HOW CAN NICHE BRANDS COMPETE IN CHINA?
Maserati sold 100 SUV Levantes on Alibaba Group’s Tmall Luxury Pavilion in 18 seconds. Tod’s partnered with Chinese KOL, Mr. Bags, to create a limited edition handbag, which sold out, and totalled 4.7 million RMB in sales. These are some of the case studies that e-commerce platforms, such as Tmall and JD.com, like to showcase when selling the China opportunity to European and North American brands.
What these platforms do not necessarily divulge is that many of the marketing events that are generating these sales, like Tmall or JD’s Super Brand Day, are not available to every brand. In fact, brands need to submit an application which includes a full proposal to bring traffic to the platform. This begs the question: How can small brands compete when larger brands have much larger marketing budgets?
Create Content Specific To The Chinese Audience
In an era where Chinese brands are gaining popularity, and Chinese consumers are becoming more nationalistic, brands need to adapt their content. Chinese consumers are becoming more discerning, and are expecting to be communicated to directly, and not as a secondary global market. Furthermore, content for Chinese e-commerce platforms needs to be created with a different approach from Western shopping platforms. On Western e-commerce platforms, the purchase intention is much stronger than on Chinese platforms as search and discovery is happening on search engines like Google, making conversion optimization the main goal of e-commerce platforms. In China, Tmall and JD play a similar role to search engines, with more consumers going directly to platforms to look for new products and brands that address their needs. As such, content needs to be more informational, and educational to build more awareness and a deeper connection with consumers who may be unfamiliar with the brand.
Compete On Newness, And Uniqueness
The China market is notoriously competitive, and Chinese consumers are perhaps some of the most fickle consumers in the world. When thinking about how to compete with larger brands in the market, brands need to be hyper consumer-centric to gain market share. While brand is still the leading factor driving the purchasing decision of Chinese consumers, younger generations have become more sophisticated, being relatively more influenced by product design and quality. With endless product alternatives at multiple price points already in the market, small brands will quickly die if they do not provide a unique product offering. Many brands have created exclusive products for e-commerce platforms, like MARNI’s limited edition mini trunk handbag for Tmall, or Carl F. Bucherer’s exclusive Patravi ScubaTec edition for JD (with a bezel in JD’s iconic shade of red), building their e-commerce value proposition and in turn winning platform resources (ie. traffic).
Image: Carl F. Bucherer
Test E-Commerce Through Other Models
Online retail sales in China is estimated to have reached $1.5 Trillion last year, growing at 24% over the last 2 years. The coveted Chinese millennial and Gen Z consumers contributed largely to this growth, and are expected to make up 45% of the Chinese luxury market by 2025. As such, launching an e-commerce store is a must for brands that want to get visibility among their target audience; but, such an endeavor can be expensive, and might not be a wise investment for brands with limited resources who are looking to drive profitability quickly. Furthermore, even if brands have the resources to launch a JD or Tmall store, the platform may not send them traffic if they have not yet built up demand (ie. search volume) on the platform. An option that is available for new brands in China is entering the market through other retail models within these large platforms, such Tmall’s Net-a-Porter or Tmall Select portals, which allow small brands to gain visibility without taking on inventory risk.
Given the competitiveness of the China market, and the saturation of brands on e-commerce platforms, niche players cannot count on a templated e-commerce strategy to build their brand. Instead, they need to focus on what makes them unique, and develop a platform and content strategy that allows them to effectively communicate these points of differentiation with their target consumer.
One advantage niche brands have over larger competitors is a flatter hierarchy, which gives them the ability to be more agile. This means they would be able to adapt to changes in market trends and industry requirements at a much faster pace than their counterparts. Given their relatively more modest resources, it is imperative that these brands get creative in order to stand out. This can be achieved by working with the right local partners and agencies to effectively define and execute a market entry strategy. Following which, the brand would then be able to build a strong community of followers, and eventually drive sales conversions.
Cover image: Pexels.
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Jeffery Sehl is the Associate Director of Client Development at DLG (Digital Luxury Group) and is based in Geneva, Switzerland. Before joining DLG, he spent two years working for Alibaba Group on its Tmall Luxury Pavilion business development team in Hangzhou, China. He has also worked for L’Oréal, and MDC Partners.
Originally from Canada, Jeffery graduated with an Honors Business Administration from Ivey Business School at the University of Western Ontario.