Digital revolution in China

During Chinese New Year, people still give red envelopes, but now this old tradition is done via WeChat red packets instead of red paper envelopes.

Mobile marketing in China
Family members, friends and specific groups of people now build separate chat groups for closed discussions, to share digital greeting cards and more. You don’t need cash to buy something from a street vendor — you can use Alipay to settle any transaction. These are what we experience daily while living in China.

China has the largest online population in the world, with 668 million active Internet users (49% of China’s total population). The Internet has become an integral part of living here. The impact on society, consumers and businesses in China is enormous. China’s Internet giants like Alibaba and Tencent have transformed the daily habits of its netizens, as well as the digital norms of businesses. Business models constantly evolve in response to relentless competition. While there have been amazing achievements, there are also risks.

Internet adoption nurtures booming e-commerce and m-commerce

High-speed technology, a more modern lifestyle and surging mobility in China continually change the way businesses operate and engage with consumers. This evolution has affected the entire nation’s embrace of quality and ease of life. Consumers in China spend a lot of time online — anytime, anywhere, for all possible reasons. You can search for anything in Baidu, and buy everything from Taobao or Tmall (Alibaba platforms), from fresh fruit to furniture. The unbeatable prices, smooth logistics and after-sales services make purchases hassle-free. Data security has made it more comfortable to browse and shop on smartphones.

Businesses are forced to embrace market and communication changes not just locally, but nationally and globally. Having an online presence for flagship stores is mandatory for retail brands, and they must be equipped with active and engaging communication platforms.

Advanced social media features shake up traditional business models

In China, a business operating without social media would be at a tremendous disadvantage. New features in social media create user reliance and spur great popularity for in-app services, even paid ones. Users highly value in-apps for convenience and accessibility. For example, mobile non-cash payment systems like Alipay or WeChat Payment have almost replaced the need for bank credit cards — for shopping, meals, utilities, mobile data top-ups, taxis, flight tickets, money transfers, movie tickets, donations and more. While this may not be common in other countries, social media with non-cash payment feature is something that businesses in China find invaluable.

Brand exposure to possible threats

While it is undeniable that businesses — big or small — are exposed to great opportunities by cooperating with e-commerce platforms supported by tech companies (such as Alibaba, Tmall, JD, Taobao), this “exposure” may also come with some risk.

A major concern is data ownership. Online platform builders have access to all user data and brand information — even marketing strategies, sales revenue, target audiences and traffic sources — for all brands served on the platform. Valuable brand information might be in jeopardy if shared with competitors.

Another potential threat is overdependence. What happens if a platform breaks down? It could disrupt a brand’s business operation or perhaps stop the main source of traffic altogether.

Due to these concerns,many brand retailers, including start-ups, have begun to finance their own e-business platforms to capture and secure their own customer engagement.

Cross-service penetration causes industry disruption

Alibaba Group, Tencent and Baidu started out as pure technology companies. Throughout the years of development, they have in fact penetrated the telecommunications and finance industries. While the emergence of overlapping services is applauded by most users, it is a threat to banks and other financial institutions.

The venture into non-cash payment systems has greatly changed consumer expectations. Eventually this will transform credit as well. Besides Alipay dominating online businesses throughout China, Alibaba also offers a platform for online lending and mutual funds, operated via social media. The development of trust products, P2P technology and wealth management products (WMPs) has given a second chance to many small businesses that seek alternative funding channels when bank loan applications are unsuccessful. When you find a better value in savings accounts, brokerage offerings and insurance premiums, switching from traditional financial sources (banks, insurance companies and brokerage firms) is appealing. This is already shaking up the financial market in China.

As a developing country that’s rapidly moving toward a modern society, China’s high adoption of the Internet and digital technology has boosted surging economic growth. Chinese government policies ensure that every industry serves national goals, especially key economic sectors like automotive, electronics, financial services, real estate, healthcare and service. Facilitating the adoption of the new Internet era for the nation requires great effort to build digital literacy. This will create some risks and disruptions; however, it is for the sake of China’s long-term sustainable growth and boosting a consumption-driven economy.