Bargaining culture in China: how does it affect online buying?

It's no secret that bargaining is important in Chinese culture. Haggling over prices is not all about the money. It's mostly being used to create trust and a connection between the buyer and the seller. That this process should not be underestimated shows by the fact that some critics blame the failure of Best Buy in China on the fact that bargaining was not an option in their stores. 

Best Buy, a big US retail chain went to expand their branch to China and used exactly the same concept as they use in the US. ''We offer the Best Buy, and our list price is our lowest price.'' No bargaining needed because it's already at the lowest price. Best Buy didn't understand that it was now missing an import aspect of the purchasing process in China, regardless of the price tag. Their approach just didn't offer offering the full purchasing experience and caused them to fail.

A good example of how far this culture goes is Taobao.com, China's largest online marketplace. One of the most popular features on here is the option for buyers and seller to connect and chat. This function is giving a platform to re-create the traditional bargaining process and makes sure the buyer and seller can bound and create trust before the purchase happens.

Negotiating over prices basically happens when the same product is available at different independent sellers like on markets or small stores. Usually the buyer is not having a preference for one seller/brand yet so the only important thing would be, the price!

 But there is a change happening and tradition might be outrun by ease. The new wealthier middle class doesn't  want to waste time negotiating and fears to over-pay as a result. They usually already know what item or brand they want and there is no need to play out time consuming routines. Think of products like Apple, Luxury watches and jewellery like Rolex, Omega and Cartier and designer clothing like Burberry, Dior etc. The exclusivity of those items is also making a bargain impossible.

My conclusion is that the required bargaining is often more trouble than pleasure for the younger and wealthier generation, because they just don't have time for the hassle. They know what they want and want it easy and fast. This younger group might cause a change in the buying process of Chinese consumers, although at the moment that younger wealthier generation is still a small part of society. The larger part still wants their bargaining  and Best Buy and their concept of 'list price is lowest price' might just have arrived a bit too early.

Has Pepsi become Chinese enough?

This weekend I was at the Midi Music festival in Shenzhen which had a whole stage and area sponsored by Pepsi Coke (百事可乐). Live bands, video-games and of course their famous soft-drink were there to appeal to the young urban crowd attending the festival. This reminded me a lot of Pepsi's strategy worldwide, tying itself to pop and sports-culture to obtain a cool image with a young target group. How does this work out for them behind the Great Wall?

Pepsi Coke first entered the Chinese market in 1981, 2 years after big rival Coca Cola re-entered the territory after a 30+ years absence due to the communist rulers closing their borders to foreign investors. As a very American-looking brand, Pepsi worked hard during the past 30 years to become more Chinese. But looking at their strategy, it hasn't been so different from what they've been doing in the rest of the world. They just added a bit of Chinese flavour to it. But often these 'Chinese spices' still seemed cooked up in the States.

A good example is this 2004 ad, featuring famous Chinese pop stars like Taiwan's Jay Chou and Hong Kong's Edison Chen. But they don't sing a note: instead they do what Americans like Chinese to do: kung-fu!



Another beautiful case of Pepsi literally showing its love for the Middle Kingdom is this commercial surrounding the 2008 Olympics: 'Love China' (all the people in the commercial are shouting 'Love China')



Where did this marketing strategy lead to? Well, to a 4.4% market share in China. Which is not bad concerning the population traditionally has a preference for non-carbonated drinks including tea and fruit juices. But when looking at Coca Cola's 15% market share in the country, it seems Pepsi has lost this cola war as well. Maybe that's why in their latest Chinese New Year commercial, the focus is on family and love. Traditionally a much more 'Coca Cola' claimed area.



But people who know a bit of the Chinese entertainment industry will still recognise familiar faces ;-)

Wall Street Journal explaining WeChat.

In my previous post I already wrote how WeChat has the potential to change the way we use social media.
The Wall Street Journal also picked up on the success of this 'Made-in-China' app and made a very informative video. It's clearly illustrates its popularity to the still oblivious American public. Must see:

WeChat: has the laptop become obsolete for social platforms?

