Crafting an effective online channel model that complements offline sales is a critical strategy for many multinational companies in China, and the urgency among multinationals has been further enhanced by an increasing number of local B2C competitors aiming to offer everything at just one click or one QR-code-scan away from Chinese consumers.
Multinational executives in the Chinese market have expressed concern around two major themes: (1) how to build an effective multi-channel plan without offline cannibalization, and (2) how to maximize the impact of technology to influence purchasing decisions. It is essential to recognize that online initiatives are not necessarily in conflict with sales in traditional channels, as long as companies can strike a balance among both approaches in product offerings and marketing efforts.
Below are a few effective online channel tactics that we’ve seen companies have undertake to adapt to China’s evolving e-commerce scene:
- Evaluate key market segments: Utilize multiple online channels and offer unique products online to target different consumers
For companies aiming to improve market segmentation and direct targeted groups of consumers to different offerings, leveraging a variety of e-commerce platforms is a great strategy. For example, say a consumer apparel company launches multiple online channels to effectively capture sales. The company’s newly arrived goods, targeted at the its loyal customer base, are mainly offered on its own website, while limited quantities are also sold at flagship stores on Tmall and JD.com to increase brand visibility. At the same time, clothes that are out of season are sent to authorized online agents to sell at discounted prices and help offload inventory.
Many multinationals also allow online sales of tailor-made products to highlight their distinctive branding and culture. A leading telecomm firm in China has even launched collaboration with major e-commerce platforms to gather customer data and launch customized C2B (consumer to business) products based on consumer preference analysis.
- Choose a strategic mix of channel models: Balance online and offline channels to mitigate cannibalization and experiment with emerging O2O (online to offline) service models
Under China’s highly fragmented channel network, it is challenging for multinationals to access lower-tier markets by navigating through several layers of distributors without taking advantage of e-commerce. However, online channels with lower costs may also pose a potential threat of reducing offline sales.
Some companies seek to solve this issue by integrating online and offline CRM systems, working with trustworthy master distributors to streamline offline supply and limiting online sales to just a specific range of products and China’s biggest e-tail players. Unified pricing for end customers has also been applied – goods are supplied to online retailers at a higher price compared to offline distributors to ensure the same margins. Other multinationals are able to further integrate the process by exploring the “Groupon” experience where consumers can buy a product or service package online and enjoy discounts in physical stores.
- Capitalize on social media influence: Leverage online marketing platforms and align with China’s e-commerce calendar
Chinese consumers’ purchasing decisions are very easily influenced by social media. A few foreign firms have started to proactively broadcast marketing messages and drive recruitment efforts online. Social platforms can also be used to generate sales and manage customer relationships.
To stay ahead of the game in China, it is also of paramount importance to regularly refresh local marketing calendars. With continued marketing efforts of online giant Alibaba, China has turned Singles Day (Nov. 11) from a niche bachelor holiday into a nationwide sales promotion party. Other similar sales initiated by e-commerce players include the anniversary promotion of JD.com on June 18 and the “Double 12 Shopping Day” on Dec. 12.