At the “International Roadshow 2018: China Insights” in Munich Bernard Wong, Managing Director Serviceplan China Shanghai, and Marcus Ma, Managing Director Serviceplan China Beijing, talked about apps and what brands can learn from them. The article sums up some insights they gave.
Any online-shop project without a decent PIM system poses a huge risk, because excellent product data and flawless interface function are the keys to success.
In e-commerce projects, we are constantly faced with the issue of customers not having a PIM system (Product Information Management System). Product data often only exists in fragments – in different systems and in various formats. And when, at the start of a project, it’s time to plan project expenses and duration, the result is usually a feeling of astonishment. Many customers are surprised by the large figure for system interfaces and data integration. But it is precisely this investment that is of crucial importance, because excellent, well-managed product data and flawlessly functioning interfaces are the key to any online shop’s success.
Say goodbye to unnecessary risks when managing product data
As a service provider, we enter uncharted territory when dealing with companies which do not have a PIM system. This is the riskiest part of the e-commerce project. The customers themselves often have no clue what lies in the abysses of their systems. Whether it be an ERP system dotted with special fields or diverse Excel marketing spreadsheets managing numerous product texts for the web, it is only when the customer and service provider start searching together that they discover the great depths of data management and handling. At this point, every customer should realise that it is worth investing a decent buck in integrating product data, and thus tackling the root of the problem, in order to ultimately carry out a faster, cheaper, more streamlined e-commerce project.
The PIM system as the ideal aggregator for all product data
What is the difference between PIM-less and PIM-based e-commerce projects? The biggest difference lies in the number of interfaces to the online shop. Without a decent PIM system, data is often fed into the shop from various sources, usually without sorting, cleaning or filtering. Collating extensive data from many different systems in the online shop is very time-consuming and susceptible to error in itself. A PIM system prevents this problem, as the online shop is assisted by a strong partner who feeds it all product data through just one interface. This minimises the process, rather than the previous rigmarole of hunting high and low for the latest product data and identifying the responsible managers, who then had to laboriously gather all the relevant product data. The PIM system is the “Single Point of Truth”, doing away with the need to waste time and effort looking for and collecting product data (see Fig. 1).
Another important aspect of PIM-based e-commerce is the fact that the online shop is separate from the product management processes. The platform for product management, translations, texts, photography and much more is located in the PIM system, taking a great strain off the online shop, which is not optimised for these processes. A customised PIM system provides standardised interfaces, data mapping, matching and merging functions, and workflow functions to adjust data and plugins for shop systems to access all available product data. In a PIM system such as the one offered by Contentserv, the product data can be provided to an e-commerce system like Shopware using a standardised plugin following successful data integration. Faster, more streamlined product data management is thus a clear aspect in favour of PIM-based e-commerce (Fig. 2).
Reducing all project costs by introducing the PIM system
Any customer yet to adopt a PIM system but who wants to get started in e-commerce initially needs to tackle the challenge of managing their own data – whether it be for their own online shop or for sales via online marketplaces. In addition to significantly reduced expense, a customised PIM system enables a fast time-to-market and saves costs through flexible options for publication on all online and offline touchpoints. If I, as a customer, find a service provider who not only offers me a new or optimised e-commerce platform, but also sets up my PIM system beforehand, at least 50% of the costs for this will be paid using the savings from the e-commerce project; in other words, half can be refinanced (see Fig. 3).
A suitable PIM system means satisfaction for all stakeholders
A customised solution not only makes end customers happy (since they can enjoy extensive, personalised product information), but also the staff who are constantly working with all kinds of product information and the challenges of data integration. Once the suitable PIM system has been set up, product and e-commerce managers can each offer specialised software which maximises their strengths precisely where these are needed: the PIM system to manage product lifecycles and the e-commerce platform for all marketing and sales activities.
PIM-based e-commerce is faster and more streamlined
A PIM system can help tremendously to reduce expense and risk by acting as the ideal aggregator for all of the online shop’s interfaces. PIM-less e-commerce often overloads the shop system with product data from all kinds of systems and functions which would be better handled by a PIM system. E-commerce operators without PIM systems end up wasting both money and time over the long term, and also increase the risk of all their e-commerce activities. While the first launch of the e-commerce activities may be faster, these activities will lack a reliable basis if they do not have solid systems and processes in the background, because inefficient, error-prone processes impede the desired rapid growth. PIM-based e-commerce is essential for anyone wanting to be successfully equipped for the digital future. Only by correctly managing product information using a PIM system is it possible to lay a solid basis and optimum foundation to unlock all digital sales channels and successfully pursue Connected Commerce at all touchpoints over the long term.
