Thank you everyone who joined the Webinar on Feb 23, 2021!
Aurelien Rigart, VP of IT Consultis, and Sandrine Zerbib, Founder and Chairwoman of Fulljet, part of Baozun Group, presented an overview of E-commerce strategies in China focused on how public and private traffic can complement each other to help you tackle the challenging and competitive Chinese eCommerce ecosystem.
This webinar is divided into 3 sections as follows:
Section 1: The Chinese Digital Landscape (04:34 - 11:55)
The digital landscape in China is very different from the rest of the world. China represents 25% of global e-commerce. The non-specialized platforms, like Alibaba, in China enabled the evolution towards the future of e-commerce.
Section 2: Public & Private traffic: an Overview (11:56 - 27:47)
Both public and private traffic are essential to businesses. Public traffic is open to everyone, such as Baidu and Alibaba. It allows brands to build their awareness by participating actively in platforms’ campaigns and events. They get traffic from the platform. On the other hand, private traffic is a controllable traffic pool based on the “public traffic” platform. It allows brands to have full ownership on their traffic and data, and thus enables brands to personalize customer experiences and build up customer loyalty.
Section 3: Why Should Brands Adopt a Hybrid Strategy?(27:48-44:00)
To develop a full digital ecosystem, brands are encouraged to adopt a hybrid, Omnichannel strategy. In this section, we provide detailed analysis on two successful brands with hybrid strategy: Burberry and Maje. We also analyzed how brands can efficiently incorporate digital public traffic, physical stores, and digital private traffic together for seamless interconnection between all their digital assets.
We hope that you enjoyed the webinar! Feel free to join us in the future to explore further potentials for your e-commerce business and digital transformation journeys in China!
Transcripts of the Webinar
Thank you everybody for joining today, it's a pleasure and to have you here with us. So we have Sandrine with me who I'm going to introduce.
Today, the goal is actually to speak about basically e-commerce strategies in china. We're here to talk about two specific notions, one is about public traffic, and one is about private traffic, so we are lucky today to have two experts in each of the fields.
We are very grateful to have Sandrine Zerbib with us. So she's the founder and the chairwoman of Fulljet. She's a visionary, she's bold, and she's resilient. I've known her for about eight years, I think we started roughly at the same time. Fulljet recently joined the Baozun group, this is a huge news in the digital world in china. She's also the former president for adidas greater china, she's an advisor, mentor, and board of member for apparel and sports company so she's china business expert and always looking for large and challenging projects.
Now my turn, I'd like to introduce Aurelien that many of you already know. Aurelien is the co-founder and vice president of ITC and as you have already noticed and you will continue to see throughout our webinar that he is communicative, passionate, and inspiring. He drives the business development and the expansion of IT Consulting. He also assists c-levels and board of directors of many fortune 500 companies to establish their digital transformation roadmap. He is a keynote speaker at adobe magento and at many other associations like AmCham and is always very keen on meeting and learning from similarly entrepreneurial minded people.
So Fulljet is actually a TP but it's primarily a strategic and brand focused industry expert specialized in developing online go-to-market strategies for premium and luxury brands. So in a way we can say to make it short, we are a boutique TP and we've just joined the Baozun group. Baozun on the contrary is not boutique, it's the leading brand e-commerce, the leading TP brand e-commerce solution provider in china with integrated capabilities encompassing everything from e-commerce value chain covering I.T solutions, store operations. massive resources and massive investments in I.T. So the most advanced technology related to e-commerce of all TPs in China and we got married quite recently actually.
I'm the co-founder and vice president of ITC so same as Fulljet, we're like a boutique agency but mostly focusing on the digital transformation area. We have three offices with 60 people in China and southeast Asia and we've been servicing many different brands on their digital transformation journey helping them with their I.T system integration setting up mini programs, loyalty programs, marketing automation and so on and so forth. Moving on to basically the topic of today which is to first understand the Chinese digital landscape and then we're going to tackle a few possible strategies.
We get a couple of super experts in the Chinese landscape but it's always important to realize the key differences between China and the rest of the world. In the rest of the words we have google, amazon and so on. In China we're going to have Baidu, Tmall, WeChat. What’s interesting here is basically to understand the different market shares of the total e-commerce revenues globally. Mostly in the west represent 12% of the global e-commerce plus retail and when we look at China, I mean there's a lot of reasons why this is like this but China represents 25%, so more than two times the e-commerce revenue generated in the rest of the world.
