The business case for U.S. apparel brands to market to the Chinese customer is gaining momentum as the fast-growing Chinese middle class and its widespread use of online purchasing has created a juggernaut opportunity to participate in the largest e-commerce marketplace in the world.
As important as it is for brands to recognize the Chinese e-commerce market’s growth potential, it is even more vital for them to fully embrace the distinctive characteristics and priorities for these consumers. Their key traits — loyal yet open-minded to new brands, quality-minded, information-curious and economically empowered — render them ideal customers to engage and retain as they broaden their ranks and increase their wealth.
Global luxury brands and increasingly U.S. companies are recognizing that this burgeoning marketplace offers a dramatic launch pad for both established and emerging lines. The following provides some guidelines on why this is a momentous time to enter the Chinese e-commerce marketplace, and how to successfully engage this distinctive consumer audience.
The business case for engagement. The growth of the Chinese middle class already in progress is expected to continue from 430 million today to 780 million in the mid-2020s. As these consumers increase their incomes, they will feed into the entry levels of the luxury market that, according to McKinsey & Co., should double between 2016 and 2025. At that time, more than 7.5 million Chinese households are expected to spend 1 trillion a year in RMB (US$150 billion), or 44 percent of the total global market. To put that in perspective, that is equivalent in size to the French, Italian, Japanese, UK, and U.S. markets combined only two years ago.
As Chinese income and consumer confidence grow, they spark a demand for higher quality food, cosmetics and clothing. Hand in hand with this trend is the Chinese commitment to technology that is a key catalyst to its consumption.
Technology is the fuel for growth. Integrated e-commerce and communications platforms such as WeChat, a multi-purpose social media and mobile payment app, seamlessly connects Chinese consumers anywhere in the world. In particular, Chinese Millennials who themselves will make up 65 percent of China’s consumption growth through 2020, are communicating on WeChat among their friends, social media network and transportation, food or retail providers — often all at the same time.
This is Facebook on steroids — facilitating vast information-gathering, decision-making and purchasing. Nielsen’s 2017 Online Shopper Trend Report said that 51 percent of consumers have opened push notifications sent from a brand’s official WeChat account. Twenty-seven percent of consumers indicate that they buy more after receiving these messages.
We know first hand. VIP.com’s NYSE-listed parent company, VIPShop (NYSE: VIPS), recently secured an equity stake from the owners of WeChat, that will allow VIP.com to provide brands access to potentially 1-billion active users monthly.
Information is the glue to your brand. Especially for the middle class consumer for whom international brands have been heretofore economically, geographically or technologically unattainable, gaining access to them online has fed a deep appetite among Chinese consumers for quality international merchandise. At the same time, it has facilitated their connection with all the aspects of merchandising that U.S. corporations have been desperate to convey in an impatient, time-starved consumer marketplace.
Unlike many American consumers, who pursue the “next” brand or product, Chinese consumers are curious to take the time to learn more about all manner of brand characteristics, information, storylines, and related purchase options.
Chinese e-commerce consumers — who are 80 percent female, interested in quality and willing to pay for it — will linger on a brand site to learn more about its range of products. Since they are also young and relatively new to accessing Western brands online, companies should offer luxurious details and adjacent product information. This also benefits emerging names since the Chinese digital market presents them with a chance to jump-start their businesses faster than they can in other markets.
At VIP.com, we have tracked a high level of loyalty — 84 percent will come back to the site. With the right information, they will also purchase from it.
That’s not to say that Chinese consumers aren’t embracing the “new retail” that combines both the online access and in-store experience. Rather it puts the onus on international brands to ensure that both realms can meet the brand and information-hungry consumers.
Delivering on quality product. A state-of-the-art supply chain and AI-enabled transportation system allow global brands to reach customers in 2nd and 3rd tier Chinese cities, and beyond to remote areas of the vast country. Huge robot-served warehouses and drone deliveries ensure the quality control required by sellers and premier customer service expected by buyers.
Hillary Wang is Head of Global Buying for VIP.com, the third-largest and fastest-growing e-commerce platform in China. VIP.com has 18 warehouses, a cross-border international logistics system and offices around the world including 2 in the US, New York and Los Angeles. VIP.com forecasts tripling its current sales of U.S. goods into China from $2.2 billion in 2017 to more than $6 billion by 2020, and expects to continue to add more premier names to its e-commerce platform as it has done weekly since its June launch in New York.