First of all, in B2B settings, many stages of this cycle run concurrently rather than sequentially: request for a quote can be issued before all the potential suppliers are contacted and shortlisted or the spec is finalized. Back and forth nature of the buying process means that, in many cases, a customer expects its suppliers to be a part of the requirement definition and even writing a spec.

At times, this apparently hectic process, may simply look like lack of professionalism, which in some cases may just be the case. This often causes Western companies to become frustrated and withdraw too early, much to the delight of local competitors. First implication of this situation would be realization that persistence and patience are crucial in dealing with Chinese businesses.

Western companies are often viewed as very professional when it comes to their product but not flexible enough to be willing to modify their offers to solve a specific business problem.

Second implication can be defined as an expectation of partnership type of relationship with a potential supplier. Chinese companies regard their suppliers as subject matter experts, those who probably understand the technical need better than anyone else and are willing to provide the most suitable solution to their customers.

Western companies are often viewed as very professional when it comes to their product but not flexible enough to be willing to modify their offers to solve a specific business problem. They are often seen as the type of supplier that can’t be a true partner or a long term solution provider that goes much beyond the sale itself.

Chinese competitors are typically much more aware of this aspect of a purchase decision and are willing to adapt their offer to precisely fit the needs of their customers. Most importantly, provided a local competitor has the solution, they are much more patient in their approach, willing to listen and understand precisely what is expected from them.

What would I advise to a Western company? Based on my own experience, I’d simply recommend to act local – adopt local ways of doing things, never get frustrated and always project your willingness to become a partner, not just another supplier. When you meet your customer, don’t just talk about how great your product is – take time to understand what exactly the problem, that they are trying to solve, really is and then adjust your offer accordingly.

Another advice I’d give is always be willing to help to your customer with your expert knowledge. For example, you could offer to come or send an expert to analyze their process that may help them to solve a specific problem. In my company, we sometimes offer free audits that result in a professionally prepared report that summarizes our conclusions regarding process improvement and recommends solutions. Unsurprisingly, besides of obvious benefit of building trust, such approach may give you plenty of opportunities to steer your customers in the direction that benefits you as a supplier as well.

Always remember that choosing a supplier is almost always about minimizing the risk, therefore building trust is the sure way to accomplish that.

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Singles day is an informal shopping festival in China that has originally celebrated people who are still single. It falls on 11/11 which is meant to symbolize people who are not in a relationship. Since it started back in 2009, it has become the largest shopping event in China, akin Black Friday or Cyber Monday in North America, although much bigger.

Originally, the event was started by Alibaba which began offering discounts on its main shopping platforms, Taobao and Tmall, that lasted for 24 hours. The festival was picked up by other Chinese e-commerce sites like JD.com and now, increasingly, by traditional brick-and-mortar stores. Most of the action still goes online via e-commerce sites and mobile apps.

Every year, the festival kept getting bigger but this year, there were concerns that  it might actually slow down a bit. The main worry was that slowing Chinese economy and the trade war with US would dampen shoppers’ enthusiasm.

“It is possible that there will be a slowdown in growth for Singles Day sales, given that they have had exponential growth in the past,” Xiaofeng Wang, an analyst with Forrester, said before the event.

This did not happen. In fact, 2018 Singles Day raked a whopping $30 billion in the first 24 hours, beating the last year record of $24.2 billion.

Here is the latest data compiled by Statista:

Similar North American events are dwarfed by China’s 2018 Singles Day – the sales on Thanksgiving Day combined with Black Friday are about 5 times smaller.

Attempting to capitalize on seemingly insatiable appetite of Chinese shoppers for foreign products, the event was picked up by platforms outside of China. A recent survey from research firm Oliver Wyman found that 57% of China’s online shoppers consumers were planning to buy goods from overseas during 2018 Singles Day. The top countries that were most popular with the consumers are Japan, USA and Australia.

In addition, Alibaba’s South East Asia subsidiary, Lazada, was offering Singles Day discounts in Singapore, Malaysia, Indonesia, Thailand and Vietnam.

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Most popular example of PPP based scale is a Big Mac index, popularized by The Economist. Most commonly, the baskets of goods are used to compare purchasing power across countries.

