LEARNINGS FROM CHINA. A MASSIVE, POWERFUL, CUSTOMER-DRIVEN, FAST EVOLVING ECOSYSTEM.
From the morning coffee to the late drink, meeting with investors and founders all day is always a good way to feel the pulse of an ecosystem, that’s what we did with @50Partners (12 French business angels and entrepreneurs for this trip) visiting Shanghai.
CHINESE ARE GREAT MERCHANTS, IN LOVE WITH “ALL IN ONE SOLUTION” ON THEIR MOBILES FOR A SEAMLESS EXPERIENCE.
A few years ago when you arrived in China, pollution was visible with a yellow fog and also a lot of noise. Now, from the motorway to the streets of the city surrounded by little shops, restaurants and the big windows of luxury stores, Shanghai seems a pleasant city to live in: pedestrians crossing at the red light, electric vespas, bikes and disciplined car drivers watched by the cameras. Compared to a lively Paris where I was for a few days last week. it looks so quiet! But don’t believe your first feeling, it moves fast, and even faster in the last 3 years than before. Mobile and “super apps” have changed the way things are done and make it easier for plenty of new entrepreneurs.
I began my trip in Shanghai with a lovely diner overlooking the Bund, hosted by a dear friend still working with L’Oreal (where I spent many years in my career). During the conversation, she shared her enthusiasm about Alipay and Wechat pay, asserting “it’s changing my life”. She acknowledged that she had the feeling to come back to the old world when back in Europe. She just paid in a second with her scanned QR code on her mobile while I was still trying to find one of my master and visa cards in my leather wallet lost inside my hand-bag, and I felt pretty much like a tourist.
Future is no wallet and seamless and it’s already daily life in China!
Basically, she was doing everything with WeChat and Alipay: messaging, reading her timeline with news, following fashion bloggers for latest trends, shopping, ordering a Didi ride, paying her monthly invoices…She said: “it’s like a personal assistant for your personal life, and a flawless experience”. And she pretty much needed it as a busy executive while luxury and beauty is growing so fast in China. Great insights!
Alibaba and its peers Baidu, Tencent and Xiaomi (popularly termed BATX a few years ago) in China have a combined market capitalisation of about $900bn, incubating more than 1,000 new ventures within a decade and an average annual growth of 50+ per cent, they are showing an unprecedented expansion. And we could guess a global ambition, empowered by the data they have every day on their platform. Also with new AI talents educated in the US (CMU, Stanford, MIT) and coming back home especially in the last 3 years appealed by new opportunities, and thousands of computer science PhD in their own universities.
Tencent’s WeChat has more than a billion users worldwide, and people connect on WeChat for 4 hours per day! Yes Tencent has an edge in mobile technology, from payment to communication. Alibaba and Tencent have penetrated almost every aspect of the life of Chinese consumers and are rapidly spreading pioneering payment. And Xiaomi overtook Apple in the Chinese market and is one of the largest players in smart homes, the internet of things and smart wearables, while Baidu is one of the big players in artificial intelligence.
While their roots are in search technology, e-commerce, social communication and software, times have changed in the last 3 years. A fast change empowered by huge amount of data, mobiles being used by everyone in the big cities.
The only comparison I’ve found for being part of my life as a company in the US would be Amazon: my groceries at Wholefoods, Prime Video, Alexa device at home…
In fact, as suggested 2 years ago by an article in Chinadaily by Wei Wei and Mark J.Greeven, what BATX have created are business ecosystems rather than corporations and they co-evolve with the dynamic business environment. Business ecosystems are boundaryless organisations of interdependent businesses with customer-centric offerings across industries.
Chinese business ecosystems developed and transformed from organic growth to rapid expansion by investment, incubation, innovation and internationalisation.
But forget BAT (search engines, e-commerce, social networks, and now digital payments, cloud computing) , China’s next-generation tech giants are TMD.
In smartphone-dominated lifes, fueled by AI and sharing, here comes now the new Unicorns: news app Toutiao, group-buying service Meituan-Dianping (food delivery, movie tickets, group discounts, restaurants reviews) for nearly 300 million Chinese, and ride-hailing firm Didi Chuxing (bike sharing, food delivery,…).
What remains consistent in China is the love for “super apps” with different services and enabling people to stay on it. No wonder WeChat claim 4 hours per day in its users’ life.
CONSUMER GOODS AND RETAIL. WATCH OUT WHAT’S NEXT: COMMUNITIES!
A dynamic ecosystem with Chinese investors first now.
12 000 startups are founded every day in China, only 0.02% survive.
When it’s a success, it’s massive and it goes fast! When my friend Denis Barrier working with Cathay Innovation in San Francisco described to me the app Pindodo helping Chinese customers to benefit with their friends from real time value for money deals, I forgot it. Two years later, Nicolas Du Cray informs us of the market valuation at $ 25 billion for the company in the Nasdaq.
