Last Saturday (28 January) marked Chinese new year, called the ‘spring festival’ in China. Many millions of Chinese people travelled back to their families in the provinces to celebrate the festival, the most important holiday in the Chinese calendar. Celebrations will continue for around two weeks to welcome in the year of the rooster.
Each year is not just associated with an animal sign, but also one of five elements: gold (metal), wood, water, fire or earth. So 2017 is a fire rooster year.
Chinese people believe that what happens at new year influences your fortunes in the year ahead. Indeed, understanding China offers an insight to what is going to happen globally in 2017 and beyond. Let’s examine six important trends that brands can learn from China.
The future of mobile
China, like many other developing markets, did not follow the pattern of the West in going from physical shops to PC to laptop to smartphone. Many consumers just went straight to the smartphone and have never engaged directly with a website.
The question asked in the West is: what is our strategy for mobile? In China, mobile is the strategy.
The Chinese technology industry — particularly mobile — has pulled ahead of what we see in the West. Handset makers such as Xiaomi and Huawei have fantastic build quality, amazing performance, great storage, long battery life and look great. And this is before we start talking about the Apps that are available.
Any visitor to China will immediately be struck with the ubiquity of the smartphone to the Chinese consumer. If you think Westerners are addicted to their phones, wait until you visit Shanghai or Beijing: Chinese people live life through their mobile phone.
Chinese consumers are on smartphones at least two hours a day. Internet users in China reached 668 million in June 2015 and 549 million of those users, almost 90%, accessed the internet on a mobile device. In other words, the number of internet users in China is more than twice the population of the US and almost the population of Europe, and most of those individuals are walking around with a smartphone. But, this has barely started: the total number of internet users represents less than half of China’s population of over 1.3 billion.
The question asked in the West is: what is our strategy for mobile? In China, mobile is the strategy.
The future of social
If you have not heard of WeChat, download it immediately. WeChat had 768 million daily users in 2016 – that is 35% year-on-year growth – and 50% of WeChat users are on the App for 90 minutes a day, typically sending around 80 messages. What is WeChat? Think of WhatsApp, mixed with Facebook and Twitter. And throw in Skype and Facetime. WeChat’s roots extend back to its original hit, the QQ instant-messaging program launched by Tencent.
The rise of WeChat is inextricably linked with the rise of the QR (quick response) code – a technology that has long been under-utilised in the West. These two dimensional barcodes can be read by devices such as mobile phone cameras or scanners. In China, the QR code has become the magic sauce of mobile commerce largely as a result of the success of WeChat.
All the major internet giants in China such as Alibaba, Baidu and Sina Weibo have added a built-in QR code reader to their own apps to easily connect their users to additional services and content via any mobile device, anytime, anywhere.
But WeChat is much more powerful than just gaming or chatting. It is also disrupting CRM and email. WeChat enables businesses to register an ‘official account’, of which there are now more than 8 million. Followers who scan the QR code of the business, either from its website or at a physical location, can then ‘follow’ the business through without the need to sign up through a registration form.
Think about how much less friction is involved in using official account apps for services such as hospital pre-registrations, visa applications or credit card services. A WeChat official account also allows a business to perform outbound marketing to its followers with up to four promotional messages per month (via text, audio or video).
What is so significant about the above activities? The answer is that WeChat has become a CRM platform that controls the intermediation between businesses and consumers through owning and managing user profiles. It is so simple but so powerful.
The future of ecommerce
Mobile is ubiquitous in China – a way of life, not only a medium of communication. Brands are not just purveyors of products and services, but partners helping consumers with daily living. Most Chinese companies have recognised this, and build their advertising and marketing, social communication, shopping, purchasing, and payment programmes around mobile.
On mobile, consumers talk, text, shop, order food, hail taxis, book travel, trade stocks, pay for products and services, deposit money into their bank or transfer money. About half of all ecommerce in China happens on mobile, compared to just over a fifth in the US and around a third in the UK.
The ecommerce paradigm has shifted to brands and platforms that offer a complete experience rather than a narrow focus on sales. As a result, many Chinese brands are doing things that are yet to be seen in the West, integrating experiences across all touchpoints and channels, often using virtual reality and 3D imaging to build continuous engagement along the entire consumer journey.
The future of payment
Every time the WeChat app is downloaded onto a mobile phone, so too is an embedded QR code reader which can facilitate a whole range of O2O (offline-to-online) services, from scanning posters in subway stations to joining social networks and making payments.
WeChat supports payment and money transfer, which allows their users to perform peer-to-peer transfer and electronic bill payment. With WeChat Pay plus an official account, a business can accept payment from a customer through the use of a QR code. The customer uses their WeChat Pay app to create a QR code detailing the required payment and the business simply scans it to complete the transaction.