This recent infographic by SCMP (South China Morning Post), Hong Kong newspaper that was recently acquired by Alibaba, shows the comparison of the economy of China vs. US.

For example, it shows, that in GDP terms, Chinese economy is still significantly smaller than US, $10.36T vs. $17.42T. However, in PPP terms, IMF puts China slightly ahead of US for the first time:  $17.92T vs. $17.8T.

Of course, considering that China’s population is about 4 times larger, the GDP per capita is only $7,593 vs. America’s $54,629.

The infographic than makes some interesting comparisons between different goods and services in China vs. US using Beijing and New York and the representatives for each country. For example, it turns out that most clothing, shoes and gas are more expensive in Beijing. However, transportation, is significantly cheaper in China, up to 94% difference in the case of public transport.

Click here for high resolution graphics.

Economy of China vs. US

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According to Wikipedia, Shanghai, with it’s population of 24 million, is also the largest city proper by population in the world. It is also a home to a vibrant expat community of 174,000 and counting. With more than double per capita disposable income compared to national average, Shanghai is also the shopping capital of China.

Despite dismal air quality, the average life expectancy of Shanghainese stands at over 82 years, on par with the most advanced countries in the world.

In this post, we’d like to share an infographic from Go-globe on Shanghai in numbers.

Shanghai in Numbers

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This giant virtual shopping mall has become a staple of modern Chinese culture, a place where one can find practically anything and have it delivered straight to the door in just a day or two.

Taobao has also enabled millions of people in China to supplement their income by selling goods online. Large percentage of those sellers were even able to leave their day jobs to focus entirely on running their online outlets.

Presently, western brands in China primarily sell their products on another Alibaba’s shopping platform called Tmall. Although, similar to Taobao, it is a sort of upscale department store, as opposed to bazaar-style Taobao market. Tmall has been designed to attract buyers who are looking for genuine branded products and are prepared to pay premium for top quality. 

Unfortunately, start up cost of opening a Tmall store range somewhere in the range of RMB 150-200K and are further complicated by complex and strict requirements by Alibaba to ensure that only quality products are sold there. Penalties for breaching the rules can be substantial and costs of running and maintaining such stores could be prohibitive for smaller retailers or those without a recognizable brand name.

So, for those type of sellers, Taobao represents an easier option that doesn’t require a major investment while allowing to test waters with specific products and offers.

Here are twelve tips on how to make sure that the goods your Taobao store is selling get noticed, product links get clicked and, ultimately, your visitors convert to customers.

#1: Product title

Since the products are searched by their names, this is by far the most important part of the listing. The product name should pack as much content as possible and even though, the long product name may look awkward, if part of it matches the search criteria, it will get shown. So, longer descriptive name are always preferable to short ones.

#2: Product description

The second criteria that is used in Taobao searches is product description and it is what the shoppers would see when they click on the product link. As opposed to the long descriptive product titles, description should be kept short and “scannable”. Once a visitor is already on the product page, the goal of the description is to keep them interested and have them staying on the page as long as possible.

#3: Product photo

We live in a visual world and shoppers are constantly bombarded with imagery from every angle. The key of making your product stand out is the thumbnail picture of it placed in the listing. Pictures designed to attract attention should be sharp, focus on the entire product or its main feature and be of high contrast. It’s always the best strategy to critically assess your product photos vs. competitive offers and simply make sure that yours are better.

#4: Product page

Product pages in Taobao are often long, packed with lots of text and additional pictures which is actually a good strategy. Interested visitor will keep scrolling to read more, and, once enough information is obtained, can buy it right away. The last thing you want to do is provide insufficient information to a potential buyer.

#5: Feature authenticity

One of the main concerns of Taobao shoppers is to avoid getting scammed by buying a product that is fake or of poor quality. The best way to alleviate such concerns is to provide proof of genuine origins of the goods that you are selling by displaying clear pictures of the original packaging, shipping documents, relevant certificates etc. Those can simply be photographed or scanned and shown in the product page.

#6: Customer service

Responding to customer inquiries and answering questions quickly is critical in getting interested buyers to convert as soon as possible. Most effective sellers are able to answer questions almost instantly via live chat which would be the best way to communicate. It quickly builds trust increasing overall sales success rate.