In the last couple of years, entrepreneurs across the Middle East have launched new products, businesses, and have shown the possibility of creating a vibrant startup scene similar to Europe and the United States.
Startups from the region have shown great promise. An example for this is the recent acquisition of Souq, an e-commerce player that got acquired by Amazon for close to $800 million. Another notable exit from this region is Talabat which was acquired by Delivery Hero based out of Germany.
According to a report published by MAGNiTT, a research agency, more than $870 million were invested in Middle Eastern startups last year and each company raised more than $500k individually.
E-commerce, however, is a crucial domain in which startups can do much more to fill the gap in the market, so let’s take a closer look at this vital industry.
Present and future of e-commerce
According to a report published by BMI Research, the Middle East is one of the fastest growing e-commerce markets in the world. The same report also projects that the sales volume of this region will expand to $4.3 billion in 2020 from $22.3bn in 2016.
Out of that sales volume, $19.8 billion will originate from the United Arab Emirates (UAE) as currently close to 88% of UAE’s population are internet users with a smartphone penetration of 78%.
But when looking at the current state of the market, Gartner reported that only 15% of the businesses in the region have an online presence and 90% of online shopping import products from outside the region. These statistics clearly show the tremendous opportunities that lie ahead for the online retailers.
Across the region, men are more likely to shop online than women. For instance, in the UAE 59% of online shoppers are male, while Egypt shows the biggest disparity – with 77% of shoppers being male.
Younger web users are contributing to the drive of the e-commerce market too. In all the markets analysed, 26-35 year olds are more likely to make purchases online than any other age group.
In Egypt, a massive 50% of digital shoppers are 26-35 years old.
As for products bought, air tickets, electronics and fashion items are the most popular goods purchased online by shoppers in the Arab World.
E-commerce is getting social
The leading way for e-commerce brands is to connect with shoppers across the Arab region via search engine optimisation and social media.
Facebook is the leading social channel among Arab online retail brands, with 41% using the service. Instagram is also proving to be popular – with 23% of these companies making use of the photo sharing app.
It’s good to see an increasing in-depth coverage of the digital market(s) in the Middle East. E-commerce growth has certainly seen an impressive growth.
For those looking to connect with online shoppers across the Arab World, brands need to be aware of the comparatively acute demographics currently making purchases online at the moment – i.e. men aged 26-35 – and trying to understand what makes other web users to try online shopping.
Access may be an issue for certain consumers. And we can also see that certain product types may be better offered through online channels than others.
Social and SEO are seemingly proving to be increasingly vital for e-commerce companies to reach more and more customers, so it will be interesting to see how digital shopping continues to evolve in terms of a search tool, and seeing an increasing adoption in social and more mobile technologies over the coming years.
Challenges in e-commerce
Although the prospect for the e-commerce market in the Middle East is huge, there are many obstacles restricting the progress. Here are some of the key issues:
There are high trade barriers in the region which makes it difficult for online retailers to ship products. Moving goods through customs can trap any company in a bureaucratic nightmare — especially when you add high tariffs, changing regulations and volatile currency exchange rates. Amazon’s Souq, which delivers products primarily to the six countries in the GCC customs union, is an exception.
Most startups would probably fail if being faced with the adverse conditions in the Middle East. In Egypt, for example, there are no bankruptcy laws. That means an entrepreneur could end up being jailed if debts are not cleared on time.
Simply closing a company to start a new business can also prove to be extremely problematic. Endless amounts of regulatory paperwork is involved and it can take up to 5-10 years. According to World Bank, the average ranking for starting a business in the Middle East stands at 117, which is far below the rankings of the US and the UK. So it’s safe to say that there are still quite a few hurdles in the way for Middle Eastern startups.
Usually, startups attract new talent by offering employee stock options. This is true for most of the world but it’s an alien concept in the Middle East as businesses are forced to operate with outdated legal and regulatory systems.
