Digital China Report: Mobile first and last

More than half of all ecommerce sales in China this year will be made through mobile devices. With 530 million smartphone users in China, who spend an average of five hours on their phones, a racing m-commerce market is forging new connections between buyers and brands.

Consumers have simply skipped the desktop era and are 100-percent mobile for their internet usage. “China is a mobile-first nation when it comes to consuming digital information and having digital interactions, both within themselves and with brands,” says Alex Misseri, SVP and head of retail/ecommerce, Razorfish. But what does a brand really need to succeed in China’s retail scene?

“Recognising this is the first step,” adds Misseri. “For most of our clients, they struggle to catch up with the digital evolution of the consumers out there. They have to think mobile-first.”

Chinese consumers use mobile systems like WeChat in all areas of their lives. Much more than a messaging system, it has evolved into an ecosystem for modern China. Internet banking in China can be clunky and slow, and seamless mobile payment systems have been quick to grab market share. WeChat Wallet has revolutionised the ways consumers pay, transfer money and top up phones, as well as paying bills, ordering cabs, booking cinema tickets, giving hong bao (red envelope) and even managing your savings. For its 650 million social network users, WeChat is an essential social tool, and there isn’t much it can’t do.

But WeChat is still competing in retail terms with the online retail giant Alibaba and its mobile payment system Alipay. Alibaba’s success in China is built on immense ecommerce sites such as Taobao and Tmall, where mobile payments are becoming increasingly significant. In the quarter to December 2015, 68 percent of its total gross merchandise volume was made using mobile devices, and the number of mobile monthly active users increased 48 percent year-on-year to 393 million. Alibaba says even relatively new mobile shopping app, Mobile Taobao, has already surpassed an average of 110 million daily active users.

On Singles’ Day in 2015, China’s biggest shopping day, more than 27 million purchases were made via mobile devices in just the first hour. And by 2pm, mobile purchases accounted for 70 percent of the gross merchandise value, up from 45 percent the previous year in the same period. 

Alibaba’s Alipay and Tencent’s WeChat payment have around 49-percent and 20-percent market share respectively. WeChat has built its m-commerce around the successful creation of a community, with a payment system on top. Alibaba’s mobile payment system has 10 years of retail experience to build on, making it the more established player, now even targeting Chinese consumers overseas.

“I don’t think there is a preference for either Alipay or WeChat among the bigger brands,” says Sascha Engel, managing partner, Asia at K1ND. “It’s not a question of whether you should offer one or the other—you should offer consumers whatever form of payment possible. It’s truly a walled garden that the big players like Alibaba and Tencent build to keep transactions and traffic within their own ecosystem. Brands need to be aware and plan accordingly within their digital strategy ...  So in a nutshell, offer whatever payment possible.”

New to the market is disruptor Apple Pay. China is only the fifth global market for Apple Pay, following launches in the US, Canada, Britain and Australia, but Apple controls about 14 percent of the China smartphone market. This equates to around 150 million Chinese wireless subscribers. Apple is gambling that even just signing up two-thirds of these to Apple Pay would equal 100 million users of the service. But for the dominant Alipay and WeChat, there is not necessarily any call for alarm, as 85 percent of the smartphone market still use Android devices which don’t support Apple Pay.

“Mobile shopping has already become a mainstream way of consumption in China as mobile penetration continues to increase,” says Zhang Kuo, general manager of Alibaba Group’s merchant business division. “Nowadays, consumers can access shopping sites or shopping apps on mobile anytime, anywhere. So mobile shopping is characterised by the fragmented time they spend and a higher frequency of visits.

“Whereas in the PC era, consumers usually visited an ecommerce site to look for specific products, nowadays in the mobile era, they often browse a shopping site/app on mobile for shopping-related contents as well. Consumers are also getting used to following the accounts of their favourite content generators within a shopping app, rather than just bookmarking storefronts and product listings as in the case of the PC era.”

Another marked difference in the mobile-first era is the geographical opportunity. An estimated 600 million Chinese people still live in rural areas, with limited retail options. M-commerce has stepped in to fill this gap—spending by rural consumers grew in excess of 250 percent in 2014, according to Alibaba’s own figures.

Accessing consumers through mobiles often means a more conversational approach, particularly considering the links between m-commerce and social networks. Visits via mobile are quicker, meaning the purchase system has to be flawlessly simple and needs to be direct. 

“Social media usage has also really changed the game of how consumers become aware about brands and products,” says Chris Hatfield, director of digital consumer marketing and media Asia-Pacific at Clinique. “Mobile is the connective device for this conversation and behaviour, and we certainly want to be as a brand connected to these touch points where this interaction is happening.”

For retailers, it also makes it easier to accurately pinpoint users’ habits and preferences. “Tencent knows what you post and read on your WeChat Moments, which games you play, what you are talking about with your friends in chats, where you hang out and when you spend money,” says Engel. “If you would combine all that data, it’s a pretty powerful consumer profile.”

In addition, users generally remain logged in to different accounts on their mobiles, making purchasing a one-click option. “This allows merchants to customise different storefront designs to cater to different types of consumers and ultimately achieve a better conversion rate,” says Zhang. “With mobile, merchants and consumers can also be more interactive with each other, as consumers are online anytime, anywhere. This provides merchants with a much more powerful platform than PC with which to share contents and build brand loyalty.”

The introduction of these quick and easy-to-use payment systems has offered up new opportunities in the online-offline retail world, too. “When it comes to the old-fashioned brick-and-mortar stores brands operate, it is imperative that brands who operate these outlets embrace new forms of payments,” says Engel. “Consumers are as used to scanning a QR code as they are to swiping their card. As a brand you need to offer consumers options: in the end it’s all just another method of payment.”

Alipay has been launching tie-ups with traditional property developers and hotel operators such as Marriott, introducing m-commerce payment options, special mobile deals and a range of other mobile incentives. This is the way of the future. Brands are increasingly keen to encourage customers to order and pay directly via their phones, cutting down waiting times and offering more efficiencies.

“In many cases, the journey does not start and finish on mobile,” says Misseri. “People start browsing in a store, on a tablet, then maybe pay via mobile. A lot of journeys start somewhere else. This naturally introduces the notion of omni-channel and O2O, showing that once again, consumers are ahead of brands and marketers. They are already omni-channel. So the consumer in China is in front of the brand and more advanced.”

But to master m-commerce does require high amounts of investment. As consumers are online wherever they are, they expect brands to be online, too. They look for real-time responses, updates and information, and they are not patient about waiting.

“Consumers nowadays are also on the lookout for contents to be entertained, learn about new trends or acquire knowledge while on the go,” says Zhang. “Rather than just product information, merchants should also consider providing consumers with high-quality contents to impart industry knowledge, communicate their brand story and foster customer loyalty. Our data shows that among the top 10 best-selling women’s apparel stores on Taobao Marketplace in 2015, five are operated by online celebrities who are adept at accumulating followers by promoting contents.”

By 2019, China’s mobile sales will account for 71 percent of all ecommerce sales. As the m-commerce trend continues to sweep the country, brands and retailers neglect mobile opportunities at their peril.