Social Ecommerce: The Future of Online Shopping is in China

Guest post: Olivier Verot has been living in China for almost 8 years and founded a digital strategy agency specialized in the Chinese market. 

With 24% online sales growth in 2018, and a total revenue of 1.3 trillion dollars in 2018 (National Bureau of Statistics of China), China is the fastest growing online market of the World.

When Facebook was launched in 2004 and started being more and more popular, China decided to build its own digital ecosystem, instead of relying on the American ones like Twitter, Instagram, Google, YouTube, Amazon, etc. Since then, the Chinese Digital Sphere is developing new technologies and adapting to users’ behavior to optimize their experience as well as the revenue of the platform.

Another characteristic of China is the number of people using the internet: at the end of 2018, they were 829 million users.

Moreover, among these users, nearly 871 million use the mobile channel for their web activities. In China, the mobile is the channel most used by the Chinese netizens. This is due to the democratization of smartphones (that are very affordable in China) and the development of payment via phone (WeChat Pay and Alipay in particular). This trend is much less common in Western countries (almost non-existent).

Where are these developments from? What are the applications that leveraged this evolution? The main result of these radical changes is the appearance of the social e-commerce.

What is Social E-Commerce? 

Social e-commerce is a mix between a social network and an online store. It’s a great way to combine the engagement of a social network with the efficiency of e-commerce. In this sense, some applications have become platforms offering a wide range of services where social life and the act of purchase are linked.

Why is this new trend a success in China?

Because Chinese people tend to lack confidence and trust in the brands. This is due to repeated scandals and numerous counterfeits available for purchase in the country. In addition, the omnipresence of advertisements in all forms of media (billboards, videos, social media ads, flyers, etc.) is making traditional marketing methods ineffective.

Thus, the Chinese tend to turn to people or entities of trust. Among others: their families, their friends, their work colleagues. More recently, KOL (key opinion leader) has developed into a real trusted figure for Chinese users. KOLs are digital influencers. They are known for a particular style, a special hobby, and most importantly the ability to grow a community on social networks. They most of the time have a cool personality, they are attractive, funny, smart, … They are very committed to their community that follows them for their authenticity, the trust they have in them and their common interests. Therefore, the Chinese users often turn to their favorite KOL before making a purchase, and they will be more inclined to buy something if their KOL has already tested and approved the product or service.

In this context, Chinese users are turning to social networks to access product reviews, "unboxing" videos and photos that allow to get the first impressions of their peers on a product directly after opening it. What is the benefit of these social networks? Without a fuss, they promise an entertaining and enjoyable experience. In addition, the development of mobile payment technologies (such as WeChat and Alipay) allows users to pay in one click instead of having to type all the numbers of their credit cards on a traditional Western platform.

Xiao Hong Shu: The Leader of Social Commerce

Founded in 2013, Xiao Hong Shu or Little Red Book is a social commerce platform that looks like a mix of Instagram and Pinterest platforms tailored to e-commerce use. Today the platform has more than 150 million users including 30 million daily active users.

The platform describes itself as: “a sharing platform for young people’s lifestyles throug deep-rooted UGC shopping sharing community”. The community of Xiao Hong Shu is mainly composed of women (85%) and relatively young (since 84% of them are under 30 years old). The Chinese Millenials are the main target of the brands that created their e-shop on Xiao Hong Shu, these young people have a different way of spending their money compared to their parents, they tend to choose more qualitative and luxurious products. In this the post on Xiao Hong Shu are ideal because they allow to post pictures that catch the eye but by clicking on them, the posts look almost like articles with an in-depth review and create a trust worthy feeling that makes the user more willing to purchase it.

The most popular products on the platform include: travel, fitness, fashion, snacks and products for mom and baby.

How can brands benefit from Xiao Hong Shu?

1# Content Marketing

The platform is content-oriented, so it is important to work on the texts, images, videos, etc., basically any content that will be published should be well prepared and precise. Xiao Hong Shu does not allow brands to buy ads, and campaigns with KOLs are very limited, it is important that the content is informative, creative and offers something new to users, if it is primarily commercial, the effect will be negative.

2# Create an official account and E-shop

To get the most out of Xiao Hong Shu, brands can create their official account to share their own content and then create their e-shop to allow users to buy products directly from the app.

3# KOL campaigns

If they should remain occasional, KOL campaigns remain a great way to communicate about a brand on Xiao Hong Shu. They will increase the reliability of this brand and the desire to get one of its products. In addition, KOL are social media professionals and know their community, so they will be able to provide targeted content tailored to the target of the company.

How’s Xiao Hong Shu a great marketing/sales tool? 

The major advantage for brands is that the application provides insights into trends in their
industries and desires that grow in consumers. What are the new demands, the new needs?
And thus, allow the companies to adapt their product development.

The platform is also a good tool for dialogue with the brand’s community as well as potential customers, the distance between the customer and the company is reduced, it creates confidence between the two parties and therefore boosted sales. Finally, creating campaigns and making online sales on a platform like Xiao Hong Shu makes it easy to evaluate the number of engagements and reaction to content, or a product. The number of clicks, comments, followers makes it possible to have a clear idea of the return on investment made by the company.