Labor laws also make it difficult to fire employees, especially when it comes to foreigners, while the existing education system in the region fails to provide locals with crucial technical skills, such as coding.
Amazon’s arrival is definitely a dangerous signal for the local e-commerce stores. Amazon is more of a gigantic logistics facility than an e-commerce store and the acquisition of Souq.com will help them to build stronger facilities in the Middle East. Amazon can definitely offer a wide range of products and outpace the local e-commerce stores in terms of delivery time. They will also be driving huge marketing campaigns to get locals in the region onto Prime membership.
Amazon’s customer-centric approach and the mission to provide the widest range of products at the lowest price possible makes it an intimidating competitor of any local player.
Fostering adoption via government’s efforts
If the industry is supposed to succeed, the governments in the region will have to play a crucial role in promoting e-commerce, in addition to the efforts of private companies. One of the major ways to build trust can be enhancing e-governance and digital services.
Most of the countries need to integrate the traditional offline services such as visa programs, transportation services, utility services and more online platforms that can leverage online payment gateways to provide efficient services to the local population. In fact, other countries can get inspired by the UAE which has established the world’s first purpose-built duty free retail hub — ‘Matajircom’. There should be concrete efforts from the government to work in conjunction with the regional and international firms to boost e-commerce in the Middle East, so that they can keep up with the rest of the world.
Notable e-commerce startups
Despite the problems that startups in the region face, many have managed to beat the odds and reach notable success. One of the most prominent startups in the Middle East is Wadi.com, an Amazon-like e-commerce store that raised $67 million in a Series A round with an undisclosed valuation.
Contrary to Amazon, Wadi sources products from a diverse set of retailers and sellers (without maintaining warehouses) and operates online in the UAE and Saudi Arabia. This helps them to deliver products at a much faster speed than Amazon and staying ahead of the international giant.
Mumzworld.com is another notable e-commerce store that’s targeted towards mothers and baby products. The startup secured multi-million dollars in a Series B funding round from Wamda Capital, twofour54, and Endeavor Catalyst.
Souq.com, which was acquired by Amazon, has established its business throughout the GCC and Egypt and currently commands the largest market share with more than 23 million monthly visitors.
Other e-commerce players that have a strong ground in this region are Aido.com, Awok.com, and Zappos clone Namshi.com. Another popular e-commerce store is Cobone.com which is centered around daily deals.
The future holds a lot for the e-commerce players in the Middle East and it’s definitely great to see companies succeed in spite of the intrinsic barriers. Their success is inspiring for other players to build great products and services apart from building trust in the local community.
Economic reforms, diversification and improvement in labor laws coupled with steady growth in internet penetration will propel the e-commerce market to new heights in the next decade. This can also be seen from the chart below.
Many e-commerce strategies focus on excellence in design and optimum tailoring of shops for the mobile world, exciting campaigns as well as media planning that will attract a great deal of attention and ensure extensive coverage. There is no doubting that all of this is important. Yet even the best planned marketing euro is wasted if the product detail page that customers eventually reach at the end of their journey throws up more questions than answers. What are the product features? What does the material look like exactly? Are the details correct?
The user is often just presented with the most basic information: height, width, depth, size, material. Such information would not be adequate to sell a product in brick-and-mortar retailing. We want to experience products and grasp them in the truest sense of the word. And this is precisely where a large gap exists all too often – despite all connected commerce efforts – between store-based and digital retail or between aspiration and reality. Carelessly designed product detail pages – and we are not referring here to usability or design, rather the main product information – are the final blow to the successful outcome of the user journey. No purchase is made, because the customer simply does not find adequate information about the particular product. An even more bitter pill for the online retailer is if the customer decides to purchase – despite poor or inadequate information – but then is not satisfied on receiving the goods. Expensive returns, negative reviews and dissatisfied customers are the result. We therefore recommend following the four steps outlined below to optimise the product content and thus prevent precisely these negative consequences.
1. Address the topic of content early on
Preparing high-quality and unique product content takes time: time for coordinating internal processes, time for consulting with manufacturers and time for preparing, enriching or refining the content. Texts have to be written, attributes maintained and photos taken as well as edited. These processes have to be done and dusted before good content can be produced quickly in large quantities. In the meantime, you avoid the error of relying on a service provider just before the go-live that, despite not knowing your product range, promises to caption 100,000 products virtually overnight and enrich them with attributes. This cannot go well. You should therefore place the topic of product content among the top items on your agenda.