#7: Research keywords

One of the best ways to design the optimal product titles is to research relevant keywords. Taobao provides keyword research tool that can also be used to figure out search volume for a particular product. This information, in turn, allows sellers to design the most attractive offers and focus on products with the best combination of strong demand and limited supply.

#8: Research visitors data

Taobao’s seller back-end provides various analytics on visitors, which primarily focuses on where they are browsing from, which platform they use (desktop vs. mobile) and what products they have viewed. This data can be invaluable in tweaking the product pages to match the tastes and preferences of a specific type of visitor.

#9: Learn visitors behavior

Behavioral patterns can also provide valuable insights on why some products sell better while others do not. For example, if a particular page has many views but few sales, it could be because of the pricing. On the other hand, product pages that don’t get a lot of clicks could be improved by adjusting some visuals;

#10: Test on mobile

Majority of Taobao buyers nowadays use their cellphones to browse and shop. This means that it’s crucial for your page to load quickly and render properly on Taobao mobile app or mobile browser. You should test your product pages with mobile to make sure that they still look attractive on mobile screen and can be navigated just as easily as on a computer;

#11: Add WeChat account

One of the best ways to keep your customers returning is to encourage them to connect to your WeChat official account (provided you have one) by placing its QR code right in your product page. This will allow you to push regular messages with new offers, coupons or  bits of useful information directly to your customers’ phones.

#12: Cross market via alternative channels

Learning about your visitors and buyers from Taobao analytics has an added benefit of leveraging this data towards your other marketing campaigns, such as in social media or mobile. For example, if you see that you are getting many visitors from a particular area, you could target them with location-specific offers via WeChat or Weibo.

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It is also a predominantly younger generation’s phenomenon with 50% of mobile shoppers aged between 24 and 30. Thanks to its popular mobile apps for Android and iOS, Taobao came to dominate China’s m-commerce space with estimated 76.1% of the market share. The next largest player, popular online store JingDong, accounts for slightly over 5% of the entire market.

Here is some more figures from this excellent infographic produced by Go-Globe.com:

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Would opening a Tmall virtual store be a sound strategy for your Chinese market expansion? This depends on several factors which I’m going to discuss next.

The reach

B2C ecommerce market was estimated to be at about 600 billion yuan (~100 billion dollars) in 2013 with Tmall accounting for roughly half of that number. Clearly, if your primary goal is the reach, Tmall platform should be your first choice. Also, Tmall is being positioned for tier 1 and 2 cities, while Taobao covers traditionally less affluent lower tier cities.

Who qualifies

If you are a registered company outside of China, Tmall requires you to be a certified retailer or a trading company and the products should be under your own brand or licensed to you. Also, Tmall has a preference to retailers who have been in business for at least 2 years with the annual turnover of at least 20 million dollars. Of course, if you are a well known international retailer, it would be fairly easy to get approved.

Tmall can be an effective sales and marketing channel for fast moving goods, such as fashion items and apparel. It may not be suitable for companies that want to maintain full control of their brand development and those who seek to project exclusivity, such as luxury goods for instance.

Tmall’s sales conditions

The retailers on Tmall are required to join Tmall’s genuine product protection agreement. If shipped overseas, the products must be delivered with international courier companies through proper customs channels and every shipment must be traceable. All the product specs must be in Chinese and all measurements in metric system. Products should be shipped within 72 hours from order completion and there has to be a return location within Mainland China.

Cost

The costs can be categorized into setup and ongoing. Setup costs include store design at somewhere between RMB6,000 to RMB20,000. Annual fee, aka technical service fee, varies according to product category is set to either RMB30,000 or RMB60,000. The merchant may be able to redeem either half or the full service fee if they reach Tmall’s predefined sales targets for the product. In addition, Tmall requires a deposit which can be set at RMB50,000, RMB100,000 or RMB150,000 based on the chosen store format and the trademark status. The deposit is designed to reimburse customers in case of breach of “Taobao Mall Service Agreement” which prohibits selling counterfeit goods.

Ongoing costs include 5% commission fee on every transaction as well as optional marketing services.

Tmall marketing

Tmall is the part of the larger Alibaba’s ecosystem which actively promotes it within its C2C Taobao platform by pushing Tmall search results to the top. Also, since most Chinese users are already familiar with Alipay payment system, they would feel comfortable using it for Tmall purchases improving conversion rates.

