China is not only the most populous country on the planet, but one with an economy and society evolving at a ferocious pace. For e-commerce, companies like Alibaba, whose anticipated US-based IPO was valued at $221 billion this week, are starting to look outside of China to cement future growth. Whilst there is clearly no decline in online shopping, it does pose the question of which company or vertical is going to be next to experience hyper-growth?
According to a study by McKinsey & Company, in 2000, 4% of Chinese people were in the middle class range (making US$9,000 to $34,000). By 2012, 68% of Chinese people were in this range. This socio-economic development has been the driving force behind the Chinese e-commerce market that transacted $865 billion dollars in 2013, the largest market of its kind worldwide.
Looking at the results of different e-commerce industries, online travel bookings saw a 62% increase in 2013 compared to 2012. A lot of that growth came from international hotel groups, airlines and OTAs (online travel agencies), which have aggressively increased their reach in the market by building a presence on regional search engines and social media platforms.
Compare this to the well-versed success of Chinese online fashion retailers, and whilst growth is still significant, it’s less than half that of the travel sector at 25% year on year (2012 to 2013). Could travel be the next hyper-growth story to come out of China?
Interestingly, both Alibaba and Baidu, the dominant domestic search engine — have acquired travel businesses in recent years. Alibaba bought Qyer.com in 2013 and Baidu purchased Qunar for $306m back in 2011. These were timely purchases as last year the Chinese government banned the practice of selling tours at cost or at a loss and then enforcing tips and extra fees on the trip itself. This change in policy has instilled a confidence in the industry that is supporting continued growth, particularly when it comes to travel packages bought online.
Accessing the travel market through search, display and social
The publisher landscape in China is a significant obstacle from a display point of view as it’s much more siloed than the network-oriented nature of Europe and North America; exposure here needs long-term planning with considerable local knowledge and expertise.
From a search point of view, Google and Bing only have around 2% market share with Baidu dominating at 58%, followed by 360 with a 25% share and Sogou with 14%. Investing in local expertise to ensure these domestic search engines produce value for a brand or advertiser is key.
Social media is particularly important for the Chinese travel sector. With the growing middle class and crucially, 90% of outbound travellers being under the age of 45; it points to an obvious demographic for brands and advertisers to reach online. To reinforce this, more than a quarter of Chinese travellers (27%) use social media to help them make decisions on holiday destinations and this rises to a third (33%) amongst travellers under the age of 35.
Much like the search engine landscape, Chinese social media is dominated by local platforms. Across desktop and mobile, people are communicating via QQ, the most popular instant messaging service and online chat forum. WeChat is the most popular social network for mobile users, with 365 million monthly active users. Weibo is the leader in desktop social media followed by RenrenWang, which focuses on a younger audience. For advertising purposes WeChat and Weibo offer the most opportunities for international brands. Tailored profiles, biddable activities and other engagement features have allowed brands to rapidly grow their awareness in the market and drive sales from their respective target audiences.
Focusing on the audience rather than the use case of a platform is vital to succeeding in Chinese social media. Local platforms tend to follow similar formulas, merging the familiar functionality of western platforms such as Facebook, Twitter, Instagram and WhatsApp into one, more all-encompassing experience. Ensuring the content and communication you deploy matches the audience being spoken to, will help drive engagement from new consumers.
My experience in supporting international luxury brands in expanding into the region has provided me with an awareness of a common desire amongst brands to explore the opportunities of China, but also a common underestimation of the challenge. Western online marketing strategies need to be totally disregarded. Strategies that are specifically tailored to domestic platforms and the audiences that engage with them will provide far greater success in the increasingly lucrative Chinese travel market.