2. Do not rely on the manufacturer
“We will get the product details from the manufacturer” is a widely held belief. Yet many manufacturers only have very basic product content at their disposal and sometimes not even any product photos as yet. Moreover, you have to transfer the information from the manufacturer to your system. Non-standardised interfaces and different formats often require laborious manual reworking and end up costing you time. And don’t forget: the same manufacturer will be supplying its product details to different retailers – your competitors. This is far removed from unique content.
3. Invest in unique content
Product content is primarily intended for the visitors to your shop. It should inform and encourage the visitor to make a purchase. But getting to the product detail page is a long journey. That’s why good editorial product content has to be prepared optimally for the search engine. Search engine-optimised content promotes the right keywords, is detectable by bots and above all is unique. Duplicate content is penalised in the rankings by Google and others. An investment in unique content is therefore an investment in the performance of your shop. Regardless of whether you have product texts created in-house or by an agency, you invest time in sensible briefings, engage authors who are competent in the most important SEO requirements and familiarise the authors with your product range.
4. Think user-centred – not in channels
The mantra of “media-neutral content” applied for years. The same product content should work in all channels. However, the quest for the smallest common denominator results in content that is then suboptimal in all channels. Print content has to be prepared differently than web content. Product detail pages accessed on mobile phones have to look different to detail pages opened on tablets or on the desktop PC. While customers perform extensive searches on the desktop at home and check every detail, they primarily want to see all key details at first glance on their smartphone when on the move. At the end of the day, what is important is to generate the ideal content in each case for the user to suit their respective usage situation. Therefore, take on board the views of your customers and answer the question as to when which product information is interesting for whom and where. “Media-neutral” content on the other hand patronises your customers.
Top-class product content is not rocket science and – admittedly – not exactly the topic the CDO or Digital Manager will tackle first. But experience shows that it is what concerns your customers. The topic has therefore deserved more attention.
This article was also published on internetworld.de.
In a few years, commerce might look like this: since I can see online that the jeans I really want are available at the shop around the corner, I can just head out to try them on in person. Just before I go into the shop, I receive a push notification on my smartphone telling me that I can buy the shirt from my wish list immediately, with a five-euro discount. The trousers are already ready for me in the shop. The trousers and shirt both fit, but because I don’t want to take them with me right now, the shopkeeper sends them to me at no extra cost. As the shopkeeper has also looked at my purchase history and knows what I like, he also recommends a jacket to me. The jacket might not be available in-store in blue (the colour I want), but I can take a look at it on a digital signage screen. I then add the jacket to my wish list, which I can access online and in-store. I pay for the shirt and trousers with my smartphone – there’s no need for cash – and leave the shop. Everything is conveniently delivered to me at home the next day.
This is one of many scenarios currently being tested to offer clients the best possible digital and personalised customer service, even at point of sale (POS). For salespeople who haven’t yet considered the idea of connected retail, it might seem almost menacing at first glance: How are you supposed to do all of that? What aspects are relevant to me? And where should I start?
From my experience, I’d like to recommend the following steps:
1. It all starts with the CEO
The first requirement is a business leader who is completely behind the idea. Without that, it just won’t work. Developing and implementing successful connected retail solutions is a matter for the boss as this can influence the entire structure of an organization.
It’s important for all internal stakeholders to be involved in the project. A cross-channel shopping experience that combines analogue and digital elements requires a variety of skills: marketing, IT, sales, and the shopkeeper must all be brought to the table. Even the employees in the shop play a key role because only they can successfully apply the concept in practice. You therefore need to create a holistic vision from the very beginning for all participants to work toward.
2. The client is the focus of all activities
The target audience is, of course, the client. “User centricity” shouldn’t just be a buzzword, it should be self-evident. You shouldn’t begin without identifying the client’s needs and understanding their behaviours. Only by doing so can you really offer them relevant services on the appropriate POS touch points to offer interactions that create added value.
Even a simple tablet can enable added value interaction: a shopkeeper can call up additional product information for the customer and offer them additional products that aren’t currently to hand. Furthermore they can access the customer’s purchase history, which is saved on a digital customer card and offers information about the customer’s preferences.