Think about how powerful this model is when you apply it to small retailers or street vendors who use their WeChat QR code reader on their mobile phones, instead of a dedicated point-of-sale terminal. And think about how the use of digital technology in this instance has substantially broadened the market for WeChat by providing convenience and a method of cashless transactions.
The future of travel
China is becoming the largest source market for international travel, overtaking the US in 2014. The income growth and expansion of China’s middle class makes long-haul travel more achievable. The rapid expansion of airlines such as Hainan Airlines on the international stage makes the Chinese traveller a more accessible consumer.
Already, Chinese travellers are ranked among the top spenders on a per-trip basis. Their preferences are rapidly shifting towards long-haul travel, higher-cost accommodation and up-scale shopping. Cities are the primary attraction for Chinese outbound travellers: nearly 92% of total Chinese outbound travel spending is received by major global cities.
This has ramifications for hotels and retailers welcoming Chinese tourists: nearly all Chinese travel brands – and indeed Western travel brands with services to China – already enable their customers to transact through WeChat. The user simply scans the brand’s QR code and then follows the brand.
To book a flight, simply go to the airline app within WeChat. To receive customer service, again use WeChat to send a voice or text message to an agent in a call centre detailing your request. What about when you arrive into your hotel room? Simply scan the unique QR code in the room and use the in-room app on your mobile phone to control the temperature, the lighting or room service, payable through WeChat Pay.
At the other end of the scale is the need for airlines to cope with the increase in future travel. Boeing is forecasting over the next 20 years a general market need for over 39,600 airplanes valued at more than $5.9 trillion, with 38% of these in Asia – the majority in China. Think of the impact of this demand on the need for pilots, training, inflight crew and aviation fuel. It’s mind boggling.
The future of competition
Written in the late 1990s, Shona Brown and Kathleen Eisenhardt’s book ‘Competing on the Edge’ suggests that IT businesses oscillate between order and chaos, with change occurring in unprecedented and unpredictable ways, barriers between previously unrelated industries erased, and hyper-competition leading to the fast rise and fall of companies. They argue that three principal vectors lead to business success:
- Advantage can only be temporary. Companies must continuously generate new sources of advantage and view change as the key source of new opportunities for growth.
- Because advantage is temporary, strategy will have to be emergent and defy simple generalisations. Companies must always consider a broad array of options, with resulting actions and overall direction being only semi-coherent. Plans should always be shifting in accordance with the opportunities.
- Reinvention is the heart of all of a company’s activities. Businesses will have to constantly change how they operate, and efficiency will count for less than the ability to generate and test new ideas.
Brown and Eisenhardt also suggest that businesses should gain maximum benefit from existing products by extending offerings to new market segments – a process called “stretching out the past” – using existing strengths to launch new products and test the market.
Almost all of China’s leading entrepreneurial companies exemplify these three trends, because China’s markets are at multiple stages of development. This means constantly iterating and launching new products aimed at the immediate future; no five-year plan or decision making by committee.
For further reading on how Chinese companies compete, try Edward Tse’s book ‘China’s Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business’.
Future of entrepreneurship
Alibaba dominates ecommerce and electronic payments in China, and its $25 billion IPO in 2014 was the largest ever. Its various sites account for around 80% of ecommerce in China, and are worth more than those of eBay and Amazon combined.
Tencent, meanwhile, dominates messaging through WeChat; and Baidu, the equivalent of Google in the West, accounts for over 60% of Chinese search engine activity. Together, these three companies are referred to as the ‘BAT’ companies, just like ‘GAFA’ in the West (Google, Apple, Facebook, Amazon).
Huawai is now one of the world’s leading manufacturers of mobile and telco network equipment, competing against Ericsson and Nokia. Xiaomi is building its brand to take on behmoths Apple and Samsung. Entrepreneurs have built up these huge businesses through the power of their personality in a viciously competitive environment.
In summary, although the Chinese market appears to be so different to the West, it is just further along. China therefore gives us a glimpse into the future with its diverse strategies, reiteration and reinvention; a balance between systems, rules and chaos; and a mind-set that is against being locked into outdated competitive models. Sounds like something we can all learn from in 2017 and beyond.
So, happiness and prosperity to you for the year of the fire rooster. But if you want to practice your Mandarin, then I’ll say 恭喜发财 (gong-sshee faa-tseye). Or if you prefer Cantonese, 恭喜發財 (gong-hey faa-choi).
Colin Lewis is interim CMO of travel technology company OpenJaw Technologies.