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Opening the Chinese Channels

Opening the Chinese Channels
 
     
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When we describe IVIS as a multi-channel specialist, many think we are in the television business. In fact, multichannel means a variety of ways for retailers to reach consumers. From a consumer angle, a channel is a touch-point to a brand driven either by convenience or lifestyle. This might mean catalogues, kiosks, the internet or a bricks and mortar building. Convenience stores, hypermarkets, search engines, social networks and affiliate marketing are different revenue streams to reach different customers.
In the UK, multi-channel operation has come a long way. Tesco is now a world leader with revenue exceeding £2 billion, selling everything from groceries to electrical products, from financial services to pet insurance. Customers can interact through myriad routes and have products delivered from the store, distribution centres or even directly from suppliers.

Multi-channel Marketing in China

In a few years China will have more internet users than the entire EU population, but even given its thriving e-commerce industry, multichannel marketing is still missing from Chinese businesses. One reason is pricing. Taobao makes up 80 per cent of China’s e-commerce market, illustrating the vital relationship between the Chinese consumer and bargains, which are not affected by multi-channel marketing. This will change as the market matures to a more sophisticated multi-channel paradigm driven by convenience and lifestyle.

Shifting Retail Paradigms

Retail today is best described as “continuous dialogue” that begins long before purchase and ends well after delivery. Today’s successful retailers are there when shoppers are doing web research, and still there when consumers are sharing their experiences on social networks. This is the multi-channel experience.

Broadly speaking, retailers face three main challenges as they transition from a single to a multi-channel approach: achieving customer centricity, business agility and organisation alignment. Customer centricity is about making the buyer the heart of all decisions. A leader at a major multi-channel UK retailer once commented, “We don’t have a business plan; we only have a customer plan.” This means all departments from marketing to manufacturing focus on achieving the best possible customer service.

Business agility is also crucial. Companies need the right combination of technology and processes to ensure quick reactions to market trends. Given the axioms, “change is the only constant” and “your competitors are only a click away,” and we see agility is vital for survival. Finally, we cannot achieve a successful multi-channel paradigm without having the mentality of “one brand, one company, one vision.” This means we need to think horizontally across all departments, and not vertically with each department in a separate silo, failing to interact and not developing as one business.

Developing a Mature Market

UK businesses’ systematic approach and organisation can help the Chinese market as it evolves from a web focus to a full-blown multichannel environment. Conversely, the Chinese have a can-do attitude that refreshes and energises everyone around them – including hardened UK executives. The Chinese balance their lack of experience with a sheer hunger to learn, adapt and excel.

The Chinese business approach is also commercially rich and astute. For example, UK companies favour the Concession Model where a retailer would rent space to suppliers, sell their products and earn commissions. But while the UK would have 40 to 50 per cent of the products as concessions, in China this could be as high as 90 per cent. This minimises risk and increases variety for consumers.

Another example is Li and Fung Company, which produces 40 to 50 per cent of the clothes found in any European shopping mall. This US$15 billion company orchestrates 14,000 factories in China and around the world, has 15,000 employees, and operates a sourcing network of over 80 offices covering over 40 economies across North America, Europe and Asia. Yet, it has no manufacturing facilities and it directly owns almost nothing.
While lessons learned in mature markets can benefit young e-commerce sellers, there is much to be said about a business paradigm based on 4,000 years of civilisation set to dominate how we trade in the future. China is opening its doors to the world of multi-channel marketing, which offer new opportunities for all areas of business.

 

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