3. Think big, but start smart
Complete your vision with an integrated view on your comprehensive touch point system, but develop new touch points step by step. Gain experience and develop it further. And, above all: avoid an off-the-rack solution that isn’t tailored to your clients.
Come up with potential solutions for small problems, develop the approaches to implementing them, and test them directly in short cycles. This iterative approach allows you to start with minor investments and safeguards against losing investments. Only when the scenario is successful as a prototype should you start with elaborate linkages of ERP-, CRM-, or till systems.
4. Don’t wait, start now
Start collecting ideas from smaller projects with your partners (retail, agency, etc.). These experiences will improve your collaboration before larger projects arise and create a uniform image for clients.
But most importantly: start now! Anyone who hesitates now will be left with nothing in the long run because, ultimately, the client will shop at the business that makes the correct information or products available at the correct time, in the correct place, and in the correct context – online and offline.
This article was also published at wuv.de.
It was possibly only a simple development error that led to a security gap at eBay in December 2015, which had the potential to intercept client passwords during the login process. The consequences of hacker attacks that take advantage of such breakdowns can be substantial – and extremely unpleasant for the user: SPAM-mail, Phishing or stolen credit cards are only a few of them.
And the eBay example shows: large players are also not spared. Up to 87 percent of all websites have medium security flaws, while 50 percent have serious security gaps. The resulting annual loss worldwide is over 400 billion US Dollars. Stores not only risk serious damage to their image with data loss. Online stores are responsible for the security of client data, and are accordingly liable for data leaks. Processes and methods that target the security of e-commerce solutions are therefore indispensable for stores. However, this is not limited to a particular phase in a project, but runs through the entire period up to the day of implementation and activation. Security is an indispensable part of the design process, part of the implementation, part of the system infrastructure and part of the operation.
The following points in particular should be addressed:
Define clear requirements
It seems so mundane, but it is so important: Security begins before the project starts. And each web-store has its own requirements. In a B2B shop which charges a fee for the download of technical documents, it is of course extremely important to design very safe identification or customer registration and access protection. For a telecommunications provider that offers all of its products through a self-service portal, it is equally crucial that only the authorised user has access on the contract and invoice data. Although both examples require the implementation of access security tools, the underlying requirements are different. These must be recognised in the “Requirements-Engineering” phase, and form the basis for later implementation.
Set your standards
“Secure Coding Standards” help developers write secure codes for the web. Ideally, they fall back on safety tested frameworks. Although these preventive investments are immensely important for the security of the web application, there are still no recognised industrial standards, or a norm which defines the security of web applications. Therefore each agency or online shop must take on the responsibility itself and create its own portfolio of standards in the areas of quality assurance, security and testing.
Therefore, a few years ago we started to collect best practices or recommendations from experts, for example the Open Web Security Application Project (OWASP), so that every client does not need to search for a standard themselves, and to be able to offer truly measurable security.
Search for your security flaws
In addition, at the end of any development, we put it through a “Web Application Security Test”, which checks whether our security standards are actually adhered to. In order to do so, we work with a certified “Ethical Hacker”, a specially trained IT expert that possesses a hacker’s knowledge, but who is working for us. Additionally, this is done using various software tools (we use, for example, IBM AppScan) that simulate attacks on the application. Any suspicious reaction by the application is documented and must later be manually verified or falsified. At the end, there is a report that documents the security flaws that have been found, and provides technical assistance to help rectify the problems.
Consider each security flaw found in this phase not as an error by the programmer, but rather as a success! You’ve discovered this in the development phase. The later an error comes to light, the more expensive it is to rectify.
Conduct continuous monitoring
Factors that cannot be influenced, such as the execution environment (browser), different devices (desktop and mobile) and heterogeneous systems introduce challenges to e-commerce solutions that are not always predictable in advance. Selective security and penetration tests, in which experts (e.g., certified ethical hackers) perform targeted attack attempts, help to keep these factors in mind. Because the number of newly discovered security flaws and the ways in which software gaps can be exploited grows daily.
Moreover, there is the option to install an additional “Web Application Firewall” (WAF). This one checks every incoming request before it is passed on to the actual web application. Therefore, a WAF needs to have a complex set of rules that is customised to the particular web application. Suspicious requests are rejected immediately, and, under predefined conditions, could raise an alarm (e.g., through an email to an administrator, when 100 requests per second are sent from an IP address that contain the code for a SQL injection). As a WAF is an independent system, attack attempts do not even come close to the protected application, or the data to be protected.