One other thing because today the goal is to talk about how complementary private and public traffic can be. When we look at public traffic in the U.S., that's going to represent 45% maybe 50/55 depending on what we consider public versus private. But when we look at China and especially, I mean things are starting to shift and evolve. We're going to see why we get like so many opportunities for different brands, but in the past, it's been like an 80/20 or even an 85/15. There is a lot of slight evolution and there are reasons why splits are different in China and the U.S. The goal is to try to understand it and Sandrine is going to explain to you a little bit more about it.
Just a few words about this complex but at the same time can be a very rewarding e-commerce market in China. The first thing which I think is really important to understand is that the platforms not only are big, but they are not specialized unlike the platforms in the west. The lines are completely blurred between e-commerce, social commerce, social media communication, and every platform tries to do as much as possible of all the things. I would say as a result of all this, number one the e-commerce market is huge, it's close to 1 billion internet users in China which is two thirds of the population it's quite significant.
When we know that there is still a substantial rural population, so the rural population is also connected. It's also in terms of massive volumes, because it is actually more than the combination of the US, the UK, Japan, Germany and France, which is quite impressive. It's very concentrated, you've got 90% of the B2C market in the hands of three platforms. It's very competitive, you've got massive platforms which have massive traffic but also a huge number of brands on each of these platforms. So for instance, on Tmall, you've got 150,000 brands which makes it obviously more challenging to get out of the crowd. As a result, it's expensive to operate on these big platforms, particularly on the big e-commerce platforms like Tmall. But it's also expensive to acquire new users. The cost of customer acquisition on Tmall for instance has increased by 158 percent from 2018 to 2019.
Let’s continue on setting the pictures, I think it's interesting to see that it continues to grow massively. Here is a slide that shows the growth of WeChat in a relatively short period of time. You can see that this happened over nine years which is pretty much nothing and now we are reaching 1 billion active users with 20 million official accounts and 50% of users spending up to 90 minutes per day on WeChat. You will see later and Aurelien will explain this at large that WeChat is like a swiss knife, it offers many opportunities and possibilities.
Another picture of what a platform is the fact that they are very complete ecosystems. I was saying earlier that they are not specialized, and they don't want to be specialized. I think a perfect illustration of this will be Alibaba. Alibaba is a massive ecosystem where you can pretty much do and find everything. You can find core commerce tools like Tmall that you may be familiar with. There are other tools like Taobao, Aliexpress, Lazada for Southeast Asia, Tmall global and so on and so forth. You've got mobile media and entertainment with online tv and video platforms. You've got local services like food delivery and location of stores. You've also got payment and financial service. And payment is quite big in china actually you may know that mobile payment in china is massive. You've got marketing services and data management, logistics, and cloud computing. So it's very complete ecosystems that enable the platforms and particularly in the case of Tmall and Alibaba to offer a fully immersive experience to the users.
So as a result of all this, as I was saying you can do pretty much everything, you don't go on a platform, beat Tmall or beat WeChat or beat any other platform. You don't go there, find what you're looking for, click buy and finish. It's not at all what you do. You go there to have fun, to watch some live streaming, to watch a video, to interact with your friends, to interact with the brands, to play a game on a mini program on WeChat. And eventually to purchase something. But it's really an immersive shopping experience and the fact of purchasing something comes at the end of all these activities so you spend a lot of time on the platform. You get a lot of information on the platform on your favorite brands and eventually you buy something, which I think is a very different feature from what we have in the west.
So now we're going to know all the secrets of public and private traffic thanks to Aurelien.
I think a question that everybody might have is what public and private traffic is. What are the differences between the two of them and why today things are becoming blurrier than ever? Public traffic is everything the brand is going to go on a marketplace and it's going to compete for the attention of the users. They don't have the chance to have full ownership of the data of users and that's really one of the challenges Sandrine was suggesting just earlier. There's been a raise of 150% on the cost of customer acquisition. It's been a little bit of a challenge and some brands have felt that things were a little bit hard for them, so they wanted to make sure they were going to diversify their investment on platforms including website, apps, and store experiences. Or in China the WeChat mini programs that were born in 2017-2018. We're going to see that actually for a lot of brands, the WeChat ecosystem and the mini programs are the go-to place for brands.
