This is article is to highlight the current challenges that brands face, demonstrating three ways how you can adapt your marketing strategy to enter the China market online. I share three recommendations, based on my experience managing a big online store in China, and based on my experience with Tmall and Alibaba.com.
To start, during the pandemic, we saw a big boom in e-commerce sales. The sales of the online retail increased a lot, but after the boom, the growth of online retail is slowing down.
The challenges brands face now in a post-pandemic era, is to maintain customers, to make sure they stay interested and stay loyal to their brand. Even though there is a 10% growth predicted in e-commerce sales in China, the overall growth has gone down.
From double digits growth before 2021 to 9% sales growth predicted in the coming years.
Prepare a Business Plan The first recommendation to market your brand in China is to prepare a business plan. This may sound very obvious, however, I still have a lot of clients that think they can skip this part. The business plan is crucial in my view because based on the market research, you will find so many insights that can help you prepare in terms of budget planning, sales growth, and managing your expectations.
With market research, you can answer Is my brand known? Does it have a presence already?
Based on these outcomes (brand popularity), you know how quickly you can activate your brand and how much budget you need to enter the market. In addition, wIth market research you can find your competitors, who they are, what are they selling, and for what price.
One last thing that I think is very important is to look at customer reviews when investigating the market. If you look for example, in a store of a fashion brand, you will see a lot of customers complaining or explaining about the size, the material, and their experience with the products. This is very valuable information for fashion brands as it tells you what Chinese customers want and what they expect.
You can adapt your product strategy to the outcome of the market research to make sure your product is aligned with the product insights you obtained. Market Research Example: To give a quick example of how to do market research, I share with you a case example.
Case: Max Verstappen wants to sell in China (Max is the Formula 1 World Champion). To start, I type his name in the Tmall search engine to explore the search results (see image below).
What stands out is that the first result is not related to Max Verstappen at all. The other three search results are T-shirts of F1 drivers. If you look at the title of the first result, it has no reference to Max Verstappen. Is this a mistake of Tmall, you may wonder?
This is not a mistake, it is an advertisement. Even though the shop is not selling anything related to Max Verstappen, they are bidding on the keywords. That is a good indication that Max Verstappen is known in China. Furthermore, his competitors are selling t-shirts at a very low price and have a low sales volume. Amazingly Tmall shows the sales of individual stores. You can see the sales of the competitors' shops of Max Verstappen, which helps you understand the volumes competitors do. Search results in Tmall with keywords “max verstappen”.
With the insights of market research, you can manage your expectations. In my experience, it will take 2-3 years before you reach break even or make a profit in China online. Here are three scenarios. Many companies expect a natural upward trend, like here in blue (see image below).
If you have zero awareness, however, it will be costly to achieve this as you need to invest heavily in raising awareness and activating your brand. A brand like Brand B already has awareness and can grow quite fast in the beginning. However, this can attract competition from bigger players in the market who can sell similar products to compete with you. For Brand C, it takes longer to become activated, but if they keep investing they can keep the memento and maintain steady sales growth.
Create a local marketing strategy My second recommendation to brand your way in China is that you need to have a local marketing strategy. That means, you really have to understand the current trends. A lot is about visual adaptation, like website design inside a marketplace like Tmall. Other adaptations are the influencer's strategy and product strategy you use to enter the China market. To share, four brands that I think have a good understanding of the current trends. The first one is Allbirds (an American shoe brand). Looking at their Chinese shop you will see a difference from their international shop. In China, they are focusing on the shoe in a lifestyle setting. On top of that, they show the shoe combined with clothing. This is because, in China, it is important to give styling tips. Chinese customers want to know how to wear shoes and how to style them. The brand Allbirds has visually adapted its product display.
Visual adaptations of Allbirds’ Tmall China Store The second example is Antica-Farmacista. On Instagram, you will not find any influencers that the brand uses for its marketing strategy. Basically, only the product and the product owners are shown on social media. On the contrary, in China, they have a completely different strategy. They worked with Austin Lee, the biggest Tmall Livestreaming Influencer, to activate their brand, through means of live streaming. The complete opposite of their international strategy. Supergoop sells sun lotion in a stereotypical way on their international social media channels. They show a typical city-bronzed woman, whereas, in China, they took a different stand by choosing a man to represent their brand in China. Instead of the stereotypical vision of a woman, they took a ballsy turn by choosing a man. This shows a great willingness to adapt to the market. Lastly, Lululemon recognized and acknowledged that Chinese customers have different preferences in terms of product use and fitting. They have recently launched an Asian Fit line that is tailored to the Chinese body type and product wishes.
Develop a local content strategy My third recommendation is to prepare a content marketing budget. If someone asks me how much budget I need in china to grow my brand, I always ask them, how fast do you like to grow, and how big do you want to be? The budget depends on your timeline and the cash flow that you have available. It will determine the brand activation trajectory. To open an online store on Tmall, the cost breakdown consists of agency fees (trade partner), that help you with the operations of the Tmall store, social media agency fees, and platform fees like sales commission, and a deposit.
On top of that, you need an e-commerce team in China because running a store is quite labor-intensive. For one, setting up the store is costly therefore you aim to have a sustainable presence in the market. A local e-commerce team is necessary to achieve this goal. Finally, it is not possible to copy-paste your international brand assets onto the Chinese market or Chinese social media platforms. You can of course, but then you will be less successful. There is a marketing budget needed for investing inside the marketplace and outside the platform. This budget is to develop commercials and do local PR and activations with local influencers.
In my experience, a (content) marketing budget comprises 25%-30% of your sales revenue, in the first few years of having your store live. Below you find the total overview of the costs of setting up and running an online store in Tmall. Cost structure Tmall store To provide some theoretical background, to show you why it is so important to have a marketing budget for outside Tmall, follow image below.
As a brand, you will have customers who become aware of your brand through a message or article shared on WeChat, or via a DouYin video coming from your brand. These are the first touch points that customers have with your brand. The next step is when they become interested in your brand. Customers will investigate who is buying the brand, what they can expect, and what the quality is of your product.
In the current days, this is happening through live streaming, where customers can see the product from all angles, which is a really good way to make customers interested in your product. Another way is through RedBook, where customers can learn about customers experience of regular customers, who authentically share their product experiences. When customers are ready to buy, the return to Tmall, the next touchpoint, where they finally buy your products. As you can see, there is a lot happening outside the marketplace in terms of marketing activities and staying top of mind of customers, serving all their touchpoints.
How to convert customer awareness into conversion If you want to expand to China, iBoost helps to create the right marketing strategies for your brand. This article was written by Kelly Hezemans, founder of iBoost Online.