How Chinese retailers used digital tactics to survive the coronavirus crisis

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By Elena Gatti, managing director of Azoya EU

It has now been two months since the coronavirus first surfaced in China and after a nationwide lockdown things are getting back to normal. Restaurants, bars, and retail stores are opening up throughout China and people are going back to work. The vast majority of gyms, movie theatres and other entertainment venues however remain closed. 

During the crisis many offline retailers were facing the end of their business. However, some of them shifted their activities to digital tactics, such as livestreaming and private WeChat groups, to keep their businesses alive. Let’s have a look at how China’s digital ecosystem enabled retailers to survive during this challenging time and what Western retailers and brands can do to learn from them. 

Livestreaming as a lifesaver

Livestreaming has already been a huge trend in 2019 and it doesn’t come as a surprise that several retailers have turned to livestreaming to keep their businesses alive. Since Chinese New Year the demand for livestreaming hosts has more than doubled with recruitment posts growing by 132%. Such livestreaming sessions typically take place on Taobao, China’s eBay-like C2C marketplace platform with >600 million users. 

How does a livestreaming session look like: Normally, a host will introduce the brand, and will oftentimes incorporate a raffle or sweepstakes game to entertain people. Then, he/she moves on to discuss specific products, usually trying them on and showing them off to the viewers through different angles. Users can at any time click a small link to make a purchase, which is enabled through a pop-up order window and Alibaba’s mobile payments platform Alipay. 

Additionally, the video sessions are interactive. Each session resembles a virtual chat room; any participant can type comments and ask the host to try on different products or ask questions about fit, colour, size, etc. Livestreaming allow the viewer to get a better sense of what the product looks and feels like in real life. Conversion rates are generally higher, though there is the added cost of paying livestreaming hosts and influencers. 

During the coronavirus, fashion brands across the board turned to livestreaming to make up for closed stores. Dior and Chanel have livestreamed fashion shows and used celebrity ambassadors to promote them on WeChat and Weibo, China’s popular social media platforms. But not only fashion brands are using livestreaming. On 10 March, furniture retailing conglomerate Ikea started a live-streaming session to draw attention to its Tmall launch, attracting 27,000 viewers within the first 10 minutes and peaking at 300,000 viewers. Ikea’s launch on Tmall was the first time it’s partnered with a third-party platform to retail its products. Historically, furniture retailers such as Ikea have relied heavily on its showrooms and offline stores to drive sales, but in the face of the current coronavirus, it is now realizing how important e-commerce is. 

There have also been car repair shops, farmers, catering companies, real estate agents, and more turn to livestreaming to appeal to customers and drive sales. In February, over 5,000 real estate agents from 100 Chinese cities used Taobao Live to show apartments to buyers. 

Aside from Taobao/Alibaba, competitors such as JD.com, social commerce platform Xiaohongshu, and China’s ubiquitous super-app WeChat also adopted livestreaming functions over the last year, giving small merchants more options to hawk their wares. With everyone being stuck at home over the last two months, the coronavirus crisis has given livestreaming e-commerce a chance to cement the habit in everyone’s minds.

When looking at the West, one company that is now offering similar livestreaming e-commerce is Amazon. With “Amazon Live”, the company is employing its own livestreaming hosts to present items ranging from beauty and cosmetics to apparel. It might become more popular over time in Western countries as lockdown measures around the world are enacted by governments to keep the coronavirus from spreading. 

Smart supermarkets are using omni-channel e-commerce to reach customers

Smart grocery store chains in China such as Alibaba’s Hema, which has recently been renamed to Freshippo, Tencent’s Super Species, and JD.com’s 7Fresh have all seen abrupt increases in orders through their on-demand delivery services, which can be accessed through mini-apps on WeChat.

A Freshippo spokesperson said that they are prepping six times the amount of fresh vegetables for its 50 stores in Shanghai, equivalent to 330 tonnes of groceries. JD Daojia, JD.com’s on-demand delivery service platform which services the likes of Wal-Mart and JD’s own grocery stores, has also seen a fivefold increase in sales.

Since everyone in China is staying inside to stay away from the coronavirus, the only way for them to get food is through these on-demand delivery services, which explains why demand has skyrocketed. And with WeChat mini-programs, delivery is super easy: Customers can order whatever they want on the retailer’s WeChat mini-program store; each supermarket can deliver groceries to one’s door within an hour. However, delivery is typically limited to a 3km or 5km radius. Such a model works well because WeChat is integrated with WeChat Pay, and delivery addresses and other info can be saved within the mini-app, meaning that orders can be completed with just a few taps of the finger.

While food and grocery delivery services have taken off in the West, it has scaled at a slower pace due to higher labour costs and more regulatory restrictions. China also benefits from more densely populated cities which makes delivery services more cost-efficient.

Social selling on WeChat helps retailers reach audiences in quarantine

One other tactic that has taken off is the use of private WeChat groups to circulate discounts and other promotions for loyal customers. In China, this tactic is called private traffic, in which brands and retailers will set up private 500-person WeChat groups that are not visible to the open public. It gives members both a sense of privacy and exclusiveness. In the West, retailers are more likely to use e-mail marketing for the same purpose, but in China e-mail is less frequent and people prefer more instantaneous messaging channels such as WeChat. 

Private WeChat groups also enable retailers to build a stronger sense of community with local customers, as oftentimes people hosting these WeChat groups are local store managers at department stores and other retail outlets. In a sense, private traffic turns store employees into mini influencers who seek to provide a greater degree of service for customers looking for advice. 

One prominent example is China’s largest sportswear brand Anta Sports. The company has given 30,000 employees and distributor partners individualized QR codes on WeChat that they can share with potential customers. The QR codes, which direct customers to the brand’s e-commerce store on WeChat, track how many sales each employee can make and gives them a percentage cut of each transaction.

Anta Sports providing individual QR codes on WeChat

Department store chains in both Hangzhou and the coastal city of Xiamen have also adopted private WeChat traffic methods to encourage consumption online. Even global luxury brands have started to do it. 

Upstart Chinese beauty brand Perfect Diary has taken it to the next level and created a virtual influencer called Xiao Wanzi, and hundreds of different WeChat groups in which employees provide discounts, games, and other gimmicks to customers. Customers can pay through WeChat Pay. Such tactics have enabled Guangzhou-based Perfect Diary to become valued at $1 billion, just a few years after its launch in 2016.

Virtual influencer for beauty brand Perfect Diary

Will these tactics also take off in the Western world? It is hard to say as the retail ecosystem in China is very different from any other country in the world. In China, content is much more integrated with e-commerce, often on the same platform. This is because online advertising historically has been less targeted and provides lower ROI than in the Western world. 

Furthermore, mobile payments are a way of life in China and it is very easy to make an online purchase with just a few taps of the finger and a six-digit pin code on WeChat Pay/Alipay. The West has yet to eliminate the use of cash and clunky credit cards with their 16-digit numbers and security codes are still required to make online purchases. 

However, as the coronavirus crisis makes its way across Europe and millions of small retail merchants are forced to shutter their doors, they may have to resort to new measures to keep their businesses alive. Looking at how Chinese retailers and brands have handled the crisis is definitely worth a look.