5 Key Basics for Marketing in China - Part II
2. E-Commerce Platforms
Examples: Mobile marketing ads, Programmatic ad buying
Platforms: Tmall, JD, Suning [combined: 90% of market share]
Target Audience: Specific
Feasibility for SMEs: moderate
Marketing or promoting your product or services on specific e-commerce platforms is one most attractive strategies for both promoting and selling your product/services. The Chinese business to consumer (B2C) online retail market has surpassed the $1.5 trillion (CNY) per quarter or $230b (USD)/$305b (AUD) for the first time in the Oct to Dec period in 2018 – which equates to about $100million in online transactions per hour.
The market is also a quasi – oligopoly in that the top three firms Tmall.com [owned and operated by Alibaba], jd.com and suning.com accounts for about 91% of B2C online transactions. It is wise to note that Amazon’s market share in china is less than 1%. Tmall.com is without a doubt the leader in the market, however, without official estimates, commentators suggests that their market dominance is at approximately 60% of the online transactions.
Like many of the online stores overseas, each of the e-platforms has its own promotional event around various Chinese holidays. However, the most significant is perhaps the 11.11 or singles day (November 11th) – similar to the Black Friday on Amazon.com, the 11.11 e-shopping day generated, in 2018, $213.5billion (CNY) or $32b (USD) or 42.7b (AUD) for the tmall.com alone.
For overseas brands wanting to enter the Chinese market, these events represent both an opportunity and a threat. The opportunity is that the number of users and the amount of spend during these peak periods are significant – resulting in greater brand awareness and more sales transactions. However, consumers also expect significant discounts during these sale periods, meaning that companies may need to reduce their profit margins during peak periods.
A question I often get asked is: what is the cost of promoting my product on these sites?
The short answer to this questions is: it depends on a combination of 4 factors:
1. Brand recognition [in China]: the greater the brand recognition, the more negotiating power, for the companies when it comes to getting a fair price
2. Timing: it is probably more wise to drive your marketing push around non-peak periods if you are a more boutique brand with a limited budget
3. Relative or relevant competition: With any market place, the platform will always prioritise its current relationship as compared to the new entrance. Money also does much of the talking in these partnership. I suggest companies partner with complementary brands to help leverage market power [a good example is a small boutique brand offering complementary products to significant and well known items: phone or laptop cases].
4. Niche or unique product segment: many of the larger e-commerce platforms will periodically segment different categories within various product sectors – though it happens sporadically, companies in the past have been able to convince platforms of its uniqueness and hence the creation of a new product category. Product segmentation based on countries (i.e. Made in USA or EU or Australia) have yet to be widely adopted, however discussion amongst e-commerce platforms regarding this is idea is progressing very quickly due to the recent regulation changes across ‘Daigous’ (pronounced Dai Go - individual or a syndicated group of exporters outside China).
Overseas brand traction and penetration into China is both challenging and exciting – a multilayered, systematic and data driven approach is often what is required to reach the world’s largest group of consumers. Companies abroad, all want a slice of the pie, however, Chinese mindset, culture and trends can be contrary to Western thinking. I often suggest to companies to engage and consult with experts who sit between both cultures and involve these experts far earlier in the product development stage, rather than the tail end marketing phase.