China as a whole is a society where trust level is comparatively low. Because China was originally a very under-developed economy where people used to know one another well. Now it has slowly moved into a fast-growing economy with rapid urbanization and highly mobile community where people have to face the change from a well-acquainted society to a society of strangers. In this process, the original trust structure is destroyed. So the whole of China is a low trust society. People worry about food safety, worry about gutter oil, and worry about whether there are problematic ingredients inside canned foods from industrialized production. In such a low trust society, Chinese online retailers, nevertheless, have established a relatively good trust model through Taobao’s operation in its early days. Even though Taobao previously had a lot of counterfeit goods, it has a rating system and an evaluation system. Despite some problems, on the whole Mainland Chinese’s perception of Taobao is still pretty good because it helps you to identify counterfeits or poor quality products through other customers’ evaluation. Therefore, I think China’s online retailers have in fact helped a lot in raising the level of trust and rendered the current e-commerce flourishing. In terms of the real economy, the trust level for brick-and-mortar stores is relatively low. If you encounter a quality problem in the things you bought from a shop, it is very troublesome to ask for a return. However, with e-retailers, returns are very efficient. Overall, China’s e-commerce and Internet economy including online news, information sources give people the impression that they have a higher trustworthiness than the brick-and-mortar businesses. Overall speaking, China is a huge market. Cities like Beijing, Shanghai, Guangzhou and Shenzhen are as developed as Western countries and residents’ lifestyle and spending concepts are as close; residents are pursuing middle-class lifestyle and they are particularly influenced by the European and American cultures, movies, television series and American dramas. But China has villages that are like Africa because their economy is relatively less developed, spending is still very much based on the concept of price-performance ratio. To them, it is good enough to get the best out of the least spending. Therefore, there is a difference in spending concepts. We have some data that support this. We obtained from Weibo the data on a large number of mobile phone models and found that in Tiers 1 and 2 cities, the market penetration rate of high-end mobiles like iPhone is comparatively high; but the rate declines steadily in Tiers 3, 4 and 5 cities. On the contrary, brands like Vivo and Oppo the focus of which are in price-performance ratio and are of medium- to low-end models, their penetration in Tier 1 cities is low whereas in Tiers 3, 4 and 5 cities is high. So I often say China’s economy was previously under-developed and people’s core consumption concept was price-performance ratio focusing on paying the least to get good products, but now everyone wants a consumption experience. So currently Tier 1 cities reflect this kind of consumption experiences that lean towards modern consumption concept; but in Tiers 3, 4 and 5 cities more of them are still insisting on the traditional high price-performance ratio quest. In this regard, I have also run a course on research methodology at the Management School. At the time, some students also did comparative studies on China and overseas online web platforms and so I would like to make several suggestions. First, there is still a need to localize to a certain extent. Some elements are well-known overseas but not so much in China and these could have caused misunderstanding. Most might think Chinese like red, like Chinese knots and Chinese symbols of the like kind. But in reality, Chinese do not like these very much. They do not like the tech-related Internet to tie up with the very traditional Chinese elements; they think this is in fact unsophisticated. A typical failure example is the Chinese characters on Nike sneakers. The first thing we have to sort out is what elements Chinese like - not those most traditional Chinese elements; these instead could cause resentment. What’s more, there are regional differences in China. China once created a promotional propaganda using a procelain doll as a mascot. The mascot was extremely unpopular in the south. People felt that the image was very annoying. This is the first point. Secondly, the Chinese market is huge, so no need to worry about investors. China has a lot of hot money, that is to say, can’t find good investments and so they hold high hopes on these new up-rising industries like e-commerce. Therefore, with developments like e-commerce in China, there is no pressure to make money within 3 to 5 years. Through this kind of financing- Round A, Round B, Round C, he can obtain large sum of money. He can burn money. So the general investment strategy is not so much as to make profit but to capture the customers and the market share first. So under such a macro environment, they like to engage in price wars. Compete by giving discounts on quality products- really cut-throat discounts and even compete on discounts. Once market share and goodwill are secured, then comes the emphasis on making profit. This is one special characteristic of China’s e-commerce development. The third point is about related regulations. For example, it will tread on the legal boundary, the grey area. I have mentioned America’s Newegg before. When it first entered the Chinese market, it competed with China’s Jingdong. They fought a very ferocious discount battle. Jingdong then first bought all Newegg’s products and sold them on its own website afterwards. This was indeed exploiting a legal loophole. Was it a big issue legally? Not quite. But this was not a particularly reasonable competition tactic. These are some of the characteristics of China’s e-commerce.
