The Many Faces of Social Commerce in China

Published on Inside Retail.

While the rest of the world second-guesses whether they will be in lockdown the following week, China for the most part has found itself curiously upbeat. In 2019, over 160 million people exited the country for pleasure or business, notably spending an average of US$ 1500 a person while abroad. With borders officially closed over the past year, a significant portion of that disposable income has found itself fueling ecommerce within China’s own borders.

 

Some interesting trends have emerged that can drive practical applications for brands as they think through how they might capture this discretionary spend. This does not mean all brands need to blindly pursue these tactics, but these trends do speak to the diversity and innovation that exists in selling products in China. These tactics also highlight the influence and impact social media has on creating and converting demand.

 

Here are some of the emerging facets of retail and ecommerce that are exciting us today.

Duty Free Retail Meets Live Commerce

As of 2020, the Chinese government has significantly increased the annual limit for duty-free purchases by domestic travelers to Hainan island allowing visitors up to RMB 100,000. The effects have more than doubled duty-free sales value in the island’s Sanya resort to RMB 27.48 billion in 2020, a year that saw 15.5 million domestic travelers.

Spend that used to get poured into targeting Hong Kong, Tokyo or Paris bound travelers will now go into Sanya and other future domestic duty-free destinations. A recent KPMG report has predicted Hainan to become the world’s biggest duty-free market in the next two years. For luxury travel retail brands this is an opportunity boon. 

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YSL (Yves Saint Laurent) partnered with China Duty Free Group to bring its #Claimyourlove campaign to Hainan on China’s Valentine’s Day 2021, launching a sweat-proof, all-weather foundation at the tropical paradise. The campaign was pushed through a live broadcast that invited its 10 million viewers the opportunity to purchase directly online – what happens in Hainan, does not necessarily need to stay in Hainan.

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Another example of duty-free action saw the launch of leading travel retailer CDF-Sunrise’s WeChat store. Followers can watch product presentations through live broadcasts, use discount coupons to buy, and pre-order prior to entry into the CDF. Followers also benefit with push notifications for airport pick-up – a little service that ensures their flights are not missed and they have given themselves enough time to queue and collect their shopping. This strategy maximizes time spend, allowing browsing and discovering products and deals before and during their stay. Brands do not even need an offline presence at CDF to open online brand boutiques within the WeChat store.

Creating Virtual IP to Contest KOLs

Brands have invested heavily in KOL and live-broadcast commerce. The lesson being – you sell if you are known. Without brand power, sell-through can be a struggle. But to counter influencer inflationary pressures, some brands have created their own IP – virtual characters who bring the brand to life. However, the need for brands to invest in IP that is not dependent on leasing influence, but on building one’s own brand currency.

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On June 2021, Chinese beauty brand Florasis introduced its namesake to connect with online audiences. Today she has an estimated 300 thousand followers on Weibo. Making her one of the most powerful virtual influencers. Florasis is the first domestic beauty brand to create such an ultra-realistic avatar.

 

Cosmetics brand Perfect Diary kicked off this trend by launching its virtual persona Xiao Wanzi on WeChat and engaging customers through private and group chats – a beauty advisor, friend, promotional information supplier, and customer service assistant – all in real time. Other brands that have done similar include Givenchy, Burberry and L’Occitane, who have all creating their own IP.

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Givenchy partnered with SuperELLE and Tencent Games to feature a virtual boyband, The Futurer. The campaign starred the band kitted in Givenchy’s Qixi collection of ready-to-wear garments shot, filmed and broadcast by SuperELLE.

 

 

IP Collaborations for Hype Demand

 

With on-demand automated production, country-wide 24-hour delivery and shorter product life cycles, it will nevertheless be the time-bound limited editions (or hype drops as they are known in the industry) that are likely to be more prominent. Volume sales will transition to value generating and word-of-mouth led growth.

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Global brands are seen actively collaborating with Mickey, Snoopy, and KAWS and other IP to both shape their brands but also to sell out limited editions on release date. The KAWS x Uniqlo collection when released usually sells out on the same day with product showing up on Taobao hours later selling sometimes 100x its retail price earlier that morning.

Also common on social media feeds are people sharing the adventurous behavior of shoppers, as push turns to shove in order to get hold of items that fit. As footage of customers clambering over one another and stripping store mannequins permeate across social media, it only adds further fuel to the hype around these products and the brand.

The C in CRM is For Community NOT Customer

 

The perimeters between CRM and social community have blurred, and sales of products are now being directed by an army of KOCs (key opinion consumers). Brands are vested in building partnership with community influencers that direct the content creation and the activation of a brands’ products. New opportunities have emerged through affiliate sales SaaS platforms that let people earn money by enrolling to help brands drive community sales, whether that’s Chinese brands or daiguos (foreign surrogate shoppers for Chinese customers). With borders shut daigous and P2P accounts on Taobao have anchored into selling us everything from apparel to infant milk formula.

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China apparel brand Peacebird has mobilized employees to push out promotions to their social circles. During shopping festivals in China, they promote brand offers on their personal social accounts, and the company also launched an app “Niaoda” (鸟嗒) to encourage employees and users to share their own daily outfits, and help flood social feeds.

Notably, many of the tactics – be it hype drops, IP collaborations, or time-bound live-broadcasts are all utilized to dominate social media feeds and algorithm recommendations to similar audience types and potential customers.

Second-life Commerce

 

A recent visit to the laundry revealed, unlike a decade ago, patent leather handbags being primed for a second life, acting as part retailer part repair store.

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China's secondhand luxury market is flourishing as young consumers are looking for affordable high-end goods through second-hand trading platforms. Research firm Bain & Co reported that China accounts for almost 50 percent of the global luxury market.

 

With luxury products going mass, Alibaba’s Yitao also gives used luxury a second life. From collectibles, car parts to handbags items, the products on sale are pre-owned or sometimes excess stock. Arguably, these are the first steps Chinese shoppers are making towards sustainable ownership of luxury, as younger environmentally conscious consumers enter the market. A recent announcement by the LVMH group joining blockchain company Aura reinforces this pivot – giving owners of former and future luxury traceability of their product.

 

 

The great unifier of the many faces of retail is still Brand

 

Marketers monetize brands through the lowest denominators of digital trade be it a live-broadcasts, WeChat store, or KOC offered coupons. There are innumerable opportunities and techniques for brands to leverage in selling product.

 

Some of the best pieces of communication were created with the intent of converting demand. In the day, we called it direct advertising; mailers then became email, and email turned into SMS, and short messages a decade ago were replaced with WeChat notification. Today, ‘direct’ involves piloting KOCs and affiliate marketing approaches to dominate feeds - directing traffic to value creating or value converting destinations.

 

Some of the world’s largest advertising companies were built in the 70s and 80s on their ability to covert demand through direct advertising. They went on to contest leadership of general advertising companies. The same can be said of Chinese brands that are hotly contesting the position of MNC brands in China and for the most part are leading packaged food, apparel, cosmetics, electronics and appliances.

 

We argue that value creation is as important as value conversion and that demand is a consequence of desire. We believe media and martech innovation will find more efficient ways to capture customer spend but only when paired with timely and targeted brand building exercises.

 

Our belief is that regardless of what face the brand puts on to transact, it needs to have a strong brand foundation and context of the environment it sells in.

For more retail trends, download TBWA’s latest global reportThe Future of Retail