The headlines focus on trade wars, on tariffs, on shifting supply chains and on slowing GDP growth.
And yet the Chinese consumer keeps spending — on travel, on luxury goods and on video games, among a slew of other items and services. The growth is slowing, to be sure — to roughly 8 percent as of the latest stats through the first several months of 2019 — but it is still significant.
The Chinese eCommerce market has indeed proved buoyant, even in the face of geopolitical tension. The country represents 25 percent of the world’s internet users and a rising tide of disposable income.
To get a sense of the scale and buying power, consider the fact that on Singles’ Day earlier this month, Chinese consumers spent roughly $36 billion online. Chinese travelers book 300,000 airline tickets each day and make 150 million overseas trips annually. Console and PC gaming brought in $15 billion in 2018, and roughly 94 percent of paying users make in-game purchases.
It makes sense that many Western firms – retailers large and small among them – would desire entry into a market where hundreds of millions of users stand ready and able to click and buy.
In an interview with PYMNTS, Nick Tubb, vice president of commercial affairs at Ingenico ePayments, said that tapping into the power of the Chinese consumer requires merchants to pay attention to nuances that are not present in other eCommerce markets.
Tubb said China has been a relative latecomer to eCommerce, and as a result has leapfrogged the tech-related challenges that have come through the legacy form factors and fragmented payment systems seen elsewhere.
“Over the past 15 years, China has developed a unique eCommerce ecosystem,” he told PYMNTS. “It’s an ecosystem where there are a couple of conglomerates that pretty much cover people’s social and financial lives.”
Those conglomerates, of course, include Alipay and Tencent, where consumers can do everything from manage their budgets and investments to book trips. And, of course, they can make payments, in a country where the Western card brands have yet to make any real impact and where UnionPay holds sway (and, according to recent stats, has a 45 percent share of the global payment cards in circulation).
In China, Tubb continued, consumers conduct a significant portion of their daily lives within this digital realm, rather than through search engines. He likened this existence to a “discovery-driven online world.”
Chinese consumers are focusing more and more on recommendations to find products. As a result, international firms must be searchable on Baidu or 360 in order to get those recommendations in the first place, said Tubb – and about 90 percent of Western brands are not optimized for Chinese searches.
“As a Western brand, you are not going to be successful with Chinese consumers if you rely on your presence on Google or have a digital marketing strategy based on Facebook Messenger,” he told PYMNTS. “You really need to get into these digital ecosystems such as Alipay or WeChat.”
Gaining recognition is one thing, but converting browsers into consumers is another. Payments have become a critical component of the conversion experience. As Tubb noted, merchants have a better chance of cementing the sale when they give consumers a completely local experience. In China, that means offering the ability to pay using Alipay, WeChat Pay and/or the UnionPay card, and to make payments in yuan.
“Western firms absolutely need to understand that they need to offer eWallets,” said Tubb, who added that “the idea that you can go into China offering some way of paying with Visa, Mastercard, American Express or PayPal – and that those methods alone could be successful – is completely wrong.”
It’s a misconception that must be addressed by firms wishing to enter the Chinese market, where two eWallets – WeChat Pay and Alipay – hold 90 percent of the market.
The drive to offer a continuum of localized experiences may prove logistically onerous or too costly even for the largest and most international of merchants, said Tubb. It is indeed possible for international brands to go local independently, but the complexity and investment needed to do so may be underestimated.
Tubb recommends that Western firms partner with companies (Ingenico among them) that have local offices in China and Chinese employees with knowledge of how local consumers behave.
To that end, Ingencio said last month it had partnered with Alipay and WeChat Pay, in addition to UnionPay. As part of those integrations, the payment service provider enables merchants to offer Chinese yuan to consumers through those payment methods.
“There are firms that can advise an internet strategy and logistics strategy,” Tubb told PYMNTS. “When it comes to payments, of course, companies entering the market should not be spending all the money to reach potential consumers and then not allow them to pay in the ways they want.” (Source: pymnts.com)