Written by David Lloyd, Managing Director UK, Ireland & Nordics, Alibaba Group.
Most people would agree that scale breeds opportunity – and China most definitely has both. Although the sheer size of China can be overwhelming, Scandinavian brands who are looking to take their business to the next level need to consider the opportunities in the market offers. Indeed, as the world gets smaller, the opportunity to do business anywhere simply gets bigger, something we are focused on at Alibaba
With online expected to count for 18 percentof the retail landscape in China by 2020, China is the clear leader in global e-commerce, and its lead is growing. It’s Important to remember that, while the Chinese market is huge already, only 11 percent of the total population has reached the middle class, a figure that will reach around 75 percent by 2030, according to a reportby the Economist Intelligence Unit. Hence, the growth opportunity remains significant for brands that are willing to take a first step into the market.
What, then, has led to this rapid growth? China, the world’s second largest economy, was slower in building its physical retail landscape than the West. This, coupled with a digital revolution in general, and a widespread use of smartphones in particular, combined with huge growth in disposable consumer income and consumption, has meant that the country is now streets ahead when it comes to online shopping.
Consumers in China shop via smartphones on e-marketplaces, rather than individual brand websites. Alibaba Group alone have around 617 million mobile active users per month, and the number of consumers who bought a product after seeing it in an online store increased from 19 percent in 2015, to 43 percent in 2016. This constant online engagement is also increasingly a defining feature of the Western retail experience: mobile commerce has gone global, and consumers will not wait around for brands who are unable to deliver the seamless shopping experiences they have come to expect.
This dramatic rise in online shopping has been fuelled by demanding, tech-savvy consumers, drawn from an expanding Chinese middle-class who are hungry for high-quality products. Overseas brands are especially appealing, and the demand for Scandinavian brands in particular is rising – Swedish brands, for example, were in the top 20 list of most purchased products on Alibaba’s platform Tmall Global in 2017. Several Scandinavian brands have already taken the opportunity to tap into the Chinese market using Alibaba’s platforms. For example, Volvo offered the latest iteration of its model XC60in an exclusive colour on Tmall, and Denmark launched a “Denmark Pavilion” on Tmall Global. Brands such as Bang & Olufsen, ECCO, ONLY and Vero Moda,are examples of Danish brands that can be found on Tmall. Additionally, H&M opened a store on Tmall in March 2018, and the CEO, Karl-Johan Persson, commented that the launch beat H&M’s high expectations.
As mobile natives, the Chinese consumer craves far more than just basic transactions when shopping; they value the brand experience almost as much as the products they are buying. This has incentivised retailers to innovate: they look for new ways to create personal, immersive and seamless brand experiences, merging the online and offline worlds by integrating their digital and bricks and mortar operations. At Alibaba, we call this “New Retail”.
With truly global trade closer than ever before, there has never been a better time to learn from the increasingly innovative retail landscape in China, and to embrace the opportunities it presents. To this end Alibaba is especially well placed to collaborate with Scandinavian brands and to support them to tap into this highly attractive market.