The Tencent Opportunity

Stuart Elmes

China is a BIG market.

With a population quickly approaching 1.4 billion people, a rapidly expanding middle class, a consumer economy that is expected to grow by 55% (reaching a staggering 6.5 trillion US dollars) by 2020, and an online grocery market expected to be worth $70 billion more than the next 9 top online grocery markets worldwide combined; China is a country oozing online retail marketing potential for companies worldwide.

Exactly what form these marketing opportunities will take for Western businesses over the next few years is a matter of much speculation and debate, since China's biggest mobile player, Tencent (owner of the country's largest online messaging app: "WeChat" and largest online news portal: "QQ") has thus far held its virtual treasure trove of data from its estimated 1.6 billion global users pretty close to the chest.

However, as Tencent has recently begun to experiment with ways to further monetise its massive user base, it appears as though the mobile giant, and China as a whole, might be poised to open things up on an unprecedented scale and finally play ball with Western marketers in ways that should certainly have the western world's online retail giants quivering with excitement.

The Tencent Opportunity

China has, for the past decade, represented an intriguing enigma for western business people, simultaneously a market rife with opportunity and notoriously difficult for western companies to break into.

The country’s rapid growth has clearly caught the attention of US President Elect Donald Trump…

WeChat, with its global reach of 760 Million users, has already made some tentative forays into sophisticated world of digital marketing. Companies like Mercedes Benz, Montblanc, Yves Saint Laurent, and Burberry have all made use of a WeChat feature which allows companies to develop “mini-apps” within the WeChat platform which create interactive campaigns targeted at the platform’s Chinese users.

Swiss watch brand Montblanc, for example, partnered with Chinese astrology expert Wang Xiaoya to develop its “Moon phase” campaign for WeChat, a campaign designed to exploit the Chinese public’s cultural fascination with the phases of the moon and their perceived impact on personality traits. Associating their brand with the lunar calendar’s well-documented importance in Chinese culture represents just one of the myriad ways that western companies can begin to make connections with China’s populace.

But it’s not only luxury goods that are moving in incredible numbers through China’s wide open online marketplace. China’s population has been quicker than that of most countries to embrace online FMCG (Fast Moving Consumer Goods) brands, and currently holds the globe’s top spot (by a wide margin) for online grocery sales, a market which has generated $41 billion USD in China in 2015. The second biggest market for online grocery shopping is currently the UK, which generated $14 billion USD over the same period.

Over the next five years the trend of rapid growth of online FMCG sales globally is expected to not only continue, but grow ever more rapidly. In China, meanwhile, this trend is expected to explode, growing to be a $180 billion USD industry by 2020.

In stark contrast to ad-oversaturated European and North American audiences which have been inundated with online banner advertising on a large scale for the better part of 2 decades, Chinese internet users have been exposed to such forms of marketing only since about 2006. As a result, The Chinese people, by and large, respond much more positively to advertising as a key aspect of their online experience and the ROI for online banner ads consistently outperforms that of most other countries worldwide.

Additionally, Chinese consumers, many of them members of the country’s emerging middle class, have forgone the Western tradition of purchasing one or more family cars which make traditional in-store grocery shopping such a simple process. For such people shopping for groceries online and having them delivered to the family home can mean a drastically simplified grocery shopping experience.

This information has not been lost on Tencent, which began placing native advertising on the WeChat platform last year and has begun delving into its massive collection of user data to identify and exploit additional monetisation opportunities both within and outside of its existing platforms. Additionally, Tencent has begun partnering with major western advertising agencies to help sift through the data and develop strategies to grow its presence in the region.

However, at this stage in the game Western marketing and advertising techniques remain largely unexploited on Chinese internet platforms like WeChat and QQ, leaving the door open for forward-thinking western advertisers to get in on the ground floor of what very well could be one of the most lucrative online marketing channels the world has ever seen.

Will Western marketing and advertising techniques prove to be sufficiently effective in a Chinese marketplace which has little in common with that of the West? That remains to be seen. What is clear is that the opportunities for both FMCG and luxury goods online retail sales in China are massive, and that western companies would do well to establish a foothold in this market before it too becomes oversaturated, and that such a process will almost surely involve some innovative thinking and approaches if it is to have any hope of connecting with Chinese consumers to a meaningful degree.

For those that are able to bridge the gigantic cultural chasm between China and the West, the opportunity to engage an emerging online market like China’s is surely too good to pass up.

It is, quite frankly, the type of opportunity which may never present be presented again, at least in our lifetime.