How to earn brand loyalty from China's millennials
Sep 14, 2022
Editorial Content Writer
8 minutes to read
As the cohort is now entirely of working age, the success of many businesses around the world is influenced by their ability to cater to the largest group of consumers – millennials. In the Chinese market, creating brand loyalty among millennials is arguably more important than anywhere else; it’s a real game-changer.
Why? The answer is simple: China has over 400 million millennials.
If you really need a yardstick to see how huge this group is, you can compare it with the number of millennials in the U.S. (73 million), Indonesia (70 million) or Brazil (75 million).
To win the loyalty of China’s millennials, businesses need to have a solid understanding of:
China’s e-commerce ecosystem — because millennials live on their mobile devices. They are constantly connecting and communicating.
Unique characteristics and behavior of Chinese millennials.
Special features of winning loyalty schemes in China.
In this article, we’ll see why a company’s understanding of these three elements is crucial to its success in gaining the loyalty of Chinese millennials.
What is China’s e-commerce ecosystem like?
China is by far the biggest ecommerce market in the world. According to Statista,
E-commerce revenue is estimated to surpass US$1.4 trillion in 2022,
E-commerce market volume is expected to be US$1.6 trillion by 2025.
The number of users is expected to amount to 1.2 billion users by 2025.
User penetration will be 71.9% in 2022 and is expected to hit 83.9% by 2025.
Operating in this massive market is tempting for many global businesses, but definitely not easy. Big brands like Amazon, eBay and Groupon entered the Chinese market, hoping to capitalize on the Chinese market’s huge potential. However, that didn’t happen because — among other things — they didn’t know the market and the preferences of its major segment — millennials.
To succeed in China’s e-commerce ecosystem, you need to know the major operating platforms that allow non-Chinese brands to sell their products online. Although brands are allowed to have their own digital stores, most Chinese shoppers make their purchases on e-commerce platforms. As a result, it’s almost impossible to reach a significant customer base without partnering with one or more of the online marketplace platforms in China.
Here’s a list of the top three cross-border ecommerce platforms in China:
Tmall is the largest cross-border B2C online marketplace. Launched in 2014, Tmall Global is Alibaba Group’s channel for cross-border e-commerce. The platform allows retailers without operations in China to create their virtual storefronts and ship products into China from their home countries. Around 30,000 brands from 87 countries offer their products to the Chinese shoppers on Tmall Global. Most Tmall Global users are in their thirties and live in urban regions of China.
JD Worldwide is the second largest ecommerce platform in China. It is JD.com’s cross-border ecommerce platform which allows Chinese consumers to buy products from global brands. International businesses can use the online platform to sell their products without having to have a physical store in China. Due to their partnership with global shipping and logistics companies, they offer shipping and warehousing services to ensure products get delivered safely and on time.
Kaola is the next giant Chinese ecommerce platform. Launched in 2015 by NetEast (a leading internet company in China), Kaola offer premium products at a competitive price. The purchasing power of their customers usually surpass that of other platforms.
What are the biggest challenges of China’s e-commerce ecosystem?
Tmall, JD, Kaola, Xiaohongshu and other online platforms in China connect foregin brands to a super large group of local consumers. However, working in China’s e-commerce environment is certainly not without challenges. The two main challenges businesses face in China’s ecommerce ecosystem are related to competition and regulations.
When you enter a market with over one billion users, you wouldn’t expect to have only a few competitors. Not only do you need to compete with other international brands, but also you should have a meticulous strategy to deal with Chinese businesses that
Know the market and the culture of its consumers better than you.
Are able to offer their products at more competitive prices.
Are super quick in updating their offerings.
According to Christian Nothhaft, the competition [on China’s online platforms] is so intense that it has created new shopping seasons. China’s Singles Day (promoted as anti-Valentine’s Day) in 2016 raked in US$18.7 billion dollars of sales in total, with the first US$1 billion being sold within the first 5 minutes of trade.
A key measure by brands to maximize engagement with Chinese online shoppers in recent years has been offering attractive discounts and incentives.
What is important in setting up the promotion strategy for Chinese e-commerce platforms is that each of them has their own unique characteristics which impacts what promotional solutions work best for them. For example, Kaola is known for the strong sense of community among users. In such platforms, referrals are super effective because customers have a high degree of trust in what other customers recommend.
The regulations about e-commerce activities in China are areas of increasing complexity for international companies which decide to operate in the Chinese market. In March 2021, China’s State Administration for Market Regulation announced further measures to supervise online transactions on e-commerce platforms. The main focus of these measures is the clarity of information and data privacy in the e-commerce environment.
If you want to market to China’s millennials, you need to familiarize yourself with regulations related to your business activities on social media in China, especially rules regarding advertising on WeChat.
First released in 2011, WeChat is a mobile messaging app developed by the Chinese company Tencent. According to Statista, in the first quarter of 2022, WeChat had almost 1.29 billion monthly active users.
