Three Online Disruptors for Retail Businesses in China

Online channels are altering China’s business landscape for good. With emerging service models offered by local e-commerce giants like Alibaba and and increasingly influential homegrown social media platforms, China’s consumer preferences are evolving, too.


Sources: Frontier Strategy Group analysis; iResearch; Alibaba

To help multinational corporations better navigate China’s online business sector, I’ve highlighted three important trends to monitor under China’s digital revolution:

  • High mobile utilization signals enormous opportunities in m-commerce

China’s Internet and mobile penetration hike has been fueling unforeseen growth in its B2C e-commerce sector. With the world’s largest population of Internet users (649 million by the end of 2014), about 80 percent of China’s Internet users have made online purchases at least once a month in 2014.

According to the China Internet Network Information Center (CNNIC), 85.8 percent of China’s Internet users in 2014 accessed the Internet using mobile devices. Surveys also show that 55 percent of them made a mobile payment within the last year, compared to 19 percent in the US. With Chinese consumers shifting from online commerce to mobile shopping and payment, an m-commerce takeoff in the next couple of years is likely to bring further changes to online service models in China.

  • Rapidly developing online-offline (O2O) services are re-shaping consumer behaviors

An increasing number of Chinese customers have shown preference for emerging online-offline services, where they can purchase online and pick-up/return offline, or apply online coupon discounts in physical stores. The proliferation of mobile payment systems is further facilitating this O2O trend, which is expected to expand to multiple areas of a Chinese consumer’s daily life, including dining, travel, medical consultation, education, etc.

With the burgeoning development of e-commerce in China, supply chain players like logistics service providers are also undertaking new ventures to compete with e-tail rivals. One good example would be SF Express, one the country’s largest logistics players, who has established SF Best to become a national food e-commerce company and opened thousands of SF Heike stores to serve online-offline demand for commodities, financial assistance, and convenience services. Multinationals are encouraged to experiment with new service models in China by forming effective partnerships to enhance consumer experience for targeted segments.

  • Social media influence in China is growing like never before

Chinese consumers are growing obsessed with acquiring information through various social media, as homegrown social networks, such as Qzone, Weibo, and WeChat, dominate the domestic market and attract millions of monthly active users. People now use social media platforms for instant messaging, microblogging, news updates, traveling, and shopping.

As social media becomes increasingly leveraged by companies to enhance branding, engage customers, and even generate new sales opportunities, it is imperative for foreign firms in China to capitalize on the social media boom and design a localized online marketing strategy to complement offline efforts.

With China’s ever-changing online channel environment, a multi-channel strategy to optimize sales and marketing without hurting offline distributors has become a critical area of focus for many multinational companies. I will follow up next week with a few applicable online channel strategies that foreign and local firms have successfully adopted in the Chinese market.

For the full report on B2C Channel Management in China: Crafting an Effective Online Channel Game Plan, FSG clients can access the client portal. Not a client? Visit our website to learn more.

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