Be Secure from the Beginning
The cornerstone for a secure e-commerce solution must therefore already be selected during the design – even before the software is actually used. In addition, regular testing of the software, as well as any resulting updates is unavoidable and absolutely necessary. Only then it is possible to keep the software up to date, and to ensure its safety.
This article was also published at e-commerce-magazin.de.
The Amazon Dash Button has been hotly debated in all forms of media over the last week. Readers of Germany’s “Stern” magazine, for example, had a very clear opinion. More than 70% answered the question “What do you think about the Amazon Dash Button?” with the answer “A load of rubbish”. (Source: stern.de) Why has the response to the Amazon Dash Button, which aims to make a lot of peoples’ lives easier, been so negative?
Lots of arguments against the Dash Button
There are apparently many arguments. After its introduction on the German market, the Dash Button is being hotly debated. Data privacy advocates warn of the possible misuses of the button’s new features. Consumer advocates warn of a lack of price transparency when ordering. Usability experts raise the question of how many Dash Buttons it is sensible to have in a household and we’re wondering what actual benefits they would have for us. But where is all this aversion coming from? After all, with the Dash Button Amazon is the only company offering us a product integrated in everyday life that reflects the ideas of pervasive computing and the internet of things.
The Dash Button is currently only aimed at a specific target audience
Amazon was certainly aware that the Dash Button wouldn’t be mainstream at this stage and that it wouldn’t be every customer’s cup of tea. But we should also be clear that we are living in the world of connected commerce where the effect of the long tail is still valid because the target audience for the Dash Button may be small relatively speaking, but in absolute numbers is large enough to make the Dash Button a successful model for Amazon. Because, according to a survey by “Stern”, 10% of respondents clearly advocated the Dash Button. They said: “Great, I hate shopping in supermarkets!”
Could the real home of the Dash Button possibly be in B2B?
Another reason for the harsh criticism might be that the Dash Button was born in the “wrong world” – in the world of B2C e-commerce. Would it not actually be better suited in B2B e-commerce? Imagine a production operation. Synchronised supply chains, as well as just-in-time and just-in-sequence processes are already a reality in the area of series production. Demand impulses between manufacturers and suppliers synchronize the order and product flows here. But there are still a great number of processes that run manually.
Aside from the rigorously timed series production, there are plenty of production facilities that do not deal in large-scale production. They use machines and tools that need to be serviced at irregular intervals. Replacing and topping up auxiliary and operating materials is also performed according to need. In this scenario, the Amazon Dash Button could optimise internal logistics. If attached to the respective machines, it could be used for various materials or even maintenance services. Orders placed would go to the warehouse or requests to the servicing and maintenance service provider. Using the buttons, internal processes can be initiated and the costs allocated to the correct cost units. If equipped with NFC and the “Purchaser” code carrier, it would even be possible to assign the respective purchaser and thus ensure that only authorised individuals can submit material orders or service requests.
If we take a step back from the manufacturing industry and consider everyday office life, the Dash Button could also be of use in such environments: for example, an employee takes the last pencil or notebook from the material store and immediately orders new products by pressing a button on the shelf. Orders that have been placed can, if desired, be combined into a weekly or monthly order and the order is then automatically submitted at the specified time.
There will certainly be many scenarios like this where the Dash Button could make life a lot simpler. Without any security concerns.
The Dash Button – an exciting first evolutionary step
The Amazon Dash Button is a first mover product of its kind. However, it hasn’t necessarily been greeted with the appropriate levels of euphoria, but instead with a great deal of scepticism. “I am convinced that the Dash Button in its current form will not survive the next two years. But maybe that wasn’t even the idea behind it,” said Gerd Güldenast, Managing Director of hmmh. The Dash Button is a new generation of device that will evolve over the next few years and find new fields of application. It is a further step in the integration of connected commerce in everyday life, in order to improve and simplify life.
Maybe the Amazon Dash Button will find a wonderful home in B2B commerce.
This article was also published at internetworld.de.
