Chinese New Year eCommerce Guide: Trends, Insights and Best Practices13 February 2015
The Chinese New Year marks the start of the Spring festival, a two week long celebration marking the beginning of a new season that is traditionally associated with health and prosperity. For retailers, this festival also presents a unique opportunity to reach out to a large consumer group that perceives the Chinese New Year as a time for new beginnings, or more specifically, new things. China is one of the fastest growing markets and with more than 1.4 billion Chinese across the globe, the holiday is indeed a golden opportunity for retailers both online and offline. So how can eCommerce retailers leverage this holiday to reach out to online consumers in China? This article discusses some key trends and best practices for the season.
In 2014, SingPost eCommerce research found that majority of US mono brands were looking to China with a clear eCommerce strategy. 71% have set up an eCommerce business in China without a physical retail store. This also rings true amongst British retailers – Advertising Age revealed that high street fashion label Topshop launched on the mainland in September 2014 with a purely eCommerce strategy via Shangpin.com, an online retail platform. Global retailer Costco also leapfrogged setting up physical stores in China and announced its market entry via Alibaba’s Tmall marketplace.
In the global retail space, Chinese New Year was listed as one of the top five international holidays for eCommerce in 2012, according to Business Insider. And it’s traction is growing year on year – according to Economy Watch, consumers in China spent over USD $86 billion within just the first six days of the festival in 2013 with that number increased to an estimated USD $97.4 billion in 2014.
Holidays like Chinese New Year represent an annual high point in the continuously growing Chinese market. China’s eCommerce revenue reached an estimated USD $2 trillion in 2014, a 25% increase from 2013 according to China’s Ministry of Commerce. With such significant spending and consumer interest, the Chinese New Year is a lucrative opportunity for eCommerce businesses to leverage on the shopping opportunities provided by the holiday season, much like how China’s Single’s Day sales continues to illustrate the raw purchasing power of the Chinese market. In a 2014 study by KPMG, Single’s Day revenue grew by 80% from 2012 to 2013. In 2014, Chinese eCommerce company Alibaba reported USD $9 billion in revenue across this popular shopping day, officially making Single’s Day the most successful online sales event in the world. With Asia Pacific having taken up more than 30% of global online B2C sales in 2014, eCommerce businesses are now positioning themselves accordingly to maximize profits during peak seasons such as Single’s Day and Chinese New Year in 2015.
However, businesses need to understand the various eCommerce trends, cultural nuances and logistical considerations that go along with a festival such as Chinese New Year. That means providing products and services that are relevant to Chinese New Year buyers, as well as establishing reliable delivery, inventory and stock keeping systems to meet surges in demand and ensure timely order fulfilment.
Key Trends Shaping eCommerce in China
Various trends are shaping the China eCommerce landscape, specifically in mobile, social media, local payment solutions and growth in lower-tier cities. A keen understanding of these ongoing trends is key to capturing a market with potential that goes well beyond the Chinese New Year holiday.
Mobile is Key
According to a 2014 A.T. Kearney report, China’s eCommerce market has grown to an estimated 300 million online shoppers with more than half of China’s internet users accessing the internet on their mobile devices. In statistics released by KPMG and Mogujie in 2014, desktops and laptops lead the way when it comes to internet access (69%), but smartphones (53%) are following close behind as smartphone penetration continues to grow among Chinese consumers. Web application and design agency Go Globe released figures that projected mobile shopping to grow as much as 91% from 2013 to 2014. Mobile payments have already begun to take off among Chinese consumers. In a 2014 KPMG report, 55% of China’s internet users had experience in mobile payments, as opposed to 19% of US internet users. With mobile commerce projected to reach as high as USD $160.88 in 2017, according to Go Globe, eCommerce businesses need to develop a strong mobile-focused strategy in order to remain relevant in the increasing mobile Chinese market.
