5 Reasons Why China’s Online Retail Is so Successful AND Structurally Ahead of the West

TechNode on the current Chinese e-commerce market:

E-commerce in China has seen such rapid growth in 2017 that even something as mundane as selling vegetables is starting to sound sexy. During the first six months of 2017, China’s online retail sales of goods and services recorded a 33.4% year-on-year growth amounting to RMB 3.1 trillion ($470 billion).

Here are the reasons TechNode identifies for why Chinese e-commerce is experiencing tremendous growth right now:​

1. Personalized discovery:

Brands prefer to set up stores on well-established platforms instead of running their own websites. This gives them an opportunity to be a part of a shopper’s journey of discovery – Chinese consumers log into their favorite shopping platform to see the hottest new trends and receive real-time customized recommendations.

Think of it like this: In the Western world, people used to use a general search engine for, amongst other things, searching for products. Every time a user returns to the search engine they start, essentially, from scratch. No stable connections between businesses and customers where established on the discovery platform level.

Looked at from this angle, Google & SEO are primitive and have a serious short-coming that is dampering online retail growth: Online retailers can‘t really rely on their main discovery platform for fostering regular customers.

The emerging Chinese ecosystem is completely different. It is far more sophisticated.

2. Seamless sales

​Here is this sophistication in action:

Thanks to platform integrations, shoppers in China discover brands and products through an increasingly diverse set of channels. Gaming, news, social media, and the ever popular live streaming phenomenon in which internet celebrities (网红, wǎnghóng in Chinese) market themselves and products are all connected to e-commerce websites. One example is JD’s recent partnerships with Qihoo360 and Baidu which will allow the e-commerce giant to seamlessly target consumers where they spend their time on the internet, be it social, search, maps, news or security.

​WeChat, obviously, belongs to this category as well.

In the West, social media services like Facebook started on the desktop and while they managed to make the jump to mobile rather spectacularly for their own business they are still behind Chinese services which, like WeChat, are mobile native.

Look, for example, at the very early-stage, rudimentary Facebook marketplace.

It really can‘t be overstated how important the larger online ecosystem for online retail is​. More robust platforms for discovery and re-engagement mean a more robust growth; they mean a different dynamic.

Increase growth by a few percentiles and you get a different systemic dynamic overall.

4. C2B innovation

Data insights can be of higher quality if you have more regular customers (instead of one-offs):

By using data insight and following trends, social media, and events, Chinese companies can give shoppers exactly what they want at the right time. This allows more experimentation: if the product fails, it can be withdrawn fast, and if it works, it can scale up. […]

Again, the abundance of data makes it easier to predict trends. But the C2B approach requires more than that—the entire process of creating and launching a product takes only a few weeks instead of a few months. This is why speed and agility are crucial.

5. Agility, flexibility, and speed

When Alibaba was first founded in 1999, China’s consumer companies were less developed than their western competitors. However, the initial hindrance soon proved to be a boon. New companies, less burdened by physical retail operations and bureaucracy, used agile decision making to develop a vibrant and highly competitive market. This has also been transferred to agile product development.

​At larger scale thanks to a large home market, Chines online retailers can rely on an agile manufacturing ecosystem to bring products fast to market. Combine all the mentioned aspects and you get an ecosystem that has a far higher iteration rate than what you have in the West.

What to expect: Expect Chinese online retail to keep growing insanely fast for the time being. The ecosystem as a whole keeps maturing, unlocking scale effects in several areas which feed back into the system itself. Also, expect Chinese online retail to increasingly look futuristic and alien to Western eyes. Faster iteration means faster evolution.

One big question is what of this will spill out to outside of China, how and when. (Besides capital of course.)

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