China is known worldwide as the workshop of the West. But for many years, it has no longer only been known for its extreme production capacity. It exceeds repeatedly the superlatives in all the statistics and rankings, and the digital world is no exception.
Currently of the Chinese total population of 1,362,000 inhabitants, more than 600 million are already online, which is an Internet penetration rate of almost 50 per cent. It makes up 22 per cent of global internet users (1) in one country, and over 95 per cent have one or more social media accounts (2) which they also actively use, on average around 1.7 hours/day of intensive use (3), making China the undisputed social media giant.
But those are not all the superlatives. China has managed, in less than 15 years, to become the world’s second largest eTail market and become a global leader in online sales of luxury goods, which is reflected in an annual turnover from online sales of 2.9 trillion (2014). (4) And the market, seemingly unrestrained, continues to grow. Alone in the first quarter of 2015, online shopping sales once again increased by 45.2 per cent compared to last year, with an increase of 169.3 per cent (5) in mobile shopping. Recent forecasts even expect 2015 to be a turning point in B2C eCommerce with mobile becoming the dominant e-shopping channel.
In recent years much has been written about the digital and mobile ecosystem in China, making the three Chinese Internet giants, Baidu, Alibaba and Tencent, familiar to marketers worldwide. Three companies and the three corporate visionaries behind them, Robin Li (Baidu), Jack Ma (Alibaba) and Huateng “Pony” Ma (Tencent), whose significant contributions to the digital revolution in China and China’s digital market resulted in the BAT Ecosystem (Baidu / Alibaba / Tencent). An ecosystem that has catapulted the three men not only to the forefront of digital China, but also to the top of the Forbes list of the richest Chinese.
To be a successful company in China, whether B2C or B2B, consumer or luxury goods, it is necessary be present online and to be part of this ecosystem, and this in a way which is relevant to the Chinese audience. And it needs to be understood that what is familiar and successful in the Western world is not necessarily the solution in the Far East. To succeed, an understanding of the culture, as well as the digital environment is indispensable, and not just in terms of language. An adaptation to modern Chinese lifestyle is essential and in 2015 that means: social media, eCommerce and mobile.
The Chinese rely on social media more than any other (marketing) channels, because social media channels provide an opportunity to express and exchange their views in ways not possible in other, largely government controlled, channels. Through their experience with the government, the Chinese attach great importance to the opinions of other Chinese. Recommendations from friends, from family or from business partners are in great demand. More than 66 per cent of all Chinese trust and rely on their friends, especially when it comes to buying or investment recommendations. Moreover, instant messaging systems in eCommerce provide direct and immediate contact with the customer, which can significantly increase trust and influence on the customer. The interaction in social channels between users, with KOL (Key Opinion Leaders), as well as brands, can therefore take place directly at a different level and specifically affect decisions. This means that there is nowhere worldwide with more social media addicts.
Since most Western social networks (Pinterest, Facebook, Google+, Twitter and YouTube) are blocked in China, and are difficult to reach reliably via VPN tunnel, a separate national social network has evolved over the past few years, based on the central platforms Sina Weibo and Tencent’s We chat. A social marketing network has emerged which many experts consider better, and from the marketing perspective allowing more targeted, efficient marketing measures than is the case in Western media.
With regard to e-commerce the Chinese government’s last 5-year plan (2011-2015) set a clear objective: China as a global leader in eCommerce. This was centralized and energetically launched. Government action ranged from simplified processes in the creation of eCommerce companies, including tax breaks, a significant improvement of Internet and mobile networks (4G), as well as logistics, through to innovative payment arrangements. And the goal was achieved. Chinese consumers bought more online than ever before, and the aforementioned incredible figures prove that. But again, only those who understand how the giants, Alibaba (B2B), Taobao (C2C) & Tmall (B2C), function can be successful here.
But what now makes the Chinese market so different to the rest of the world? How do these superlatives come about? And above all: how can we use these opportunities?
In a recent interview, Jack Ma, founder of Alibaba, put it in a nutshell: “In other countries eCommerce is a way to shop, in China it is a lifestyle” – and that’s exactly how eCommerce in China differs from the rest of the world.
And what applies to eCommerce also applies to other digital measures. The phenomenon in China is not the figures as such, impressively as they are, but the fact that “online” is “integrated” into the lives of 1.3 billion Chinese people, and that it is an indispensable normality – daily business.
