Understand China e-commerce from user demographic
According to eMarketer, China is the largest e-commerce market in the world, which is $1.94 trillion. Even though U.S. market is ranked number two, but it is less than one third of size of the China market. Ebay was in China about 15 years ago, Amazon also has an office in China. However, Ebay has already failed in China market, Amazon also does not have much shares of the market. The e-commerce space in China is dominated by domestic platforms, including Alibaba's Taobao and Tmall, JD.com, and newly emerged rising start, Pinduoduo, and a few other small local or vertical platforms. Among all the sales made on e-commerce in China, 80% purchase happened from mobile devices in 2019. In this article, I analyzed the Chinese e-commerce app design, starting from the analysis of Chinese demographic.
1. E-Commerce Personas based on Age
For historic reasons, same age group experienced the same historical events during Chinese history after World War II, hence resulted in similar life experiences and shaped similar behavior and way of thinking. So the first way to understand China e-commerce users is to look at their age. We normally segment them by generations, which are 50s, 60s, 70s, 80s, 90s and 00s. Which means people born at 1950s, 1960s, etc. or after year 2000.
People born on the 50s, right after the new government set up, now most of them have already retired. They experienced 3 years’ drought and famine when they were little; they experienced culture revolution when they were young; some of them have studied some Russian, but many of their education were interrupted; then they experienced a nationwide laid off when China did a reforming and broke the so called “iron rice bowl”. Some of them started their own business after that, many of them just never got recovered and end up living in the poverty and struggling for a living. Now most of them are living in the small city, with retirement allowance, separated from their kids, who are working in the big cities. They are afraid of change, all their life they want a stable, secured living, and they always try to save every penny. This generation were mostly brainwashed, they against the western philosophy, and support the communist party.
People born on the 60s, grow up during culture revolution, their education were interrupted because of that. Some of them participated the 1989 Tiananmen square event, they care about the country’s development, they are nationalists and care about politics. Some of them were able to go back to school and finished their college, now become the leaders in many areas. They experienced the social reform and national gate opening, they participated in the free market and economy growing. They may also separate from their kids since many of their kids are studying or living overseas. They are the revolutionary generation, instead of being so loyal to the government and the country, they care more about their own family.
People born on the 70s, were mostly able to go to school, they grow up with similar childhood, play similar games, watch similar TV programs. Their families start to have TV and some other electronics like radio, refrigerators, and so on. But their family still live on budget during their childhood. When they go to college, they start to experience internet and the technology wave. This generation started to experience free and competitive economy, and now many of them are in the administrative positions in different areas. This is a transitional generation; they have to be brave. They respect and love their parents. Even working in big cities, part of their salaries will always goes to support their parents.
People born on the 80s has more consumer electronics, they have a relatively richer childhood. Overall this generation has better education and most of them have college degrees. They experienced the impact of internet, many of them are now in this industry and work with coding and engineering. Now this generation are starting to build family, with heavy living expenses. E.g. high housing expenses, high education cost for kids. This generation is responsible for their small family unit but love themselves as well.
For people born on the 90s, the Chinese economy have developed, so they mostly had a worry-free childhood. During their school years, they have very heavy homework. With more competitive market, they have to work very hard to get into good schools. This generation were immersed with digital world, they are so familiar with all kinds of digital products, and willing to spend. They love famous international brands, love to chase for fashion trends. They travel much more often, the opening of China and the development of economy also make them easier to travel around the world. So they have a global vision and willing to try startup, some of them are digital currency and block chain believers, and even had made a fortune out from that. However, this generation may not be a good employee, and they do not want to work at extended hours. Because of the one-child policy in China, they were the center of their family during childhood, and had gain a lot of attention. Hence, it is believed that this generation may be more selfish and pursuing their own life goal.
People born after the year 2000 mostly enjoyed a more material childhood, they were able to get many toys and gifts they wanted. They were able to travel to even more countries and attended many kinds of camps. They have to attend many interest training courses during childhood, and their time are all packed up. They like to compete with peers for luxury life styles, they like to show off, like to TikTok, and spend a lot of time on mobile phone. They enjoy shopping, ordering, and entertaining on mobile phones. They do not want to work since many of them have a rich parents and they were spoiled. Many of them also lost their own life goals, vanity drives them. They like to do make ups, many of them event do plastic surgery to change their appearances. They have their own stars and their own tastes that other generations can hardly understand.
2. E-Commerce Personas based on Geographic
China is a large country with widely varying landscapes. It is about the same size as the United States. China was a developing country, but recent years it has grown very quick, thanks to the market-oriented reforms, which released China's strong productivity. With 30 years of explosive growth, now it becomes the world's largest economy. However, since China's territory is very vast, the economy situation is different in different areas. Before TV becomes popular since the 80s, different city may even speak a different dialogue or even different languages. Not like in the United States, where many people may live in similar life styles. In China, life style can be quite different from big cities to small cities to villages.
