Who is the real owner of Flipkart
- Stuart Fuller -
In our cyclical pursuit of a bargain, consumers today are taking full advantage of the internet to find the best deals. Brand owners not only have to compete with competitors online and offline, but also with those who make alternative and counterfeit versions of their products. The concept of alternative products has never been as prevalent as it is today when we look at buying online. Savvy consumers often buy products that "get the job" at a fraction of the cost, ignoring the intrinsic value that the brand has developed and can offer. One only has to look at the area of British supermarkets, where the relatively new entrants Lidl and Aldi have doubled their market share in just three years by offering cheap replacement products.
The growth in e-commerce now means that the most ambitious brands and no longer those with the largest marketing budgets worldwide can compete with almost no entry barriers and regardless of linguistic aspects. That is true for the majority of companies and markets, but that view is in fact ignoring the world's second largest and fastest growing economy, China. Despite the technological and cultural barriers affecting today's marketplace, China is both the greatest opportunity and threat to every single brand owner, whether or not they have an e-commerce strategy.
If anyone needs further proof of the strength of China's ecommerce opportunity, they should check out the stats from Singles Day (November 11th), where sales soared nearly 26% to a staggering $ 38 billion this year. Black Friday is the biggest day on the US retail calendar since it was "born" in the early 1960s, while Cyber Monday was ranked the biggest day in online retail in 2005. However, Singles Day now dwarfs the US holiday weekend, with earnings roughly five times as high and showing no signs of slowing.
Brand owners are now beginning to understand the importance of having a strategy that encompasses the Chinese market. But what are the key lessons brand owners need to understand before successfully entering the Chinese market and, more importantly, tackling the devaluation of their products through counterfeiting and intellectual property infringement?
How is my brand translated in China?
Translating and transcribing brand, product, and marketing names is often a tricky task. In most cultures, you just can't translate words and hope that consumers will understand their real meaning. For example, when Kentucky Fried Chicken decided to open their first restaurant in China, they initially failed to think about what the real meaning of "finger licking," their famous marketing slogan, was. The literal translation should have been, "We'll eat your fingers off," while Pepsi's slogan, "We'll bring you back to life" has been translated "We'll bring your ancestors back from the grave" - probably not quite the value proposition they have wanted to convey for their brand. The brand competitors Coca-Cola had no reason to laugh because the original translation of the brand actually meant "female horse stuffed with wax". The Chinese only changed a few letters to "ko-kou-ko-le" （可口可乐） and refer to the product as "luck in the mouth", which is much tastier than one in several ways.
It is essential that any brand that is serious about entering the Chinese market works with experts in the local language who can explain the nuances and key facts about Chinese consumers' behavior. Chinese characters can represent a lot of meanings - a single Chinese character symbol can represent a word with many more characters. It is also important to remember the meanings of numbers in the Chinese language - a single number is considered either auspicious or ominous. A combination of numbers changes the meaning dramatically - the number 1, for example, is seen as a symbol of strength, unity and concentration. The term "individual" can be represented by '11' or 'Yiyi'. The Chinese Singles Day, the world's largest annual e-commerce day, is spelled with '1111' （11 月 11 日).
Chinese internet users are used to searching for certain terms and using abbreviations - for example online shopping - 网络 购物 becomes 网 购. Because of the use of the Pin-Yin (Latin characters) system, many search terms will be in some form of the first two letters of each character, it being important to know if your brand has a "nickname" in China.
It is also important to see which other brands have already established themselves in China with similar (or even exactly matching) terms. The kind of "first come, first served" branding system in China means that despite its global reputation, a brand owner in China is already on the decline before it even begins.
Finally, it is worth checking if the brand names or keywords you are using are on the list of words blacklisted by the Chinese government. Using these words in a search or digital asset strategy will make your website go away very quickly.
The lessons here are that a brand should try to understand the official Chinese translation and its precise meaning, the shorter variant often used on social media and Chinese search engines, and the shortest version based on pin-yin, the Term used by the latest digital generation. Finally, don't forget to make sure that all marketing slogans are understood as well and that your brand doesn't fall into the realm of unfortunate names like KFC, Pepsi, and Coca-Cola.
How will consumers find me online in the Chinese market?