So, this doesn't mean that we should turn our back to public traffic. Public traffic is a must for large volumes and the big platforms are extremely important if you want to deal with large traffic. This is where you can really build your awareness and your online presence. You've got millions of people who visit these platforms, I prefer to call them platforms than marketplaces and I'll come to this in a second. You can participate in campaigns that give you even more exposure for your brands. For example, big shopping events like the double 11 that everybody has heard of. You can also figure out or pay for traffic that is going to the platform and how you drive it to actually your own store on the platform. One quick word here is that the reason why I don't like to call them marketplaces is because I think this is one of the fundamental differences with the western platforms. They are not exactly marketplaces of course Taobao is but if you think of JD and Tmall, they are not. They are truly platforms, they are virtual malls, so basically it is a huge platform with huge volumes, but each brand has its own store and environment on Tmall. That's for the overall picture on the platforms but I think importantly, let's look and let's zoom a little bit on Tmall.
To start with, why on Tmall? Because Tmall actually represents more than 60% of the B2C markets e-commerce market in China. So, it is absolutely fundamental to know about Tmall and to catch the opportunity of Tmall when you can which is not necessarily for everybody. We may discuss this later but it's a huge platform with 785 million monthly active users with massive growth of monthly active users. As I said, it has a very big market share, a huge GMV and a massive number of international brands. So this is really a platform where international brands open their virtual stores. It's the dominant player in the market with the GMV which is 10 times the GMV of JD which is the number two now.
On Tmall there is a portal called luxury pavilion. It has been open for a little while but has really increased its traffic and its interest a lot recently. It is actually a portal that gives you access to the special department of Tmall which is reserved for luxury brands now. These luxury brands increase every day and we've seen an explosion of them, particularly with the COVID in 2020. In 2020, we've seen a lot of brands like Cartier, Piaget, Chloe, and Gucci opening up. So a lot of brands have actually entered luxury pavilion during the year of the COVID. And during the same year we've seen that the online market has started to account for 33% of luxury sales compared to only 12% in 2019. There is really now a place for luxury brands. JD is also trying to compete, but for the time being we have to admit that the winner in luxury online seems to be Tmall with a huge increase in luxury pavilion and a lot of growth in perspective as well. I would say if you can, you should really invest in platforms rather than marketplaces because this is where it's happening.
When we're talking about volumes or significant volumes of sales. 80 % of international brands use Tmall to initiate their market entry to China, especially e-commerce market entry. The GMV generated by Taobao live which is a live streaming platform inside Taobao has been incredible in 2020 with 350 million U.S. dollars. The double 11 has also been increasing and reaching incredible numbers every year; the last one was close to 75 billion U.S. dollars. It’s also a very active platform with a lot of festivals so it's not just the double 11. There are actually nine major events per year. There is always something happening on Tmall as well as on JD which actually creates a lot of buzz and a lot of opportunities for brands to expose themselves.
Thank you, Sandrine, for introducing the public traffic, so now let's touch base on the private traffic. This is a new trend, so this is something that you really kick started. I remember all the marketers started to talk about it in 2018, the only former goal of WeChat was just to generate visibility and interaction. But starting from 2018, WeChat started to become a revenue generator as well and an area for data collection. So why is private traffic important today? It is important for brands who want to have a total ownership of their traffic, experiences, and data for brands to be able to establish deep connections with their customers and drive more sales, leveraging CRM, social CRM, marketing automation, and a deep loyalty to provide a very personalized experience to each of the customers.
On WeChat, there are a lot of opportunities we saw earlier that Tmall has a lot of users obviously WeChat has a little bit more. And not everybody on WeChat is to shop, but we can see that if we provide them with the right experience, then we might convert them into shoppers. So we have 1.2 billion users as of quarter 3, 2020; 20 million registered official accounts and about 800 million monthly active users using WeChat mini program which were just launched three years ago. We have a lot of different businesses that are leveraging WeChat pay. So an interesting figure to have a look at is that 50% of the users opening WeChat every 90 minutes, and they're spending a lot of time on WeChat not only for shopping but for chatting. What we want you to focus on today is since the birth of the mini program, the amount of millions of RMB that were actually spent on the WeChat mini program first year was 600 billion RMB, the second year was 1.2 trillion, and the last year was 1.6 trillion RMB which represents quite a substantial amount.