Chinese have been successful merchants for centuries. No surprise, Sidney Wen Managing Director and Andy Qian Executive Director working with Fosun (having invested US$ 85 billion since 1992 with a focus in health happiness and wealth) or SOSV ChinAccelerator’s team describe the ecosystem has based on consumer goods and retail, Advertising, E commerce, Entertainment/Gaming, and with a recent focus on Education and Health. And compared to the Silicon Valley, China is now learning enterprise business models, as past cheap cost of labor was not pushing companies towards Saas solutions.
International solutions won’t work “off the shelves”, so it could be the next wave of big companies in China.
Talking about VCs, he reminded that in the past US VCs (especially the Tier 1 with Sequoia) were leading investments, now Chinese VCs are the huge part of the fundings. Series A are from $ 3 to 10 Million, and it’s common now to talk about A+ A++ Series.
Listening to all the great Chinese and expatriate leaders we met, 3 key elements to keep in mind if we want to learn from each other and have cross border bridges.
Proud Chinese customers, traveling a lot.
Tourism matters. Now with a lot of information on the web, and connection with their Chinese American family and friends, every one knows what are the hot brands or the high quality ones in Europe and America.
At the moment, the leading brands are growing even faster. Lancôme (I’m a proud ex CEO as a reminder) has always been a leader in market share in the selective market for beauty in China, but the growth has accelerated with a huge double digit number in the last years.
However, behaviors could change fast. New companies, with purpose and data-driven founders and an authentic tone of voice could appeal to a new generarion of customers.
The Millennials and Generation Z shaping our behaviors: conscious customers?
We could guess that the Dolce Gabanna crisis could be forgotten very quickly. Being here just after the crisis, I guess it won’t be.
Chinese have just learned they have a huge power to break brands if needed. The decrease in sales and worldwide impact in image of a viral video and a post shows something. It goes fast again… You can erase years of work in a few days if you don’t show a great understanding of the culture here, and what is acceptable or not.
The new generation wants high-quality products but they also crave for a true tone of voice.
Sustainability and clean beauty is not yet the core of the conversations. Still, plenty of educated customers take care of what they eat and drink, concerned that their fruits and vegetables stay weeks in their fridge not showing any sign of demise. (There is even a small island delivering organic products near Shanghai and appealing to them).
There could be the rise of new champions in the US and in Europe, founders sharing their values and ambition, wanting to have to be the best for the world, still obsessed by hand-crafted products and high quality, beautiful things, design.
Key influencers are leading the word of mouth and prescribing what to wear and to purchase. It could change: celebrities were vital for global brands, now it’s not only the top influencers but also the long tail, the user generated content in social media conversation, predicting new trends and enabling new brands to emerge.
Word of mouth, organic growth are what matters in China. Brands will be more and more chosen by the final customers.
By contrast, I’ve got the feeling in the US the paid media is bigger. It reminds all of us that to have a sustainable success you need a great story, awesome products and …advocates!
We enter an era of communities, where people are engaged as sharing the same values interest, and passion. And communities in China could be big ones.
Regulation and Data: services creating value appeal to customers, tolerance is bigger than in Europe or even in the US.
If you want to connect with me on WeChat, I need to accept your invitation after sharing with you my cell number or QR code, like a double opt-in after a first information you have about me that is not public. It’s very different compared to Instagram or Facebook and seems like a closed group at the end, where you share reviews on products, news, and interests.
In China, every one wants Data-driven services. Face recognition is acceptable if to save time in a VIP line, as some investors shared the story with us. Yes regulation about privacy and security will evolve but the tolerance is bigger than in the US and for sure compared to Europe.
Control offenders with cameras wouldn’t be tolerated in Europe, but here people say “we need it for improving safety”.
Conclusion.
I wonder why so many Chinese founders and funders look at what’s going on in the Silicon Valley, learning from us every day. Same in Singapore, a good example being Golden Gate VC looking outside their South East Asia footprint.
And why there is so little interest from us in the daily news , or simply traveling to Shanghai and new cities where Chinese unicorns are based. For sure it’s complicated for foreigner founders and investors in China, even being based here. All the more, we should try to understand what’s next in China. I’m personally fascinated by their focus on retail and e-commerce, empowered by AI and social media.
China has a focus on its huge market but also in South East Asia, Africa. India already uses Whatsapp type of payment.
Chinese companies will expand globally. And they have access to 275 Million customers part of the middle class just in South East Asia. I’ve discovered that Indonesia was the fourth market worldwide after China, US and India.
Being in Singapore after Shanghai, I’ve learnt about the Chinese Unicorns but also South East Asian ones such as Caroussel and Go Jerk competing with Grab (ride-hailing).
Inspiring learnings for the next generation of Direct-to-consumer companies in the US.
Guess what, We’ll come back!
Odile Roujol
Founder BeautyTech community
Founder Fab co-creation Studio
Partner with @50partners (Paris)
