Chris Ryan
Jan 21, 2021

China brings the future of commerce into focus

AnalogFolk's Asia MD describes how China's sophisticated, tech-savvy consumers are driving brand innovation amid a fourth industrial revolution that's just getting started.


The dawn of 2020 had an auspicious numerical ring to it in China and elsewhere: the turn of a decade, the anticipation of an Asian-based Olympics, and potentially positive political winds of change in the US. It’s hard to believe that barely a year ago no Eastern or Western astrologer could have foreseen the impact of the coronavirus pandemic and global health crisis, and the lasting change this would bring to an unevenly distributed world.

While the crisis remains far from over, we are seeing some trends begin to consolidate, and now that vaccination programs are finally underway, business and policy decision makers are looking to what the future might hold—seeking in particular to identify which of the many technological, cultural, and economic changes we have witnessed will represent permanent alterations in the way we behave, as opposed to short-term emergency measures.

In 2021, the world is turning to China to identify key indicators in consumer behaviour, and the way leading ecommerce brands have responded to the opportunities of engaging shoppers during the pandemic. No longer deserving the clichéd tag of ‘copied in China’, the combination of advanced manufacturing capabilities, sophisticated user adoption of technologies and digital payments, and the chronological unfolding of the pandemic itself, have combined to put China in pole position as we start to envision a post-Corona economic landscape.

While Amazon and Walmart focused on scaling up their point-and-click sales distribution services fast, Chinese brands like Alibaba and Tencent were already approaching retail from an engagement perspective. They're blending social media and entertainment into the retail environment, creating a holistic user experience. And this was perfectly positioned to respond to shifting consumer needs—from lockdown boredom to the emergent phenomenon of ‘revenge spending’ (over-compensatory binges). With growing competition from the likes of Meituan and Pinduoduo, the online retail and payment market is thriving and innovating in China, rather than becoming overly dependent on single dominant market leaders. It remains agile enough to respond quickly to shifts in public mood and attention.

Capturing and responding to changes in mood helps brands optimise bricks-and-clicks marketing activities and nudge action as rolling lockdowns and curfews continue to constrain real-world behaviour. Engagement with social commerce and the influencer marketplace, such as the famous Mr Bags, can sell out a key product in minutes. Growth in livestreaming ecommerce, through online shopping malls set up by Alibaba and Tencent or by influencers on social media, is expected to be another legacy of the pandemic. This area is estimated to be worth US$60 billion in 2020, with the US accounting for just US$1 billion of sales.

This blended user experience is further facilitated in China by the integration and broad consumer acceptance of embedded digital payment options, creating super-app experiences for the user, who never has to leave their familiar environment. Siloed Western platforms are years behind China in terms of group deals, micro-credit and digital payments. But they are striving to catch up; the growth of the European brand Klarna, whose volume and revenue for the first half of 2020 grew 44%, demonstrates a hunger for consumer convenience and control over payments which is largely unmet beyond the Eastern hemisphere.

Just as with the remote work trend, changes in retail patterns were already happening long before Covid-19, and the hollowing out of traditional high street shopping is just one example. Every crisis creates winners and losers, and brands that are tied to declining traditional sectors—such as formal workwear providers—will suffer if they are unable to pivot to meet new needs. Similarly, retail brands will need to do more to encourage shoppers to return to their stores, with greater uptake of technologies such as click-and-collect experiences, microbial-safe touchscreens, and blended AR experiences like virtual dressing rooms.

Indeed, to fully embrace the potential of the fourth industrial revolution, brands will need to seek new audiences for existing products and services, such as home fitness products in the face of gym closures. Sales for Nike China rose 8.9% to $11.2 billion in the quarter ended November 30, beating analyst projections of $10.6 billion and reflecting the increased demand for an infrastructure of educational and accountability apps around the products themselves. This filled the gap that professional trainers and facilities could no longer address, in a market which was perfectly positioned—due to smartphone adoption, 5G infrastructure, and more—to engage with it.

The challenges of 2020 have impacted every aspect of life in ways we could never have imagined—and will continue to do so. Provided emerging regulatory constraints can be successfully negotiated as digital China finds its position in global marketplaces, the potential is unlimited.

And it goes way beyond ecommerce. Technologies from unified communications to medical analytics and telehealth are converging and consolidating around a world in which we need to do more things from home and at a distance. We can expect China’s technologically sophisticated consumers to drive increased demand. This in turn will shape digital product and service provisions through quality user experiences in ways we cannot yet begin to imagine.

The fourth industrial revolution has truly only just begun, and China is right at the heart of it.

Chris Ryan is Asia managing director and partner at AnalogFolk.

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