The Importance of Brands on Chinese e-Commerce

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Navigating the fast-paced, constantly changing e-commerce marketplace can be challenging for brands in China today. According to Ogilvy China’s latest whitepaper titled, Why Brands Matter on Chinese Ecommerce, analysts estimate that a total of 10 million online stores will sell more than 1 billion products with a transaction value of more than 1 trillion dollars this year. The key to being successful is standing out from your competitors and being able to differentiate your brand in a way that marks success for the long term.

In China’s constantly changing online environment where thousands of brands are fighting for consumers’ attention, strong brand awareness is more important than ever. It is different than shopping in traditional brick and mortar stores, because the choices for consumers are unlimited and prices are more competitive. If a brand does not stand out, it may lose out. As a result of this competitive marketplace, brands are spending more on e-commerce platforms and generating high sales volumes. With this investment, they need to consider their brand in the short-term as well as the long term.

“The fast changing e-commerce environment tends to make brands more focused on the short-term sales growth rather than brand building for the long term. With brands spending more and more on Ecommerce platforms and generating a large percentage of total sales through Ecommerce, it is essential for brands to be able to navigate this environment. Brands in China are increasingly built bottom up, and social and commerce driven campaigns need to ladder up,” said Chris Reitermann, CEO of Ogilvy China and co-CEO of Ogilvy Asia Pacific.

Ogilvy China’s whitepaper identifies the main groups of online consumers based on shopping behavior and outlines strategies to win over and retain consumers. It also shares some misconceptions behind the typical marketing strategies targeting e-commerce.

Discounting prices and offering free shipping have been popular strategies used to increase online sales in China, because they result in top line growth without bottom line increases. Yet, Ogilvy China analyzed hundreds of brands on Taobao/Tmall and identified a strong correlation between brand power and greater search exposure. Among the 10 categories they assessed (apparel men, baby care, beer, body care, cooking oil, dairy and milk product, face care, hair care, household appliances, and mobile), brand power directly linked to search volume across all categories. The finding: On average the best known brands have 15 times larger search volume that less known brands.

Ogilvy China also performed a similar analysis for price variance, defined as the range of price movement on e-commerce over a 12-month period. The finding: The higher the price variance, the more likely the brand is relying on price promotions. In most categories, the stronger the brand power, the less likely the brand relies on price promotion to drive volume. While there are some exceptions, like hair care and television, where brands reduced prices to gain market share the brands that stand out are more apt to maintain premium prices.

The whitepaper concludes that “brands and e-commerce need each other. In this mutually beneficial relationship, ecommerce offers brands options to simplify choice, provide shortcuts and build value amid an infinite sea of possibilities, while branded marketing in ecommerce creates visibility, trust and engagement with the consumer.”

Despite the challenges brands face with the fast-changing dynamics of the e-commerce marketplace, there are opportunities. It may just involve less conventional and more forward-looking strategies that use data and technology to better understand consumers’ needs and to generate ideal brand exposure.

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