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Why Brands Struggle With China E-commerce

Speaking at Retail Without Borders, Kung Fu Data’s chief executive Josh Gardner explains why brands are still struggling to crack e-commerce in China.

Following a lively panel discussion on cross border trade in a post-Brexit Europe chaired by John Snow in London this week, Josh Gardner, co-founder and chief executive of e-commerce specialist Kung Fu Data, was giving advice for navigating another uncertain market - no less predictable - on the other side of the world. “No matter big your brand is, you can get all sorts of things wrong in China. It’s a minefield,” he advised in his keynote speech at Retail Without Borders 2019.

Despite the difficulties, non-domestic brands have been successfully riding the e-commerce wave in the country for years. According to figures from Kung Fu Data, which has generated over $300 million in revenue for its clients, Alibaba signed 190,000 brands for Singles Day in 2018, up from 5,000 brands three years ago. Now China is an incredibly overcrowded market and, though Gardner is adamant that success is still attainable, it can only be achieved through a high degree of nuance. And, as numerous high profile failures clearly indicate, there is no one guaranteed formula for making your strategy work.

That said, there are a number of things that are a must for any company considering such a move. From strategy insights to activation, ORDRE highlights Kung Fu Data’s takeaways for the world’s fastest moving marketplace.

What works globally does not work in China

There is no easy solution when it comes to engaging consumer interest. In terms of brand strength, Kung Fu Data suggest that such a concept is often misunderstood. What the company primarily looks for in brands is a commitment to China, and whether they are strong enough - with the right resources (not necessarily capital) in place - to meet the challenges posed by the market.

“Automation is a myth. China is a high touch, intensive place to do business,” Gardner says, explaining that thought a considerable amount of preparation is necessary, many companies still fail to realise this. Consumers are handheld from service to delivery in this 100% factory-direct hyper-personalised social shopping - and as such are far more discerning than their Western counterparts.

Is your brand ready?

Gardner asks if brands are logistically ready to compete with Chinese domestic offerings, particularly the luxury sector. He cites the Taobao app as an example of how advanced Chinese digital is: eight applications in one, each requiring activation and maintenance. According to the chief executive, e-commerce assets must be robust and beautiful - minimum requirements normally include 5 images per product, 360’ video and copy; brands must have the ability to offer same or next day delivery for free alongside prompt, responsive online customer service.

Moreover, when it comes to product offerings, Kung Fu Data are after a certain sense of uniqueness. “You need to be a sector leader,” states Gardner, “with a subcategory or an iconic product, or you can just be lucky and Chinese tourists buy your products because you are from London.”

Control your Inventory

Even if you have been successful elsewhere, the perils of growth in China remain. You must be able to understand how to control and or recapture your unauthorised revenue from parallel distributors. Product market fit and control of your channels are essential to avoid being cut out on price. “Centralised inventory and price control is as important as uniqueness [of product],” Garden argues. In addition, brands need to prove authenticity via images, as forgery is rife and well-guarded against. He cautions brand owners to beware of product hijacking and to avoid offering exclusivity without protection clauses.

Perhaps most importantly, Gardner warns how what is done can rarely be undone: as you can’t change the way people think about your brand once the image is out there, it is vital to consider preactivation as part of your strategy. “Are you known by word of mouth already?” he asks. Because China is a vast market, you may already be activated without even releasing. Obviously, research and knowledge are vital to any successful retail strategy; though cultural differences and the country’s sheer size make such processes more demanding, they remain as important than ever for brands wishing to conquer this substantial and lucrative market.