So why should brand invest in social commerce? So for today, 95% of the brands that are doing E-Commerce in china have a media program, not necessarily an e-commerce one, but they have set a mini program it can be for content, loyalty, or a drive to store. There are different opportunities we have seen, there is about 250 billion dollars last year compared to 120 billion in 2019 which were actually spent on WeChat mini programs. We see that this is a place where it is successful in terms of driving revenues for brand. We're not here to talk about money that is transferred from one wallet to another but branding brands that are selling here. And for 1/3 of the users, the average spent per user per month was between 75-150 dollar according to McKinsey. 25% of users surveyed think that social media is definitely the right place for them to buy. Two other figures we want to have a look at is that as of august 2020, there were already 3.2 million mini programs, which is huge.
Plus, overall 25% increase in the number of mini programs that each user is going to use. Basically what brands are realizing in the market is that there is a need for deeper connection and a stronger loyalty. This is a survey conducted by Jing and the Digital Luxury Group which measures the cost of open rate between 2018 and 2019. What we see is that things are going down all the time, it's because users are getting bombed with notification all the time from group chat and they just see this, they click on it, and then they don't even open it. So what it means is that there is an overall decrease in engagement. When we saw earlier there's competition on Tmall, but there's also competition on WeChat. It's not like a blue ocean where you're going to enter and things are going to be easy. In order to compete against other brands and noise, you need to work on better engagements and have deeper personalization and loyalty to ensure the rest as well.
In order to move forward, brands need to clearly have an identification of who their persona will be and what kind of interaction they want. They need to define and map out their user journey. This is an approach where we need to dig very deep and leverage what we call omni-channel.
We're going to see a little bit later of what exactly we're going to call omnichannel and how we can approach it. But brands need to think about how they can maximize each of their current assets before making additional investments. They need to ensure that they're going to maximize this 48-hour window where they have the chance to exchange interaction with users when they are coming to brands’ official accounts. Then they need to work on implementing chatbot services, automated data collection, personalized menu, a clear tagging. and segmentation strategy for both B2B and B2C lead scoring.
While talking about WeChat and private commerce, we cannot forget about what we call WeCom which used to be WeChat Work. There have been a lot of changes in terms of name. WeCom is the sister app of WeChat. It provides the opportunity to connect like slack and interact directly with the users in WeChat. It's an enterprise level solution.
There are already 5.5 million enterprises on it and there's 130 million active users and WeCom has been competing against Alibaba's solution, but one of the reasons why a lot of companies turned towards WeCom is that WeCom can easily connect your entire sales team to WeChat. A user in WeCom can interact with a user in WeChat seamlessly. When we're talking about the word of luxury and retail which involves social selling. There's a client telling when we sell goods at an expensive price or in cosmetic and other areas where the goods are going to be a little bit cheaper. We've seen a major boom for brands using WeCom as a way to market their product and ensuring that the entire team is going to be aiming towards generating revenues for the brand.
Last but not least, WeChat search has evolved tremendously. Here we see for example, on the right side we see blue, and the WeChat search monthly active users has reached more than 500 million users so they're not only looking for brands. Brands now can display their content on WeChat official accounts easily. Their mini program as we can see on the right, there are visible e-commerce links to other e-commerce platforms, and music. It makes WeChat similar to Alibaba.
Those are becoming operating systems that are so complete that instead of going to Baidu, users might look for WeChat.
I think what is important for you to understand is that Aurelien and myself are not competing. What we are really advocating is a hybrid strategy that uses all the platforms and particularly combines private and public traffic to get the most out of both models. When we approach a strategy in China, there is everything that is related to private traffic, all the market shares and how we're going to drive KOL, TV commercials, and media towards that marketplace to lead to a purchase. But what we see as well is that there's obviously the physical source. Earlier our definition for today is how we can complement both public and private traffic, but we should not forget physical source retail is something that is crucial here, that's what it's part of the equation.
The last but not the least is what different strategies brands will have. They will have the tendency to bring the different users where they have the chance to actually maximize their ROI, loyalty, and data. For some brands, they're going to have a better return on investment being on Tmall versus being on WeChat or on their own website. And some of them step by step, they will want to have a healthy percentage instead of having an 80/20. They might look forward to having a 60/30 or something even more different. We're talking about big brands that have been investing heavily, like Nike for example, on their CN for a longer amount of time but what you're saying is the exception that is confirming the rule. We need to take into the equation for all those parameters like physical stores, marketplaces and the private channels.
