E-commerce in China: a whole different world

Researching on critical factors of success in e-commerce targeting the world's most dynamic economies and some findings are just amazing. Of course the context is profoundly different from what we have in Europe, but consumer preferences may be even more different and perhaps counter-intuitive in certain cases, e.g. sites designs that would feel crowded and too "loud" in many European markets appear to be just about what Chinese consumers like in many product categories. Really fascinating read, which also makes it very clear that China is as much a big commercial opportunity as it is a riddle for European companies.

Here's a short sequence from a show on CNN in which the boss of leading player Yihaodian (backed by WalMart who have been smart enough to not interfere with the way the business is managed locally). He claims that one of their approaches is to list the top 5 things foreign players are doing when entering China and do the exact opposite (100% different as he says). Better watch:

Amongst interesting findings of research on retail in China, there's this classification of online shoppers done by China Business Review and one can only marvel at the impact of historic events on consumer behavior:
  • Frugal retired: Born before 1960, most of these Chinese consumers grew up in tough political and economic times, did not receive systematic education, and worked at state-owned enterprises. The difficult environment during their early lives made these individuals frugal and sensitive toward changes in consumer goods prices.
  • Wealthy retired: This group experienced difficulties similar to the frugal retired consumers, but wealthy retired individuals primarily worked in government and government-funded enterprises that provided higher wages and better retirement benefits. Though many of these consumers are frugal, they are less price-sensitive and often value quality more than cost.In the next 5-10 years, spending habits of Chinese consumers who are older than 50 will change slightly. These consumers will increase spending on groceries as the government raises retirement pensions in line with inflation rates. Though they will consume healthcare and entertainment products, their children will likely buy these products for them.
  • Frugal forties: These consumers, who grew up during the Cultural Revolution (1966-76) and early stage of the reform era, swing between tradition and new trends. They work in various companies—state-owned, private, and foreign-invested—and earn modest incomes. These consumers generally save a large proportion of their earnings to take care of their children and parents.
  • Wealthy forties: These consumers share the same background as the frugal forties, but they work for the government or large state-owned enterprises and have slightly higher incomes. Though they must also raise children and look after their parents, they are willing to pay premiums for quality products. In the next decade, consumers in their forties will have fewer childcare responsibilities and expenses. These consumers will thus increase spending on entertainment, groceries, travel, and high-quality and healthcare products.
  • Thirties: Many consumers in this group are well-educated and grew up in a more open environment than their parents. Compared with older generations, Chinese in their thirties save less, spend more on entertainment, and often shop online. They also pursue value and quality rather than low prices. These individuals will become the most important consumers in the next decade, buying for their parents, children, and themselves.
  • Twenties: Consumers in the first generation of the one-child policy have opposite shopping habits from their parents. These consumers barely save and spend most of their income on entertainment, advanced electronics, and other trendy products. They often shop online and look for products that help distinguish their personalities. They can also be impulse buyers. As consumers in their twenties age and start new families, their shopping habits may become slightly more conservative, though they will still favor high-quality and convenient products and spend more on groceries than previous generations.
  • New generation: The new generation of consumers (under the age of 20) is the most Westernized and open to new products. These consumers pursue individualism and often use the Internet to follow global trends. Though most in this group do not yet earn an income, they significantly influence their parents’ decisions on food, clothing, electronics, and other purchases. Social media is an effective marketing tool to reach this group of consumers (see the CBR, January-March 2011, Social Media in China: The Same, but Different).
  • Migrant workers: Migrant workers (generally 25-45 years old) are rural residents who moved to the cities for jobs starting in the 1990s. They can be even more frugal than elderly consumers, buying only the necessities and saving money to send remittances to their families in rural areas. Many migrant workers are expected to see a big increase in incomes and move their families to the cities in the future. They will significantly increase spending on groceries once they receive city household registration, or hukou, status and fully integrate into city life. Migrant workers’ consumption levels are unlikely to match that of their urban peers, however.
  • The rich: There are more than 1 million Chinese with assets over $1.5 million, and the number is increasing rapidly. Rich consumers (generally 20-60 years old) are fairly concentrated in large urban areas, with Beijing, Guangdong, and Shanghai housing about half of this group. These individuals are successful entrepreneurs, top managers, and business owners. They pursue the best products available, particularly imports, and are the perfect candidates for marketing new products. Premium supermarkets have already emerged in China to provide high-quality products to wealthy consumers (see Choosing the Right Retail Format).
According to research carried out in 2013 by Bain in China, the behavior of local consumers who buy online is characterized by four key attributes as shown in the exhibit below.