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Capturing the Chinese Consumers in the
Changing Digital Era
Jasmine SunApril 2, 2014
1998
2000
2001
6
Online consumers are evolving – so should brands
Source: SmithStreet Research and Analysis
Premium LuxuryVia official e-commerce
or omni-channel
Cheap / Counterfeit productsVia mass online market place
Accessible LuxuryVia official e-commerce
Discount / Overseas agency Via multi-brand channels
Online Luxury Shopping Experience Curve in China
Not seeing official presence online, new consumers are mislead by the counterfeits in terms of brand positioning, pricing and style.
Experienced consumers at the forefront are ready to consume accessible luxury online. When they can’t find official channel
online, they have to turn to the non-official ones.
7
Many luxury brands see the importance of developing official e-commerce platforms now, for branding and expansion purposes
Source: SmithStreet Research and Analysis
8
4
5
2
31. Tell the story of the brand and logo
2. Bigger font size
3. No need to share with a 3rd party platform such as Weibo
4. Pattern on the sides are too loud compared to the white background
5. A beautiful poster would be better than a product picture on the home page
Besides, the website connection is very slow.
1
Brands need to adjust to the different need of merchandizing and user experience demanded by local Chinese consumers
Source: SmithStreet Analysis among Shanghai luxury consumers
1
1
1. Local customers expect to have an obvious sign on the top of the home page for customer service, such as telephone numbers or a chat window
9
Big and mid-sized auto insurers have been active in developing e-commerce platforms, viewing it as a key future growth point
First Purchase• convenience of purchasing• strict requirements by 4S dealers
Renewals• better pricing• relationship and service provided by the 4S Store
First Purchase and Renewals• within personal networks (friends working in
insurance corps)• higher levels of service and extra discounts
Renewals• lower pricing relative to agent channels• Telephone sales currently dominate the direct channel
due to the convenience
Renewals • Important information resource• not fully developed yet, more popular among tier 1 and
young consumers• viewed as a key future growth point
Source: SmithStreet Interviews & Analysis
4S, 76%
Agent (Personal Network), 16%
Other, 6% Tel, 2%
4S, 28%
Agent (Personal Network),
36%Other, 2%
Tel, 36%
Online, 8%
Purchasing Channel for First Purchases%, N = 50 Respondents
Purchasing Channels used for Renewals% with past experience at each channel, N = 50 Respondents
10
More luxury spending happens overseas than in China, and there is a trend away from Hong Kong to less crowded places
South East Asia – leisure destination for all cities but not for luxury purchase
Europe U.S.
Europe and US
SHPriority destination due to cheaper price, more options and better service
BJ/CD Not an important destination
KoreaMainland China
Hong Kong
Korea
SH/CD Not an important destination
BJFirst option for overseas purchases due to geographic proximity, and cheaper price and smaller crowds than HK
Mainland China
SHOnly for accessories and small jewelry items under RMB 10K
BJ /CDBuy a broader selection of items domestically as are less sensitive to price differences
Hong Kong
SHOnly a destination for some fashionistas; most consumers have ‘upgraded’ to shopping the EU or US
BJSwitching to Korea for cheaper prices and no crowds
CDComplain about the crowds but HK is still the top overseas option for buying luxury
Source: SmithStreet Interviews & Analysis
Key Overseas Destinations for Buying Luxury
11
Independent travelers to Europe who buy a lot luxury typically researched online and based on word of mouth to choose hotels
• Among different groups of different consumption level, hotel spending doesn’t follow tight while luxury consumption goes up
• Booking.com is the most mentioned as the typical channel for reservations, on the wheels of travel agency
• Key factors for hotel selection on comparison websites: price, number of stars and convenience to key destinations to ensure value for money
Source: SmithStreet In-depth Interviews and Analysis
12
Internet connection has been fast moving from only PC based to mobile based - people are no longer offline
Smartphone Penetration # of Smartphone Users
Source: CNNIC; KPCB; CLSA
In Less than 5 years, the number of smartphone users has grown by over 33MM, accounting for 72.2% of total web users
38,825
35,558
30,274
23,344
11,760
5,040
72.2%
69.3%
66.2%
60.8%
39.5%
24.0%
2012 Jun
2011 Dec
2010 Dec
2009 Dec
2008 Dec
2007 Dec
Total internet users Percent of internet users
The growth rate of smartphone penetration in China started to exceed that in US from 2012. This trend is expected to continue in the next few years
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013e 2014e 2015e 2016e
China USA
Accelerating Smartphone Penetration in ChinaSmartphones as Percent of Mobile Users
Smartphone Users in ChinaThousand