A frequently asked question by non-Chinese businesses is “Can I advertise on WeChat in the UK/US/Europe?”
The answer is yes for most industries. However, the following overseas industries are banned from advertising on WeChat:
What are Chinese millennials like?
Once you have a solid understanding of the e-commerce ecosystem in China, you need to figure out the unique characteristics of Chinese millennials in order to market to them.
Like anywhere else in the world, millennials are the individuals born between 1981 to 1996. Also known as Gen Y, they’re the demographic cohort that follow Gen X and precede Gen Z. Millennials are often the parents of Gen Alpha.
Chinese millennials were the first generation in the country to feel the impact of China’s booming economy. As a result, their concerns and interests are totally different from those of their parents.
It’s not possible to find traits that 400 million people have in common. However, some general observations help businesses engage Chinese millennials with captivating loyalty schemes.
They’re tech savvy
The first thing you need to know about Chinese millennials is that they’re digital natives. More than 90% of Chinese millennials own a smartphone. An average millennial in China spends 5.4 hours per day on their mobile device, more than an average U.S. millennial who spends 4.7 hours a day on their mobile.
They rarely use cash
Chinese millennials do most of their transactions through mobile payment solutions. That’s why the fintech industry in China has grown rapidly in recent years. If you want to work in China, creating a partnership with a domestic fintech firm is a good strategy to gain the trust of millennials.
Partnerships with Chinese super apps can especially benefit international businesses. A Super app is defined as “a closed ecosystem of many apps that people would use every day because they offer such a seamless, integrated, contextualized and efficient experience.” China’s WeChat and Alipay (owned by Alibaba) are extremely popular among Chinese consumers.
They love luxury products
Chinese millennials and Gen Z love to purchase luxury goods. It’s estimated that millennials in China will represent a whopping 40% of the personal luxury goods market by 2025.
Unlike their counterparts in other countries, they have virtually no student-loan debt. As a result, they have more money to spend on luxury goods. If you sell luxury products, you should boost your offerings with timely promotions to establish a good rapport with millennials.
They’re big savers too
Spending on luxury products is a common tendency among millennials in China. However, they’re concerned about saving a good chunk of their paycheck. A survey by China’s Phoenix Tree Holdings shows millennials and Gen Z have a balanced approach to budgeting and personal spending. They spend where they find value and save where possible.
Promotional solutions like cash-back, discounts and coupons enable businesses to offer customized features to their millennial customers while addressing their concern to save money.
What are some good loyalty programs in China?
Now that you understand China’s e-commerce ecosystem and Chinese millennials well, it’s time to set up an effective loyalty program.
Despite a stereotype that millennials have less loyalty to brands, they’re actually quite loyal and even willing to pay higher prices for certain products when they feel a personal connection to a brand.
For Chinese millennials, personalized relationships are the root of loyalty. To build any sort of consistent customer base among this demographic, you should nurture and form a relationship over time.
Successful businesses in China have recognized the importance of personalized relations with millennials, running loyalty schemes that prioritize customized and exclusive experience for their millennial customers.
These loyalty program are very popular among millennials in China:
Alibaba’s 88 VIP Membership: This is the top tier of Alibaba’s loyalty program. In China, number 8 is believed to be the luckiest number because it sounds similar to a Mandarin character meaning “well-off.” 88 VIP membership package offers exclusive benefits to members across the Alibaba ecosystem covering commerce, entertainment and local services.
Shangri-La Circle: Shangri-La Hotels and Resorts runs a 4-tiered loyalty program, Shangri-La Circle, to create exclusive experiences for its loyal members. The four tiers are: Gold, Jade, Diamond and Polaris. Members can redeem their points for free room nights, dining experiences, spa treatments, lifestyle products and more.
GreenTree Loyalty Program: GreenTree is a leading hotel operator in China. They offer attractive price discounts to their returning guests. According to Nothhaft, their loyalty program has more than 50 million paid members and aims to reach 100 million members in the next 5 years.
To earn loyalty from the Chinese millennials, you need to consider three main elements:
China’s e-commerce ecosystem
Unique traits of Chinese millennials
Priorities of successful loyalty programs in China
Successful loyalty programs in China emphasize a strong sense of community among their users. As a result, community-building is a prerequisite for the success of a loyalty program in China.
Chinese millennials not only want to belong to a community, but also they wish to have a say. They remain loyal to your brand if they realize you value their loyalty, you value them.
Check out our “Definite Guide to Customer Loyalty” to learn how to set up an effective loyalty program that powers your promotion marketing, especially when you target millennials.
Every month, I share an insights newsletter with thousands of marketers.
Content Lead at Talon.One
Wiener Strasse 10
41 Church Street
B3 2RT Birmingham
One Boston Place, Suite 2600
02108 Boston, MA
1 Scotts Road, #21-10 Shaw Centre