Alibaba: The China Opportunity

Here’s a stat to get your head around: over the next five years, the incremental growth of Chinese consumption will be larger than the entire UK market.

China has long allured internationally minded retailers, but the complexity of regulations surrounding trading, the significant cultural differences with western shopping, and the vast and varied geography of the country make it a difficult nut to crack.

In fact, speaking at Retail Week Live 2016, House of Fraser’s Chief Customer Officer, Andy Harding, described it as almost impossible to permeate successfully without a partner – in House of Fraser’s case, Sanpower.

Part of the challenge with expansion into China are the number of myths surrounding the retail market. Amee Chande, MD, UK & Nordics at Alibaba Group, helped to dispel some of these in her Retail Week Live session “The China Opportunity”. Amee revealed:

  • Luxury retail is not the only (or even necessarily the most prominent) opportunity. There is an exciting market emerging among China’s growing middle class, which will consist of more than half a billion consumers by 2020
  • It’s not an urban phenomenon, either. The number of online shoppers in rural areas is expanding by more than 40% year on year, showing national potential for ecommerce expansion

So what do retailers need to know about how Chinese consumers behave, in order to get their entry strategy right?

Firstly, technology and ‘multi device’ interactions are even more prevalent in the East than the West. The average shopper in China will make seven different touch points with a product before purchase. This may not be commercial, either; social media and opinion gathering/sharing is incredibly influential on the buying journey.

This means that although shoppers may not expect complete consistency between channels – Andy Harding noted in his earlier talk that omnichannel isn’t valued as highly in China, so consumers won’t baulk at different prices online and offline – being able to reach them in all these touch points and influence their path to purchase is very important.

Secondly, Singles Day means everything. The Black Friday of Chinese retail, 11.11 has transgressed from being a day of bargains to almost a national festival. Amee shared a video of consumers excitedly loading their online baskets ready to embrace Singles Day deals, with one woman purchasing over 100 items during the day (although she wasn’t keen for her husband to find out!).

68% of the transactions processed during Singles Day last year came from a mobile device, so a strong mCommerce strategy will prove pivotal for retailers wanting to capitalise on China’s fast-growing digital shopping market.

Thirdly, the appetite for overseas brands is strong. A third of all the goods bought on Singles Day were cross-border transactions with an international retailer. Many European retailers will already be familiar with the impact of Chinese tourist spending on home ground; according to GfK Global, holidaymakers spent $229 billion globally in 2015, with Europe overtaking North America as the preferred destination outside Asia.

The Chinese government is reacting to this craving for cross-border commerce, relaxing their regulations so that European retailers can ship goods to China without having to register each product individually.

So even with stock market wavers affecting investment confidence, China’s retail market is still a force to be reckoned with. And with Alibaba Group planning new initiatives to bring western and eastern commerce best practices closer together, the online giant could prove an even more powerful route to market as the China opportunity grows.

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