China presents a massive growth opportunity for British businesses but they must understand the Chinese consumer, adopt a mobile first strategy and move fast, all of the time.
Those were the key messages from Alibaba’s Unlocking the China Opportunity event, hosted in London last week.
Designed to examine how British businesses can navigate the changing China market, grow their business in China, and engage Chinese tourists in the UK, the event attracted hundreds of business leaders to hear and learn from top Alibaba executives, industry experts and successful UK businesses.
The majority of delegates came from the consumer goods (35%) and retail (26%) sectors; with service providers (14%), other (11%), financial (8%) and tourism (2%) also represented. The majority were small businesses with 56% employing fewer than 100 people, 7% employing between 101 and 249 people and 39% with a workforce greater than 250 people.
More than half the audience (59%) stated they had a China strategy and 41% said they did not. Approximately half the audience (51%) had visited China in the last 12 months but a similar number (49%) had not.
“We believe China represents an extraordinary growth opportunity for British businesses and that together we can unlock that growth opportunity,” said David Lloyd, general manager of UK, Netherlands and Nordics, Alibaba Group.
Lloyd said China has the world’s largest global e-commerce market, bigger than the second and third biggest markets combined; while the UK has one of the most advanced digital economies in the world. It was Alibaba’s objective to bring the two groups together, he said.
Alibaba has been present in the UK for half of the company’s 20-year history but has only built the team during the last four to five years.
The company’s mission is to “make it easy to do business anywhere”; and for British businesses to succeed in China by connecting them with Chinese consumers through e-commerce, Lloyd said.
Lloyd presented Alibaba’s key e-commerce channels, alibaba.com (B2B), Taobao (B2C) and the (B2C) Tmall marketplace for both domestic and international brands (Tmall Global).
Lloyd revealed that Tmall has 800m active users and the average user visits the site seven times a day, spending 27-28 minutes online with the retailer.
In addition to e-commerce, Alibaba has invested heavily in media and entertainment plus local services including holiday planning and food delivery. Online orders placed at its Hema (Fresh Hippo) stores can be delivered within 30 minutes, for example.
The above are all supported by payments and finance, marketing, logistics and cloud.
In the UK, Lloyd cited partnerships with Harrods and Manchester United Football Club. Harrods attracts 20% of all Chinese tourist spend in London, Lloyd told delegates. That’s facilitated by the adoption of Alibaba’s online payment platform, Alipay. “They [Chinese tourists] know they can go to Harrods and find great products and pay,” he said.
Working with Manchester United, Alibaba has built a content partnership and is the Club’s exclusive video partner in China, connecting it with Chinese consumers.
The business is also helping British businesses enter China at scale and build a presence on Tmall. Brands already featuring on the global marketplace include Holland & Barrett, Burberry, Dr Martens, ghd and Jo Malone.
A less well known brand is the laser hair removal device, SmoothSkin.
When Lloyd first met the business it was a small company that was just starting to build a China strategy. Today, China is SmoothSkin’s biggest market, he said.
“That’s transformational,” Lloyd said. “When you get it right, you get it really really right.”
Angel Zhao, president, Alibaba Global Business Group, presented the company’s global vision. “Globalisation is a key strategy for Alibaba,” she said.
Zhao also emphasised the importance of mobile – 90% of the company’s transactions are conducted on mobile – and shared the success of the retailer’s latest 11/11, Singles’ Day event: it attracted 200,000 brands, 500m users and 299 brands surpassed a gross merchandise value (gmv) of Yen 100m on the day.
Zhao said Alibaba aimed to empower its partners through its global buy and sell e-commerce platforms and highlighted the reach of the Group’s Alipay app and its online travel platform, Fliggy, which enables users to conduct their travel business anywhere.
Zhao also shared Alibaba’s UK goals – China is the UK’s sixth largest export market – while Tmall Global boasts 200 European brands (from France, Italy, Spain, the UK, Germany and Benelux), which are recording 50% growth in sales year-on-year.
Serious economic relationship with China
Sir Sherard Cowper-Coles, chairman of the China-Britain Business Council (CBBC), interviewed by Julia Hutton-Potts, director of international communications – EMEA at Alibaba Group, said Britain had a serious economic relationship with China with UK exports up 30% year-on-year and he suggested that if Britain approved the use of Huawei technology for its 5G network to “expect a tremendous upsurge in the China-Britain relationship”.