Social media has also become an important driver of eCommerce activity in China with over 625 million active social media users according to a 2014 report published by We Are Social. Social media platforms such as Tencent’s microblogging platform We Chat has grown to 600 million subscribers in 2014 from only 300 million in 2013, while social networking site Qzone boasted more than 600 million monthly active users in 2014. Chinese online consumers have been observed to be more active online with regards to their purchases and preferences compared to their US counterparts. According to Forbes in 2014, 75% of Chinese internet users provide product feedback on social networks, while US rates are less than 20%. But despite these numbers, We Are Social reported in 2014 that China still stands at 46% in terms of social media penetration, showing that there’s still a lot of room for growth in the sector.
Popularity of Electronic Payment Platforms
Online shoppers in China have also become more receptive of electronic payment platforms. In a 2014 report from China Briefing, 70% of all online transactions in China were paid for electronically while only 30% were settled in cash. However, the electronic payment market is dominated by online payment service Alipay with 48.8% market share, followed by TenPay (19.8%), Union Pay (11.4%), 99Bill (6.8%) and China PnR (5.3%) according to 2014 figures published by Chinese SEO Shifu. In 2014, Alipay released payment statistics over the past ten years, revealing 42.3 billion transactions over the past decade, averaging 4.23 billion transactions a year and 11.5 million transactions a day. Alipay’s success can be attributed to a number of factors, one of which is its incorporation of an escrow system that protects the interest of both buyers and sellers from fraud and non-service.
Growth in Rural Areas and Lower-Tier Cities
Another notable trend in the Chinese eCommerce market is the burgeoning growth of online shopping in lower-tier cities and rural areas in China. Although a 2014 ATKearney report cites that a majority of the Chinese consumer market are still concentrated mostly in the country’s top cities, the fastest growth is being experienced by less-developed areas. In order to access these highly lucrative regions, it becomes especially important for brands and retailers to make various logistical improvements in order to increase geographical coverage in harder-to-reach regions in the country, particularly during high volume seasons in Chinese New Year. Various China-based eCommerce businesses have already begun to invest in expanding within China. In 2015, China Daily reported that Alibaba will invest USD $1.6 billion to build operational centers and service outlets in order to cater to rural sectors. Its competitor, JD.com, has also announced plans to build centers in China’s Guangdong Province to serve farmers shopping online.
Top Shopping Categories During Chinese New Year
Food, fashion and travel are some of the most popular shopping categories for retailers during the Chinese New Year season. The Spring Festival marks the largest migration of Chinese travellers in the year as consumers take trips to be with family or go on vacation. China’s National Development and Reform Commission estimated 3.6 billion passenger trips over the Chinese holiday season in 2014, which was 200 million more passenger trips compared to 2013. Airlines like Cathay Pacific and Dragonair released combined statistics that showed a substantial jump in sales during the Chinese New Year season. Both airlines served a combined total of more than 2.5 million passengers in January 2014, a 9.3% increase during the same period in 2013.
Booking agencies have also been quick to jump at the opportunity to serve the vast influx of passengers. In preparation for 2015’s Chinese New Year, travel booking site travelchinaguide.com has been advertising Spring Festival bookings as early as December 2014, providing visitors with various early bird promotions and discounts for tours across China. Beijingholiday.com, a China-based tour booking site, also provide special themed tours catering specifically for tourists who are looking for the full-fledged Chinese New Year experience in the Chinese capital.
Outside of travel, fashion and cosmetics shopping is another big draw for festival revellers, with sales tending to peak right before the holidays. According to a survey released by the Hong Kong Trade Development Council (HKTDC), Chinese New Year holiday sales peaked seven days before the festival in 2014, totalling over USD $1.2 billion across various cities in China. This is nearly double the revenue of 2013, where pre-holiday sales peaked at USD $0.74 billion.
Cross-border shopping also continues to be a growing trend among Chinese shoppers. According to China Internet Watch, online shoppers from China purchased USD $12.5 billion worth of goods from foreign retailers in 2013 and were estimated to have spent an additional USD $22.6 billion in 2014. Popular product categories include cosmetic and skin care products, women’s clothing as well as perfume and toys, mirroring overall in-border Chinese consumer trends. In a joint survey published by KPMG and Mogujie, top online shopping categories among Chinese consumers include cosmetics (53%), women’s shoes (39%), women’s clothes (36%) as well fashion accessories (34%) and bags (34%).
