5 lessons from China’s digital innovation and transformation for global brands

Over the past few decades, China has undergone one of the fastest, most comprehensive cultural and economic shifts in history. As each society undergoes changes, because they go through them at different stages in their development, at different speeds with different resources and priorities, unique solutions and approaches emerge that others can learn from. Here are five key lessons global brands and businesses can take away from China’s transformation.

You might need to completely rework fundamentals – or abandon legacy systems altogether

The first widely recognized modern charge cards and credit cards were introduced around 1958 by Diners Club, American Express and Bank of America. They came into wider usage in the 1960s and 70s and were popular in many countries by the 80s and 90s.

China’s advantage in digital payments was that it had no entrenched legacy systems

In the mid-80s in China, however, interbank lending and credit cards didn’t exist. The first Chinese credit card was introduced in 1986 but credit cards never gained the popularity they had in the West. So when it came to developing digital payment systems later on, China’s advantage was that it had no entrenched legacy systems based on credit or debit cards. As a result, it was relatively easy for Alibaba to initiate its own online system in 2004 to facilitate virtual payments on its websites. Its system – Alipay – didn’t depend on the use of credit cards but linked directly to accounts at Chinese banks.

In the case of Ping An insurance, one of China’s first large insurance businesses, the company already had a legacy system in place, but its chairman Peter Ma took an early decision to transfer the bank’s proprietary IT systems to the cloud. This was in 2013, when cloud computing was still new. Jessica Tan was in charge of the transition. “This was unthinkable at the time. … but we moved 80% of our production systems to the cloud. It took time and it was a very painful process” she recalls.

However, this tough challenge had enormous pay offs in the long run. It allowed the company to implement advanced data analytics across its businesses through the cloud at a time when no one else was, making their system more robust and their data more available for other, more flexible uses, including the company’s next move into AI-based software services.

China’s biggest digital success stories are Swiss army knife apps like Meituan and WeChat

Its time to adopt a mobile-first mindset

Other legacy systems that China wasn’t dealing with when it began its digital transition were desktops, laptops and gaming consoles. In the 80s and 90s, most people in China didn’t have them at home while a minority had access to desktops or laptops at their workplaces. This made the smaller, more affordable mobile phone the device of choice. They’re widely used around the world, especially with the development of high capability smartphones, and China has a very high penetration rate for mobile phones and the mobile internet. Some of its biggest digital success stories are platforms that created Swiss army knife mobile apps and ecosystems, like WeChat and Meituan, where people could conveniently accomplish multiple tasks without leaving the platform and without racking up enormous bills for data usage.

Platforms in China optimized themselves for performance on phones in ways that wouldn’t excessively drain the battery or use up too much memory or mobile data. They also honed their services, offerings and algorithms to keep people on their app or scrolling for more. We can see the success of this approach with the ubiquity of China’s TikTok in the West, (its domestic counterpart is called Douyin) and its addictive hyper-personalization algorithms. Tencent’s gaming interests were also initially built around online and mobile games rather than consoles and proprietary gaming systems.

Smartphones of some kind are ever-present in many other countries as well, and yet, some brands and organizations still haven’t scaled up their mobile offerings to match the capabilities of the supercomputer that everyone is carrying in their pocket. Desktop websites and physical stores are still important but at our current state of digital development, a mobile-first mindset is a huge asset.

Purpose-built apps can unlock the potential of social commerce

Businesses globally are already aware that social media’s massive reach makes it an indispensable tool in marketing. In China, both social media platforms and e-commerce apps are increasingly being designed with social commerce in mind, making it an integrated part of the consumer journey that anyone anywhere can seamlessly access.

This puts brands in a bit of a bind in the West. They can’t simply go on Facebook, make a company page, upload their products to Facebook’s social commerce options and do livestreams with embedded purchase links because there are no pre-built, cohesive pathways for social commerce. Even if they could, there wouldn’t be many viewers because commerce has not been integrated into the social media ecosystem in the same way as in China.

In an omnichannel world, businesses also need offline locations that can draw customers online 

Brands that are ahead of the game, for example Warby Parker and Nike, have developed their own apps with specialized tools to facilitate mobile purchases, selling directly to consumers and are using these apps to build fan communities. This is the direction that brands in many places will need to go in order to take advantage of the power of social commerce.

It’s all about Online-Merge-Offline

In an omnichannel world, not only must businesses have an online presence that can draw customers to offline locations, but also offline locations that can draw customers online. These two entities must be aligned and intertwined in new ways in what a strategy now being called “online-merge-offline” (OMO).

Examples of what this might look like in reality for the customer include: getting access to online discounts or privileges as a reward for visiting physical stores; experiencing augmented or virtual reality simulations of products or services at physical stores; making online purchases from an apparel retailer and collecting the package at a convenience store near one’s home;  accessing help from online customer service representatives while at physical stores, providing an dual in-person and digital customer service experience.

Pop-up stores are another major feature of online-merge-offline. Pop-ups are suitable for almost any brand, especially direct to consumer (DTC) online-only brands. They provide a chance for both existing and new consumers to touch, feel, see, smell or taste your products in a fun, exciting environment. Brands use pop-up stores in China as compelling tools to boost brand awareness, offer samples, provide coupons, give free gifts, collect feedback and increase sales.

Harness digital capabilities to keep customers loyal

E-commerce platforms in China are known for their fast response times, follow up and fast deliveries. Customer service is often easy to get hold of through a company’s WeChat account or their account on another online platform.

Amazon is known for some of these things, but many other Western companies haven’t got this aspect mastered. It can be difficult or impossible to contact customer service and once you do, you might be kept on the line on hold for hours. Once you do get through, you may get erroneous or unhelpful information. Deliveries can be delayed for long periods without warnings or updates.

This is a recipe for losing repeat customers. Digital tools and social media access should facilitate rather than interfere with efficient, speedy customer service. It’s an area where many Western brands have decided to cut corners, betting that bigger profit margins will be worth the risk of losing customers. At least for the moment.

We’ll see where things go in the next phase of digital development we’re entering.