Sir Sherard said many people had been brought out of poverty in China and they were interested in brands such as Harrods and Manchester United, as well as whisky and shortbread. “They are buying things for lifestyle versus to survive,” he said. Opportunities are also being created as more Chinese people travel the world to places like Bicester Village and Harrods or attend British universities.
“Britain is cool,” he advised.
Sir Sherard said the CBBC had built up networks in China and the UK to help British businesses sell into China and for China to export to the UK.
“Some people want to hold China back, so we have to make the case for economic engagement with China. If you are serious about growth in the modern world, you have to sell to China,” he said. “In China an economy the size of Australia is being added every year.”
Sir Sherard said the CBBC was expecting and planning a series of major meetings this year focused on business opportunities of interest to China, adding that “China leads the world in many of the technologies of the future”.
Asked to describe the China opportunities, Sir Sherard surmised: “They are all superlatives – it’s beyond belief.”
New retail in China
Frances Yu, partner at Deloitte, explored new retail in China and began by comparing the world’s two major shopping holidays, Black Friday and Singles’ Day, which she billed as an entertainment extravaganza featuring the likes of Taylor Swift and Kim Kardashian. Comparing sales over a normalised time period, Alibaba’s Singles’ Day event recorded hourly sales four times higher than Black Friday in the US and UK, Yu said.
New retail in China means connected consumers; the emergence of a digital eco-system, where share of time is the new currency; and innovation is characterised by experiences, Yu told delegates.
Chinese people are mobile-first consumers and it’s their ‘go to” device for personal use, leisure and systems, Yu said.
In the new eco-system, where time is money, brands need to engage with consumers across the different day parts, Yu advised. A consumer could spend a whole day within Alibaba’s eco-system, shopping at Tmall, using Alipay, the Group’s entertainment services and apps, for example.
“It’s not just about transacting but getting a better share of time of the consumer,” Yu said.
China is also a hotbed of innovation, Yu told delegates; but experience-led innovation is key and she presented retail examples including a leading hot pot restaurant, which has removed friction points in-store with technology to show customers whereabouts they are in a queue and robots to serve orders.
“New retail is not just about retailing – it’s a new way of thinking,” Yu concluded.
Reaching Chinese consumers in the UK
Roland Palmer, head of Alipay for North West Europe, showed how Ant Financial, Alibaba’s online payment services provider and its platform, Alipay, are helping British businesses reach Chinese consumers in the UK.
Palmer said Chinese tourists were making 150m trips a year outside of China and that was a great opportunity; especially with Alipay, the world’s largest digital payments platform.
Alipay’s mission is to offer “mobile payment everywhere’” and is already available in 55 countries worldwide, Palmer said.
Ant Financial is also adding new technology and setting new goals such as its 310 target for processing and approving applications for business loans. According to Palmer, it should take just three minutes to apply for a loan, one second to approve it and with zero human interaction. Palmer billed the service as a “revolution in the world of credit”, which enabled businesses who may have not been able to get credit previously to do so through their mobile phones.
Similarly, using QR code technology, businesses can accept payments from a static QR code and complete their banking on their phones.
Palmer said there were four key reasons Chinese consumers chose to use Alipay: familiarity, good exchange rates, discounts and marketing; and he revealed that 90% of shoppers will spend more using Alipay.
Palmer said the value of Alipay’s UK sales was an estimated £1bn and growing by 53%. That’s generated by 500,000 Chinese tourists plus 500,000 Chinese living in the UK; of which 100,000 are students, who tend to be from more affluent backgrounds.
Alipay partners with retailers and brands across the board in the UK ranging from department stores to food and beverage and luxury brands.
Alipay is also a sponsor of UEFA EURO 2020, as part of an eight-year partnership deal.
Understanding Chinese consumers
Mei Chen, head of fashion and luxury UK, Iberia and Northern Europe, Alibaba Group, provided top tips for understanding Chinese consumers – the 1.4bn people who are looking for new products to buy and 57% of whom are online.
Chen agreed with Yu that mobile is central to Chinese consumers’ daily lives but that the customer journey was unlike that in the UK, where it may start with an online search, an app or website URL. In China, the journey is centred on marketplaces like Alibaba. “Everything starts in one app and finishes there,” Chen said.
