Multichannel strategy consultancy Practicology discussed the opportunity for western retailers wanting to sell online in China at its 2016 client conference.

1. Everything you need to know
about China in 30 minutes
Chris Vincent, CEO - Asia Pacific
Arthur Cheung, Country Manager – Greater China
Practicology Conference 2016

2. Who are your
customers in China

3. China Ecommerce Ecosystem
3
Consumers
t.qq.com
Social
Main
Buying
Channels
Search
Engine
New
Buying
Channel

4. China’s demographics
► There are 4 Tier 1 Cities in China: Beijing,
Shanghai, Shenzhen & Guangzhou
► There are approximately 60 Tier 2 Cities
► There are 200 Tier 3 Cities
► And over 350 Tier 4 Cities
► There are over 160 Cities with a population
greater than 1 Million people!

5. Lower Tier Markets are picking up the growth

6. ► Tier 4 and Rural cities Taobao
Tier 4 and Rural cities Taobao

7. How to enter China – Ecommerce Channel, Marketing and General Practices
Source: China’s Connected Consumers When 10,000 Chinese shop... Insights from a 2015 survey, KPMG CN

8. Peak Shopping Day in a Week & Hour in a Day
Mon Tue Wed Thu Fri Sat Sun

9. Types of B2C Plaforms

10. Trade partners

11. ► The traditional entry point into China digital
for western brands is Tmall
► Sales on Tmall can be tremendous as you are
reaching such a large population
► Tmall is not the only marketplace in China…

12. Marketplaces – Market Share

13. ► These trade channels are like an outsourced ecommerce
department
► They could do everything from sales to customer service to
logistics
Trade Partners Overviews
Trade Partners Roles & Service
Trade Partners

14. The challenge with TPs
► There are literally hundreds of TPs in the
market now
► Hard to find good talent
► Turnover rate is huge
► Most are run like a factory
► Visibility on TP effort is hard to track
► TPs are getting too large now – some have even
floated on western stock markets
► Brands don’t have a direct connection with
their customers

15. Take Back Control
What we think…
► Initially you want to manage the trade function
directly
► Get to know your customers
► Outsource the support functions
► Supply Chain
► Customer Service
► Design
► Later you want to take back total control

16. The challenge with marketplaces
► Very Difficult to differentiate
► Discount driven
► Fakes and Grey market imports are a real issue
► Doesn’t really allow o2o or multichannel
engagement
► Ultimately you want to have direct access to
consumers

17. The rise of WeChat

18. To understand WeChat you have to understand
the foundation:
► It is a mobile first market
► Censorship is rampant
► Microblogging or Weibo was/is massive in
China
► D2C sites have struggled to get cut through and
break the marketplace monopoly.

19. People often say WeChat is like
Whatsapp...

20. WeChat is a lifestyle app

21. • WeChat has 1.1 Billion
registered accounts and 700
million active users, 70 million
outside China as of May 2016
• 200 million of them have
credit cards attached to their
bank/ credit card accounts
• 83% users purchase product
online
• 55.2% users open it more than
10 times a day
• User spend on Wechat’s daily
is over 40 minutes
• WeChat contributes to $1.76
Billion in lifestyle spending in
China

22. WeChat Consumer Engagement to Purchase
New
Buying
Channel
Other market
places

23. WeChat Consumer Engagement to Purchase
23
To the
Brand site
Shopping
products
QR Code
in Menu
Follow and
blinding
Msg to
customers
Promotion
banner with
links to html
pages
Menu to the
product page

24. Multi-Level Marketing

25. ► As WeChat Commerce has gained
share in digital shopping. Integrated
apps / platform are developed to
deliver social viral and marketing
opportunities to direct sales to
Wechat shops
► Multi-Layer Marketing in China has
become a hot trend in China growing
since 2014. Numerous Social
Distribution / Multi-Layer Marketing
Platform had been founded.

26. Real Life Example
According to Law in China, if that is not exceeding 3 level, this is still legal.
Lab Series
WeChat
Store

27. Multi-Level Marketing Via Wechat
► Using MLM (multi-level
marketing) Wechat store
owners can acquire
fans/customers by viral
marketing or a QR code in
Wechat, friend circle or
messenger.
► If they then remarket this onto
their contacts they can gain
some commission from each
subsequent shopper.
This is a MLM wechat platform , the right hand side screen cap
shows the profit an individual gained from his down-line fans

28. O2O Wechat CRM Case – Sasa Perfumery
Binding personal via sending QR
code to the brand official account
By auto-reply function,
they can get staff coupon
/ connect to customer s’ accounts
Generate coupons for customer
Reply enquiries when their own
customers ask something in the brands
official wechat
View the record of coupon usage and
comission status

29. Cross-border Ecommerce

30. Cross-border ecommerce

31. Drivers of cross-border ecommerce in China
Why is cross border so big?
► The amount of fakes in China is rampant
► Run from Hong Kong – has a much more
western approach to laws and governance
► Tmall Global only allows one global flagship
per brand
► Items are viewed as “real” by Chinese
consumers because they are from somewhere
else!

32. General Practices Flow Chart – Cross-border
Bonded Warehouse Model Direct Delivery Model
Bulk merchandize from
overseas
and ship to China
Stock in bonded warehouse
Customer place the order
Pick & Pack
Bonded Custom Check
Domestic Delivery
Customer place the order
Merchandize from overseas
Pick & Pack
International shipping
Package entre custom warehouse
Logistic Custom Check
Domestic Delivery

33. The China caveat
One caveat to dealing with China is
that rules can change regularly so
ensure you are kept up to date on
changes or potential changes.

34. Cross-Border Tax (Jun 2016 Effective)

35. Thanks for listening
If you want to discuss China or the
wider Asia pacific region please
email us at:
chris@practicology.com
arthur@practicology.com