In order to ensure that we can create that loyalty, and we can have a data flow. What is important to understand is that, somehow the brands need to be everywhere. The consumer is not different from one platform to another. Overall all consumers go on all platforms: they go on WeChat, Tmall, and stores. As a result, it's really important to understand the consumer journey in order to make sure we cover all the bits and pieces so when consumers start to think about buying something, especially something expensive, they think about it, they get some information on trends, they remember some experience of their friends, they also do some research, they actually do research both on WeChat and WeiBo butalso ofcourseonwebsites.TheydoresearchonbigplatformslikeTmallorJD because it's full of information. Then finally, they start to go to platforms to make comparisons on price and sometimes also on services. They buy and then we enter into the loyalty loop.
Another way to look at it is the fact that the consumer journey is truly multi-dimensional. There are many opportunities for brands to interact with their consumers as much as possible. It's important for brands to make sure they are a little bit everywhere. In these different touch points that lead to consumers understanding of the brand history, the products, and others. All the touch points are more about advocacy where friends will actually talk about the brand. There are everything which is lifestyle-related so we will see later that some brands offer a very exceptional offline experience including exhibitions, and concerts sometimes. Then finally, purchase and repeat purchase. All these touch points are important and we can't neglect any of them.
Here I would like to rapidly look at two brands and see how they work on all this and both brands are doing very well in the digital landscape in China. One is Burberry, so Burberry has been a pioneer in digital transformation. Today in China, they are close to 10% of their retail sales online and team which accounts for 85% of these sales which is quite significant. What they managed to do on Tmall is actually quite impressive. With 50 million U.S. dollar GMV in 2020.
In spite of this, they are actually on a lot of platforms and they explore a lot of the touch points we talked about. Even though they do 85% of their online sales on one platform, they are actually on WeiBo. They are on the Red, and WeChat. They also have physical stores and we're going to see that one of their stores is very special. They're websites, they use not only the traditional e-commerce platforms like Tmall: Luxury Pavilion and JD, but they also use some vertical platforms like Farfetch and net-a-porter. They make sure that they are visible in a lot of places where consumers go, so they leverage their WeChat mini program even though as we saw it's not where they do their biggest volumes of sales.
Not only do they leverage their WeChat mini program, but they have been extremely innovative in mixing on and offline via Tencent and WeChat. They have actually partnered with Tencent to open what they called a social center in ShenZhen where people get in and it's completely seamless with their WeChat experience. They use their social currency to unlock some opportunities in the store and to gain some social currency in the store. This is quite unique, it's very new and innovative but it really shows you that we can go very far in terms of hybrid channels. They also do AR interacting mini programs, what is interesting is that they also do this on Tmall and not just on WeChat. They also have a purely shopping-like e-commerce mini program on WeChat, and this doesn't prevent them from conducting similar activities on the team. So, you see they really go everywhere, and they explore all the touch points with consumers being able to take pictures on WeChat. They can do the same on Tmall to choose templates with their brand ambassadors. They leverage their celebrities, KOLs, and they create offline events which in turn get back online through live streaming.
Let's look at another brand which is Maje. Maje is also interesting because it's even more pronounced than Burberry. The fact that actually their online sales on tmall is 98% of their online sales, a very substantial proportion of their total sales online which is now for them reaching somewhere between 35% to 40% with significant GMV.
As you can see, approximately 40 million U.S. dollars. Nevertheless, they explore all these touch points because it's fundamental for their consumers' experience. Although they do so much of their sales on Tmall, they are on all major social platforms more or less the same. We have discussed previously that they have their own website and stores. Obviously, they also explored other e-commerce platforms such as JD and they are on verticals like net-a-porter. Again, a very hybrid strategy which is not only driven by where the brand does itself, but also a lot about sharing and particularly when we talk about their brand websites. Instead of using it primarily as an opportunity to buy, they actually use it to expose their brands and to encourage their consumers to share as much as possible, so they have multiple entries to their websites. Then include a WeChat account to give an entry to their website, which is something very important that you cannot do with Tmall. They encourage people to share their website on both WeChat and WeiBo. They also encourage people to click a little icon on their website and go to their mini program. So, you see, that here you have created on WeChat a much more intimate relationship with their consumers, newsletters, services like clothing alteration, memberships, vip programs and so on and so forth. They don't do the same way on Tmall because Tmall does not exactly offer the same possibilities, but this is where the hybrid strategy makes a lot of sense. They have a lot of volumes on Tmall and they have this more intimate relationship with consumers on WeChat particularly, and this more intimate relationship in turn actually nourishes the traffic on Tmall.
