The Role of Social Media in Commerce in China
The Money is Moving Inland, and Brands are Already Beginning to Chase it.
Interview with Fenghua Mo, Director and Founder of Market Me China Ltd, on the Role of Social Media in Commerce in China.
by ELLEN TATHAM, German Chamber Ticker
The size and force of the Chinese ecommerce market is astounding: A flash sale on WeChat sold 388 smart cars in 3 minutes.
A conservative estimate puts China a decade ahead of the West in terms of Social Commerce – ecommerce that involves social and online media, supporting social interactions during the purchase. Fenghua Mo (also known as Sammi) specializes in online marketing in China. She is trained in Baidu PPC, and Baidu SEO. As director of Market Me China Ltd she helps Western companies establish a good online presence in China. German Chamber Ticker Team had the opportunity to speak with Ms. Mo about social commerce and marketing western brands to the Chinese market.
Q: Can you please brie y explain the main social media networks in China and how brands can utilize them best?
A: Because Facebook, Twitter and Youtube are banned in China, social media is dominated by domestic platforms. WeChat and Weibo dominate the social media landscape in China. WeChat is a mobile app, similar to WhatsApp, with a billion accounts registered and around 600 million users as of the third quarter of 2015. Weibo, whose name means ‘microblog’, had 600 million registered users and 400 million business users during the same period. WeChat is great for established brands, and it is a strong channel for consumer engagement, customer service and brand loyalty. Weibo is great for market entry, and it is a great channel to build brand awareness.
For video sharing, YouKu is the site of choice for most Chinese, with nearly 600 million users and a valuation of £3.5 billion. It has a 20% share of the video market, with 150 million active daily users and 900 million daily video views (2014 Q4).
The various different platforms afford brands an opportunity to utilize cross-channel promotion and get their message seen by as many people as possible. Some of the globe’s biggest brands already use social media in China to the full in order to do this.
A multi-channel strategy is important for several reasons. First it gives you the best chance of getting your messages seen by your target market. Chinese internet users are highly active, and the more content you have out there, the easier it will be for them to find.
Second, each platform attracts a slightly different user, although many Chinese have accounts on all the major platforms. The different formats allow you to engage with your target market in their preferred way.
Third, as well as increasing the chance that your target market will see your content, cross-channel promotion gives you a higher chance of converting a prospect into a lead. Users who like your video content may check out your Weibo or WeChat, learning more about your business offering and absorbing more of your sales messages.
Q: Chinese social media is often much more integrated than its western counterparts with a multitude of functions such as being able to book a taxi, pay your bills and make investments. How does this shape consumer habits and do you think the west will catch up in these aspects?
A: As smartphone popularity in China continues to grow, more and more consumers are becoming aware of the convenience their device can bring to their daily lives. It’s possible to do almost anything using social media in China; there are even street noodle vendors taking orders via Weibo and WeChat.
In many ways, the relationship between the expansion of social media functions and the demand from consumers is symbiotic. The younger generation of Chinese internet users are more tech-savvy than the older generations, so as they grow up, they naturally bring technology into the core of their lifestyles. App makers responded by providing greater functionality which the user, eager to embrace, adopts, creating the demand for further innovation.
Then there are the actual changing consumer habits – a greater disposable income is seeing the Chinese turn away from expenditure on products in order to spend more on services, such as leisure. Before, apps were able to satisfy the consumer’s need for material goods by integrating online shopping. Now they have to diversify in order to still be relevant in a service-orientated market.
At the same time, the internet has made it possible for people to access the necessities with greater ease, even ones they would have been unable to access before – such as virtual appointments with doctors, or distance learning courses. So some developments are a ‘natural progression’ and the only reason consumer behaviour is changing now is because those things didn’t exist for the previous generation to exploit.
In terms of whether this will transfer across to Western networks; I think is not so much a case of Chinese apps being more ‘advanced,’ but a reflection on the different attitudes held by Chinese and Western social media users. In China, a key attitude is ‘the more, the better.’ You can see this in the design and layout of Chinese social networks, as well as the number of features they have. Western websites and apps are often clean and simple, with users preferring a straightforward approach. So I don’t think we will see the multifunctional side of social media in the West to the same extent that we do in China, because it’s not what the end user wants.
