The pace of Chinese transformation is stunning. China is becoming an empire again – technologically and economically it soon may be the world’s leading economy.
It may soon turn out the role of the center of the world is played by a non-English speaking state, which has an empire party system and is frisky capitalism when it comes to market. A state which follows a completely different value system than Europeans do. Are we ready for the Chinese market-system yin and yang? Are we able to be a partner of “socialism with a Chinese face”?
Thinking about China, you must not think about it only as a state, but primarily as a civilisation; a very old one, which is the mother of numerous inventions, including paper (in China paper was used already in the 2nd c., while in Europe it wasn’t know until a thousand years later and until as late as 15th c. in Poland). This is the civilisation where the idea of the Great Wall of China originated – and was brought to life with enormous outlay of energies and funds (along with the natural barriers the Wall is more than 8 thousand km long). As I was walking along the Wall, I was thinking about all the people who had to submit their life to this idea, how many had to die to make the vision of their leader come true. No wonder it is China where the Great Firewall emerged. What seems grotesque now in the context of the customs war, is that the firewall was built by American conglomerate Cisco Systems.
China is a huge and complex market. I have been fascinated with it ever since my first visit to Shanghai and the nearbyHangzhou, the seat of Alibaba (read my first coverage from China). During my last trip to Beijing I was enormously impressed by the meeting with Yu Wang, founder andCEO of TanTan, the Chinese counterpart of Tinder. He represents a very interesting group of Chinese businessmen. As a child – due to poverty and hunger – he emigrated with his parents to Sweden, where he was educated. But after studies he went back to China “to do business”. “Six years later I realized I knew nothing about that country,” he said frankly when asked what surprised him most in doing business in China.
While we admire Chinese technological achievements, it is worth realizing that a great amount of them are copies of Western innovations – much improved copies. Already back in the 19th c. one of the Chinese high officials, Zhang Zhidong, promoted the idea: “Chinese solution as a basis. Western science as use.” This continuous to be a topical idea in contemporary China.
China today is the world’s second economy, with ambitions to become the first one. It is a homogeneous market with more than 1.4 million people. What’s important, the society is mobile, digital, and data is an essential drive of innovation there. Last year in Shanghai the expression that I heard most often was “leap frog”. Almost everyone there uses mobile phones and mobile Internet (98 percent of the population), and only half of the users are familiar with the Internet via computer. Chinese society and its habits are being shaped early on by the small screen. No wonder so many young people and investors are willing to implement and expand mobile ideas in China.
We can point to three important trends in the behavior of this data driven society:
All this is possible thanks to unified mobile payment systems. Two are dominant: WeChatPay and AlibabaPay. This year it was really difficult to pay with Visa or even to find a cash maniche – not to mention how astonished people were at the look of cash. And nobody there cares about tourists, no one is trying to make their life easier. It almost seem like they’re not interested in our money. Of course, you can arrange that someone buys you e.g. a ticket for a train to get to the Great Wall and you give them cash in return, but that does not happen very often.
An application with 1 billion users is WeChat. They say it is the Internet all in one app. It is true. But this is too much of simplification. It is an entire ecosystem based on conversation – the app started with a simple communicator. Today, the application allows you to start a conversation, see what your friends are recommending, do shopping, make payment. People who do not have a Chinese phone number and an account in a Chinese bank are not able to use the application for making payments, so they don’t have access to the stores – and hence are not able to experience how the system works. There are ways to overcome this barrier, but they are very time-consuming. Imagine you can buy a truck via phone – not a toy truck, but an actual vehicle e.g. for your construction company!
What for many Western companies continues to be a dream – to keep the shopping process offline and online, so that it’s convenient for customers – has become a usual thing in China. For instance, while on a taxi you can use the application to buy water from the driver. Or you can order coffee while walking in the street with Luckin Coffee app, to pick it up a few moments later at your destination point.
The PICC network of stores offers to its customers a game on WeChat in which they can virtually grow fruits. When the fruits are ripe, they automatically get a basket delivered to their home full of real fresh fruit.
WeChat is a profitable operating form for companies. “The conversion rate on WeChat is 4 percent per month on average. This is much in comparison to Facebook, where monthly conversion is close to 0.03 percent,” says William Bao Bean, Managing DirectorChina Accelerator. When comparing Facebook to WeChat, it’s good to realize they use different business models: for WeChat, revenues from brand advertising are ca. 20 percent, while in for Facebook they make up 80 percent of the business.
In China, influencers enjoy a similar position as here in Poland – only you need to multiply their value by 30. There are many more of them and the offer is highly diversified. When planning the media in China you take into account bothKey Opinion Leaders (KOL) and Consumer Opinion Leaders (COL). Influencers run their own stores, there are companies who help them sell – both their own brands and other products. Just like in Poland, the Chinese e-commerce market is highly impacted by microinfluencers, who generate much conversion.
