The Growing Crossover Between Online and Traditional Industries

Mark Du
Account Director
Millward Brown

Chinese consumers are changing from seeking low price and convenience in favor of quality and premium offerings. Market driven companies in the digital world like Baidu, Alibaba, and Tencent (BAT) are not only managing to grow, despite the decline in the economic growth rate, but are also catering to these changing consumer perceptions. They’re achieving this through a variety of methods, by investing or merging, and by conducting an "Enclosure Movement" within digital categories and even crossover industries.

Within digital categories, “huddling for comfort” is the new normal. Virtual economy big shots are continuously making investments, mergers or acquisitions in hot territories, from O2O and entertainment to e-commerce. They are also maintaining growth and strategic placement by leveraging each other’s advantages. Examples in 2015 included the merger of leading “share economy” brands Didi and Kuaidi; Alibaba’s acquisition of Youku Tudou and the “Tencent and Plan” to gain more mutual benefits following their strategic cooperation in 2014.

In the long term, virtual economy leaders must seek to extend their play into traditional sectors, particularly in service industries such as entertainment and sports. A good illustration of this is seen in Alibaba’s investment in the Guangzhou Evergrande Taobao Football Club in 2014, a move that sought to enhance consumer association and inspiration through the brilliant performance of this football club.

To succeed, brands must not only build meaningful relevance by meeting consumers’ changing needs but also stay salient by “circling” their services around consumers’ daily lives. Brands also need to figure out the key differentiators and crossovers between online and traditional industries, to build consumer trust and enhance their corporate reputation.