While eCommerce businesses are in direct competition with their physical retail counterparts, the HKTDC also highlighted that growth in the Chinese New Year season has been spearheaded by online sales in 2014. In another survey conducted by the HKTDC, six surveyed online retailers posted a total of USD $55.6 million in revenue across just seven days of the festival, a substantial 43% increase from 2013.
Best Practices for eCommerce Businesses during Chinese New Year
Despite presenting eCommerce businesses with a wealth of opportunities, there are key considerations to bear in mind during the Chinese New Year, particularly when handling increased demand and a higher influx of orders. According to Advertising Age, China-based eCommerce giant Alibaba was reported to have increased warehouse space and personnel by as much as 60% to meet demand during Singles Day in 2013. To stay competitive during such holiday periods, businesses need to bolster internal infrastructure and support systems downtime between two weeks to a full two months before the festivities. Here are some best practices that businesses can integrate:
Prevent Service Downtime by Improving Server Systems – Servers need to be able to handle the increased web traffic to prevent site downtimes and service outages. When investing on server side improvements, businesses need to take the time to stress test their servers prior to the pre-holiday surge to prevent loss of service during the holiday season itself.
Cater to Large Inflow of Orders – Improvements towards stock keeping and order placement are also essential when serving the large influx of Chinese New Year buyers. This is where accurate demand forecasting and extensive pre-planning becomes essential. But managers should also be willing to bolster operations with 24 hour warehouses for additional sales and support staff to ensure a streamlined workflow between order and delivery.
Expand Offering of Delivery Options – Businesses should not rely solely on single delivery services, especially when serving developing markets where local infrastructure may keep orders from being fulfilled on time. This is why secondary and tertiary courier services are important during peak sales seasons like the Chinese New Year. This gives operations the flexibility to address delivery concerns ahead of time to avoid delays. Business should also leverage alternative delivery services, such as electronic parcel lockers. Singapore Post operates over 80 parcel locker stations in Singapore, called POPStations, which allow consumers to pick up their parcels at a convenient time and location.
Improve Delivery Efficiency by Securing Transport Commitments – The demand for reliable and timely transport will inevitably increase during peak seasons like Chinese New Year. This is why businesses are encouraged to secure volume commitments early in order to guarantee availability of delivery and transport assets.
Prepare for Increased Purchase Returns – An efficient and reliable returns system is critical during the holiday season. Due to the expected surge in new customers, it is important for businesses to be able to make a lasting impression among new buyers to ensure future patronization. Having a solid return policy not only improves customer satisfaction but also increases the percentage of return customers and future referrals.
Partner with Local Logistics Networks – During a peak period like Chinese New Year, businesses will face roadblocks such as late product delivery and slow collect-on-delivery processes. To address these concerns, it is recommended to establish and strengthen relationships with local logistics providers. This means creating partnerships with local logistics companies to ensure reliable operations not only during Chinese New Year, but across the Chinese shopping calendar.
With 2015’s Chinese New Year just around the corner, businesses should prepare to make the necessary improvements to both their front end and their logistic infrastructure to keep up with the influx of orders. It’s the combination of strong, reliable logistics partnered with a firm grasp of consumer insights and market trends that will ultimately determine the success of businesses during the Chinese New Year shopping season.
How SingPost eCommerce can help
SingPost eCommerce is a full service eCommerce enabler that provides global brands with Asia Pacific’s first end-to-end managed eCommerce solution which includes – Enterprise Grade eCommerce Technology, Warehousing, Delivery, Returns Management, Site Operations, Regional Customer Care and Performance Marketing. We operate across Asia Pacific with a fully interconnected eCommerce infrastructure and 22 distribution centres.
As part of the Singapore Post Group of Companies, our clients leverage on this extensive fulfilment and logistics network as well as our market knowledge across the Asia Pacific region including China.
- China’s eCommerce Market in 2014: The Logistics Challenges
- ATKearney – China’s E-Commerce Market in 2014 (PDF)
Marcelo Wesseler, CEO of SingPost eCommerce