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Pivoting to China through social commerce

by Alexandra Kimmons
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Social commerce

China has become a trailblazer in the field of social commerce in recent years, enabling brands to reach a huge network of customers and become overnight sensations, writes Alexandra Kimmons

China has become a trailblazer in the field of social commerce in recent years, with 89 percent of urban consumers in China already using social commerce, a figure that is predicted to rise.

This has enabled some companies to see sales in China boom. For example, Perfect Diary – a cosmetics brand – achieved RMB 100 million in sales in just 13 minutes during last year’s Singles Day promotions. According to RuHnn, one of China’s most successful influencers, Zhang Dayi, reported earnings of  £37 million in 2016.

This trend is not just confined to China’s affluent first-tier cities. Backed by funding from Tencent and Baidu, the retail platform Kuaishou has emerged as one of China’s most popular live-streaming and short video platforms. With 62 percent of its users living outside of first- and second-tier cities, Kuaishou represents a key opportunity for international brands to tap into hard-to-reach demographics in these areas. Even outside of China’s cities, social commerce has successfully been used to connect rural consumers with local entrepreneurs.

Framing the Covid-19 pandemic as a form of social experiment seeking to understand what happens when a nation goes into hibernation, Adam Knight of Tong Digital says that “the answer is perhaps obvious – the entire nation goes online.” During China’s lockdown, WeChat social commerce traffic increased by 83 percent, and Taobao live-streaming viewing figures increased sevenfold. WeChat’s Mini-program function, launched in January 2017 and now a key social commerce tool, saw the average time spent daily by users on Mini-programs increase by 25 percent during the pandemic. Smaller players have also been able not only to survive, but thrive within China’s e-commerce market during this time, a prime example being group-buying app Pinduoduo, which on 13th May 2020 overtook JD.com as China’s second-largest online retailer.

These trends have compounded the attractiveness of social commerce as a way for foreign brands to break into the China market: hesitancy has been replaced with a desire to engage. Charlotte Keesing, director of corporate affairs and international at Walpole Group, says that whilst some high-end brands have previously been reluctant to explore e-commerce, they are now beginning to innovate in this field, and smaller businesses for whom China was previously out of reach are now keen to do the same.

Rachel Zheng, the managing editor of Jing Daily, says that social commerce is uniquely suited to the Chinese commercial environment as it “capitalises on the high value placed by Chinese consumers on personal connections.” In this way, she argued, Chinese consumers regard social commerce as an inherently sociable activity that allows consumers both to keep up-to-date with their favourite brands, and to have their preferences informed by the online activity of their friends and family. In China, she noted, social commerce is “definitely a way of living.”

Social commerce is uniquely suited to the Chinese commercial environment as it capitalises on the high value placed by Chinese consumers on personal connections

Similarly, Knight highlights the contrast between the Western and Chinese e-commerce models, the former being optimised for efficiency and convenience whilst the latter is optimised for engagement and discovery in an attempt to create “a social experience, not a solitary one.” Chinese consumers’ online shopping experience tends to be confined to far fewer platforms than their Western counterpart, which allows Chinese social commerce giants to use data collection and analytics to finely-tune each user’s content, leading to very high click and follow-through rates. The Chinese concept of New Retail, pioneered by Alibaba founder Jack Ma, aims to combine the best of the online and offline retail sphere by adapting the traditional O2O model into an OMO (Online Merge Offline) model.

Knight described live-streaming and live-commerce as perhaps the hottest current trend in China, with over 526 million Chinese consumers expected to tune into a live-stream this year – representing more than half of China’s online population. This trend now encompasses not only retail but also automobile and real estate, with Taobao Live live-streaming events capturing two million viewers in just two weeks during China’s lockdown, including 1,068 properties sold over the course of a single eight-minute live-stream.

Pearl Zhu, CBBC’s retail and e-Commerce business advisor, emphasises that brands must think carefully about their goals for social commerce: whilst live-streaming may not be the most suitable means of driving up sales, it can be a good vehicle for boosting brand awareness, particularly where companies involve both key opinion leaders (KOLs) and leading figures from within the brand itself. She also emphasised the need for brands to take a sophisticated approach to their online activities, recommending careful curation of content by scripting live-streams and considering how to engage viewers both during and after the event in order to ensure good customer retention. She also emphasises the importance of selecting a live-streaming aesthetic that is consistent with the brand’s identity offline, and recommends that brands formulate a social commerce strategy based on extensive market research that examines how their competitors utilise this medium.

British luxury brands have come to regard China as a priority market, and with Chinese consumers set to account for over 50 percent of total luxury goods sales by 2025, companies in this industry are increasingly turning their attention to both their offline and online presence in China. Whilst acknowledging the devastating impact that the Covid-19 pandemic has had on luxury brands in the retail and tourist industries, Charlotte Keesing is excited about the opportunities and impetus for innovation that the crisis has created. “The pandemic has damaged the twin engines of retail and hospitality within the luxury goods market,” she said. But exciting developments in digital strategy in China may just become the industry’s lifeline.

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Additional reporting by Hannah Williams

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