Q: Studies show that 40% of Chinese consumers are happy to write reviews or share their online shopping experience compared to 1% of westerners. In what ways do Chinese consumers demand more interaction from brands?
A: Chinese consumers may be becoming westernised, but their own culture and traditions are not forgotten. In China, the concepts of ‘face’ (‘mianzi’) and ‘relationships’ (‘guanxi’) are highly important in all social interactions, from the family unit and the company hierarchy to the way in which brands approach consumers. The biggest thing companies in the West have to worry about on social media is making a blunder; an ill thought- out Tweet, for example. In China, consumers expect brands to show deference to their values and culture; not doing so could alienate them from their audience. Because of this, it is impossible to build the required ‘face’ without interaction.
Another part of the issue is trust. Chinese consumers have had their confidence in products shaken by domestic scares. Perhaps the most infamous case involved infant formula, and the revelation that Sanlu baby formula contained melamine; a chemical found in fertiliser and plastics. Tragically, several children died and around 300,000 were taken sick after drinking the contaminated milk. Understandably, Chinese consumers demand a lot more information on the products they buy and use than those in other countries. This is reflected in the fact that the average shopper on peer-to-peer eCommerce giant TaoBao spends an average of 45 minutes using tools like instant messaging called Aliwangwang to ask sellers questions about their products and themselves before making a purchase.
So Chinese consumers demand respect and value reputation, but they also need to be convinced that what they are buying – and who they are buying it from – is trustworthy. This makes social media interaction the obvious choice for brands looking to expand into the Chinese market.
Q: What are the main mistakes that brands make when marketing towards the Chinese consumer?
A: Almost all of the Western companies who have failed, or performed poorly, in China have done so because they treated it as ‘just another market’. Brands that enter the Chinese market with their usual strategy and expect the Chinese consumer to bend around their preferred ways of operating and marketing are doomed to fail.
One of the largest examples was eBay, which was notoriously beaten by TaoBao (a comparatively small company at the time, owned by Alibaba) in the mid-noughties. As mentioned above, TaoBao has features such as live chat Aliwangwang that allows direct conversations between the buyer and the seller, so they can converse, investigate products and even haggle over prices. eBay featured customer reviews, but for Chinese consumers that simply wasn’t enough. They also got their advertising wrong – using the wrong platforms for their target market. TaoBao’s founder, Jack Ma, was able to outmanoeuvre the American giant simply because he knew what Chinese consumers wanted.
A failure to understand the market is a classic downfall that companies continue to make today. Both Microsoft and Sony have launched their latest generation games consoles in China, despite the fact that gamers there prefer games that are better played on desktop PCs or laptops, because of the need for a keyboard and mouse. The Xbox and Playstation franchises may be incredibly popular in other parts of the world, but they don’t offer much to a Chinese gamer.
It’s easy to fall foul of the political landscape in China if companies aren’t well-prepared and respectful of the government. Google continues to have problems operating in China because of its stance on internet censorship, which has cost the search engine giant a huge amount of potential market share. Google now comes under fire from both those who think it believes itself to be above Chinese law, and those who question its morals for agreeing to uphold government censorship criteria by blocking certain websites.
Q: When we talk about “the Chinese consumer” it’s almost like saying “the European consumer” – there is huge regional diversity. Do brands need to adopt different strategies for different areas of China or different tiered cities?
A: Absolutely. There’s a big difference between tier one cities – the most developed, such as Shanghai and Beijing – and the rural tier four cities. It’s about much more than location and population though; consumer habits and desires are different, too. Just as a brand can’t approach China in the same way as they do a Western market, approaching a tier three city in the same way as a tier one city often won’t work.
Brands often assume that the densely populated coastal cities are the best entry point to China, but even disregarding the fact that these are now a crowded market, there are other reasons to look further inland. Between 2002 and 2022, the proportion of middle-income earners living in the more developed Eastern region of China was forecast to drop from 85% to 60%. The money is moving inland, and brands are already beginning to chase it.