Thus, social e-commerce is developing strongly in China, it offers significant potential to companies that want to establish and represents a model towards which Western platforms will have to adapt in the years coming. This will require moving from a strategy very focused on physical retail to a digital strategy that will require a good mastery of the tools of these e- commerce platforms and various social networks.

Half of Amazon Stuff from Third Party Sellers

Recode has a great report into Amazon’s latest third party seller numbers. Third party sellers, if you arent familiar, are the small businesses who use Amazon to sell their products in a marketplace environment.

My favorite quote:

These merchants also play another important role: They supply Amazon with an almost limitless assortment of goods that make it the everything store — more than 100 million items in the U.S. are now eligible for two-day shipping under Amazon Prime. And more than half of all items sold on Amazon last quarter came from third-party businesses.

The two key numbers here; over 100m goods available with Prime, and half of all goods sold are now from third party sellers. These numbers are astounding, true scale that no other merchant including Walmart can touch.

Full story

Direct to Consumer Brands

Inc has written a fantastic overview of the rise of Direct to Consumer, or DTC, brands. With input from Wharton, the birthplace of Warby Parker, Jet.com and others, this is well worth your time.

Wharton professors, venture capitalists, and entrepreneurs are fueling an entire generation of Warby Parkers. Now there are more than 400 startups tackling products from toothbrushes to bras. What could go wrong?

Link

Build or Buy?

This is a guest post by Ben Koppenens of Ecquisition.com, an online website marketplace (https://www.ecquisition.com/).

Before you set up an ecommerce business, you will have to invest 6-12 months at least. Is your goal a website with high rankings in Google? Then add another 6-12 months. You can skip this initial phase by taking over an existing shop. This way you can save a lot of time and get a head start. In this article we will discuss this kind of acquisition.

Buying an existing web store

By buying a web store you have some major advantages. Often there is already revenue, contacts with suppliers, clients and of course the website itself.

If you are going to buy an existing webshop, there are a number of factors that can boost the price considerably. For example, if you have to buy the current stock directly or if the seller based the price of the webshop on turnover that he expected to make in the future. First and foremost, based on a broad-based valuation method, our advice is to come up with a price that you both consider acceptable. But in whatever way you come to a price, when the website has proven itself, the purchase price will reflect this success and requires an investment.

On the other hand, the self-launching of a webshop also has its drawbacks. Adapting that design every time, creating valuable content, building up SEO positions, fine-tuning the technology or building a regular clientele can be a lengthy and expensive process. On average, starting a serious web store costs 25,000-30,000 US$ at least.

Ways to find an existing web store

If someone possibly thinks about selling his web store, he will not immediately show it on his website. Showing that a webshop is for sale will quickly make you lose customers. That is why there is usually nothing to see on the web shop itself. But just like in the other company sales there are special mediators and websites for this. This ranges from simple advertisements at market places to full purchase guidance. This website offers ecommerce company’s for sale as well as advice when you want to buy or sell: ecquisition.com.

Risks when buying a webshop

Always make sure that you carefully examine the price of a webshop. In many cases this is based on, for example: numbers of visitors and generated revenue. But does this mean that there is actually profit? What are the costs of those visitors, for example? If there are a lot of advertising spending needed to attract those visitor numbers? Because we can all advertise and buy visitors! (effective and cheap advertising is still good though). Visitor numbers can also drop quickly in the event of a possible takeover. For example, the seller may have mentioned his shop on many other websites (his own PBN). If he is no longer owner, these links will be removed, which means less direct visitors, or even visitors from search engines. You will have to build all of this yourself. So always do good research before you purchase a website.

Advantages of taking over an existing webshop

You no longer have to worry about creating the website, finding suppliers or buying the domain name. Because that’s all done. Often there is still stock present, or a dropship contract, and if you are lucky, the website already has quite a few visitors. So you can get started right away. And with problems you can still ask the seller for help.

Other advantages:

An existing customer base
Backlinks to the web store
Existing stock/suppliers

Disadvantages of taking over an existing webshop

But there are also disadvantages to taking over a ready-made web store. You did not set up the webshop from the beginning, so probably certain elements are not entirely to your liking. The start-up period often consists mainly of hard work and a lot of investing, but during this start-up period one learns to know a shop and niche through and through. You made every decision and solved every problem, so that your webshop will no longer have any secrets.

Margin of Opportunity

What is the best way to increase your margins as a merchant? Sell your own merchandise. Quartz as an interesting piece on Amazon’s “secret” plans for private merchandise:

Trawling through over 800 trademarks that Amazon has either been awarded or applied for through the US Patent and Trademark Office (USPTO), Quartz identified 19 brands that are owned by Amazon and sell products or have product pages on amazon.com.

The key strategy behind private label brands is this however:

Perhaps what Amazon is trying to do as it rapidly expands into new businesses—especially business areas where it might not have forged partnerships with well-known brands—is to give the impression to customers that there are tons of options to choose from, when in fact, they’re really just choosing between different Amazon brands. “Consumers pay a premium for a brand, that’s why they’re not store-generic,” DiMassimo suggested.

Retailers have long adopted a multifaceted brand approach to retailing – think Zara plus Massimo Dutti, Oyosho, Bershka etc or HM plus COS, Cheap Monday or indeed pretty much any other major retailer these days. As above, it’s about generating margin whilst at the same time, presenting a feeling of choice.

Read the full piece