Recently, Instagram and Shopify announced competing platforms to integrate social and commerce, hoping for greater user engagement and higher conversion to purchase rates on their respective platforms. As people in the tech community in the US debate the possible outcomes and merits of these dueling approaches, China is far ahead with a much more advanced social commerce ecosystem.
For social commerce success, China admittedly has demographics on its side. Gen Z, the global generation truly born into the social media and mobile devices era, represents 13% of household spending in China, relative to just 3% in the US. The power of this social media savvy generation in China has created opportunities for companies to build on this link between commerce and social.
Although technically an emerging economy, China is home to some of the world’s most connected consumers. Of the 1.4 billion people in China, 79% are active social media users, spending 5–6 hours on the internet each day. 89% watch videos, 71% watch live streams, 53% play live streamed video games, and 74% shop on their mobile phones. These digitally savvy consumers have inspired Chinese companies to monetize this video oriented attention, positioning themselves to bridge the gap between commerce and multimedia content.
From Huya (game streaming) to Pinduoduo (cheap Taobao) to Dianping (Yelp for China) to Yinke, Yizhibo, Douyu, Bilibili, and Meipai (live streaming platforms) to Xiaohongshu (shopping reviews) to Duoyin (TikTok of China) to Weibo (Facebook of China), China is a rich, booming ecosystem for social. But beyond pure social, each of these aforementioned Chinese platforms have successfully moved from their initial use case bounds to become true social shopping sites. 30% of China’s online retail business stems from social commerce 10X that of the US’s mere 3%.
China has a far more advanced influencer economy that serves as a foundation of human capital and infrastructure for successful social commerce. China’s influencer economy has effectively monetized the longtail of products and content creators.
In the US, influencers are primarily celebrities who rose to fame from previous experiences in television, modeling, or other high profile work. In contrast, in China, influencers are primarily everyday individuals who become famous through creating content for brands. Their first exposure to the public eye is as an influencer.
Massive businesses have been built around Key Opinion Leaders and as multi-channel networks whose primary purpose is to travel the country identifying and training students and other young people who could be potential content creators for client brands. One such company, Ruhnn, raised $125 million in an IPO in 2019.
While these everyday influencers lack many of the obvious advantages of top name celebrities with huge followings, they do have a key advantage: consumers find them more relatable and trustworthy. For one, China’s mainstream media is state-owned, so being able to hear directly from consumers themselves is a breath of fresh air for most citizens.
The relatability factor is also especially important for those outside of 1st tier cities. These cities represent the largest growth in consumption and disposable income in China and serve as development examples for other emerging markets in Southeast Asia and beyond. They are also the largest and most high potential markets for domestic brands in particular. Given their very recent development, their citizens have not yet been won over by international brands, leaving a white space for Chinese brands and their social commerce partners. As Pinduoduo has shown, massive companies can be built by targeting specific geographies and socioeconomic groups. Similarly, Yunji, which IPO-ed in 2019, targets 3rd and 4th tier cities.
Through bringing on everyday influencers, brands can reach more advocates, who, in turn, reach more customers in every corner of the country. Beyond simply marketing the the product, some companies, including Shihuituan (the Uber of convenience stores in China) have made local community leaders (their version of influencers) points of contact for logistics as well, which substantially lowers their own costs, creates more connectivity with their target communities, and shares more income with their community leaders.
Moving forward, with the shift to online resulting from the COVID-19 lockdowns, interestingly, anecdotally, sales associates are being trained as influencers and content creators for their stores as their offline roles become obsolete.
China has successfully integrated multimedia content with shopping platforms, a feat that the US is only starting to crack with initiatives like Instagram’s Shops and Shopify’s competitor Shop.
China’s culture has long been more blunt and direct, so consumers have been more accepting of ad based content. Even from the top down perspective, while the US has strict rules around posting ad based content on social media, China has no such restrictions, which creates more opportunity for integrating content and commerce.
While US ads are simply ads, Chinese ads integrate more truly value-add, educational content that share more than just a brief rosy view of product benefits. For example, content creators working with auto brands will not only share more about the specific items they are advertising but also general car maintenance best practices. Similarly people advertising skincare products also share more about sleep, hygiene, and diet best practices for healthier skin.
Driven in part by this value-added content, Chinese consumers approach commerce platforms with different intentions. Specifically, in the US, people go on eCommerce platforms like Amazon with a singular focus and specific intention to buy. These platforms become a utility to solve the particular need that the user has in mind. One KPI of these platforms is how quickly a consumer was able to find what they are looking for, purchase, and leave the platform. In contrast, in China, people visit social and commerce platforms to be entertained and to learn rather than to purchase a specific item.
The juxtaposition of Dianping vs. Yelp underscores this distinction. While Dianping is commonly referred to as the Yelp of China, it is quite ahead of Yelp in integrating content and commerce. While Yelp is a pure utility play, a place to find the ratings of restaurants, Dianping includes content from influencers sharing more photos, details, and experiences on restaurants and different types of foods to help users with more curated discovery. Similarly, Taobao is known as the Amazon or eBay of China, but in fact incorporates much more educational content, including regular influencer live streams sharing more and answering questions about products. From day 1, both Dianping and Taobao have integrated content as a core part, rather than as an afterthought, of their platforms.
