A convenient and hassle-free environment is a good start for an online brand experience

People do not enjoy shopping at Apple stores or at Kiehl’s counters simply because their outlets are ubiquitous. They enjoy shopping because of the memorable experiences. Apple’s retail space allows customers to trial products without sales pressure. Kiehl’s old-fashioned apothecary feeling and friendly staff, who approach customers only once, provides a wholesome experience that inspires trust. Both the Apple and Kiehl stores are linked to the brands’ points of differentiation. Most important, both Apple and Kiehl replicate this experience online.

This principle of consistent brand experience is true in China, too. Successful Chinese retail brands go beyond the physical store. They provide an experience that connects with their customers. Online is one method of tapping into experiential retailing, albeit virtually. The difference in China is scale. China overtook the US to become the world’s largest retail market in 2013, when Chinese spent just under $4 trillion at the cash register. This spending is poised to grow to $6.4 trillion by 2016.

In contrast, the US, Germany, and India combined would still be shy of China’s retail sales value. The sheer size and fragmentation of China’s competitive retail sector provide monumental challenges when developing a strategy and executing so that the brand experience is consistent in every physical store and online.

Physical and virtual presence needed

Experts generally advocate depth over breadth: achieve strong market share in a small number of markets rather than spread yourself too thin. Yet physical presence can still be important. Customers need to “see you,” and having physical stores is akin to advertising on television. Anyone serious about attracting Chinese customers needs to be seen to be credible. Physical stores can help achieve this credibility. But presence needs to be complemented with consistent in-store brand experience.

Online retailing is an exciting and important “take” on instore experience, especially among younger customers. It also overcomes the depth versus breadth trade-off. In a few years the online share of retail sales will hit 10 percent in China. Only five years ago it was virtually nothing. China is now the fastest growing e-commerce market; 42 percent of all netizens have become online shoppers.

Case study: electronic retail

Among electrical retailers, to take an example, data from WPP’s BrandZ™, the world’s largest brand equity and analytics database, show that purchasing from only one or two retailers appears to be a common but declining consumer practice. Consumers are also price driven, meaning they will shop around for the best deal. Brand equity is essentially a fickle commitment: “Of course I am loyal… until there is a better deal.”

As Chinese have become aware of more electrical retailers, equity has declined for many retail brands. No so for online retailers. Taobao, Tmall, and JD.com have grown in brand equity. These three brands now have the highest equity across all electrical retailers. Leading “bricks and mortar” electrical retail brands, Gome and Suning, come a close second, but have both experienced significant declines in the last year.

Yet a closer examination of BrandZ™ data for online retailers versus Gome and Suning reveals how they build equity similarly. Equity is the predisposition consumers have for your brand, in this case, to visit your store.

Key metrics: Meaningful, Difference, Salience

Three key metrics help us measure equity: Meaningful, Difference, and Salience. To be Meaningful is to have clarity of purpose that connects with customers. Difference is just that, having a point of differentiation. This may be small or big. Salience is a needs based awareness, or the brand that comes to mind when you have a need in that particular category.

All brands are strongest in being Meaningful, then Different, and finally Salient. But online electronic retailers are stronger in all aspects, and are definitely more Meaningful to Chinese. This is important, as being Meaningful has the highest relationship in driving equity, followed by Salience.

Most online shoppers in China are light spenders who spread their purchases across multiple channels. Online brands like Taobao, Tmall, and JD.com are among the first to offer huge variety that is truly convenient and hassle-free. Now Suning is pouring money into online retailing. Since Chinese consumers generally see online retailers as more "meaningful," this investment should help Suning be seen as more "meaningful." Suning seems to have narrowed some of the gap. Gome trails behind the pack.

Anyone who has shopped for electrical goods in China and has had to wait for service, or has been pressured to buy a particular brand, or has endured a host of other less than positive experiences, will understand the power of convenient and hassle-free shopping as a meaningful starting point for an online strategy and hence powerful in driving equity towards that retailer.

Insights for e-commerce brand building

  1. Great retail brands provide a meaningful experience for customers.
    The strongest retail brands provide something beyond the physical store or the product, something memorable that customers enjoy and which entices them to return.
  2. Online retailing is a powerful platform to activate experiences.
    The strongest retail brands have clever online retail strategies. These brands lead the market in delivering unique brand experience. They’re not copycats or me-too offerings.
  3. Convenience and hassle-free is a good starting point.
    Because shopping in China’s physical stores can be frustrating and tiresome, convenience and hassle-free is a good starting point for an online retail strategy.
  4. Great brands will go further.
    Hassle-free is just the starting point. It’s good, but it’s replicable. To stand out from the pack, successful online retailers will need to go beyond hassle-free.

BrandZ China Top 100 2014

BrandZ China 2014 Report Top 100 Report
English | Chinese

Top 100 Chart
English | Chinese

2014 BrandZ China Top 100 Infographic

BrandZ China 2014 Infographic

Methodology and valuation by Kantar Millward Brown

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