China 2016: INSIGHTS | GROWTH
CHANGE, OR BE CHANGED
THE GROWING CROSSOVER BETWEEN ONLINE AND TRADITIONAL INDUSTRIES
Chinese consumers are changing from seeking low price and convenience in favor of quality and premium o erings. Market driven companies in the digital world, such as “BAT”, are not only managing to grow despite the decline in the economic growth rate but are also catering to these changing consumers’ 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 include the merger of leading “share economy” brands Didi and Kuaidi; Alibaba’s acquisition of Youku Tudou and the
“Tencent and JD.com 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 service around consumers’ daily lives. They must also figure out the key di erentiators and crossovers between online and traditional industries, to build consumer trust and enhance their corporate reputation.