I segmented Chinese market by different tier of city or village, because that also means people live there may have different general income level and education level. Even though there are already internet and other media channels, the perspective toward the world are still quite different among different group of people in different areas. The understanding of fashion and elegant are also different.
People live at the 1st tier city, e.g. Beijing, Shanghai, or Shenzhen, they have much higher income, higher educational level, many of them work in the tech or financial industry. They have a global vision. They care a lot about their children’ education, and invest a lot money in it. The housing is very expensive there. They spend time travel around every year during holidays or vacation. Because of busy life style, they also do a lot of shopping via their mobile phones, and care about the brand and quality of the product. What they are wearing normally reflecting their social class as well, elegant but not too much.
Although people have shared same basic human nature, vanity may affect 2ndand 3rd tier city people even more. 2nd tier and 3rdtier cities, the salaries there are relatively lower, but the living expenses there are also lower. They also have very strong purchasing power, maybe even stronger than people live in the 1st tier cities. Because even though their salary maybe only half or one third of the overall salaries in 1sttier cities, but the housing cost maybe only one tenth. Besides, there are some small business owners in 2nd tier cities and have made their fortune by doing international trade. To show off themselves, to put a tag on themselves for higher social classes, these group of people may even purchase much expensive luxury products.
People in 3rd tier cities, though they were also driven by vanity, but they do not have that much buying power, so they may end up purchasing fake brands. Same for small town residents, they end up have their own fashion trend, and have their own taste and favorite local branded products.
People in relatively rich villages, their taste and purchasing behavior may close to small town. Because a nearby town means a weathercock for the fashion trend and will influence the local residents’ taste. For poor villages, price may still be the main consideration for them to make purchasing decision. An outdoor bazaar may be their favorite shopping place.
3. E-Commerce Personas based on Psychology Profiles
Because of their growing up background, their environment and experiences, different people may form different psychology profile. Some people are very rational, some people maybe are very emotional, some people may be in between.
Shopaholic group sure is the most emotional group of shoppers. A shopaholic is a person that has addicted to shopping. It is also called Compulsive Shopping or Compulsive buying disorder. These group of shoppers are out of control of their shopping behavior, they may spend more than they can afford; even though they may not really need those items; even if that shopping behavior may have caused argument or difficulties in their families.
Shoppingpal refer to those that need to do shopping to feel that they belonged. When they see their friends had one, then they must have one too. Even if that merchandise maybe he/she does not really need it or he/she actually hard to afford it. Sometimes a shoppingpal may buy certain items just because those items are symbols of a particular group or trend or an influencer, and those purchasing make them feel engaged into that group of fashion.
A shopatient normally use shopping as a reaction to feeling angry or depressed, so they need that behavior to cure themselves. The feeling after making the payment, holding the shopping bag, make them excited that they own something new and fresh, so the bad feeling goes away.
A shopylist is relatively more rational. They have their own taste, they are into one or several certain style, and they know how to pick and fit into that style. They are different from a shoppingpal, because they only buy what fit into their style taste; instead of buying to enter a certain group of people. They have their own judgment, and they know how to purchase the “right” items.
A shopgifter are those who normally buy for others, e.g. buy for their loved ones, their family, or their parents. These group are mostly well budgeted, since they have so many people to take care of, and so many burden on their shoulder. Many house wives may fall into this category. Because limited budget and so many people they care about, they may even sacrifice their own purchasing needs.
A shopcholar, as the name implies, they are the scholar of shopping, they are so good at calculating. A calculator, physical one or virtual one in their head, is their must-have weapon. They know where they can find the cheapest beef, where they can find the cheapest gas. They may spend hours just to compare the prices. They may wait for days for a deal of a merchandise. They carefully cut the coupons and put into their wallet and use them wisely.
Of course, each group can be male or female, and can be at different age or geographic zone. From emotional to rational, the sequences are: shopaholic, shoppingpal, shopatient, shopylist, shopgifter and shopcholar. An individual might jump from one to another group based on his / her psychological status; but psychological status does NOT normally change unless some other trigger events happened, e.g. break up with lover, win a lottery, etc.
4. The positioning of China e-commerce
China has many e-commerce sites, among them, Tmall, Taobao, JD, are some big players. Pinduoduo recently become one of the largest and went to Nasdaq within 3 years since it is established. Xiaohongshu is also a popular e-commerce community. Each one of them has its own specialties and positioning.
Taobao was founded by Alibaba Group in 2003. What makes Taobao special is that it has all kinds of products and services, whatever you can think of or whatever you have never think of, it can be found there. Taobao is a C2C platform and there are millions of small business owners there are providing merchandises and services there.