More broadly, content first companies are moving into commerce driven search, further underscoring the power of content and commerce integration with a content first approach. Bytedance, for example, announced earlier this year that it would build a Baidu search competitor. Social content companies have more granular data on consumer preferences for actual products and how they evolve in real time. Empowered with this stream of intel, these companies can build more targeted search platforms optimized for purchase.
On the macro front, China, unlike the US, is a mobile first country. When people in the US got smartphones, they immediately searched for the websites they had come to know and love from their personal computers. In contrast, when people in China got smartphones, they had no lockin with existing platforms, so mobile platforms were able to approach customer acquisition with mobile based customer education. Consequently, all platforms in China were optimized for this largely mobile only customer base. With the singular focus on the mobile medium, companies were able to build more integrated products that served many use cases for the individual consumer, leading to verticalized platforms like WeChat. In contrast, US platforms focused on serving a use case for all consumers, leading to our horizontally integrated platforms.
Because of China’s mobile first nature, consumers are much more accustomed to taking and watching videos on their smartphones. Videos have the same draw and convenience in China as photos have in the US, making China a hotbed for live streaming and other video based content, including commerce oriented content.
Even after these initial formations, Chinese platforms have a greater tendency and ability to become increasingly verticalized, given the potential for cross-ecosystem partnerships and the business culture norms and precedents in place. For example, Alibaba launched Connect to compete with TikTok and court influencers to create content for AliExpress merchants. Similarly, Pinduoduo, which began as a group buying platform has recently moved into live streaming through leveraging WeChat rooms.
Pinduoduo’s collaboration with WeChat is not an exception but rather somewhat of a norm. With WeChat specifically, 95% of eCommerce platform brands have created WeChat mini-programs (small, downloadable apps inside of WeChat). Outside of WeChat, Kuaishou, a Chinese video sharing app, teamed up with JD.com, China’s largest online retailer for Kuaishou users to shop on JD.com without ever needing to leave the Kuaishou app, further integrating content and commerce.
More officially, Dianping merged with Meituan to combine the best of the online and offline worlds, respectively. Toward a similar end, Pinduoduo invested $200 million in retail giant GOME.
Li Jin recently wrote about the need for spontaneity in shopping experiences as the magic of happenstance disappears in a purely online world. While the US is far from achieving this, China has, ironically, spontaneously, rather than intentionally, come much closer.
While US group buying platforms like Groupon have seller first ideologies, Chinese counterparts like Pinduoduo have instead prioritized the customer. As a result, Pinduoduo has seen far superior user retention and engagement relative to Groupon. Unlike Groupon, Pinduoduo’s deals are initiated by consumers; products on the platform are national, not purely local; and the platform sells everyday goods, like fruits and vegetables (and even more recently, HPV vaccines!). The consumer driven structure of Pinduoduo and the platform’s fit for a variety of daily needs coupled with its strategic gamification (like daily check ins that earn you points, price chops from sharing Pinduoduo with friends, and special cards that give users different discounts) has enabled Pinduoduo to infuse spontaneity and fun into shopping routines.
Beyond Pinduoduo, Chinese commerce platforms have embraced spontaneous discounts with limited time offers tied to time sensitive live streams created by influencers on the platform of partner video sharing platforms. These time constraints bring a dose of adrenaline to the online shopping experience, push consumers to make impulse purchases as they would in offline stores, and leverage scarcity to create an actionable sense of FOMO.
On the macro front, China’s longstanding one-child policy has created a greater sense of loneliness in a generation of adults who are now coming into greater disposable income. Their search for connectivity leads them to seek out social spaces, like WeChat discussion rooms or interactive live streams, including many with an ultimate commerce focus.
Looking ahead, with China’s rapid rollout of 5G, we will likely see better, technologically enabled social commerce with even more opportunity to interact with live streamers and brands.
Although China faces the aforementioned tailwinds in social commerce, more is not always merrier. With so many social commerce platforms to choose from, Chinese companies may have difficulty in building their brand and cohesive messaging. Perhaps collaborations officially through mergers or unofficially through integrations will consolidate these numerous options and help China get to the Goldilocks point in truly mastering social commerce for brands and consumers. Or perhaps the very existence of the overwhelming number of platforms and sales channels drives consumers to trust real people (content creators themselves) more than specific brands, further creating opportunities for the influencer powered social commerce economy.
1. Group buying in China focused more on commoditized goods first like groceries which reduced onboarding friction
2. Group buying targeted more price sensitive 2nd and 3rd rise cities
3. Group buying was the first exposure of 2nd and 3rd tier cities to e-commerce and it was able to spread through people inviting their friends who trusted them
4. Facebook shut off access to their social graphs for social commerce companies in the US but WeChat etc took a different approach and opened it up and invested in companies like PDD instead
5. China mobile payments was a lot more developed
6. China logistics infrastructure is a lot more developed
7. Group buying in China showed the group vs. individual price really clearly and gave a 24 hour time limit to find a group which reduced cart abandonment
8. Group buying really collaborated with WeChat which met the consumers where they were instead of having them go on a different platform
9. China is more densely populated making group buying logistically more feasible
10. China’s culture is more reliant on group recommendations/offline conversations with neighbors and friends to make purchasing decisions
11. China, with its communist government, is less of a proponent of individualism (relative to the US)
12. Chinese consumers are generally more FOMO (fear of missing out) oriented and price sensitive, making time restricted, gamified group buying more possible
This article was republished with permission from the author and can be found originally here. The views expressed in the article are the author's own.