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Digital world in China is a localized market and new internet-based communication tools constantly emerge
2006 2010 20112000
PC Based (Imitation)
Blogging Real-name Based Microblogging
Mobile Based(Innovation)
China
Global
IM
Source: SmithStreet Analysis
14
Strong Presence
China US, Europe
Active Users(per month) 272MM 350MM
PriceFree
• $0.99 (iOS)• $0.99/year for other devices
Social
Leisure
Entertainment
WeChat and WhatsApp dominate different markets, but WeChat is more of a lifestyle than social media app like WhatsApp
Source: SmithStreet Analysis; Hongkiat.com; Theverge.com
WeChat WhatsApp
Text Picture Video Voice ChatLocationPicture Video Group ChatText
Meet strangers (Shake, Drift Bottle)
LocationLive Chat(Walkie-talkie)
Video Calls Moments Feed
Web Chat Public Accounts
Group ChatVoice Chat
Translation Taxi Reservation
Event Organization
Price-Check ShoppingNews Feed
Music Player & Identification Game
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Mobile Apps are becoming more popular among Chinese users but ROI for brands is low• Retention rate of apps remains very low while the required investment is high• Consumers need to find the APPs useful or fun to actively use it – information
promotion will not attract them for long
Although digital landscape changes fast, best choices are clear
Emails was once regarded as the most effective way to drive traffic to e-commerce sites in foreign countries, but this strategy failed in the Chinese market as consumers only use emails for work
Source: SmithStreet Interview and Analysis
Weibo was once very popular among Chinese netizens, but gradually losing market share to WeChat• Most brands have a Weibo account to engage consumers• International brands do not perform well on Weibo as their content is not localized
and strongly restricted by MKT team in domestic countries
Online ads is the most popular way to drive traffic to e-commerce sites• Most important places are search engines, commercial ads before videos as well as
pop-up ads on popular sites• Requires large marketing investment
WeChat is the most popular social media platform in ChinaCurrently offers “Public Subscription Account” and “Service Account” for retail brands to engage consumers and develop e-commerce
16
Case: Liberty Insurance – make it easier via mobile APP
Liberty insurance is making efforts to shorten the claims process by omitting paper materials for certain accidents and launching an iTunes app.
Source: iTunes; Sina
iTunes APP
Traditionally, the claims process requires the insurance company to be on site right after the accident happens, which leads to low efficiency and requires a large service team on call. Liberty has published an APP on iTunes in May 2011 which allows iPhone users to send photos before Liberty will decide if an on-site evaluation is needed.
17
Case: Burberry – target young through digital marketing
• Burberry keeps a very consistent presence across all channels: Baidu BrandLink, Weibo Account, Douban Site, and Youku. These platforms provide links to each other, as well as e-commerce sites and WeChat QR code
• Its current video applies Chinese factors such as horse-shaped fireworks (also match with Burberry’s own logo), Shanghai night view, and New Year Greeting in Chinese, showing the special efforts the brand makes for Chinese customers
“The Chinese consumers usually have 20, 10 or even only 5 years of luxury brand exposure (as opposed to 3 to 4 generations of luxury brand heritage in the west), and average age of luxury consumers is 25 years old who are digital-savvy in China (while in Europe it is 40, in the US it is 50).”
-- Chief Strategy Officer at MEC China
Source: SmithStreet Interview and Analysis
18
Case: Bestseller - m-commerce via WeChat
1. E-commerce accounts on Wechat 2. Brick-and-mortar-led Model
• Online supplements the missing elements offlineo Scan codes in-store to browse product information onlineo Choose to pick-up at stores or delivery back homeo Customers who scan and put products under wish list can have
priority to reserve products and receive order free of postal charge
• WeChat account can direct traffic to offlineEvents on the platform to direct consumers shopping at brick-and-mortar
3. Challenges
• SA training: application of online technology and online marketing skills, etc.
• System safety and stability• Technology development
4. Outlook: One-on-one Service
• Private serviceOnce the relationship is established, SA can be client’s personal contact, offering periodic updates and recommendations
• Less time-consumingo Consumers can proactively ask opinions from SAso Consumers can declare purchase purpose, book try-on section
in-advance through WeChat. By an App (under development) designed for SAs, they can receive customer demand at anytime to give immediate feedbacks
4 main tabs
• All products
• New arrivals
• Recommendations
• Fashion trend
Source: SmithStreet Analysis; Fashiontrenddigest.com
Jasmine Sun 孙雅珏E-commerce and Retail Expert
Office: +86 (21) 6565-6533*8017Mobile: +86 139 1618 6537Email: [email protected]
@SmithStreetCN SmithStreet
SmithStreet @斯密街中国SmithStreet
