations that make the most of customer information.

To pick up an edge with Discovery and Research, Coca-Cola invested in a system that allowed customers to order bottles of Coke with personalized labels on grocery site Yihaodian and other authorized online stores as a feature of a 2013 advancement. After ordering, customers could share pictures of their personalized bottles with friends by means of Sina Weibo and other social platforms, and Coca-Cola tracked the social network movement for marketing potential. The effort yielded significant results: At the peak of action, customers logged in to order 900 personalized labels inside a single five-minute period. The program also increased Coca-Cola's active Weibo fans, from 5,000 to 150,000. What's more, most imperative, more than 98% of surveyed users responded positively to the crusade.

Winners maximize their capacity to reach customers for Decide and Transact with a profoundly coordinated omnichannel strategy, offering products through physical stores and online sites. The best companies create a seamless customer experience through harmonized evaluating and assortment. For example, casual-wear seller Uniqlo delivers a consistent experience to both online and offline shoppers, selling the same SKUs at the same price point and, generally, with the same limited time movement. In this way, it benefits from the two channels while keeping away from the cannibalization that occurs when a lower-priced channel steals movement from a higher-priced channel.

To close the circle with the Review and Advocate step, leading retailers and brands encourage feedback, especially written reviews. Some, like Taobao, invite customers to write detailed reviews. Others are breaking new ground with social CRM, designing interactive advanced platforms that strengthen customer unwaveringness by better targeting products and services, and thereby advancing repeat purchases. Pediatric nourishment and child care products provider Biostime utilizes its membership program information. Purchase information and customer data are immediately gathered and circulated all through the system and afterward used to provide incentives to customers at every stage of the customer journey. Based on the information it collects, Biostime develops a personalized marketing anticipate each customer. It might send an alert for repurchase three days before a customer is expected to finish a specific item, for instance. The result of this effort: Biostime achieved half yearly development in 2013, far above the category average, with the majority of that development originating from repeat customers.

As Biostime has learned, the most successful companies won't just serve customers all through the online shopping journey, yet will also use what they learn at each stage to consistently innovate and disrupt their advanced business models. The dynamic universe of Chinese e-commerce is the wrong spot for the risk-averse. In our view, it's more critical for an organization to establish itself as a player with a working prototype that can be improved over time than to sit on the sidelines and sit tight for the perfect solution. The best companies will rely on partners with the skills to help them rapidly get in the game; most customary brands and retailers do not have the required capabilities inside their own particular organizations. They'll also take a "software release" way to deal with their offering, starting out small, if necessary, however with the capacity to ceaselessly update with new releases.

In such a dynamic market, companies that stand still will inevitably end up falling behind.

Written by Serge Hoffmann, a partner in Bain and Friends' Hong Kong office; Bruno Lannes, a partner; and Jessica Dai, a main in Bain's Shanghai office.

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