As what Jack Ma said "We are the ant army", Taobao is for these small hardworking ants to do business online. “The ants that be organized together can beat the elephant." Which is a strong force and generated great revenue. But the problem with Taobao is that, since these are so a large group of small and tiny business owners, it is difficult to manage the quality. It contributes to the diversity of Taobao but also brought many criticizes for there are many bad qualitied or fake products there as well. Of course the pricing and reviews balanced it in some way. Just as its name, Taobao is like a crowded marketplace at the edge of urban community, it is a place for normal citizens to search for a best deal among a junk of rinky-dink products.
When JD enter into the ecommerce battle in 2004, besides quick delivery, what they claimed is that, every merchandise was selected by them and they guarantee the quality. If customer purchase one counterfeit goods from JD, they will pay back 10 times of the fees.
So the good thing about JD is that customer can trust the quality of the goods from JD, but the disadvantages compare to Taobao is that JD can not have that many options of merchandises and services. So JD is like a supermarket, it is not high end, it is affordable, it is organized and selected, and it is trustable.
In 2008, Alibaba group introduced a newly dedicated B2C platform called TMall. TMall was only for quality brand name goods. Not like Taobao, which was a free marketplace, TMall charges a relatively big amount of membership fees for sellers to have a storefront on TMall. And it has a strict verification process to make sure only quality brands can enter into TMall. TMall becomes a great complement to Alibaba’s ecosystem.
For people with higher income and higher requirements for the qualities and brands, TMall definitely is a better choice. So TMall is like a outlet for famous brands, each storefront is owned by accredit sellers and each merchandise is relatively more expensive but with good brand and good quality.
Pinduoduo is a dark horse. The company was founded in September 2015. By 2018, one quarter of Chinese population has become its users, and its GMV had exceeded 100 billion yuan. On July 26, 2018, Pinduoduo was listed on the NASDAQ stock market, and it was one of the largest IPOs of that year. Even though there are always some controversies around Pinduoduo, that there are many illegal and fake goods in Pinduoduo, but people can always buy the cheapest goods there, hence it quickly attracted a large number of active users, and it utilized social media and viral marketing very well.
So Pinduoduo is like a bazaar at rural area, customers there are mostly lower income people, they do not expect to find any luxury or good brand products there. What people most care about is price, price, and price. Even though some people criticized that Pinduoduo sell cheap and low quality product, but the customers there had never put a high expectation on the quality either. As long as the product is OK to use, with that price, people has no complain.
5. Main segments major e-commerce platforms are targeting
Now with my explanation of each ecommerce platform’s positioning, we should be much easier to understand which segment of customers that they were targeting at. If we look at the segment by generations, Pinduoduo actually are targeting at the older generations. Those 50s and some 60s, they experienced the hard time of China economy, now most of them have retired, they do not know many brands, they cannot tell the difference between “Nike” and “Neki”; price is what they only concerned. Even though the design and quality of the merchandise may not good, but compare to what they had used during their early year, they are already quite satisfied. Taobao is mainly for the 70s and some early 80s. This group of generation, they have a huge family to take care of, their parents and their children, they have to pay high housing cost and child care cost, Taobao is a place that is affordable and can fit for their diversified needs. JD is mainly for the 80s and some early 90s, they care about the quality and efficiency, they live a quality, elegant middle class life. TMall is more for the later 90s and 00s. For them, brands are important. They want to show off among peers, they do not want to be felled behind. More important is that, after all, they are not paying with their own money.
If we look at the segments by geography, TMall is mainly for 1sttier cities and some people in 2nd tier cities, where people has higher income, care about brands and the quality of life. JD is more for 2ndtier cities, a comfortable and convenient life is important for them. Taobao is more for the 3rd tier cities and covers some 2nd tier cities and small towns. It is affordable, and it has all kind of products for their needs. Pinduoduo is mainly for rich villages, small towns and rich villages. For people there, price is their main concern, and they want the best deals. Unfortunately, for many poor villages, they still even do not have an online purchase habit or the facilities.
If we look at the psychological profiles, TMall is more for shopaholic and some shoppingpal group; JD is good for shoppingpal and shopatient; Xiaohongshu has many fashion trend communities and discussions, has attracted many shopylist; Shopgifter will use Taobao more often; while Pinduoduo definitely is shopcholar’s favorite place.
It seems almost all segments of customers have been covered by different big e-commerce players, is there still a chance for small startups? My opinion is that: some vertical niches may still have a lot of opportunities. Jumei went to IPO for selling cosmetic products, especially make-up and skin-care brands, which can be an example. But Jumei's stock price dropped dramatically when they had been found out for selling counterfeit goods on their platform, which can also be an alarm bell for the future player to learn from, that reputation is so important. It is so difficult to build, while so easy to be destroyed. Once ruined, it will be so hard to rebuild again.