Not so long ago connecting to your friends through your laptop already seemed very innovative and modern. But since the immense popularity of Wechat it's obvious: we don't need a computer to be social. It's all in the phone.

The former large social platforms in China like Weibo and QQ took after western models such as Facebook, Twitter and Skype; it started out with a desktop application which soon got a mobile brother or sister. But what do you do when the mobile online population exceeds the web surfers on computers? According to CNNIC (China Internet Network Information Center) 70% of all internet users in China access the web through their mobile device. The solution is simple: don't bother with a desktop application!

Weixin (literally: micro-message) as WeChat is called in China, was already launched in 2011 by Shenzhen based online giant Tencent. The third largest internet company in the world (after Google and Amazon) which also owns QQ and Tencent Weibo, noticed how online traffic on its platforms became more mobile. Launching WeChat seems to have been the right next step as the number of registered users have grown to 300 million in January 2013. And it's not only the Chinese who have embraced this app. Since it's worldwide launch in April 2012, WeChat has over 40 million overseas users, mainly from Malaysia, the Philippines and Indonesia but also countries like Mexico, Spain and Argentina are being conquered.

But what's so special about WeChat compared to US-made Whatsapp, Korean's Kakao Talk or Japan's Line? All these apps facilitate communication through your phone while solely using the internet but Wechat is the first app to be truly social and combining a social platform with a chat application, without needing your desktop. Just like Whatsapp you can send messages and create group conversations, like Line you send out cute stickers when you are at a loss for words and like Kakao Talk you can use it to make phone calls to your friends. The treat is actually it's social integration; as owner of Tencent Weibo and QQ, Tencent makes sure you can add your profile and capture Instagram-like pictures which will appear for all your friends to see. If you don't feel like typing, you can send out voice-messages and when you really miss your friends you can have a video conversation with them.

Actually WeChat most ground breaking step is acknowledging the fact that social interaction are still very much location-based whether you start a chat, show pictures or want to meet friends. Most friends people have within their social platforms don't live that far away and many people are interested in making friends which they can also meet in person. In WeChat, you can simply shake your phone to start a chat with a random person within walking distance.

The most interesting part for marketeers is the possibility to create official brand pages which can be followed by users. This way brand can build a personal relationship with the consumer by sending messages and starting interactions. Stores can print-out QR-codes to stick on their doors which will lead consumers directly to their WeChat branded page to continue the interaction after they left the store.The downside to this approach might be the danger of users being 'spammed' too much by companies and maybe being overwhelmed by all the app's features. It's interesting to see if WeChat is able to keep up the balance of pleasing marketeers and still providing a comfortable environment for its users.

However this turns out, WeChat has taken an important step in acknowledging the fact that offline doesn't exist anymore. Your phone is always with you and ever since the invention of the device, it has been meant to connect people and keep up with family and friends. So why shouldn't this continue now that your phone has become 'smart'?  

The rise of the Chinese shopper!

Consumers in China are on a shopping spree, not only within their own market but they also seem to be expanding their view overseas. In 2012, Chinese shoppers spent USD$190 billion outside of China. This is not only more than any other country,it’s the highest amount ever recorded.Sites such as USzCN.com have been smartly adapting to this trend by giving Chinese consumers the option to order products from the worldwide market through them.

It’s clear that Chinese consumers who order abroad are mainly interested in exclusive and expensive products and it has become immensely popular as Chinese look to purchase goods which could otherwise not be found in their country.  The products that are being bought overseas are; Watches, Jewelry, Luxury Wines & Spirits, Bags, Shoes, Cosmetics andPerfumes, Apparel, Accessories.

The main reason why Chinese consumers prefer to buy their luxury products abroad, is because purchases in China are seen as inferior and possibly fake. While the Europeans and Americans that order their products directly from China are going for the bargains.

This is a fun comparison and we think this is a sign for the future demand on both sides. In the future we expect both markets to develop in this way. Recession will continue in Europe and the US making the demand for cheaper products high whilst in China economic growth will continue and more and more people will be able to spend more money on consuming.