China has been developing so fast over the last decades, which brought the country to one of the major players over the world. Alibaba and Tencent are China’s two technology giants, leading the Chinese market in several sectors. When specialists are wondering about when they will go to spread their influence in overseas markets, actually they spend and collect only a small fraction of their revenue outside China.
Investments from these leading companies have stimulated growth and expansion in China and the next step will be to lead the development of smaller Chinese cities.
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Can you smell the opportunity ?
As the country is making effort to sustain the development of the rest of China (less developed areas and cities), as the largest players (including Alibaba and Tencent) are taking fight to southeast Asia, that clearly shows the coming of new markets.
In the big Chinese cities, often, we can feel the presence of two to three leaders per category. For example in e-commerce, you have Alibaba and JD.com, in ride-sharing there are Didi and Meituan Dache, and in the food delivery battle field, you have Eleme and Meituan Waimai. This is a kind a process in China, first there is a period of rapid growth (the first three to five year) with a lot of money poured into a category. Then, most of the time, only the top three can survive or remain on the market in profitable conditions. Alibaba and Tencent have spent billions of dollars to secure major equity stakes in the region’s leading tech startups
As Hans Tung, a managing partner at GGV Capital and an US-China investor said “If you invest early, the organic growth through M&A will eventually build a sizable business that you can monetize later when you have that market share”.
E-commerce in lower-tier cities
“Lower-tier cities will be bigger, wealthier, and more eager to spend, and could contribute two-thirds of incremental growth in national private consumption toward 2030,” said Robin Xing, Morgan Stanley’s chief China economist, in a 2017 report. If e-commerce activities seem to reach saturation level with delivery courier everywhere in big cities, it is just a beginning in the small one.
Alibaba has established nationwide brick-and-mortar service centers to allow rural residents to buy and sell goods online. They can go there and get their online orders as the delivery service is not at the moment developed enough in these cities.
AI to increase industries’ efficiency
Whether it’s in enterprise customer service or whether it’s helping e-commerce companies, we can find more and more activities leveraging AI technology. The demanding Chinese consumers expect better service and for brands, be able to provide new experience is also a huge added value.
For example, Smart Pizza Hut opened its door in Shanghai during late 2016. In collaboration with Tencent, Pizza Hut created a concept restaurant that allowed customers to order through LED menus placed around the store or through their WeChat mini program. The orders would then be delivered to the table by the same robots that led the guests to their table when they first entered the restaurant.
3 advices before launching your business in China
1. Be faster than you competitors
To do business in China you have to be active, up-to-date with the latest news and trends and adapt your strategy to the present market. It is all about. It is all about efficiency and timing.
It’s not uncommon to see Chinese teams working from 9AM to 9 PM, six days a week (in Chinese, we call that by 9-9-6). The matter is even more exaggerated for some programmers working in big companies, doing 0-0-7 (I let you do the translation).
Startups or big companies in China know they need to get to one of the top positions in their sector within short-term period and they all want to reach that point as fast as possible.
2. Find local partners
As Tung said to Fortune : “You need good local partners. We spend a lot of time working with Airbnb on their strategy in China. You need people who can provide you with local knowledge and local relationships when it comes to hiring, obtaining necessary licenses, and setting up Chinese subsidiaries”.
China is a complex market. It is not only about the business itself, but also the relationship with your partner, your Chinese consumers. There is a need to understand the local culture and what Chinese call the “Guan Xi” to success on this market.
3. Go digital
The digitalization has also changed Chinese investors’ interest, realizing that more and more of the exits were coming from technology-related investments. Because nowadays, people spend more time online, and that makes internet-related sectors very attractive in China. There are 700 million in smartphones on a population of 1.4 billion. That’s only 50% penetration with a lot more room to grow.
We can say that the digitalization contributed to China’s fast growth. Internet access and smartphones turned a lot of people into shoppers. Chinese consumers are more willing to purchase online because of the convenience and the greater range of available items on e-commerce platforms. Nowadays, Chinese consumers have a huge appetite for foreign products and e-commerce platforms have become the channels of choices for Chinese shoppers looking to purchase such items.
At this stage of development, China has a lot of booming industries. This is a promising and huge market with its own culture and way to function. We have developed many successful projects because we know how to effectively promote your business in China by using the latest digital tools.
Want to start a business in China? Do not hesitate to contact us. Gentlemen Marketing Agency is specialized in the digital marketing in the Chinese market.
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