Judydoll is ateenage eyeshadow and lip gloss brand co-created by influencers. Beauty influencers have been engaged in the product creating process from the start. The collections have small packaging and are available in multiple colors, which guarantees high variability of the products at low cost, which young people love. The offer is very well addressed. When creating lines, the company uses knowledge about what teenagers like, thus making choices about new trends and colors. The purchase process is incredibly fast. An influencer presents a photo showing make-up created with a given cosmetic and you can instantly buy it. This kind of fast purchase right after viewing a photo functions onTicToc(formerMusically) and in the RED application (teenage tips).
Alibaba is a counterpart of Amazon, and JD is a network of online and real stores. These two companies are the biggest competitors on the Chinese market. For both of them, it is data that constitutes the power, currency and innovation of the network. The data is necessary to best optimize the purchase process, to be able to fully satisfy the needs of the most important person – the customer. From convenient purchase to having the product delivered to your door. JD is working hard on developing the use of learning algorithms. From our point of view it is interesting to see how they are used to describe what people see (there’s no need to employ editors). (link do prezentacji). Back in 2015, users’ behaviors were used to construct a silent mouse especially for JD customers. In our Polish reality, private brands can be found in Biedronka stores – in China, JD has its private brand created with Logitech. Only this is not a copy of any other computer mouse, but a mouse that no one has seen before.
There are places where Amazon offers delivery via drones. China has provinces where this kind of delivery is functioning large-scale, because it allows to reach places without any road infrastructure.
I was truly impressed by my visit to Xiaomi, a company associated in Poland with cheap mobile phones – copies of Apple products.
But I have not heard such a coherent and well-thought narration for a long time. First, the company wants to offer products that are cheap, good quality and good looking. There is this way of thinking rooted in the Western world that if something is cheap, it must be of poor quality. That only expensive things are good. And it is often the case. But at Xiaomi, the assumption is different.
Xiaomi creates products for its… friends – read: customers. If you think of customers as your friends, you are open to criticism. You know that if you are criticised by a friend, it is because they want to help you. You are honest and transparent with your friends, you wouldn’t lie to them. If you make a potluck party, everyone brings the same amount. And that’s what it’s like at Xiaomi. So it is friends who find the name for your new mobile.
But if you think Xiaomi is only mobile phones, you are mistaken. Xiaomi includes data all over the ecosystem: smart home, smart car, smart office.
Millions of households, especially those run by young Chinese, use Xiaomi Speaker to navigate their apartments. In the context of media creation, a very interesting example comes from cooperation between Xiaomi and Nestle, where Xiaomi devices are channels broadcasting Nestle content helping to live healthy and acquire good habits.
Sinologist Bogdan Góralczykwrites in his book “The Renaissance of China”: “(…) when The Middle Kingdom started the reforms in late 1970s, initiating its transformation, it was a shabby, third-world, agrarian organism. (…) Today, after four decades of reforming (…) we can see the country has been through an enormous breakthrough: China is back, and what is now happening there has an entirely global dimension – and is meaningful to all of us. No matter where we are, we cannot escape China.”
We need to remember that today the Chinese job market belongs to a generation which is not only hungry for success, but whose hunger is encoded in the DNA of their families. At the same time, this is a very pragmatic nation. And there’s a lot of them. And if you also add the fact that they work so much, officially following the 996 rule, which means working from 9 a.m. to 9 p.m. six days a week, what you get is 700 million people hungry for success and ready to work beyond the limits of human strength.
China does not enter new markets aggressively. They use so called soft power instead. Imagine that masses of Chinese people, so used to their own market, travel a lot. They don’t have to exit their payment system e.g. in France, or Barcelona (they can pay via WeChatPay). Today, 150 million Chinese people go on holidays abroad every year. The number increases by about 20 million annually.
Poland is surely not a market for China. Maybe a source of ideas or innovations that you can buy. The reason the Chinese may find Poland attractive is its location, and the complex history. But we can be an important point on the New (economic) Silk Road.
What we have in common with the Chinese is the distance towards others – for the inhabitants of China trust is a very important value, but you need to deserve it. You can’t have it fully from the very first meeting. All in all, we are basically the same, only they are slightly better at counting money. Which is worth remembering.
To sum up, I will quote Bogdan Góralczyk once more: “For the first time since the 18th c. it is quite realistic, that the most powerful economy in the world becomes a non-English speaking country, which is not attached to democracy, and is not even part of the Western world. Of course, it does not have to be this way, nothing has been determined yet, but all the processes, phenomena and data so far seem to confirm that: China, followed by India, is regaining its leading position that it used to have centuries ago. This is why we should become more interested in it, and treat it as an important point of reference. Whether we like it or not, we have to be able to live well with China – and be better and better at it – because it becomes ubiquitous and is gaining influence over the rest of the world, not just over themselves (…)”
If you are interested in China, I highly recommend the following three sources:
Tom Xiong is most likely to be a guest speaker at the Trends Festival organized by Ringier Axel Springer Polska. He is a wonderful speaker with impressive knowledge – highly recommended.
Kategorie: top trends