Alibaba and JD.com remain prominent, but several other platforms are making big inroads into the world’s biggest ecommerce market. Drapers investigates China’s emerging online leaders.
For fashion retailers planning to enter China, two names immediately spring to mind: etail giants JD.com and Alibaba’s Tmall. But there are other names it is increasingly important to be aware of.
Young and innovative platforms have managed to get a foothold in the fast-growing Chinese ecommerce market, and, while they are unlikely to replace the big names, they signify an increasingly complex and diverse ecommerce market in the country. Here are a few of the most interesting.
User-generated content: Xiaohongshu (Little Red Book)
Xiaohongshu is a Shanghai-based social media network founded in 2013 and aimed at women aged under 35. The company says it is particularly popular with those born after 1995.
Users share photos and videos, and can tag items in them that link to ecommerce product pages. It has primarily been used in the beauty market, where users post reviews and images of make-up and skincare products, but the platform is increasingly being used for fashion purchases as well.
Elena Gatti, managing director for the DACH (Germany, Austria and Switzerland) region at Shenzhen-based ecommerce company Azoya, says: “People were buying products such as lipstick and posting videos of their experiences. It was growing very quickly and at a certain point they thought about how to capitalise on it.
“Now, if you are a user you can tag yourself wearing a T-shirt or using a lipstick, and other people can click that link and buy. It’s a new and interesting way of capitalising on this user-generated content.”
The app started as a way to help Chinese shoppers who were abroad share their shopping experiences with family and friends back home. Those friends were then finding the products posted and ordering them – until the app made it possible to buy directly through the platform. It also uses data from the products consumers are “liking” to predict and order in items that it thinks will be popular in the near future.
Gatti says Chinese shoppers are naturally more inclined towards social commerce, which helps apps such as Xiaohongshu to grow quickly: “For Chinese shoppers, they are firstly part of a network – friends or family – and then they are individuals. They are much more open to these recommendations. They are much more open to writing product reviews and recommendations, or making videos sharing experiences with their network.”
Alexis Bonhomme, vice-president of commercial for Greater China at Farfetch, says this is a trend the retailer observes among its most influential customers as well: “When core customers or followers of a brand recommend products, there’s a big impact. We always work to identify who these core customers are for a brand because they are very influential.”
Team purchase: Pinduoduo
Pinduoduo is a social commerce app with 300 million paying customers, launched in 2015. Its US flotation in July 2018 raised $1.6bn (£1.2bn) and Tencent, owner of social networking app WeChat, owns an 18.5% stake in the company.
The app is particularly popular with price-conscious shoppers in tier 2 or 3 cities, or in rural areas, and works by giving shoppers discounts if they persuade a family member or friend to buy with them – shoppers can use Tencent’s chat apps such as WeChat to send the deal to their networks. The bigger the group, the higher the discounts. The company’s success has prompted a scramble in Chinese ecommerce to grab a piece of the group discount market. Alibaba and JD.com have both launched competitors – Taobao Special Offer Edition and JD Pingou respectively – within the last couple of years.
Part of the reason for this model’s success is trust: consumers in China are still often unsure of platforms and brands, so they rely more on recommendations from families and friends.
Ben Cavender, principal at China Market Research Group, says: “Trust continues to be a huge factor in how consumers shop. Because people have had such bad experiences with receiving fake or substandard products or bad service, they are much more willing to buy as part of a group.”
Gatti adds there is a further incentive for brands because marketing costs are high in China: “This is a tactic that many companies are adopting because marketing costs in China are getting so high. Companies are avoiding expensive marketing campaigns and instead lowering the price of the product and trusting the organic traffic acquisition by engaging customers who are going to share these promotions and experiences.”
Entertainment and shopping: Short video apps
In 2018 apps facilitating the sharing of short video snippets have hit the mainstream, and these videos increasingly link to products on a shopping platform.
One market leader is Kuaishou, also backed by WeChat owner Tencent. In summer 2018 it started to allow some users to open what it calls “little shops”, from which users and merchants can link to products from their videos – either live streams, or video posts.
It follows competitor Douyin (known as Tik Tok in the US), which in March this year launched an ecommerce feature in its app that allows users to link to shopping platform Taobao in their postings.
China’s two etail giants have again followed quickly – Alibaba’s Tmall and JD.com have added live-streaming functions to their sites to allow brands to interact closely with shoppers.
Younger shoppers in particular have taken well to 15-second videos that bring entertainment to the shopping process in a format that suits mobile, the channel that most Chinese consumers use.
Sandy Chu, editor of retail and buying at trends forecaster WGSN, says: “Since these shopping apps are also an entertaining way to engage in retail therapy, they make it easy to indulge in impulse shopping.” She also points to Yitiao, another video ecommerce app with huge potential that in January 2018 was valued at $500m (£380m) after a funding round that was led by JD.com.
Other platforms to watch
A cross-border shopping platform selling western brands, with products sold across a number of forums and portals. It owns the largest bonded warehouses – designed to hold imported goods – in China, enabling it to offer reduced prices. kaola.com
The Beast is a retail platform that works with brands including New Balance to launch collections aimed at well-off Chinese consumers. thebeastshop.com
Look sells more than 200 fashion brands, and its key feature, Lookstore, uses influencers to help keep people engaged. Some of China’s biggest influencers, including Thomas Ye – known as Gogoboi – post content and sell products on the platform. ilovelook.cn
WGSN’s Chu says Secoo is one to watch. Aimed at the luxury market – and another platform to have attracted JD.com investment – it consists of Secoo.com, mobile apps and “offline experience centres” in key cities. secoo.com
YOHO! began in 2005 as a magazine, before evolving to include a fashion ecommerce platform YOHO Buy and lifestyle app Mars. YOHO! also organises an annual B2C trade show called Yo’Hood, providing a focal point for everything new in youth culture. yohobuy.com
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