Trust wins over Chinese consumers

Warc, 5 August 2014

HONG KONG: US and other Western brands can benefit from a Chinese desire for quality and authenticity, but they need to build their China strategies now to solidify consumers' brand choices, a leading executive at Alibaba Group has advised.

Writing for Internet Retailer, John Spelich, global vp of international e-commerce business development at China's largest e-commerce company, said trust, authenticity and peace of mind are key influencers for Chinese online cross-border shoppers.

Although luxury goods and designer labels continue to sell well in Hong Kong, he said recent research from Tmall Global, Alibaba's online retail platform, showed an increasing number of Chinese consumers are turning to more everyday Western goods, such as maternity and infant-care products.

Tmall Global found significant differences in the purchasing choices between cross-border online shoppers and their domestic counterparts.

A full 31% of cross-border online shoppers buy beauty products compared to just 5% of domestic online shoppers. Similarly, 17% purchase baby care products (versus 5% of domestic shoppers) and 11% buy food, including Western cuisine (versus 2%).

Spelich said the contrast in cross-border purchasing patterns is so pronounced that Tmall staff compare infant care products to a "gateway" encouraging Chinese consumers to first try buying directly from Western brands over the internet.

Having established their authenticity – and if satisfied about their value and delivery arrangements – they then are prepared to branch out to other products, he said.

These online cross-border shoppers are known as "hai tao", or "ocean search", and Tmall Global said they are made up of two main groups – young women looking for clothing and cosmetics, and relatively wealthy married women with children who want trustworthy foreign infant-care brands.

"As Chinese tastes continue to evolve, Western retailers have a chance to grab a piece of this vast market if they can figure out how to meet the needs of an increasingly demanding and sophisticated audience," Spelich said.

"Companies that can establish consumer trust and create an image of quality and authenticity will have the upper hand. The bad news for Western retailers: Chinese brands are getting better and better, and are more conscious of the need to project a sense of quality and product safety.

"The key is to get moving on a China strategy now as consumers are starting to solidify brand choices.”

Data sourced from Internet Retailer; additional content by Warc