China - The perfect storm of market growth
By Steve Sherfy, Mindshare, 2012
Background
It is projected that by 2015, China will become the second largest consumer market with enough purchasing power to buy 14 percent of the world’s products (The American Chamber of Commerce in Shanghai/booz&co., 2011). Given its population of more than 1.3 billion, with this buying power, both Western and Chinese companies are clamoring for opportunities to conduct business there.
However, in order to do so effectively and successfully, marketing strategies in China must be large, in scope, and focus on where consumers are digitally. China has nearly 1 billion mobile users and 100 million of these consumers use their devices for Alipay – the online payment service for China’s largest e-commerce site Taobao. Alipay already generates double the transaction volume of PayPal globally. China today offers brands the largest expansion opportunities in comparison to other markets. This, paired with the high level of governmental control and regulations in traditional media, has many international brands questioning where and how to allocate their marketing budget. Brands are turning to digital as the key to unlock the China market.
Details & Implications
Following are four emerging areas of opportunity for consumer brands to take notice of in the rapidly-emergent Chinese marketplace:
- Online Video : more than 320 million Chinese people watch online video, and time spent watching this medium nearly doubled over the last two years. Traditional TV in China has been highly regulated and, last year, China added even more restrictions to control “entertainment”, further driving Chinese people to online video, which is much less restricted. In addition, the Chinese rarely use digital recorders, so they watch re-broadcasts of TV shows online. These factors have made online video advertising an excellent vehicle for brand awareness campaigns.
- e-commerce : e-commerce is a powerful platform for any brand doing business in China to consider. Why? Because China has the world’s second-largest base of online shoppers, and they love to shop online (and socialize while doing so), leapfrogging traditional retail. Boston Consulting Group calls them “quite possibly the most social in the world during the shopping process”. Given the large number of deep-pocketed e-commerce platforms in China, there are many avenues open for exploration by international brands. Brands should partner with top sites to open storefronts and raise awareness of brands and products.
- Social : no one player dominates China’s highly active social media space, but Chinese people are every bit as active on social networks as their U.S. counterparts. Sina Weibo, a Chinese combination of Facebook + Twitter, leads the space with more than 320 million registered users.
- Mobile : China, with its 350 million mobile Internet user base and smartphones retailing under $100, is poised to lead the charge into mobile. “Social-over-mobile” in China represents one of the fastest media migrations in history with mobile already accounting for more than 50 percent of traffic on China’s top microblog and social sites. Tencent’s “do-everything” mobile app Weixin has amassed more than 100 million users in less than 15 months. While many predicted “mobile” would deliver a disruptive shift, publishers and media agencies have been left flat-footed looking for ways to leverage and monetize the smartphone screen that is so rapidly cannibalizing PC-based traffic and ad budgets in China. Here, more than any sector, advertisers, agencies, and publishers must join hands to, as the Chinese say, “cross the river by feeling the stones.”
Summary
Due to the exponential growth in the digital areas of Chinese marketing, and the flourishing market itself, international brands are clamouring to invest. And while traditional media still has its place in the Chinese market, a new, more strategic focus – and percentage of the marketing budget – should be applied to digital efforts.
