If size matters, then for sheer scale China is hard to beat. This year, it eclipsed the US as the world’s largest consumer market, with retail sales of $1.4tn in Q1 of 2018 alone. It’s also the world’s largest ecommerce market, with online sales hitting $307.4bn in Q1 2018, an increase of 35 per cent year-on-year.
Yet it’s an opportunity Western brands often struggle to crack. Marks & Spencer pulled out of mainland China in 2017, while online fashion empire Asos shut up (virtual) shop in 2016. Despite investing more than $600m in China, Amazon has only a 1 per cent market share; Alibaba, the country’s largest ecommerce platform, has 58 per cent.
While any international consumer brand can sell to the Chinese market via Tmall, Alibaba’s B2C marketplace, the online giant is now going one step further, offering a service to help brands better compete in China. The Tmall Innovation Centre (TMIC) takes Alibaba beyond retail into product development, working with international companies to tailor product designs specifically to the Chinese market.
It’s powered by consumer data – something Alibaba is not short of. It claims its 600 million users, on average, open its shopping app nearly seven times a day for 25 minutes. Data like search terms, price performance and return rates can be shared with international retailers, who can also send out consumer surveys or samples.
Since its launch last April more than 80 companies including Unilever, Samsung, L’Oréal and Mattel have partnered with TMIC, either working with it on the R&D of brand new products, or tweaking existing ones to better serve Chinese tastes. Take Mars’s chili-infused Snickers bar, something our bland English taste buds probably couldn’t handle, but which has already brought in revenue of $1.4m.
Then there’s L’Oréal’s discovery that consumers buying its SkinCeuticals range were younger than its European and US customers, therefore more interested in anti-blemish products than anti-ageing ones. SkinCeuticals redesigned its flagship Tmall store to appeal to younger shoppers, adjusting its product sizing and pricing strategy accordingly. Average spend per transaction rose from $500-600 to $1,200.
To allow TMIC to get even greater consumer insight, it recently joined forces with 10 market intelligence firms, including Nielsen and Kantar TNS. "For most leaders in the field, when it comes to their annual strategic product launches, failure is not an option," says Tmall president of marketing and operations Liu Bo.
It makes a change from failure being the standard – if hardly coveted option – for so many Western brands in China.
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