As a result of leapfrogging, the challenges of city living and government control of the Internet, Chinese consumers in cities like Shanghai and Beijing spend a huge amount of time accessing content on their smartphones. In response the digital ecosystem has developed rapidly and there is little you cannot do using only your smartphone.
Last year’s AdReaction Study found Chinese consumers spend far more time using digital screens than the global average: over 28% more time on digital devices and 20% less time watching TV. This situation is not limited to China. At a Millward Brown client event in Hong Kong, Anita Lam, Head of FMCG & Retail at Facebook Greater China, shared stats from Global WebIndex that showed consumers in many emerging economies are far more likely to spend time online than watching TV than those in developed economies.
Last Chinese New Year’s Eve, 1 billion Red Envelopes gifts were sent via WeChat. Tencent only introduced the Red Envelope app at the beginning of 2014 as a virtual version of the traditional red envelope that was filled with money and given as a gift to family and friends. However, familiarity and utility have combined to make the Red Envelope a popular way to send money and a widespread way to engage consumers with brands.
E-Commerce is huge in China. A chart in Mary Meeker’s State of the Internet report shows how Alibaba’s gross merchandise volume has accelerated exponentially since 2004, blowing past sales on eBay in 2010, and reaching three times the amount in 2014. Many established brands sold through bricks and mortar stores are now struggling to compete with made-for-internet brands that are sold far more cheaply and only online.
Many of the online brands and companies are following the ‘users first, revenues second’ model pioneered in the West. The problem is that this ‘Internet thinking’ is spreading well beyond the digital ecosystem as younger people assume that the model works well for offline businesses as well, forgetting that with traditional business models margins do not necessarily increase with scale; if you sell more you still incur the costs of producing more. Setting that aside, a far bigger problem is the assumption that everything must be done at internet speed; something which I believe is undermining the effectiveness of many marketing campaigns. Just like the thousands of start-ups that never make the big time, all too many campaigns result in superficial buzz and little benefit to the brand.
I will return to this topic in later posts, but meanwhile please share your thoughts on the fast-changing world of digital in China.