When ecommerce researchers are looking for trends that point to the future of their industry, they look to China.
China emerged as the world’s ecommerce leader in 2015 when Chinese consumers spent more than $600 billion online. Every year China’s biggest shopping holiday, Singles Day, generates four times more revenue than Black Friday and Cyber Monday combined. Individual spending continues to grow in China, and is expected to eclipse that of individual U.S. consumers by the year 2030, according to Eric Chia, a senior adviser specializing in Chinese markets and consumer behaviors at multinational accounting firm Ernst & Young.
But it’s not just the numbers that are turning analysts’ heads: China has deployed, and adopted, technologies that remain mostly futuristic ideals in the US. Customers test new products using “magic mirrors” and virtual reality. Same day delivery? Forget that. Aleksandr Galkin, CEO at pricing prediction firm Competera, recalls enjoying same-hour deliveries brought to him via scooter regardless of his location.
And China is becoming a cashless society far faster than the US. E-wallets account for 58% of mobile purchases in China, compared to America’s 15% penetration rate.
“Sometimes you need a mobile phone just to make a purchase” in China, said David Wright, a researcher who specializes in messaging apps for Kantar’s global consulting operations. “Facebook must be going over there and thinking, wow. You can see what people would like to do here, there.”
Is there a secret to China’s ecommerce success? Galkin and others suspect cultural differences deserve much of the credit. But that doesn’t mean U.S. businesses don’t stand to learn from their Chinese counterparts—a little adjustment in attitude, Galkin said, could go a long way toward modernizing American retail.
“It’s a problem of mindset,” he said. “United States retailers are like, ‘we know better than anyone in the world,’ but it’s not true. They need to change the mindset and be more open to innovations.”
China had a natural advantage, Galkin said, because when it entered the digital era, its businesses were still relatively unsophisticated in their adoption of technology. While that seemed like a disadvantage at the time, Chinese businesses were unencumbered by contracts and the expectations of days gone by, allowing them to innovate with greater ease and leave the U.S. 20-30 years behind.
Chinese businesses also retained a customer-first approach to sales and service, while U.S. firms often seem more interested in impressing investors and shareholders. “The idea that they’re building a huge platform can keep a company going” in the U.S., Galkin said, but that “doesn’t work well for consumers. Asia doesn’t care about capitalization. They care about real money.”
Galkin acknowledges that there are some aspects of Chinese ecommerce culture that would be difficult to replicate in the US. A large portion of China’s online purchases, he said, take place in messaging apps. Although consumers world-wide have begun transitioning from browsers to social media, China has a head start thanks to the lack of access to sites such as Google, and the dominance of a single messaging platform: WeChat.
Wright said that’s the first thing he noticed when he visited China this past April: “There are WeChat and Alibaba stickers on every business there…. In China, you do everything on WeChat. You get insurance on WeChat. You book a flight on WeChat. In China, Airbnb would just be on WeChat.”
The fact that almost every business—and nearly every resident—has a presence on WeChat has given conversational commerce a boost in China, Wright said, because businesses have to master fewer platforms to reach customers.
WeChat also gives businesses more control over their presence on the platform, and users are more generous in offering the data for public use, Wright said. By contrast, social media in the U.S. such as Facebook tend to be more controlling of how businesses use their platforms, and users are more suspicious of requests for their data. It’s much easier to, say, dispatch a scooter to a customer’s location when said customer can be located immediately via their user data and facial recognition.
But there are lessons that can be applied in the US, particularly regarding a more personalized approach to marketing. Because social media channels are inherently personal, communication on these platforms “needs to feel a lot more personal, and you need to make more personality come through,” Wright said.
Galkin agreed. Perhaps the chief reason for China’s success is that it skipped the mass communications era and maintained a one-to-one approach to customer service.
“In Asia, trust is the first thing you need to build” when starting a business,” Galkin said. “It’s like in the DNA for any Chinese entrepreneur.”
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