Digital revolution drives China's retail, survey finds

Updated: 2011-06-14 08:03

By He Wei (China Daily)

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SHANGHAI - Chinese companies appear to be taking much more aggressive steps than their foreign counterparts to embrace the Internet as a sales channel, according to a recent survey.

China will become the world's second-largest consumer market by 2015, not far behind the United States, with enough purchasing power to buy 14 percent of the world's products, up from 5 percent now, according to research co-conducted by the American Chamber of Commerce in Shanghai (AmCham Shanghai) and Booz & Company, a leading global management consulting firm.

"More than 80 percent of US companies in China are here to serve the Chinese market. The emerging Chinese consumer is a key factor driving that trend," said Brenda Foster, president of AmCham Shanghai.

While multinational corporations (MNCs) overwhelmingly view building brand loyalty as the cornerstone to success in this fast-growing economy, Chinese enterprises consistently identify information technology (IT) as the main factor affecting consumer behavior.

A total of 135 companies with extensive sales operations in China were surveyed in April and May. Seventy percent were Western MNCs, 25 percent Chinese mainland companies, and the remainder were from Hong Kong, Taiwan, and the other Asian economies.

Multinationals and Chinese companies are competing intensely, but they take different approaches to securing their market position, said JoAnne S. Bessler, a partner at Booz & Company.

Ken Newell, president of China Beverages of PepsiCo (China) Ltd, noticed polarization in this regard. "I think multinationals who are based here are catching up with this trend a lot quicker (than those not in China), because Chinese consumers are going straight to the digital revolution far quicker than anyone else," he told China Daily.

Chinese respondents overwhelmingly considered IT a dominant force in shaping consumer behavior, with more than 90 percent expecting it would influence 20- to 40-year-olds.

According to the report, most respondents considered shopping on the Internet and cell phones, as well as through gaming and social networking sites, as an important means of influencing the mindset of the emerging consumer class.

To address this rising tendency, 93 percent of Chinese respondents said they are already or will soon be involved in e-commerce. By comparison, 41 percent of their foreign competitors said they have not yet implemented an online shopping strategy, or have no plan to do so.

More than twice as many Chinese companies as MNCs reported that at least 11 percent of their revenue comes from technology-enabled transactions.

MNCs' seemingly less-aggressive stance in digital marketing can be partially attributed to the need for fast-cycle, localized approaches to succeed in the Chinese digital marketplace.

Many multinationals have to coordinate and link closely with their global e-commerce strategy and have less freedom to act locally and rapidly, said Andrew Cainey, managing director of Booz & Company, Greater China.

Meanwhile, most MNCs said the dominant trend is a change in consumer expectations buoyed by an increase in external exposure through travel abroad or overseas experience.

China Daily


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