How China’s emerging digital ecosystem is impacting the economy

By Dawn Lo  Monday, 13 January 2020  @Business School

UNSW hosted its 10th annual Marketing in Asia Speaker Series talk with guest speaker, Rachel Xie, Director of New Markets, Business Development and Operations at Tencent International Business Group (Tencent).

Rachel drew from her insights and experience working at Tencent and spoke about China's emerging digital ecosystem and the implications for global marketing. Tencent originates from China and is one of the world's largest social media and internet-related services companies. The company has a strong presence across consumer internet verticals in China and spans across social networking (QQ, Qzone, WeChat, Moments), entertainment (QQ Video, Tencent pictures, QQ Music, Games), information, software and tools, lifestyle and daily services.

China on technology and innovation

When in China, one does not need to worry about their mobile phones running on low battery. You can easily charge your phone at countless phone charging stations in communal public spaces like restaurants and shopping malls. Taxis have also embraced technology and can easily set up a hotspot for customers in need of an internet connection.

On 1 December 2019, the Chinese government has also put into effect new regulations requiring that Chinese telecom carriers adopt facial recognition technology when registering new mobile phone services. In a move to reduce fraud, people will need to have an existing profile on the database which will then be matched to their facial scan prior to getting a new mobile phone number. slow down is in addition to existing facial recognition technology established in Chinese supermarkets, subway systems and airports.

Who are the new Chinese consumers?

Chinese consumers are willing to spend. According to Rachel, 145 million Chinese go on annual trips overseas in spite of the low passport holder rate, currently at 8%. More than 180 million Chinese shoppers are also contributing to the local economy.

Despite a gradual slow down economic growth, domestic consumption continues to exhibit strong growth, particularly in discretionary items. In fact, China is looking to add USD $1.5 trillion in domestic consumption by 2021, therefore pushing consumption over USD $6 trillion.

Rachel said the increase in domestic consumption is due to the following factors:

  • China's outward mobility – The number of people in the upper-middle-class group has increased. The number of those aged between 18-35 has also doubled;
  • E-commerce has grown and brought along greater domestic consumption; and
  • Due to China's one-child policy, individuals have more money to spend on themselves.

 Chinese consumers are expected to contribute 44% of spending on global personal luxury goods by 2025.

The impact of daigou on the Australian industry

"The digital force has become China's key economy driver especially with emerging trends such as cross border e-commerce (CBEC) also known as daigou," Rachel said.

According to research firm Nielsen, the term 'daigou' is used to describe "a person who facilitates the buying and selling of international products on behalf of a customer in mainland China". In Australia, daigou agents are often Chinese students who have personal connections in China and operate on platforms such as WeChat to connect with customers. Nielsen reports that 100,000 to 200,000 people were working as daigou agents as at January 2019 – turning over $100 billion annually across the retail sector in Australia alone.

The daigou industry has heavily influenced the Australian retail landscape over the past 10 years – especially in the baby milk formula market. This follows the 2008 scandal in China where milk containing melamine resulted in the deaths of six babies and sickened 300,000 more. Chinese parents have since lost confidence in local baby milk formula and have turned to Australian milk instead.

Eleven years on and a deep distrust in local milk products still remains. However, the new e-commerce law implemented in China earlier in the year has affected many daigou players and the Australian milk, healthcare and luxury industries. The law which dictates that online resellers need to be registered in both China and the country they shop in has resulted in daigou transactions losing momentum. As a result, many Australian businesses such as healthcare companies Swiss and Blackmores, have experienced a sales decline due to small daigou operators exiting the market.

What are emerging trends in consumption?

"China has introduced major inventions such as G-series high-speed trains, bicycle sharing and most recently, mobile payment," Rachel said.

China has emerged as a cashless society and people no longer need to bring cash to go shopping anymore – a phone will suffice. The majority of people in China use Alipay and WeChat Pay on their phones, even in rural areas. Smaller towns have adopted digital payment by way of QR codes which are commonly used at markets and smaller retailers like fruit sellers.

According to Rachel, the Chinese population has openly embraced the digitalisation trend as they prioritise convenience.

"With the consumer experience still evolving, understanding the way that the consumer thinks is key. This, in turn, influences the way that retailers advertise products to their target audience."

How to reach a customer in a highly digitalised world?

When assessing how to reach out to their target market, companies need to consider diversified platforms to enhance the user experience. For example, which platform will best suit a brand? Which wholesaler can deliver fastest?

"It is crucial to include real-time experience and assess the need to change the consumer mindset from a push to pull strategy – an advertising technique that is less forced and makes the consumer more curious about the product," Rachel said.

In order to predict consumer behaviour and accurately target a responsive audience, many companies have turned to artificial intelligence to structure a marketing strategy based on predictive analytics results.

UNSW business school alumna Ella Werman, now a Brand Experience Executive at Westfield can relate to this and shared that throughout her degree at UNSW – she was exposed to a range of programs and opportunities which undoubtedly aided her access to the industry.  

 "The diversity and relevance of subjects offered within my Bachelor of Commerce degree exposed me to a range of skills which I still reference today. This breadth of insight enabled me to identify and narrow down my key areas of interest, being marketing and management, whilst learning valuable new skills," she said.

"Additionally, my involvement in extra curricular programs such as the UNSW Leadership Program, the Career Mentoring Program and the Peer Mentor Program granted me access to industry insights, whilst challenging me go beyond my comfort zone. These opportunities gave me the experience, connections and confidence I needed to succeed in my first full time job out of university, and for that I am thankful to UNSW."

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