Further, 60% of customers are under the age of 30. “They are super young consumers who are socially connected. They spend 30 minutes on an app, visiting eight to nine times during a day,” she added.
Thirdly, live streaming is now ingrained with influencers or KOLs (Known Opinion Leaders) increasingly influential.
Next, consumer to business manufacturing, whereby Alibaba shares shopper data and insights from its online platforms with manufacturers via its Tmall Innovation Centre in order to speed production time and decrease investment costs, is being expanded.
In one example, Mars was able to launch a spicy Snickers bar and bring it to market in just six months, half the normal development time.
Lower tier cities in China also present a tremendous opportunity to increase consumption, said Chen. China has 100 cities with a population greater than 1m, compared to just two in the UK.
Chen highlighted successful, innovative East-West branded collaborations for the Chinese market including those between H&M and Karl Lagerfield and Stella McCartney plus the Central St Martin’s graduate, Angel Chen. According to Chen, H&M has leveraged Angel Chen towards the lower tier cities. The retailer has a total of 530 stores in China, targeting 1.4bn consumers.
House of Holland has also partnered with the sports brand Xtep, which operates 6,300 stores in China, thereby winning insights into Chinese consumers and helping to take the brand to the next level.
Innovation spans all markets, Chen advised; and cited Alibaba’s own Fly Zoo Hotel, a new hotel concept offering mobile booking and check-in via an app or kiosk. Guests can opt to access the hotel and rooms via key cards or use facial recognition technology. Each room is also equipped with a Tmall Genie smart speaker to provide room service, with orders delivered by robots.
Chen also urged delegated to remember that Chinese consumers were highly sophisticated travellers too and expected to be able to use services like Alipay when abroad.
“Think about those consumers that can engage with product – how they are different and bring your products to the next level,” she advised. “They are ready for new products, really fast, mobile all the time and really innovative,” she concluded.
Defining a successful China strategy
Plan for success, don’t underestimate the market opportunity in China or the speed at which the market moves. Those were the key learnings to emerge from a panel debate on defining a successful China strategy featuring Darren Goode, president of corporate and commercial at Elvie; Justin Stead, CEO Radley & Co; Simon Boyd, sales director at SmoothSkin and Sunny Xu, global Alibaba e-commerce director at Unilever.
For all the brands, research was vital prior to market entry in China.
SmoothSkin, for example, conducted a deep dive market analysis before appointing a distribution partner and launching in China. Noticing that Chinese customers were buying its products in the UK was also a good indicator for future success, said Boyd. The business went on to receive support from both Alibaba in the UK and China, who had witnessed the brand’s growing traction. But keeping pace with the market was vital, Boyd added. “If you think you are an expert today and you have not been to China in a quarter, you won’t be an expert in the next quarter because the market will have moved on,” he said.
Goode said Elvie had also clocked growing demand for his company’s pelvic strengthening devices a year and a half before market entry. “We realised the market was quite huge and Alibaba/Tmall invited us in,” he said.
For Unilever, with an established presence in China, understanding the mindset of the Chinese and speed at which the market moves is paramount, said Xu.
Boyd agreed. “If you are working with Western retailers and think you are working quickly, you are not working quickly,” he said.
Live Streaming has changed the marketing mix, he added; while in-depth knowledge of the Chinese market is a prerequisite. Boyd said SmoothSkin used Alibaba data to win insights and, as a result, has designed a product which is 30% smaller since its original laser hair removal device had been designed for Western consumers and was too large for Chinese hands.
Radley has also modified products by shape, size and colour and has dedicated Chinese products, said Stead. Now in its second year of trading, the company is making money and “turning a nice profit”, he added. The company has also started trading on Tmall’s domestic site and can now provide a better customer service in terms of returns plus it has stock held in Shanghai.
Elvie has not had to adapt product but Goode said Chinese customers were intensely interested in his company and that it had 360˚ conversations with customers. Goode added Elvie watched the market by the hour and by the minute; while Stead emphasised the dynamism of the market and power of KOLs.
Xu agreed: “You need to be open and grow closer to the consumer speed,” she said.
Not underestimating the channel opportunity is vital too, panelists warned. Despite careful planning with Alibaba, SmoothSkin, for instance, found its sales were 250% higher than forecast just nine days later.
“You’ve got to have the ability to organise to that level and to plan for success,” advised Boyd.