11.11In the lead up to China (and the world’s) busiest shopping day, WPIC’s VP of E-commerce, Sally Zhang, joins once more to talk about what some of the emerging trends are in China’s digital space.

Sally is a Certified Tmall and Taobao Lecturer with Alibaba’s Taobao University, where she trains businesses how to win on China’s leading e-commerce platforms and drive revenue for their brands.

WPIC: Sally, thanks for chatting with us. Now, this is quite a busy time for you, correct?

Sally Zhang: This is a busy time for companies of all shapes and sizes inside China’s e-commerce ecosystem.

WPIC: What makes this a busy time for brands in China’s e-commerce space?

SZ: As we approach 11/11, the single busiest shopping day of the year, what we are seeing is that brands, platforms, KOLs and trade partners are all in full preparation mode, to ensure that they drive conversions on China’s e-commerce channels.

WPIC: What are some of the common trends that emerge around 11/11 each year?

SZ: Great question. Obviously, 11/11 is a one-of-a-kind event in the Chinese promotional calendar. No other day is similar. Lots of product categories are on sale that day. What that means is that, in order to compete on visibility, brands will need to discount their items significantly. As a result, many of our clients (and the data supports this as well) find that the day is not quite as profitable as other days in the promotional calendar. The upside, however, to these discounts, is that companies can leverage this opportunity to raise awareness for their products.

WPIC: Interesting. And is Tmall the only e-commerce platform that offers these discounts?

SZ: Another good question. Although Alibaba is the organization that created 11/11 and is most associated with the event, most major e-commerce platforms do participate. They know that consumers are in sort of a “shopping” mentality, and understand its a great opportunity to capitalize and move products. And, just like Alibaba, they start advertising promotions well in advance of the 11th. Usually, ads begin at least two weeks out for platforms and sales of all kinds.

WPIC: A really important thing for many brands to remember. Now, lets turn our attention to broader Chinese e-commerce consumption trends. Can you speak a little bit about what you’ve learned and been discussing at Alibaba’s Taobao University?

SZ: Absolutely. In the first half of 2019, we’ve seen four core trends emerge from consumers:

  • Previous perceptions of consumer behavior are being completely upended
  • Young consumers and their preferences and habits are now the biggest variables on Tmall and Taobao
  • Consumption is becoming more rational
  • Acquaintances, social scenes, private life and new emerging channels are being re-engineered to drive consumption.

So, let’s dive into those.

Trend 1: Changes in channels. Today’s customers are more willing to believe in friend recommendations and KOL recommendations, so media channels like Taobao Live, Little Red Book, Tiktok and Weibo are key channels to spread the word out to consumers.

For instance, through optimized operations, a KOL with a smaller following can rival a big KOL in terms of their ability to sell goods. That is to say, we’ve reached a point where a KOL’s ability to sell goods does not necessarily depend on how many fans they have, but rather engagement and effective targeting. These days, small KOL’s have a more targeted brand alignment, which pleases fans, and leads to a growth in conversions. So what ends up happening is a small KOL’s ability to sell goods is really no worse than a lead KOL’s.

Trend 2: Brands that are advertised as domestic and “Made-in-China” are on the rise within Tmall. Over the past year, these “old” brands are rising sharply from an e-commerce conversions perspective, as Tmall has been providing constant support to these domestic brands.

In particular, they are seeming to resonate with late Millennials / early Generation Z consumers (those born after 1995). Baique Ling, for example, may be the fastest growing brand among all the old brands. Right after this, it is followed by Meijiajing and Xie Yuchun. More than 30% of their fan bases seem to be born in or after 1995, and such, they are driving conversions that occasionally rate higher than even some major international brands. Again, part of the reason is that these “old” brands have been receiving significant support from Tmall in terms of platform presence. In addition, the original designs and original brands are having a bit of a renaissance. It’ll be interesting to see if this continues.

Trend 3: The rise of Generation Z (born after 2000). What we’re seeing from the platform data is that, about 60% of that younger cohort have higher intention towards smaller brands. Conversely, they do not the same loyalty towards big brand houses that previous generations did. And, as that generation emerges socio-economically, with significant disposable income (close to 3,000 RMBs per person in tier-1 cities), they’re able to drive growth of certain brands.

Additionally, the influence of KOL’s on Generation Z seems to be decreasing. Those consumers prefer the recommendations of friends, and dedicated search for their products. Similar to the slightly older cohort that we discussed in trend 2, these Gen-Z consumers do not think domestic brands are any worse than foreign brands, in part, due to the rising competence of several well known domestic brands, like Huawei, Xiaomi and so on.

Trend 4: Consumption is becoming more rational. In 2018, for example, a package of small bottles of white wine (such as Jiang Xiaobai) increased in its volume sold by more than 40%, while traditional white wine (in 750 ml bottles) only grew by 1.3%.

In particular, consumers across China seem to be less willing to pay a “premium” for specific brands. They’re starting to prefer cost-effective products. For instance, Maotai is known to be the top white wine brand in China, however, consumers are less willing to pay for it these days. This means that companies need to be aware of the price points at which they are offering their products, and be competitive with high quality, domestic alternatives.

Remember- about 24% of consumers in China have multiple channels to compare prices.  When they buy a mobile phone, for example, they will look at JD, Taobao, Pinduoduo and many other e-commerce platforms, to find the best price. And nearly 65% of consumers have turned towards group sales, in order to get lower prices. That’s why it’s vital for foreign brands to monitor pricing of their products and their competitors’ products inside the market on a regular basis.

WPIC: Sally, thanks for taking the time. Interesting insights as we head into the busiest shopping season of the year.

SZ: Happy to chat.