Tmall has its own mobile app for iOS and Android with it’s iPhone app enjoying 4.5 star rating.

Finally, for additional fee, Tmall offers variety of marketing services including banner promotions on its own platform, SEM, and emailing campaigns.

What are the downsides?

Although, Tmall is being actively promoted by Alibaba as the store for genuine products for discerning customers, it still suffers from the perception that it’s just another offshoot of Taobao which focuses on low prices and discounts. Some companies are concerned about their reputation being damaged if they become associated with the platform.

Another drawback is that Tmall allows only limited space and tools to express stores specific brand identity and the expression of a unique marketing message.

In conclusion, Tmall can be an effective sales and marketing channel for fast moving goods, such as fashion items and apparel. It may not be suitable for companies that want to maintain full control of their brand development and those who seek to project exclusivity, such as luxury goods for instance.

One possible strategy to consider is to use Tmall as one of the sales channels that complements the original ecommerce site where customers can go for more information about the brand and, perhaps, more sophisticated buying experience.

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The research predicts that we are going to see the traditional shopping experience looking more and more like the online one. IBM’s Watson app development platform is already moving into this physical-virtual space. An app called Fluid is a part of that same ecosystem. It builds online shopping experiences for retail businesses to drive customer engagement and conversion, has developed the Fluid Expert Personal Shopper powered by IBM Watson. The app calls upon Watson’s ability to understand the nuances of human language and uncover answers from Big Data. Consumers who use Fluid’s app will interact with rich media and dialogue with Watson, as their newfound “cognitive, expert personal shopper.”

IBM Research is exploring prototype software called the Virtual Stylist that uses data to help retailers more precisely predict clothing a customer will like, based on what complements the existing contents of their closet and their preferences. While many e-tailers today offer personalized recommendations, most are made by looking at the item you purchased, and what other people who purchased that item also bought – and then recommending to you those other products.

The instant gratification of traditional shopping will also play a significant role in re-emergence of brick-and-mortar stores. Two days delivery will feel like forever compared to being able to take your purchase back home immediately.

With the help of the cloud based technology a virtual shop assistant will be able to learn all about shoppers, from their shopping habits to their purchase history, and tailor recommendations to your unique taste and styles that will complement your existing wardrobe. Combine it with the ability to physically see and touch the products you are buying and you got the perfect shopping experience.

The instant gratification of traditional shopping will also play a significant role in re-emergence of brick-and-mortar stores. Two days delivery will feel like forever compared to being able to take your purchase back home immediately.

Clearly, this would have profound implications on ecommerce in China which has been developing at astonishing pace. By 2016, an estimated 423 million Chinese will be shopping online, up from today’s 220 million and there are reasons to believe that merging of the digital and the physical, as predicted by IBM researches, will be adopted in China at even faster pace.

First of all, connecting to the internet via mobile phone vs. computer has already become the primary way to get online for majority of Chinese.

The second reason is the traditional love of bazaar style of shopping experience in China which the online buying doesn’t provide.

Finally, Chinese get quickly accustomed to the rapid changes in lifestyle and are becoming increasingly impatient shoppers. The ability to get their hands on the purchase immediately is bound to become an important factor as well.

Here is the infographic from IBM’s research:

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First of all, B2B product selling can be classified into 3 main categories:

1. Selling of raw materials;
2. Selling of capital equipment;
3. Selling of machine components;

In general, B2B selling and marketing in China went through some changes in the last few years and still continues to evolve. As everything else in China, the rate of change has been rapid and sweeping. Basically, those changes have been around the decision making process and were driven by the need to increase efficiency.

In the past, the majority of Chinese companies were simply not profit oriented enough or at all. As strange as it may seem, making money and being profitable was not high on those companies’ agenda. How could that be? The truth is that, while making money was not a main priority of many companies, enriching of the top management was. This situation produced decision making that was not in line with company’s interests but based solely on which supplier provides most benefit to a manager making that decision.

The recent credit crunch has put even more pressure on companies to pursue profitability. This has further facilitated changes to decision making process, especially when it comes to which equipment, components or materials to purchase from suppliers.

Of course, a simple name for it would be “corruption” but things were not so black and white back then, they are still aren’t today. Many Chinese still think that it’s a part of new capitalist culture and enriching oneself on company’s account is nothing to be ashamed of.

