The three most common mistakes made by companies in the Chinese market

02.05.2019
Interview

New technologies and big data are rapidly changing trade in China.. In an interview, Chiang Jeongwen, Professor of Marketing at the renowned China Europe International Business School (CEIBS), discusses how to successfully enter the Chinese market, the competition between Alibaba and Amazon, and Chinese consumers. On 5 September 2019, Jeongwen will present  at the GDI Retail Summit.

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How do you define the Chinese consumer?

Today’s millennials and their offspring in China are much like their counterparts in the West–very individualistic and highly digital. Thanks to affordable and ubiquitous smartphones, telecom coverage, online payment (Alipay and Tenpay), prevalent social media (Wechat), millions of APPs on all living aspects, and unbelievably cheap logistics, digital life is deeply central to today’s Chinese – and more advanced than the West.. Unlike their parents, this  new generation of customers is more willing to spend on surrounding lifestyle, self-indulgence, and self-improvement–for entertainment, sport, vacation, art, language, and skills.

Retail in China is changing ever faster. How do you survive?

Enabled by cutting-edge IT, companies must use data analytics to redefine the traditional core elements of retailing–people, products and places–and the relationship among those elements to upgrade current selling formats and enhance customer experiences onor offline. Six steps to survive or excel in the future:

  1. re-think customer-centric model with seamless customer experience as the only guiding principle;
  2. develop new flexible and efficient R&D and supply chain;
  3. redesign marketing and consumer management programs;
  4. modernize retail formats beyond basics–shopping experience must be fun, relaxing and “tweetable”;
  5. transform the organization and operating model for digital;
  6. Invest in new technology like  AI and deeplearning to grow current and future businesses.

What are the most common mistakes when European retailers try to enter the Chinese market?

Based on my observations and narratives shared by experts, the top three common mistakes companies make when entering Chinese markets are:

  1. Lack of thorough understanding of China on its potential customers, business environment and practices and, to a huge extent, government policies and future directions.
  2. nadequate marketing supports to sell to Chinese consumers–whatever worked outside China does not necessarily work within China. Marketing 4Ps must be carefully re-examined for Chinese market.
  3. Dysfunctional decision-making mechanism–it has been a constant battle between HQ and local JV (or wholly-owned) company on business strategy and executions. Too much control by HQ or too little local autonomy has caused missed opportunities or even complete failures.

What is the most promising new business model that you have come across lately?

Leveraging asymmetric information and the "buy low sell high" business model is long gone in today’s China. Smart companies, 2B or 2C alike, have now recognized the importance of managing a customer’s life-cycle–selling the right products at the right time, place and price. The starting point is data. Transaction data from CRM is no longer enough. Online/Offline sale data plus social media customer tweets and chats allow companies to "know" their customers intimately. Cross-sell business opportunities naturally emerge. For example, a mobile phone manufacturer in China is ready to work with its over 25 thousand local retailers to cross-sell P2P personal loans, thanks to its ability to track phone usage behaviors. It sounds disconcerting , but the big data’ practice is under the self-imposed company discipline and scrutiny of the public and government on privacy protection.

Amazon vs Alibaba: Who will win the race and why?

It is difficult to define a "win" in any conceivable business context for these companies because, figuratively and literally speaking, Amazon and Alibaba are not on the same racing track at all. Both companies are dominating in their  respective e-Commerce markets with very insignificant overlapping businesses. Despite temporary disruptions caused by recent Sino-US trade dispute and anti-globalization movement, most experts believe continuing global trade growth is inevitable. This means more opportunities for Amazon and Alibaba to collaborate, rather than compete–a "win-win" situation.

Chiang Jeongwen​​​​​​​ will be speaking at the 69th International Retail Summit at the Gottlieb Duttweiler Institute on 5 and 6 September 2019. Sign up with early bird discount, now!