Consumers in China have come to expect e-commerce platforms to be more than just places to buy things online. They want to socialize, be informed and entertained as they shop.
That has set the Chinese ecosystem apart from markets such as the U.S., where e-commerce and physical retail are still separate instead of being extensions of each other, according to Michael Zakkour, founder of 5 New Digital, a company that works with global brands on digital transformation.
“The younger consumers in the U.S. are already stressing the idea that the socialization and the experience, in a lot of ways, are much more important than the product,” said Zakkour during an interview on The China Ecommerce Podcast. “And that is something that they’re catching up to on their millennial, Gen Z, Gen Y counterparts in China.”
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Many of the Chinese consumers understand that e-commerce is just one particular habitat of an ecosystem, Zakkour said, and that digital commerce means the digitization of the entire value chain — planning, engineering, making, buying, selling, marketing and distribution.
“The beauty of the Chinese system is that they’ve created this thing called New Retail and Unified Commerce, which includes media, entertainment, IT, technology, logistics, supply chain, and all online and offline consumer services and products,” said Zakkour, who has authored two books on China’s commerce and consumers. “Most Chinese consumers are operating at a graduate school level understanding on digital commerce, and U.S. companies and consumers are still kind of in the high school stage.”
China is home to the world’s largest online population, has the most mobile phone users and some of the most avid social media users in the world. It also has a competitive e-commerce industry with platforms such as Pinduoduo (PDD), a social commerce company that has amassed more than 600 million users in under five years with its brand of interactive shopping and value-for-money offerings.
“In my opinion, PDD was the first company in the world to start from the foundation of social commerce,” said Zakkour, who is also the head of China Bright Star, which focuses on digital commerce strategy for China and the APAC region. “They developed an ecosystem in offering a look and feel, a relationship between farmers, brands, retailers and consumers that actually socialize digitally the offline shopping experience.”
Founded in 2015, PDD set forth to create a differentiated shopping experience where users can find and enjoy value-for-money merchandise, often as a result of sharing and purchasing together with their social network. The company pioneered interactive features including the use of teams of consumers to obtain a lower price, and in-app games such as growing virtual trees that result in real fruit delivered from impoverished farmers, paid for by PDD.
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PDD also introduced livestreaming to connect farmers with consumers to help sell produce during the coronavirus lockdown when traditional distribution channels were paralyzed.
Social interactions, including interactions with key opinion leaders (KOLs), or influencers, posting of user-generated content (UGC), and reading recommendations from contacts, motivated 40 percent of respondents of a survey to buy a product they had not originally intended to purchase, according to the China Digital Consumer Trends 2019 report by McKinsey.
Chinese consumers are also voracious social media fans and spend as much as 44 percent of their time on social media apps, according to the report, that highlighted social commerce as a leading trend.
“In the U.S., it’s been a long time tradition for families and friends every fall to go to a farm where they can pick apples and pick strawberries. PDD was the first company to digitize that process,” said Zakkour. “They digitized that absolute intimate connection between the farm and the table and the consumer … and introduced what was at the time a very novel concept, which was to use digital technologies to create peer-to-peer group social shopping as entertainment and fun.”
Zakkour, who is now based in New Jersey after having lived and worked in China for 17 years, said the younger consumers in the U.S. are getting tired of the “purely transactional nature” of conventional e-commerce and demanding more interaction and socialization just like their counterparts in China. About 80% of PDD users are young shoppers below the age of 35.
“You know, a year ago, in the U.S., we got the news that Instagram created a click through to actually buy things on pictures, and from my corner of the world that was giggle worthy,” Zakkour said with a laugh, “because what were they doing was a three-year-later pale imitation of something that PDD had already perfected and pioneered.”