The last piece but it's an extremely important one, it's related to what they do offline. So both for events and for stores, they connect very deeply what they do on and offline. When we say hybrid, it's private, public and offline. These are the three key elements and the three key parts of the total journey that brands are working on. Let's take one example they did, an event which started online. It's actually Fulljet that did this campaign. We asked WeiBo users to post photos of them with their dogs and then the winner was invited to an offline VIP event which in turn was actually something you could see online with KOLs through videos.
We need to understand how to articulate and how to build all those infrastructure so we understand the complex Chinese ecosystem. Because most of the brands have been working with Tmall partners and basically they have an ecosystem that is in place with a logistic, and order management system that is going to connect. So this is at the right part where you see the logo of Tmall, JD, and everything related to the public traffic. So you already have those back-end systems that sometimes will belong to the team or partner, sometimes it will belong to the brands.
In order to grow, what is very advised is to not reinvent the wheel brands need. Use the existing system and connect through apps to those existing systems, element, and area which is going to be a masterpiece. A master coordinator of all that is omni-analytic is often going to be that order management system. We don't see it here but it's going to be linked to the retail, public traffic and private traffic. It's going to play a key element as well when it comes to loyalty and we see that in terms of front and different front end that you can have for your private traffic, you can have the website, the mini program, apps and store experiences. So there's a lot of opportunities but what we have seen in the last one year or two is the emergence of customer data platforms. Those customer data platforms are what they are making is that they are kind of coming at the middle of all of this and able to gather information that are going to come from public traffic systems, the Alibaba CRM, and different details but as well as the WeChat ecosystem. So, what you see is that brands are starting to have a unique view on users, and what is going to be their behavior on both WeChat and the marketplaces. So we're starting to be in an environment that is omnichannel and where public versus private is becoming blurrier. So brands need to adapt to this and understand what KPIs are going to be important for them and how they're going to qualify their different revenues. So the key takeaways of today is that there is no one side or one size fits all magic formula.
Question: Should I start on Tmall or should I start on WeChat? What is the revenue that is going to be necessary?
We don't see the order management system here, but it's going to be linked to the retail, the public traffic, the private traffic, and it's going to play a key element as well when it comes to loyalty. In terms of different front ends, we see that you can have your private traffic, the website, the mini-program, H5 apps, and store experiences.
There are many opportunities, but what we saw in the last one or two years is the emergence of customer data platforms. Those customer data platforms are like coming in the middle of all of this and able to gather the information that is going to come from the public traffic system, Alibaba, CRM and like different details as well as the WeChat ecosystem. You see that brands are starting to have a unique view on each of the users. What is going to be their behavior on both WeChat as well as the marketplaces. So we're starting to be in an omnichannel environment and where public versus private where everything is becoming blurrier and blurrier.
Brands need to adapt to this and basically need to understand what KPIs are going to be important for them and how they will qualify their different revenues. So the key takeaways of today, and we're going to leave the room for a couple of Q&A afterwards because there is no one size fits all magic formula.
Question: Should I start on Tmall or should I start on WeChat? What is the revenue that is going to be necessary?
We just had a couple of questions before so we're going to explore this, and there's never like a question, an answer that's gonna be start this way or start that way. Also, it's impossible to be without a consultant because many parameters lead to making the right decision that needs to be considered. The second part is that each of the brands needs to understand what assets they have enhanced and how they can maximize each of those assets. Some of those assets can act and often be the global infrastructures that can be localized in China, which could help them save potentially much money. The third part is that they're starting to have very blurry lines between the privates and the public traffic. Brands need to start to have an omnichannel approach and take into account to use physical retail private traffic and general traffic together.
Sandrine, do you want to add something to this?
No, I think these are very important points, and again, it reflects the fact that we need to capture the consumer across all the touchpoints of its journey.
Very good. So we're going to start our Q&A session. I'm going to stop sharing and then put on the video again.
Question: What is your opinion on the development of the WeChat video account?
Well, it's a very broad question. I think obviously what we've seen is live streaming. We covered one of the brands of LVMH last week and live stream and videos within the mini-program now. You can have a very seamless experience within a mini-program, having e-commerce, having a stall locator, having everything related to those live videos, so it's becoming more and more seamless. I think this is something that is going to move forward. Working on unlimited editions and working on the fear of missing out is one of the only ways ads and brands will be able to create habits. To create some limited editions within the user if they're missing out. To make sure that users are going to purchase one time, they're going to understand and retarget them as they move forward.
Question: WeChat is also a platform, what is the data sharing model between Tencent and the owner of the mini program?
