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Four lessons in ecommerce from China

As we head towards peak retail season, we speak to Eddy Dong, General Manager of Technology at WPP in China to understand what can be learned from China’s booming ecommerce market

The Chinese ecommerce market reached an estimated value of CNY 13.8 trillion (US $3.3 trillion) in 2021, making it by far the largest ecommerce market in the world. With growth rates expected to beat records again in 2022 and a groundswell of technology and innovation coming out of Chinese online retail giants, we look at some of the ecommerce trends dominating the market, and what global marketplaces can learn from China in the run-up to peak retail season.

Hardware eclipses software when driving growth

“The most astonishing strength of the Chinese ecommerce giants is the scale of their backend infrastructure,” says Dong. While ecommerce UX continues to evolve in the market through the country’s most powerful super apps, it is innovation in logistics and technological infrastructure that is driving real growth.

The most successful companies are investing in R&D in server technologies, going as far as developing their own AI chip technology to drive intelligent product recommendations for their customers. Sophisticated databases and server technologies also mean that these companies are able to manage enormous amounts of digital traffic during peak retail moments – it is estimated that around 506m people shopped on Alibaba’s C2C ecommerce platform TaoBao in a single 24-hour period during last year’s Singles’ Day. “The power and scale of these servers could be unmatched anywhere else in the world,” remarks Dong.

“Another big – but often underestimated – enabler of ecommerce in China is delivery logistics,” says Dong. “This is where we are seeing a lot of innovation with the Chinese ecommerce giants.” Delivering goods ordered online quickly and cheaply for the consumer is essential to success and customer satisfaction, but also demands increasingly high-tech solutions. For example, JD, one of the largest online retailers in China, already uses automated guided vehicles to perform sophisticated 3D shelving tasks in the companies’ warehouses as well as complex algorithms to handle China’s huge postal and delivery system.

When looking to harness this technology and infrastructure, the challenge for brands is that these platforms tend to create closed ecosystems, comparable to Apple, that do not have open APIs. To address this, WPP developed WPP EC Lens in China, a tool designed in partnership with leading technology companies. WPP EC Lens uses Robotic Process Automation technology to non-invasively obtain insights on traffic, merchants, and competitors from mainstream ecommerce platforms in China, solving the problem of brand ecommerce data consolidation in a stable, low-cost and agile way.

The metaverse comes next

The need for innovation in hardware also comes to the fore when looking at the next wave in software: the metaverse. Livestreaming and social shopping continue to be the leading drivers for ecommerce in China, a trend that will continue to grow over the next few years and will likely evolve into metaverse environments.

“There are so many untapped opportunities for Chinese brands and retailers in the metaverse but the availability of the hardware to actually enter the metaverse will continue to be a barrier to mass adoption until we see innovation there,” says Dong. Companies and retailers who can engineer and supply headsets in addition to state-of-the-art virtual experiences quickly in China will be the ones to benefit from this next wave of ecommerce.

Internet laggards should be the focus of growth

China's smaller cities and young people from regional towns who may have arrived late to online retail are becoming a key growth audience in China. “We’re seeing that people who were slow adopters of ecommerce are now catching up,” says Dong.

In addition to emerging urban audiences, Dong points to other groups that may be interested in trading digitally who may be harder to target: “Even in more rural parts of the country, ecommerce is taking hold. For example, there is currently a boom in agricultural products – from machinery to agrochemicals,” says Dong.

Around 35% of China’s labour force is in agriculture (compared to just 2% in the US) and many of these people are based in rural areas of the country. But now, notable influencers are being signed up for agricultural live shopping and are already driving considerable revenue. According to Dong, agriculture and similar sectors previously not associated with ecommerce are the next growth areas to look out for.

But stringent PIPL (Personal Information Protection Law, or China’s GDPR) places a limit on the scope of brands’ media strategies, making it harder to find and speak to these growth audiences in the ecommerce ecosystem.

“In compliance with PIPL, we are now using the Federated Learning method to leverage more third-party data, establish a more accurate model, and find growth groups in ecommerce,” says Dong. This solution, called WPP Resolve, currently enables Federated Learning practices with more than 20 companies in the Chinese market with large-scale user-consented data, helping to identify new audiences without compromising users’ personal data.

Sustainability is not an afterthought

While Chinese ecommerce might not be historically associated with sustainability, ecommerce giants have publicised concerted efforts towards supporting sustainable living and hitting net zero goals in more recent years. Alibaba’s flagship project, the Ant Forest founded in 2016 to reforest vast areas of China, has been recognised by the United Nations with a Champion of the Earth award.

Alongside these business pledges, the Chinese Government has promised to reach the peak of its carbon dioxide emissions by 2030. “We should expect consumers, brands and ecommerce retailers to start thinking about how they impact these national and international commitments,” says Dong. “House plant sales are booming on ecommerce platforms, for example, which might reflect the desire of the urban middle classes to have a greater connection to nature in their homes.”

So, as brands prepare for a competitive peak retail season around the world, the lessons from the most successful ecommerce market in the world are clear. Firstly, investment in ecommerce infrastructure should be paramount. Not only will this ensure smooth sales during key retail moments such as Black Friday or Singles’ Day, but it will also drive growth in the long term, enabling brands to develop their ecommerce capabilities at scale.

Looking beyond traditional or typical growth audiences should also be top of mind, keeping media plans agile to be able to quickly target growth markets that may not be as familiar with the online retail environment. And finally, keeping an eye on emerging movements – from software to sustainability – and focusing on innovation and technology that will enable these will ensure brands are ready for the next wave of ecommerce.