The Chinese e-commerce market is unique and “different” from the U.S. JD.com’s ability to mine data enables brands to micro-target the Chinese consumer.
That’s according to Belinda Chen, chief executive officer of the fashion and home group international brand department at JD.com. Chen spoke Friday morning on “The Future of Fashion in China & How to Reach Consumers There” at a breakfast hosted by WWD. It was attended by brand representatives from firms such as Tiffany & Co., Macy’s Inc., Scotch & Soda, Coach Inc., Kate Spade & Co., Nautica & Kipling, Michael Kors and Sequential Brands Group.
What got the attention of attendees was Chen’s point that “90 percent” of e-commerce in China is made by the top two Chinese platforms, JD.com and Alibaba.com, and that means if 90 percent of consumers are heading to the online platforms to buy, they are not going to a brand’s own e-commerce site. In contrast, consumers in the U.S. are more likely to go to a brand’s own site.
Chen also spoke about JD’s data collection, and the company’s focus on transparency with its fashion clients. “JD on the back end can see who is the consumer, what is the profile, age and what [the consumer] has bought before. JD gives the data to [our fashion clients] to help brands reach consumers,” Chen said. She added that for mobile, full integration with WeChat — Chinese consumers prefer instant messaging compared with U.S. consumers who prefer e-mails — allows JD to combine purchase data to effectively target specific products to the consumer. Further, the ability to click on messages to enable a two-step purchase process without needing to input credit card information is important because “closing the conversion loop is essential,” Chen said.
Following Chen’s presentation, some attendees cited her comment about how JD’s business model as a platform and as a wholesaler — the company buys a selection of products that it holds as inventory — in addition to its curation of product as being eye-openers for them. A few thought that JD, and its data analysis, could provide brands with greater assistance on how to market to Chinese consumers. Another said Chen’s comment about JD’s “competitor” Alibaba renting space on its platform to vendors seemed more like the Amazon model, and how even in the U.S. Amazon might not always be the way to go, depending on the brand and what it wanted to sell.
Learning how to sell online is important for many attendees, a few of whom acknowledged that their presence in the Chinese market is still in its infancy. And with Chinese consumers showing a strong appetite for buying apparel online, China remains the open sky for many brands.
Chen said that the current U.S. online apparel market is about $50 billion, with a penetration rate of 15 percent in 2015 and a yearly growth rate of 20 percent. In contrast, she said the growth rate in China last year was 32 percent, with women’s apparel the major contributor to total apparel sales online. Further, China’s online share of apparel at 30 percent is higher than that in the U.S. As for other differences, in the U.S. market Millennial women are driving the shopping trends, while in China there are relatively more male online shoppers.
“Apparel, sportswear and accessories are a regular habit for our consumers,” Chen said, noting that the lack of a national retailer with brick-and-mortar stores makes online the access point for many consumers. That makes the web a “unique channel for Chinese consumers” and, in turn, for brands looking to build a presence in the Chinese market. While there are regional offline distributors, each layer along the distribution chain adds its own margins, which results in high offline apparel prices. Online gives brands the ability to reach the consumers directly, as well a cost advantage, she said.
Average prices for online apparel sales range between $100 to $200, while price points for handbags could be two to three times that, Chen said.
Chen explained that Chinese online sites initially provided just content, but that changed following the SARS outbreak in 2002, which resulted in Chinese consumers traveling less and becoming more accustomed to shopping online, even buying groceries via the web. The company, which two years ago listed on the Nasdaq in the U.S., is number three by revenue after Google and Amazon and is the number one retailer by revenue in China, she said.