Six ways to tackle the price war with Chinese consumers
Chinese consumers continue to remain drenched in a national online shopping frenzy, filling their virtual shopping carts with merchandise from all over the world last year. This increased interest in overseas products offers Australian retailers a huge opportunity to take advantage of this booming market, but they also have to compete with the growing price war.
With Amazon announcing the tailored Prime service for Chinese consumers in October, and Alibaba giving Tmall Global a bigger shot, cross-border e-commerce continues to grow from strength to strength, despite many believing that the industry now suffers from too many regulations.
Increasing sales and the popularity of overseas shopping are signs that China’s affluent masses are upgrading their consumption. This is great news because the market volume is expanding and more Australian brands will be able to find a niche in China. It also means that competition is fierce, forcing retailers to find new ways to standout and attract sales.
During China’s biggest online shopping event Single’s Day in November last year, 10 billion yuan (almost AU$1.9 billion) of sales were recorded in the first seven minutes after the event started at midnight. Many retailers offered significant price discounts for set periods of time (i.e 30 minutes) to create a sense of urgency.
Although a number of retailers and brands still sell at steep discounts, the proportion is relatively small. While top selling products have little or no margin, they serve as incentives to encourage customers to buy long tail products. Retailers are very aware of the real risk that customers could run off to a competitor offering better deals.
Australian retailers should build their strength in the Chinese market by optimising logistics, building brand awareness and providing better customer service. These are tested methods and would guarantee cost reductions and strengthen customer loyalty. This is also means that better quality products and services will be sustainable for Chinese consumers.
Greater value on brands, quality and service
Yongming Zhang, CEO of Alibaba stated last year that low prices will cease to be the only characteristic of online sales, while JD’s VP of Marketing expressed a similar idea that the customers will place greater value on brands, quality and service.
This was demonstrated in August last year, when a delegation of Chinese online celebrities toured Australia and New Zealand to understand the authenticity and reliability of local ethical products. They visited the stores and warehouses of five retail businesses that all have established e-commerce businesses in China – Pharmacy Online, Pharmacy 4 Less, Amcal, Kiwi Discovery and Pharmacy Direct.
In return, the online celebrities shared their experiences online and the tour was broadcast on live streaming channels. This gave Chinese consumers a glimpse into how their favourite products from Australia and New Zealand are packaged and distributed, showcasing the quality of the products they plan to purchase.
This campaign helped participating retailers develop more effective and rewarding channels, as well as better understand what Chinese consumers need and want. It demonstrates how Australian retailers can drive awareness of their brands and products in China to expand their e-commerce businesses there.
How can you compete?
Following are six tips to help you differentiate your retail business in China:
- Content is key: Before a sales event, create exclusive content to share with consumers that offers inspirational ideas that the Chinese generally know little about, such as a glimpse behind the scenes. Great content can generate consumer interest and initiate them to share via social media.
- Be flexible in merchandising: Closely monitor your sales figures and inventory during sales periods; be flexible to make changes to lists accordingly; check top selling products and enhance their promotion in various channels to maximise sales. Also bundle long tail products with top selling products to stimulate sales.
- Good planning and management of inventory: During sales events, it’s easy to run out of stock of top selling products. Make sales predictions at least eight weeks in advance and find an optimum shipping and logistics route. Setting up warehouses in free trading areas such as Hong Kong is also a popular option.
- Variety of marketing channels: Maintaining traffic is growing expensive, so it’s important to adapt your business model to other suitable and emerging marketing channels. Unlike marketplaces where all brands and retailers compete on the same platform with the same traffic, your own e-commerce site or WeChat Store will be less affected by having more flexibility in traffic choice. It also encourages more loyal and engaged customers to come back regularly.
- Building loyalty: Due to the short period of time that a sales event lasts, inviting existing customers back for repeat purchasing is more effective than competing for new traffic. However, this requires that retailers improve shopping experiences; provide useful content regularly; invest in branding to retain customers and offer incentives to encourage repeat shopping.
- Provide superior customer service: Although creative marketing campaigns can help retailers and brands stand out, customer service and product quality are the major concerns of most shoppers after sales. Superior customer service is where you can differentiate your business
If your business is thinking of expanding its footprint in China to capitalise on the country’s booming cross-border online shopping market, then you need to consider different avenues to reach consumers, stand out and take your e-commerce business to the next level.
Sylvia Wei is Azoya’s deputy managing director for Australia.