The lure of cross-border e-commerce (CBEC) in China shines like a beacon in a market that already dazzles with record-breaking figures. Earlier in 2019, e-commerce transactions on WeChat mini-programmes increased by 27x year-on-year growth (source: Tencent). Meanwhile, it’s expected that the number of Chinese consumers who buy foreign goods online will exceed 200 million by 2020 (source: CBNData and Tmall Global).
Alibaba’s total e-commerce customers just reached 674 million, and last year they managed to spend 100 billion yuan in less than two hours during the world’s largest online shopping festival. Milk powder, diapers and beauty products are among the most popular product categories (MAC sold out its 3,700 special edition lipsticks in a single second). Not bad for a company looking to become the fifth-largest economy in the world by 2023.
Why do so many brands fail in a market ripe with opportunity?
A glance behind the scenes, however, reveals that the CBEC landscape is not all glitz and glamour. As evidenced in frustrated boardrooms and on the deserted pages of WeChat mini-programmes everywhere, forgotten companies are struggling to survive. In a marketplace with so much opportunity, why do so many brands – even established ones – fail? Is it still possible to launch a new brand in China or, even more intimidating, resurrect an old one?
While there is no magic formula to succeeding in CBEC, there are some poison apples you can avoid altogether. The specific circumstances surrounding each failed strategy vary from misguided product launches, lack of brand seeding, badly managed cashflows, and lack of localization. While all of these are catalysts for failure, a single weakness underlies them all: underestimating the commitment it takes to become a success story in China.
Chinese consumers are savvy, sophisticated, and spoilt for choice when it comes to great brands
China is hard work. Localising campaigns requires far greater commitment than simply adjusting the aesthetics of a photoshoot to suit local tastes. The Chinese digital landscape itself is a sophisticated myriad of content, campaigns, channels, and points of purchase.
Unlike their Western counterparts, Chinese consumers enjoy a seamless path from brand discovery to purchase: with entire journeys completed within one ecosystem. New retail is the new omnichannel: with content blended seamlessly with transactions for experiential e-commerce. While meaningful collaborations with influencers are harder to achieve, the upside is substantial: KOLs famously sell out limited edition products (from cars to luxury handbags) in a matter of minutes.
These opportunities that characterize the Chinese market also demand a carefully tailored approach. Replicating Western brand strategies is simply not going to cut it. Watch our video below to understand the key differences between marketing in China and the US.
Brand strategies must reconcile evolving societal norms with a culture rich in tradition and history
To succeed in China, brands need to balance respect for tradition with shifts in modern culture (such as evolving standards around beauty or gender norms). As homegrown brands adopt advanced digital infrastructures and aggressively build their market share, foreign brands can no longer rely on brand equity alone to penetrate target audiences. Across industries, an increasing number of international brands are strategically adapting their offering to local consumers (think of the egg tarts available at KFC or special edition lunar collections from luxury brands around Chinese New Year).
Competing in CBEC in China means competing in an experiential economy
Another winning tactic is to position your brand as the key to unlocking the lifestyle that consumers aspire to adopt. Social currency is a powerful decision-making factor, with Millennials and GenZ shoppers showing loyalty to brands who help reinforce the personal image they wish to project.
China is an experiential economy and brands should dedicate equal resources to cultivating experiences as they do on product development. Digital technologies are crucial in helping brands deliver memorable interactions with their audiences, providing immersive experiences that foster loyalty and drive word-of-mouth both on and off screens.
Which CBEC channel is right for your brand?
China’s New Retail environment demands that brands rethink their e-commerce strategies. When selling to cross border shoppers, brands can combine paid ads with influencer collaborations to drive visibility on third-party e-commerce platforms. While Tmall Global enjoys the largest share of CBEC transactions, it still requires significant commitment of resources to reach and convert customers.
There are other more niche opportunities for brands to reach Chinese consumers, such as Kaola, XiaoHongShu (Little Red Book), or VIP.com, that are worth exploring as well. No matter which third-party e-commerce site you choose for your brand, laying the foundations for product demand through forum seeding and other brand awareness tactics is key for generating early wins.
Owned channels are also fundamental brand assets in enriching the social commerce experience. Brands that are new to the Chinese market can opt for e-commerce approaches that require significantly lower upfront costs than third-party e-commerce sites.
By opening WeChat e-commerce stores, leveraging interactive mini-programmes, and driving leads from social media sites such as XiaoHongShu (Little Red Book) or Weibo, brands can focus on creating demand for their products through sustainable brand-building strategies.
- The CBEC market in China is ripe with opportunities for brands to sell to Chinese consumers, enabling brands to circumvent lengthy legal requirements (such as animal testing for beauty products).
- Most catalysts for brand failures can be traced back to an underestimation of what it takes to sell to China.
- While Tmall Global is the largest CBEC channel in China, there are other third-party cross border platforms that offer opportunities to reach consumers with less upfront costs.
- Smaller brands looking to build brand awareness can also opt for e-commerce strategies that require less upfront investment, such as owned e-commerce channels and cost-per-sale models.
About the Author
Manuela leads the Marketing division at IMS, advising clients on branding and market positioning in both Europe and Asia.
Prior to joining IMS, Manuela worked in financial regulation and compliance. Past experiences include representing France in roundtable discussions in Brussels for the European Venture Capital Fund (EuVECA) Regulation.
She obtained her LL.B (Hons) at UCL before graduating from Sciences-Po, Paris, with a Master’s in Financial Regulation.
Connect with Manuela Burki on LinkedIn