Fortunately, such views are no longer mainstream today with vast majority of companies becoming truly profit oriented. The recent credit crunch has put even more pressure on companies to pursue profitability. This has further facilitated changes to decision making process, especially when it comes to which equipment, components or materials to purchase from suppliers.

Of course, there are still companies over there who stayed immune to this process, especially SOE (state owned enterprises) and other large corporations with ties to central or provincial governments. Unfortunately, while they are still enjoying unlimited supply of free money and continue to decorate their boardroom with redwood and chandeliers things are unlikely to change for them.

The good news is that the vast majority of companies did evolve and their decision making process adopted accordingly. Nowadays, the process is becoming much more in line with the idea of cost efficiency and looking for the best value. Those suppliers who have based their whole selling and marketing strategy around entertaining their clients and sending them expensive gifts are being squeezed out by more dynamic and value oriented competitors.

At the end of the day, companies in China are now seeking products that provide the best value and those suppliers who can communicate the right points in the clearest and the most efficient ways are consistently coming on top. It doesn’t mean that the era of guanxi is over but the importance of having a product that provides maximum value and the ability to communicate that value are becoming the main factors in determining supplier’s success.

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One of the most interesting studies on this subject was conducted by Deloitte back in 2010 but the conclusions remained largely unchanged today. They have surveyed 2,000 consumers in 8 different cities to learn their buying preferences and brand perceptions. What makes this study even more valuable is the fact that it recognizes and analyzes differences between 5 tiers of Chinese cities.

As expected, not only spending power was different between 5 tier cities, so was consumer behaviour and preferences. Knowing and understanding those differences would have significant implications for marketing strategies affecting all of the 4Ps (price, product, place and promotion).

Lower tier cities’ consumers imitate buying behaviour of the top tier and are even hungrier than Shanghainese or Beijingers for expensive brands and somewhat less conscious about value-based buying approach that is more prevalent in the top tier cities.

I’m going to summarize the main points of brand entry strategies while skipping the obvious and intuitive ones that have more to do with different level of spending power characterized by all 5 tiers’ cities residents.

1. First finding of Deloitte study mentions the fact that international brands are marketable to a consistent share of the population across all city tiers. This means that, in general, there is a market for international brands even in the cities with the lowest income (5th tier).
   In fact, there are always rich people even in the poorer regions of the country that are eager to get their hands on the most prestigious brands just as do the consumers in the more affluent places;
2. Another, perhaps surprising, similarity found between all tiers is the fact that men are influenced by brand image more than women. However, the difference was more pronounced in the lower tier compared to the higher tier cities. On the other hand, apparel spending of women was higher in lower tier vs. almost equal figures with men in Shanghai (1st tier);
3. It was also found that value for money eclipses brand as the top criterion for purchases across all tiers but proportionally more purchases based on brand image are made in lower tier cities;
4. In 2nd and 3rd tier cities consumers are more willing to experiment with new brands which is good news for brands that are not yet on the market.
5. There is a significant degree of confusion about international brands and their origins. Many respondents of the study though that brands like Adidas and Nike were actually the local ones. This means that there is still a lot of room for brand recognition improvement among Chinese consumers and marketers should be paying attention to it;
6. Consumers are found to be unwilling to pay premium for abstract concepts related to “low carbon” or “environmentally friendly” marketing strategies. They tend to regard such claims as a recognition of manufacturer’s social responsibility but not a motivating factor affecting purchase decision;
7. The most successful retail marketing strategy for international brands was to enter the 1st tier cities first and build brand recognition there before moving on to lower tiers. The classic model for fashion brands has been entering Hong Kong, Shanghai and Beijing first and then going to selected lower tier regions with the highest growth potential;
8. Lower tier cities’ consumers imitate buying behaviour of the top tier and are even hungrier than Shanghainese or Beijingers for expensive brands and somewhat less conscious about value-based buying approach that is more prevalent in the top tier cities;

Cities surveyed by Deloitte based on their tier were:

• 1st tier: Shanghai
• 2nd tier: Jinan, Chengdu, Hefei
• 3rd tier: Zhongshan, Xiangfan
• 4st tier: Changshu, Xinmin
• 5th tier: administrative entities below county cities

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