China’s economic slowdown cast a shadow on world financial markets. But consumer spending has proved resilient, with the country’s online shopping market expected to grow at an annual rate of 32% between 2015 and 2017 to more than $900 billion, according to Nomura Securities.
Behind that growth are factors including a burgeoning middle class, expanding Internet access, and mobile adoption. Given the sheer size of the online opportunity, it’s hardly surprising large Western brands have poured into China to sell everything from toilet paper to performance cars.
Mastering the country’s digital marketing and retail landscape, however, is no trivial task. People might know Baidu as “China’s Google” or Alibaba as the country’s Amazon clone, but such comparisons to home markets are often more misleading than helpful.
One of the principal differences to grasp is the extent to which different e-commerce, social, video, and other digital platforms are interconnected compared with those in the U.S.
“You can’t look at digital marketing in China from a siloed approach,” explained Danielle Bailey, who leads APAC research for digital research firm L2 Inc. “Much of the marketing is cross-platform, so it’s a social campaign that hands off to e-commerce play to an interactive ad that someone can purchase from.”
That also means standard digital marketing practices in the U.S., such as launching a branded mobile app or standalone site, aren’t as relevant in China because of the pervasive role of commerce intermediaries at all levels.
But the payoff for partnering with China’s digital players is the chance to interact with hundreds of millions of potential customers. With that in mind, digital marketers should consider the following points in approaching China.
Connect To The Connectors
Any marketing strategy has to take into account the influence of China’s three digital heavyweights: Alibaba, which operates e-commerce marketplaces Taobao and Tmall; Tencent, owner of leading social networking services WeChat and Weibo; and Baidu, the country’s largest search engine.
“While each may appear as though it plays in a different arena (search, e-commerce, and social, respectively), in reality, the companies compete more directly with one another,” noted a McKinsey & Company report. It pointed out that each plays a role in the consumer’s journey, from generating demand and finding local merchants to making purchases and posting product reviews.
WeChat Rules Social Media
With more than 800 million users, WeChat has supplanted Weibo as the dominant player in social media. Some 92% of marketers surveyed by Forrester Research at the end of 2015 reported using WeChat, with two-thirds saying they were satisfied. Like Facebook, both WeChat and Weibo are pay-to-play platforms; companies have to buy advertising to ensure distribution of brand content. WeChat, though, is especially suited for such functions as offering customer service and driving loyalty and commerce, L2’s Bailey said.
That’s, in part, because it has evolved from just messaging to encompassing features including payments and business accounts. A recent L2 report on CPG brands in China, for example, gave high marks to Philips for customer service in WeChat that includes auto and manual reply, user manuals, and live chat features. Its e-toothbrush campaign promoted trials in dentists' offices in three Chinese cities, and a game-centered contest gave users a chance to play for a coupon.
While Facebook is still blocked in China, a Western rival—LinkedIn—has become the third most popular social platform among marketers since entering the market in 2014, per Forrester. Brands such as Tourism Australia, Salvatore Ferragamo, and Louis Vuitton use LinkedIn to reach professionals in both Chinese and English, with 53% indicating they were satisfied or very satisfied with results.
E-Commerce Not A One-Stop Shop
In the U.S., online retail can generally be summed up in one word: Amazon. But in China, the e-commerce landscape isn’t nearly as monolithic. Consumer companies sell through various digital marketplaces, perhaps operating a flagship on Tmall, as well as maintaining storefronts on other top shopping venues, such as JD.com or the luxe-oriented VIP.com.
Then there’s WeChat, fast becoming an e-commerce platform in its own right. An estimated 300 million of its users have connected their bank account information to WeChat for money transfers and online and offline buying. A diary study of a dozen WeChat members conducted by user experience consulting firm Nielsen Norman found 32% of all recorded activities were payments, underscoring its commerce role.
A Huggies campaign earlier this year illustrates the interplay of these various digital players. In the lead-up to JD.com’s Super Brand Day in April, Huggies’ #Crazybabytalks# effort centered on a series of humorous videos posted to Weibo and WeChat that also mentioned and linked to its JD.com store. Weibo posts also drove to Tmall. The P&G brand wound up having its biggest selling day ever on JD.com ($152 million) and more than 1 million mentions on Weibo.
“You must embrace the diversity of digital and e-commerce platforms, they’re completely different in China,” said JK Shen, managing director of digital agency Razorfish’s Shanghai office, in an interview with CMO.com.
Ride The Live Video Wave
Live streaming—of events, performances, and sports—has exploded in recent years in China. Last year, some 200 live-video platforms drew almost 200 million viewers. In terms of business, Nomura Securities forecasts this market will grow 40% annually on average between 2015 and 2018 to nearly $4 billion. Major e-tailers, including Alibaba, are catching on, launching live streaming in both Tmall and Taobao to enhance product demos and even embed e-commerce. WeChat is expected to follow the same path.
Closely tied to the video craze is the outsize role local celebrities play in pitching brands and products in China. Both domestic and Western brands enlist celebrity influencers like Lu Han—the Chinese Justin Bieber—to hawk everything from detergent to jewelry and watches. L’Oreal, for instance, used celebrity hosts for a behind-the-scenes live stream at the Cannes Film Festival, while Vidal Sasson created a video series called Model Talks, featuring top model Liu Wen and other celebs offering beauty tips.
While pop culture endorsers can help boost interaction, marketing experts warn the tactic can be costly and riskier because so much is riding on the chosen brand spokesperson.
Don’t Overlook Online Communities
Community sites focused on particular products or topics are another important—if less glamorous—way Chinese consumers get and share information on brands. Companies can use them to run display ads, host sampling campaigns, and set up brand pages. Western brands, including Pampers and Pantene, account for about three-quarters of all CPG sampling campaigns on community sites, according to L2.
While less than half of the marketers surveyed in a separate Forrester study had adopted online communities, three-quarters of those who did were very satisfied. But the report also noted that maintaining a brand community is also one of the most expensive and complex undertakings, requiring dedicated staff and a technology platform. To help avoid ad fraud on public community sites, meanwhile, L2’s Bailey told CMO.com that she advises marketers to buy advertising programmatically.
E-Tailers Hold Key To Baidu
As China’s leading search site, Baidu is often the gateway to product research and online shopping. For brands, that means a fight for visibility in both organic and paid listings. For popular, generic terms, Baidu typically prioritizes its own properties and community sites in organic listings. Meanwhile, big e-tailers like Tmall and JD.com tend to dominate paid search.
Since e-tailers’ Baidu ads often lead to corresponding search results on their own platforms, marketers should optimize their brands in e-tailers’ search pages. They can also work directly with e-tailers on cooperative search efforts to further boost visibility, according to L2.
Advertising on Baidu has lately come under increased government scrutiny. New regulations that went into effect in August limit the number of ads to less than 30% of page results and require search engines to more clearly distinguish between organic and paid results.
Baidu is also feeling more competitive pressure from popular social apps, such as WeChat. The growing amount of content generated in these apps is invisible to Baidu, limiting the comprehensiveness of its results. And the search giant’s own initiatives in areas like artificial intelligence and offline-to-online commerce (O2O) are still years away from bearing fruit, according to Nomura Securities.