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4 ways to capitalise on China's cross-border mentality
76% of total purchases by China's online buyers in 2014 came from cross-border shopping.1
Tack on China's skyrocketing outbound tourism, accelerating investment, expanding connectivity2, 3, and growing outbound migration4...all these suggest something profound is happening in China.
What lies at the heart of these trends is the growing cross-border mentality of Chinese consumers – a mentality that is transforming a population from one that was once inwardly focused and frugal5, to one whose minds – and wallets – are increasingly open.
But knowing this is one thing, engaging with and profiting from it is another.
We look at China-savvy companies and distill their success stories into four principles to help you engage with what Goldman Sachs CEO Lloyd Blankfein describes as ‘the 21st Century story’.6
#1 Smart expansion
120 million Chinese travelled out of China in 2015.
For many retailers, hitting this moving target of 120 million outbound Chinese7 travelling to increasingly diverse locations means adapting smartly to changing trends and going to where the buyers are, rather than where they are coming from.
That’s why many foreign companies, like LV8 and Prada9, have held back on breakneck store network expansion in China. Instead, they’ve focused their energies on places where Chinese buyers are going to, namely locations like South Korea10, Japan11, the US, and Europe.
This isn’t just the realm of the high-end – CBRE’s latest report on retail trends12 shows retailers of all brands and sizes were pushing themselves to think smartly about engaging with demand from China.
It's one of the reasons why locations such as Tokyo13, 14, Seoul14, 15, and Manila have been particularly sought after in the past year.
An example of smart expansion in tune with Chinese consumer’s cross border mentality is Lotte, South Korea’s biggest cosmetics company.16
Lotte launched a web strategy offering cut-price cosmetics to Chinese travellers to Korea, but coupled it with a convenient, efficient airport pick-up service allowing inbound buyers to get what they want, but with minimum fuss.16
#2 Differentiating with detail
For global hotel chains like the Hyatt and the New York Marriott Marquis17, details make all the difference when selling to their customers from China.
New York is a hotspot for Chinese travellers18 and Hyatt New York offers tailored in-house translation services, guide services, and welcome packages including eight – the luckiest number in Chinese culture – candies for clients.19
The Marriott has even gone as far as renaming the suites on the 44th and 45th floors, because of the negative connotation of the number 4 in Chinese culture.17
While catering to cultural sensitivities can get you far, more practical matters are also important.
In Sydney, another top destination for tourists from China20, Meriton Kent Street Tower19 offers another example of differentiating with detail.
An upscale hotel, Meriton expanded the size of its storage rooms, as well as hired bigger porters because when their Chinese clients come, they buy big and they buy a lot.
#3 Partnering for profit
Navigating a new market can be tough, but its easier if you find a partner that knows their way around.
That's what Priceline, the US's largest online travel booking company, did when it partnered with China online travel goliath Ctrip21 – a deal that gave Priceline direct access to the Chinese outbound tourism market, and Ctrip’s extensive range of travel products.
Thomas Cook's link-up with China conglomerate giant Fosun is another example of a retail behemoth partnering with a local company to penetrate the China market.22
It's not just about travel.
Retailers, such as Laura Ashley23 and Marks & Spencer24, are also following this route because finding the right partner who can break down the cultural divide as well as deliver a sales channel and infrastructure can make all the difference, especially in a market of 1.3 billion people.
#4 Matching the market
Asides from the first three tips above, matching the market to your offering is also a vital tactic, especially for such a large market with rampant demand for overseas products.
It’s one of the reasons why Taobao’s Global Mall is proving to be such a hit – it offers a platform where cross-border conscious consumers can engage with overseas retailers.
It’s no wonder that major name players, such as Walmart and Carrefour, feature prominently on the site.25
The platform is one thing; the data it provides, though, is another, and herein lies the crux of the issue. Taobao’s platform has deep and varied data on consumer searches, a pile of resources that help retailers understand market trends and match their offering to suit the market.
Tarry no more – it’s now or never
With outbound spending set for another year of growth in 2016, there has never been a better time to put these principles into practice.
Bear in mind though, that competition is heating up from China companies, who are equally convinced by the long-term potential of China’s emerging cross-border consumer mentality.
Dalian Wanda, one of the China’s most prominent outbound investors, is prime example.
Seeking to profit from Chinese tourists’ demand in Madrid, Dalian Wanda embarked on a mission to acquire retail complexes in the city.26
But that's not all. Acknowledging fitness as a growth industry in China, where Chinese fitness fanatics are increasingly on the lookout for global challenges, Dalian Wanda recently bought the global Iron-Man competition too.27
With this becoming less of a passing fad and more of a long-term transformational theme, Chinese consumers cross-border mentality is set for another bumper year.
And with 6.5 trillion yuan (US$986 billion) expected to be spent on cross-border e-commerce alone in 201628, there’s never been a better time to put your plans and the above principles into action.