Marketing in China can therefore only be successful if “digital” is also a matter of course, a part of everyday life. The Chinese live on the Internet; the Internet is a part of their lives. Therefore: digital channels have to be essential parts of everyday life – via desktop, tabloid, smart phone, QRCode, social media, KOL, instant messaging, Alipay etc. Every conceivable digital measure must be considered and used whenever possible in order to integrate a company and its brand into Chinese consumer’s lives.
And this is a challenge which in many cases the German/European/American headquarters cannot master in the launch of Western brands in China.
The approach “we have a marketing concept and we’ll roll it out worldwide” may work well in conditions found in many European countries or the United States. China, however, requires a different approach. In China “digital” is not just a marketing channel; it is the heart of marketing. The point where all the strands converge. Almost no campaigns come without a focus on digital. The majority of media plans for China are limited almost exclusively to digital channels to the surprise of European colleagues – and when in the exception Offline is considered, this is only part of a well thought of Offline-to-Online (and vice versa) mechanism that is the key to success here.
The seamless integration of both worlds is no longer theory but practice, which is confirmed in China, and accounts for the investments of Chinese technology companies such as Baidu, Sina and Tencent in retail business and offline business models, as increasingly highlighted in the media.
Social media has taken the key role in successful campaigns in modern China.
At a time when (from the Chinese perspective completely outdated) social media in the Western world is celebrated as the great innovation in customer communications and user dialogue – social media in China already provides all-purpose instruments and a central campaign framework and already offers, alongside marketing, a direct shopping channel, payment terminal and shipping tracking in a single application in the hands of the buyer.
And that is not the end of it. Almost every week China’s digital players put new innovations and technology into the race, which are then adopted in the shortest time and integrated into daily life by an extremely inquisitive open-minded society, eager for innovation and technical highlights,. Innovations often need months if not years to find widespread recognition in the Western world, whilst in China they spread at a record rate across all age and income groups.
But China is not only a market of giants. In addition to the known, previously mentioned players, there is still plenty of space for thousands of niche players (which often have more than 500,000 active users) who, through innovation and customer focus, satisfy the still unsatisfied hunger of Early Adapters. The need for the integration of digital applications in daily life is immeasurable and so there are now digital gadgets available for every imaginable need – which often make life much easier. It is already normal to pay at vending machines with a smart phone, and in daily life, the use of taxis or bill payment without apps and with cash is almost impossible – or at least considered obsolete and primitive.
Applications like QR Code or ibeacon, which in Germany are found at most as gimmicks in technology fairs or as a guide in innovative museums, are in China’s 1st and 2nd Tier cities essential instruments to ensure communication between advertisers and their consumers.
For those involved in advertising and sales, these developments are, in many respects, a challenge. If it is already a challenge to keep up-to-date with these new features, then the second step is to successfully use these new innovations and know how to integrate them accordingly in the communication mix as well as in sales and distribution processes. An outstanding example of this is the development of WeChat with regard to virtual money transactions as well as the use of smart phones as the dominant eCommerce channel of the future.
However, these developments present Western companies in particular often unexpected obstacles. To get an overview and find the right approach often involves high unplanned costs for highly localized communication and distribution concepts as well as the corresponding implementation itself. This often leads to global campaigns being locally adapted with only limited budgets and then often with limited success. However, anyone who is willing to invest and exploit the potential of the Chinese digital playing field is rewarded, and the Western brands which have taken a local approach are rewarded with surprisingly strong market positions.
The secret to success here is usually a strong local team with the right local partners, openness to new technologies and to some extent for the West completely unknown players and platforms, as well as anticipating a corresponding flexibility in the implementation, especially when it comes to global guidelines, IT standards and consent. Here, the Western world too often lags behind developments in the Far East, and time plays a very important role in China. China is in constant change and development, and is clearly ahead of the West in many areas. In particular, the digital environment is developing rapidly and requires of all who want to be involved successfully, the highest speed.
True to the mantra of the Digital Experts in China: “Execute fast, or die.”
(2) which explains why the number of social media users exceeds the number of Internet users
(3) Source: NBS of China, CNNIC, Tencent, MIIT of China, Global Webindex: wearesocial.com;
(5) http://www.iresearchchina.com/views/6484.html; http://www.iresearchchina.com/views/6449.html