PwC - New retail normal, content driven eCommerce and new growth avenues shape the retail and consumer products sector in China

Hong Kong, 17 May 2017 - According to PwC’s latest report eCommerce in China – the future is already here, which builds on the survey findings of PwC’s Global Total Retail 2017, the increasing maturity of businesses in using data analytics and omni-channel technologies created a new retail normal and delivered a seamless consumer journey between online and offline channels in China. 70% of Chinese shoppers consider personalised marketing to be important for their overall shopping experience while 67% of Chinese consumers say their mobile phone will become the main tool to shop.

“China is a must-play, must-win market for retailers and brands globally. The increasing purchasing power of China’s 415 million millennial consumers will sustain future growth”, says Michael Cheng, PwC Asia Pacific and Hong Kong/China Retail and Consumer Leader. “With continuously increasing purchasing power from millennial, eCommerce is enabling international retailers and brands to enter China more quickly and easily than before through online-only business models. It is also a new window for Hong Kong retailers, whose sales growth is bound by heavy reliance on mainland visitors and somewhat saturated domestic consumption driven by low population growth, to strive for new growth area.”

Michael Cheng adds, “The value of total retail sales of Hong Kong in March 2017 increased by 3.1% year on year which is the first time an increase after 24 months of continuous decline since March 2015. Though we see a better start of 2017 and a sales rebound is forecast to commence in 2018, Hong Kong retailers should jump out of their comfort zone to look for a sustainable growth in a longer run and consider to set a presence in the market of mainland China.”

While O2O focuses on marketing, retailers and brands in China are now starting to invest in omni-channel operating model which drive their customers into physical stores through their online channels. Aibaba is at the forefront of omni-channel innovation with this kind of new retail model.

The survey also shows that 52% of Chinese consumers shop using mobile/smartphone on a weekly or daily basis, as compared to 14% of consumers globally, and 41% of Chinese consumers (34% globally) use social platforms as a way to receive promotional offers.

China’s eCommerce market is set to be driven by content-led experiences. 29% of Chinese consumers, compared to a global average of 13%, use social media to see what brands or products Key Opinion Leaders and celebrities are endorsing. Livestreaming is emerging as a major growth avenue for mobile and social engagement in China while 70% of Chinese consumers use social networks as a source of inspiration for purchases.

In an era of content driven eCommerce, price is not the only way to win. This survey shows that consumers are likely to shop from a brand’s official site over third party platforms if they get better warranty/ guarantee (49%) and/or a full range and wider choice of merchandise (42%) while 41% of consumers shop for low price.

To achieve this step-change in maturity, retailers need to change and upgrade their eCommerce operating model. Nowadays, many retailers outsource their eCommerce operations to Third-Parties who manage day-to-day merchandising, logistics and promotional marketing. However, while these partners are well capable of performing execution-oriented tasks, they are ill-equipped to provide brand strategy, creative design and digital marketing. Retailers are increasingly taking back outsourced operation services and building in-house teams to control content quality, strategic alignment and unified customer experience.

This survey also reveals that eCommerce, social and emerging technologies are driving new growth avenues across food, luxury and sports retail categories in China. 62% of Chinese consumers prefer to buy groceries online, almost three times the global average (22%). While authenticity remains a worry but Chinese consumers are using eCommerce for lower priced or promotional items. 93% of Chinese shoppers have purchased luxury clothes, shoes or leather goods online. With Chinese consumers often at the forefront of digital trends, they have turned to smart devices to track their overall health and wellness. 67% of Chinese consumers use smart devices to monitor eating and sleeping habits.

Michael Cheng notes, “China, as the largest eCommerce market in the world, is now setting the benchmark for present and future global retailing trends driven by its mobile-first consumer behaviour, innovative social commerce model and trusted digital payments infrastructure. eCommerce is the clear growth story, according to PwC’s China Economic Quarterly Q1 2017, the national online retail sales of goods and services reached 1.40 trillion yuan in the first quarter, 32.1% higher than a year ago. In comparison, retail sales of the physical stores went up by 7.2% only.”

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