Making The Case For A Direct-to-Consumer Website In China

On March 19th I will present at Forrester’s second annual Marketing and Leadership Summit in Shanghai on online direct-to-consumer (DTC) sales opportunities in the Age of the Customer; I will also facilitate a short discussion on the topic with Vincent Lau, Regional Director of eCommerce Asia Pacific for Deckers.  During the track session, Vincent and I will discuss:

How eBusinesses should measure the success of their DTC site. In China, DTC sites can’t generally compete with a marketplace when it comes to traffic and sale volume – the traditional eCommerce metrics. However, they can compete in a handful of other meaningful ways – fashion retailers, for example, report higher average order values, larger margins as a result of not having to sell at discounted rates, and a positive influence on overall sales growth across channels in the region.

How a DTC site compares to marketplace channels. There is no denying that marketplaces dominate the eCommerce landscape in China, and will likely take the lion’s share of online sales for a business, but DTC sites also offer a handful of lucrative advantages. One eCommerce executive noted that the DTC shopper is very different from a marketplace shopper and is ultimately more valuable. Not only do shoppers on DTC sites spend more, they buy across categories, pay full price and engage with the brand in meaningful ways by shopping across channels and categories and contributing to social media communities.

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China’s online retail sales passed $300 billion in 2013

We recently published an online retail forecast for Asia Pacific, followed by an online forecast specific to China. The numbers are staggering! To give you an indication of the speed at which eCommerce is taking off in China, consider that recent figures from the State Post Bureau of China indicate that more than 6 billion packages were shipped in the first three quarters of 2013 – an increase of 61% from the same period in 2012. Factors contributing to China’s massive eCommerce market and rapid growth include:

  • The Alibaba Group. Unlike our U.S. and European forecasts, Forrester’s online retail forecast for China includes both B2C and C2C online sales (the other forecasts include only B2C). In China, B2C and C2C online sales are strongly influenced by the Alibaba Group’s websites Tmall and Taobao. Tmall, which became a platform independent from Taobao in 2011, is making news for its unprecedented sales and has a long list of partner brands including the NBA, Microsoft and Gap. Apple made news recently when it opened a store on Tmall in addition to its existing direct-to-consumer site. The Alibaba Group also has a stronghold on the eCommerce payments space with Alipay, which, according to Forrester’s Technographics data, tops the list of preferred online payments among metropolitan online shoppers in China.
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Using International Shipping to Reach Global Shoppers

As a member of the eBusiness team that looks at how eCommerce trends are evolving, I’m constantly talking about how global is an inevitable part of retailers’ futures. Knowing how to tackle global markets can be a challenge, but some options are making the process of tapping into international shoppers easier.

This week, my colleague Zia Daniell Wigder and I published a report for clients on how US online retailers can use cross-border shipping to reach global customers. Through our research, we found that it is not uncommon today for businesses of all sizes to use international shipping to reach new customers or for those interested in developing a long-term global strategy to test the waters with international shipping before entering a new market. The report details the flexibility of the different models available to retailers today and identifies some of the vendors in this space that can help.

Highlights from our research include:

  • English-speaking countries remain the top markets for cross-border orders. Vendors noted that the highest percentage of their clients’ shipments continue to go to English-speaking countries, most notably Canada, Australia, and the UK. This makes sense, given that most retailers do not translate their site for local markets, but interestingly, we also heard from a few retailers that there is new demand coming from smaller countries like Turkey.
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Why is the movie industry getting all of the attention?

 

Last week I wrote about what digital businesses entering China can learn from Jon Stewart-- along the same lines, Hollywood has recently made headlines with its success in the country.

Movie studios are taking the time and making the effort to crack the movie industry in China, as can be seen in the recent success of Iron Man III. Not only are the studios figuring out which cultural references will resonate and seem natural, they also work closely with government officials to understand what might be culturally insensitive to avoid a last minute pull from the screen – all important elements to being successful in China in any industry.

Is your business placing the same importance on China as part of your global online strategy by offering tailored products and content? The numbers make the case that you should be:

  • Box-office sales in China grew 30% between 2011 and 2012 – Forrester’s data shows that eCommerce sales grew by 43% between2011 and 2012
  • Chinese box office ticket sales were $2.7 billion in 2012 – Forrester’s data puts eCommerce sales in China at $169.4 billion in 2012
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What digital businesses entering China can learn from Jon Stewart

Is Jon Stewart’s recent online success in China a sign of new opportunities for non-Chinese brands? In China, the demand for global brands and content continues to grow - to the point that it has spread into new industries like comedy shows, where cultural cues are paramount to success. Jon Stewart is just one of many western icons with newfound success in China, all in part to the accessibility of new consumers through the internet.

Online businesses selling anything from humor, makeup, or shoes to baby formula can’t ignore these demands for their products in China: More and more consumers are exposed to global brands of all kinds through online offerings and travel. There are huge advantages to being one of the first brands to be noticed in the market, but just showing up isn’t enough. To be successful, learn from Jon Stewart and:

  • Localize your offering. Give your consumers things they can relate to and use. Jon Stewart did this by coming up with culturally relevant jokes about China’s culture. For retailers this could mean offering products that respond to needs specific to consumers in China, like Godiva’s Chinese New Year Chocolates.
  • Develop a fan base online. By giving your very social Chinese consumers a platform to talk about your brand, you can generate free marketing and new insights. Jon Stewart’s fans aggregate his videos in one place and work together to translate and upload subtitles on his video clips.
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In China, mobile should be a key part of your eCommerce strategy

About two weeks ago I had the opportunity to go to Shanghai for Forrester’s first event in China, “Winning the Dynamic Digital Consumer in China”. (To read all about it check out Andrew Stockwell’s blog post here.) At the event I gave a quick presentation about the potential opportunity that retailers have to engage with mobile shoppers in metro China where nearly 100% of online adults have at least one mobile phone and more than four-fifths of those mobile phones are smartphones.

It is critical for eBusiness professionals to put mobile on the top of their to-do’s when creating their China strategy because of the huge opportunity to engage with consumers - and the fact that the market remains vastly underserved. After spending a week and a half in Shanghai and Beijing and visiting American and European retail establishments this proved to be the case - only a handful had any type of mobile offering.  A few things to think about when considering your mobile strategy in China:

  • There are 1 billion mobile phone users in China, but 3G has yet to hit 25% penetration.
  • Free Wi-Fi is available nearly everywhere – malls, coffee shops, fast food restaurants, train stations and even in some taxis.
  • Unlike their U.S. counterparts, it is very likely that the first connected device for consumers in China is a mobile phone and not a PC.
  • There are specific opportunities for successful mobile campaigns. 39% of Tmall and Taobao’s sales combined were made on mobile devices on Singles Day (China’s equivalent of Cyber Monday).
  • Android is the highest adopted operating system by far.
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