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RETAILERS AND BRANDS THAT SEE ONLINE SHOPPING AS A ONCE-AND-DONE TRANSACTION RISK FAILURE IN CHINA’S SOPHISTICATED E-COMMERCE MARKET

Bain & Company’s annual China e-commerce report emphasizes the importance of investing to engage with shoppers at all stages of the online consumer journey – from online research to purchase to advocacy

Shanghai – Jan. 12, 2015 – More efficient infrastructure, investment and innovation from mega online players, and Chinese consumers’ growing affinity for online and mobile shopping have contributed to a boom in the country’s online retail sector.  New analysis from Bain & Company forecasts that online retail sales in China will grow at an annual rate of 25 percent – three times faster than overall retail, which continues to lose momentum.  Additionally, Bain predicts that by 2018 half of online sales will come from Tier 3 cities and below.  These rapid changes present new online business opportunities for companies that can embrace the country’s rapidly evolving digitalization trends.  Yet, a new report from Bain, Riding the Digital Wave in China, argues that many retailers and brands are not prepared to adapt their business model to the customer’s digital journey.

According to Bain’s analysis, China’s unique and highly functional e-commerce payment systems and infrastructure networks, rivaling those of many developed markets, have helped to pave the way for the growth of e-commerce across the country.  As this infrastructure matures, so too do Chinese shoppers, who are growing increasingly sophisticated and comfortable leveraging digital platforms, including mobile, to shop.  The analysis, conducted with data technology company, AdMaster, found that approximately 80 percent of Chinese consumers who bought online last year made at least one purchase from their smartphones; 20 percent are weekly mobile shoppers, suggesting the country could lead the world in mobile commerce sales this year. 

“China’s advanced online retail landscape and consumers’ passion for online shopping point to a fundamental implication:  a digital strategy is absolutely and immediately necessary to succeed in China,” said Serge Hoffmann, co-author of the report and a Bain partner.  “Retailers and brands cannot afford to wait for the right moment to get in the game. Instead, the best companies will jump in with both feet, start out small to make an impact and improve as needed, letting the customer be their guide.” 

Bain suggests that Chinese customers take a different, more holistic view of online shopping than most brands or retailers that think only about the transaction.  Brands should see the act of making a purchase as just one step in a three-step online journey that begins with discovering and researching products.  According to Bain, more than 50 percent of purchase decisions (both online and brick-and-mortar) are now made online. It continues when the customer decides and transacts.  Then, the analysis shows Chinese shoppers go back online in large numbers to review and advocate for or against a product – almost 80 percent of Chinese shoppers surveyed provided digital reviews following purchases last year.  The research identifies a strong positive correlation between online comments and sales: the more online comments, the higher the sales, suggesting that social media is an increasingly effective tool to create more informed and satisfied customers, who are willing to spend more,  make more purchases, and refer their friends and family.

Alongside the customer journey, a dynamic digital ecosystem has emerged in China, dominated by mega-players in digital media, e-commerce and social media that understand how to best seize the opportunities that arise from both established companies and smaller players new to the online retail field.

Bain observed traits from some of the leaders in China e-commerce, including Alibaba, Baidu and Tencent, and identified three major areas where retailers and brands can disrupt their current business model:

• Digital marketing: Leverage digital tools to better target consumers with automated processes
• Omnichannel: Provide seamless consumer experience through consistent pricing and assortment; leverage digital commerce to broaden and deepen customer reach
• CRM 2.0: Strengthen customer loyalty and promote repeat purchase; manage and support salesforce with digital tools

Woven through these three steps is customer data collection and analysis, which is an essential part of all digital solutions.

“The leading retailers and brands in China maximize their ability to reach customers throughout their journey – not just at one or two points along the way,” said Bruno Lannes, Bain partner and the report’s co-author.  “In China’s highly competitive e-commerce environment, delivering on customers’ research needs and making it simple and rewarding to provide feedback, is now as much of a differentiator as providing a convenient way for customers to buy online.” 

To receive a copy of report or arrange an interview with its authors:

• International media contact: Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102
• Chinese media contact: Pinky He at pinky.he@bain.com or +86 21-2211-5585

                                                                                               
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