Social media is still a powerful marketing tool in the lower-tiered cities. Tier one cities are the only cities in which social media penetration declined between 2013 and 2014, with tier two cities having the largest portion of social media users. Tier two city users are much more likely to use the online shopping functions of their social media apps, while the tiers below are more interested in chatting or watching videos.
Q: The majority of consumers in China don’t have access to a physical store to test products before purchase and so the digital experience is very important. Does this create opportunities for brands particularly in terms of social media campaigns?
A: There are many opportunities and obligations for brands entering the Chinese market. Most Chinese shoppers use online first when making a purchasing decision. 60% of Chinese shoppers have sought out independent reviews and social media users’ experience of the product before making a purchase. They are often looking for specific factors in the reviews that indicate a seller is reliable, offers quality goods and has reasonable prices.
This is an opportunity for brands because it means their target audience are looking online for as much information about their products and company as possible. This gives them the chance to develop a relationship.
Of course, this all goes back to what we were saying earlier about ‘face’ and ‘relationships’. The biggest concern for Chinese users is trust, especially when buying entirely online or across borders. Social media gives you a chance to build that trust.
Q: What is the age demographic of luxury product consumers in China versus the West?
A: Chinese luxury consumers are young, affluent, and middle class. They work hard and want to reward themselves for doing so. In a masculine culture like China’s, success is highly valued and owning luxury goods is an easy way to demonstrate that you are successful. Some Chinese luxury consumers value being able to display their luxury goods in public so much that their homes are often plainly decorated – there is no point in spending money on something that others won’t ever know about.
However, that doesn’t mean they are only focussed on price. That may have been the case once, but shoppers are now interested in the particular style and details of an item. Somewhat conversely to their desire to demonstrate their success by wearing expensive, well-known brands, Chinese luxury shoppers want to express their individuality. To do this, they often look for less popular, emerging luxury brands.
A key difference to note is the reliance upon digital when purchasing luxury items. By 2018, online sales of luxury fashion are expected to grow by 18% in the UK. In China, the forecast is for 70% growth. 51% of UK luxury consumers say they usually head straight to the retailer’s website when shopping online, while 50% claim they use a search engine to look for the product, and 31% start by searching for the brand. In China, between 70-80% of all online luxury goods purchases come from peer-to- peer recommendation via social media.
Q: Do you think that after the government’s focus on consumption in the five year plan we will begin to see a shift away from International brands towards Domestic Brands?
A: Personally, I don’t think so. For instance, cross-border shopping continues to grow at an impressive pace. It accounted for over 6% of all consumer eCommerce in China in 2015 and is growing by 50% per year.
Western products appeal to Chinese consumers in two key ways. Firstly, they are considered higher quality. In the same way that the label ‘made in China’ is often associated with low quality in the West, Chinese consumers often feel the same way. As we mentioned above, Chinese consumers’ confidence in domestic brands has been severely shaken by several health scandals, so overseas products are perceived as safer. Some products are appealing because they offer an antidote to Chinese problems – natural health products which promote wellbeing can help an urban consumer to counter the feeling of being trapped and unclean in a crowded city. Broken trust can take even longer to fix than building trust in the first place, so there will be no sudden, seismic shift in consumer habits.
Secondly, Western products are appealing because they aren’t Chinese. The young, rich Chinese middle class want a Western lifestyle in many ways. They are buying into a culture and a way of living as much as they are a brand or a particular product. Products aren’t just from the West; the West is part of the product. Chinese are buying a piece of the West as much as they are buying items and services. Western brands have had a long time to build up their desirable image – that’s not something that can be undermined in just a few years.
There is an old Chinese saying about scarcity creating value. The exclusivity of Western brands is enough to see Chinese consumers travelling around the world to get the items they want. Again, that behaviour isn’t something that can be changed quickly, if at all.
Ms. Mo, many thanks for your time!
(Image source: Image created by 9comeback | www.freedigitalphotos.net)
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19th October 2022
