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China emerges as the world’s epicentre of ‘social commerce’

social media in china, chinese social commerce, chinese e-commerce

More than five centuries ago Christopher Columbus scrawled in his copy of Marco Polo's "Travels" that the Middle Kingdom would bring mercacciones innumeras (an immeasurable amount of commerce). However, China has continued to disappoint foreign businessmen ever since, not least because many ordinary Chinese people have been too poor to buy anything.


That is changing as the country's middle class is growing explosively. In 2010 mainstream consumers—those with enough money to buy cars, fridges and phones but not Rolls-Royces—made up less than a tenth of urban households. In a new forecast, McKinsey predicts that by 2020 they will make up well over half. BCG reckons that urban private consumption will rise from $3.2 trillion today to $5.6 trillion in 2020.


Apple expects China soon to become a bigger market for its products than America. Six of its ten busiest stores across the globe are in China. At the height of the recent turmoil in the Chinese stockmarkets Apple's boss, Tim Cook, reassured investors that "I continue to believe China represents an unprecedented opportunity over the long term." Apple's shares bounced back.


Where should intrepid marketers go to capitalise on these riches? The wealthy east coast is now widely believed to be saturated, which suggests that firms should head inland. The Economist Intelligence Unit recently pinpointed the top emerging cities, based on forecasts for things like long-term growth in population and disposable income. It found that a few inland cities like Chongqing and Chengdu are indeed attractive, but many excellent prospects remain in the east. Obscure but booming cities within reasonable distance of the coast, like Suqian and Xuzhou, are likely to do well, and lucrative niches remain even in well-established magnets such as Beijing, Shanghai, Guangzhou and Shenzhen.


As the middle class expands, so it evolves. 


A big winner has been China's e-commerce, a market that is now larger than America's. Forrester, another consulting firm, expects gross merchandise value in this sector to exceed $1 trillion by 2019. Outside the big cities bricks-and-mortar stores are thinner on the ground, so online shopping is becoming increasingly important. Even where shops are readily accessible, consumers often go "showrooming", looking at goods in physical outlets but buying them more cheaply online. This is happening the world over, but in China the trend has been accentuated by the ubiquity of smartphones, the reliability of online-payment systems and the spread of same-day delivery services.


All this e-commerce is producing some remarkable business-model innovations. Thanks to the convergence of mobile commerce and social media, observes Miles Young, chairman of Ogilvy & Mather, an advertising firm, China is the world's epicentre of "social commerce".


Chinese consumers are fast becoming the world's most discriminating and knowledgeable. They are also quite brand licentious. The choice of top global brands there is much wider than in America, Europe or Japan. This has resulted in fierce competition, pushing firms to come up with ever more inventive offerings. Even Apple's Mr Cook says his company takes Chinese tastes into account when it designs new products for the world.



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