It's obviously WeChat, it's almost like your own website. Just to make it very simple with a mini program, you have control over your data almost as if it was your own website which is quite different from the virtual malls.
So, complimenting what Sandrine was saying, Roman I think this is a great question. Mini programs are really like in the realm of private traffic. Now the most important thing is what kind of system you're going to leverage. Are you going to use your own system, which is going to be open source where you're going to have 100% of analytics and the data? Or you're going to access a software as a service system such as Youzan or Weidian in which you might have a premium version where you're going to extract some of the data but depending on what kind of investments you're going to set forward.
Question: What should be the threshold for the brand to say I'm big enough, so I need to come to China or I’m already in China and what is the expected revenue for a brand for Tmall?
Most probably you're going to need a TP. You need to pay fees to the platform and as we discussed earlier the customer acquisition on Tmall is actually extremely expensive. It has been increasing quite significantly every year. Because of all this, you go on Tmall if you have at least sales expectations that reach a certain level. It doesn't mean that you're going to have these sales on day one, but you have reasonable, and data driven reasons to expect a certain number of sales. I would say that if you cannot expect within the next 12 months to hit at least somewhere around 10 million GMV, maybe your brand is not mature enough for Tmall, and maybe you need to work on your brand. So, I think that before making this decision, the first thing you need to see is where you stand. You also need to conduct an audit to assess better if you have a chance to hit this mark or not. This audit is going to be social listening: what's going on, who is, how many notes do you have on the reds, who is talking about you on the different social media on Taobao and Tmall, how many people are trying to sell your brand's, your brand in parallel and so on and so forth. So, when you get a full picture of this you have a better idea of your chance to hit this mark, what's the level of awareness you have; how much is going to cost you to increase the awareness. And then you can go for it.
Question: Is it better for European luxury startup brands to start with WeChat because it's more cost effective compared to Tmall?
I think it's actually a recommendation. I often have small startup niche brands which have little or very little awareness in China. It is probably wiser to start building your awareness using the possibilities of WeChat. It's more cost effective: you can use WeChat to build a community around your brand, to do product seating to attract some posts on your brand, and then when you get the awareness needed to go to the next stage, you can start considering Tmall for bigger volumes. It is not necessarily always working this way, but I would say in multiple cases it's actually a sort of progressive approach that works well.
Question: How will logistics on Tmall store management with third party agencies work with mini programs if they launch on WeChat?
This is a great question, and this is a question we are always having. Coming back to one of the previous slides when we see the existing different systems. One of the recommendations we made is actually not to reinvent the wheel you have, like an order management system and a warehouse management system that is going to be managed by your team or partner so that team or partner could be the one managing your mini program. Afterwards, in your future, it can be built by another company. This company can connect through API to your order management system which is going to be actually your source of truth and it's going to really ensure your stock management, ERP, and finance systems basically everything is going to be correlated into one single area. It's the same when you're talking about the physical space where you're going to need to connect that order management system to work together and leverage. Most of the time it can be WeChat in order to create sorts of loyalty cards and connect all the systems together. So answering that question, you need to be very smart and you need to ensure that you're not going to have a monster with 300 heads and having a proper definition of what system and how the data is going to circulate between all the systems. This is key to the foundation and success of everything. A good GP would actually propose to you a solution that enables you to integrate your order management system which is fundamental because for the hybrid strategy to work, you also need to think of integrated inventory.
Question: What is the view on public versus private traffic for brand new or niche brand? Do they still need a hybrid approach?
Once again, I think measuring the assets this brand has and based on those assets to have an initial business plan. So, coming back to the answer given by Sandrine, thinking about 10 million thresholds for the next 12 months in terms of revenue, does it make sense and then depending on the brand if there's already been physical stores or if there are six sister brands or specific KOL partnerships that can be leveraged. Everything needs to be taken into consideration, establishing a business plan that is going to bring a return on investment for that particular part.
Question: As other app platforms, like Red book, offer more entertainment and effective ways to promote brands products. And are we still reaching out to the right platform for marketing and selling in 2021?
