China’s e-commerce layer of complexity

With online retail sales closing in on US$300 billion in 2013, China has become the world’s biggest e-conomy.

For anybody who has had the chance to live in the middle kingdom, this does not come as a surprise. In fact, one hardly needs to do research to see how e-commerce is now embedded the Chinese way of life. E-commerce getting so big hasn’t really felt like a revolution. In fact, Alibaba is still a strong leader on B2B and gaining share on B2C. The key motivations for buying online are also the same as they were five years ago - price, convenience, choice. And for people in smaller cities: access. There is no reason for this to dramatically change in a foresee-able future.

Don’t get me wrong. Some things have changed. Payment has shifted to online payment as opposed to cash on delivery, showing a growing confidence in the online options. Most players have stepped up their game and newcomers have arrived. M-commerce has picked up. But all this feels pretty natural.

What has dramatically changed is advertisers’ focus. While we had strong growth in brick and mortar retail, e-commerce was, for most and at best, something brands’ invested in as a potential revenue stream for the future. In many cases it was partly or completely outsourced. The issue is when brands give these partners/distributors a marketing mandate with little or no oversight. It’s hard enough when firms split marketing functions between different departments (marketing, trade, digital, etc). At a time when e-commerce platforms play a visible role in the consumer journey, which goes far beyond simply pushing sales, this has become a major issue.  And the fact that B2C is the main e-commerce driver is an additional incentive for driving change.

So we see most of our clients now either re-claiming or at least coordinating marketing efforts across these channels. We have reached a moment in time when the weight and the specific needs of e-commerce are finally affecting organizational structures.

If the e-commerce scene had evolved rather than revolutionized, some current developments lead us to think that major changes are about to happen. Despite the recent government halt on some mobile payment systems, there is no doubt China leads and will continue to lead in terms of mobile payment services. This has enabled a quick rise of m-commerce whose share should, according to i-Research, reach 30 per cent of online sales by 2014. This share could be as high as 40 to 50 per cent for some key player such as Alibaba or Jumei, with the increased ease and simpler user experience that mobile payments afford adding a boost.

Wechat’s entrance into the e-commerce marketplace will profoundly impact the existing scene. It’s collaboration with Didi Dache and recent acquisition of a 15 per cent stake in JD.com shows Tencent’s determination to quickly grow capabilities. The exclusive launch of the Xbox pre-order on WeChat already shows fantastic synergies this alliance can lead to. Above and beyond WeChat, the entire social commerce industry should grow. We’ve seen other strategic alliances in that field, and, more importantly, brands like Xiaomi have shown this can be a successful business model.

Offline to online (O2O) should also become a major focus for e-commerce players in order to overcome some consumer barriers, such as testing or trying products, having a quicker access to their purchases. Alibaba’s investments in both Autonavi and Intime are a clear reflection of that trend.

Asia's Top 1000 Brands 2014: Top 1000 ranking Adspend for Top 100 Rankings back to 2004 Top 100 in 13 specific markets Interactive comparisons Analysis and commentary Explore now >>

What will all these changes mean for marketers and agencies?

For Agencies, a large part of the work will be to understand how each platform works and performs, individually and synergistically. As many of them are not integrated in the overall ecosystem (and integration does not seem to be on their agenda) this assessment will prove to be time consuming. It will be up to agencies and their technology partners to build systems that will enable us to manage media across platforms. At ZenithOptimedia, for example, we are working on private e-commerce exchanges to ensure real-time access to multiple e-commerce platforms and their inventory. We are also working alongside Vivaki to building dynamic creative capabilities. With consumers searching for thousands of specific products within the same brand at any given moment, delivering the right message to the right consumer at the right time will be crucial to driving high ROI.

For Marketers, the reality is that e-commerce will add an extra layer of complexity to the mix. Building capabilities in this specific field will be paramount to success, many of which will be brought in-house. The second inevitable consequence will be a substantial increase in marketing budgets to support these channels. And with this will come the need to re-assess agency rosters and scope of work.

Mathias Chaillou is Optimedia MD China, ZenithOptimedia Group