Maybe you're a little bit more expert than I can be on this. First thing, it's a moving landscape so things are not set in marble. In any case I would say that even though for instance it’s increasing and now it’s being quite aggressive in developing not only their own ECommerce functionalities but even their own money. I mean mobile payment solutions, it's not as mature as WeChat to start with, so it's interesting but it's not necessarily a replacement. That's to keep in mind. Also I would say that WeChat is a natural destination for premium and luxury brands. We have seen brands like yours for instance, opening an official account and again it's all about having as much as possible. Being where consumers are and consumers who go on WeChat and vice versa. So I don't think it should be an either or except if it's really a question of ROI or when am I ready for Tmall. So it really should be about multiplying the touch points being as exposed as possible in different platforms. The only question really is for Tmall, are you ready or not?
Question: Which is the most appropriate in and out of platform investment for a brand in any sector that needs to expand the market more than increase either market shares in it?
It's really about the share of in-platform marketing investments versus out of platform marketing investments so in this case, platform would be Tmall and JD which would be considered as out of platform investment. So, I think there is not a single answer to this. It really depends on your level of awareness. If your level of awareness is very high, you tend to go more on the platform; you also tend to reduce your overall investment which is natural. And then it's no longer about awareness building, what you do outside of the platform is more about image and intimacy with your consumers than really awareness building. If it's really focused on awareness building, when you start from a relatively low awareness level, you need to go out of platform quite significantly before using too much of your budget in platform. That's the way I would put it.
Question: Since the media became a shop now, what is the role of the physical retail brick-and-mortar stores claiming suffering?
First of all, they're not suffering because of e-commerce or mobile in China but they are actually suffering from not adopting to changes. What is the chance to live in mindsets? Only transaction focus for physical retail physical retail needs to be experiential and interactional to create loyalty on brand. So is it the right way to use your physical assets for engagement and delivering experience? I think it provides the reply you're already answering the question. We saw earlier that e-commerce was 25% but they are still 75%. So obviously it's not one of the trends going down, that is actually that much suffering people will still shop in retail stores. People will still need that experience. Obviously, one is going up and one is going down a little bit, but I think they still need to have that consideration. As you said, there are still a lot of companies that separate their offline retail completely from their online retail which obviously is not what the future is all about. It's really about making it more experiential offline, but also as seamless as possible. I think that complaining that people go on store to finally buy online is a mistake. It's not something we should complain about, it's something we should work with and the store plays a very important role in this journey. Because a consumer would go in the store and finally buy online or vice versa. Vice versa is very important in luxury, a lot of the luxury purchases start online and finish actually offline. So the difficulty takes to revisit the way you work with your partners is when you have franchisees or distribution partners. You need to bring your distribution partners in the game and to figure out a way of sharing some of the online margin. Otherwise, you're blocked and you can't evolve towards more verticality and more seamless experience between on and offline. I would say that the future is there and again there are two obstacles that we see: number one is franchises distributors but there are ways around this there are tools offered by the platform to resolve this issue, it's a question of willingness; the other obstacle is actually often quite internal, companies need to rethink their capabilities, organization, and KPIs. Very often we see competition between the CDO, the CTO, and the person in charge of retail. Rethinking the entire user journey and how each of the funnels that we saw earlier is going to actually feed off each other and having an overall global strategy for this.
Question: Do successful brands who are both Tmall and JD work both platforms the same way in terms of content engagement, target audience products range, etc.?
Most of the time I would advise they shouldn't. So, number one, we need to keep in mind that although JD is a very interesting platform, it doesn't offer as many tools as Tmall. But that's not really the point, the point is to say that you actually use different platforms with slightly different assortments, targeting slightly different consumers, and slightly different calendars. So typically, as an example, JD tends to be a little bit more masculine and tends to be a little bit higher end, except for Tmall luxury pavilion, than Tmall generally. Based on this, you have part of your assortment which is the same, but you have part of your assortment and particularly the way you push your hero products is going to be a little bit different from platform to platform. But that's not only for Tmall and JD I think, with as we said a hybrid strategy, you really need to think of what assortment you're going to present, what price strategy, and what engagements you're going to have on each of the different platforms including WeChat. So on WeChat, your own website, Tmall, JD you're going to have different assortments and different strategies. It's not 100% different but it's partially different.
I think we're a little bit past our time. We have a couple of questions, we're going to get back to you privately, you have our contacts. You're going to have both our contacts so do not hesitate to reach out to us separately. It was an absolute pleasure to have so many people joining us for a very passionate discussion, and it's the first time we do it together with Sandrine.
It was an absolute pleasure as well.
So you're going to be able to review that video on our Youtube account and we're going to send you a zoom recording and everything. So do not hesitate to review it, contact us if you need anything, we're very happy to help out and we wish you all a very good day. Have a good day thank you very much.
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