It is expected that over 566 million people in China regularly use search engines. While Google dominates everywhere else in the world, the US giant hardly comes into play in China with an estimated market share of less than 1%. This is why it is important that you understand how the Chinese search and trade online. The main search tool used by the Chinese is Baidu （百度), the fourth most visited website in the world, which today has a market share of around 66% of the search market. Other major search engines are Sogou and Shenma, both of which have grown significantly in recent years with the rise of mobile e-commerce.
Nine of the twenty-five most visited websites in the world today are Chinese language websites. While Amazon ranks in the top twenty (13th), they have now been overtaken by Tmall.com (3rd) and Taobao in 8th, which will likely keep Jeff Bezos awake at night. The company is owned by Alibaba, which has sales of $ 14.5 billion. Taobao and its sister sites AliExpress and Tmall revolutionized electronic commerce in China and now have global ambitions. Any brand that doesn't have a strategy on how to work with these online marketplaces is going to have a very difficult time gaining a foothold in the Chinese market. According to research firm Nielsen, around 90% of China's e-commerce sales come through marketplaces, with the vast majority (around 75%) coming from Alibaba's various websites.
Alibaba has also developed its own payment mechanism, Alipay, which works similarly to PayPal and is now the second most popular payment mechanism in China. All Alibaba websites are actively promoting Alipay as a recommended payment mechanism that uses a unique QR code-based approach. The most popular in some ways is Tenpay, which was developed by Tencent, which also owns WeChat, the largest social media network in China, and is built into the application, meaning it has over 900 million monthly users for goods and services pay for the application.
However, Alibaba isn't the only option for brand owners in China. Jingdong (京东), often referred to as JD.com, recently announced an association with Walmart and is considered the second largest online marketplace in China. Tencent is also enjoying growing popularity with the younger generation thanks to the WeChat messaging application hosted there, while Amazon China is now seen as a place most retailers should consider as a channel for the Chinese market as well.
Many consumers in China don't search the same way we do in the West. For example, we're looking for "cheap Nike shoes," but this search term will not exist within the online Chinese markets and therefore the use of keyword-rich domain names will vary widely. Retailers need to be consistent and ensure that external search terms match the way the products appear on the Chinese marketplace listings. When retailers offer items for sale online, they need to make it very clear that they are genuinely branded products - maybe even offer an authentication mechanism.
It is important to understand which competing products have already been sold on the most popular online marketplaces and how consumers are directed to those relevant pages. The search strategy for any ambitious brand that wants to be successful in China must be geared towards competing not only on search terms, keywords and prices, but also on a value proposition that seeks to enhance the attractiveness of "replacement" and counterfeit goods, that infringe the intellectual property of the brand owners.
Alibaba spends over $ 160 million annually on anti-counterfeiting measures, according to Fortune.com, and fined 220,000 sellers for creating counterfeit orders in February 2016, including closing 6,000 stores and clearing sales records for 390,000 products it suspected of Orders were placed, but many still believe the company could and should do more to help brand owners. The company has since founded the Alibaba Anti-Counterfeiting Alliance, which, according to the organization, represents a comprehensive intellectual property protection system with 155 members who now represent some of the largest brands in the world.
In addition to a dotCN domain and a China-based website server, every website must have a government-issued Internet Content Publishing License (ICP) that allows the website to be used in China. Unless your trademark is physically present in China, it is impossible to obtain one, although China-based ISPs can apply on your behalf.
The final consideration is how the Chinese are interacting with the brands online through their mobile devices. China is the largest smartphone market in the world, with around 60% of the population using a smartphone today. It is predicted that nearly 55% of all sales made online in China in 2019, or $ 1.94 trillion, will be made through mobile and smart devices, a percentage that will only increase with device sales over the next few years . Four out of five e-commerce dollars in the country will be generated from mobile devices in 2019 - or 80% - compared to the global average of 64.4%. As a result, any search considerations need to keep mobile SEO in mind when creating a strategy for success.
Which relevant TLDs are recommended for the Chinese market?
Although Google has always said that it treats all top-level domains equally, we know that the new gTLD program is starting to have a slight impact on how the websites that use it get ranked in search. In the Chinese market, however, the situation is much clearer. Baidu, with more than half of the search traffic in China, favors websites that use a DotCN domain name. While there are still websites that use dotCom or dotNet, there seems to be an advantage in using dotCN. However, don't be fooled into using local language variants under a dotCN subdomain - Baidu will penalize any website that does this.
Domain names play a very minor role in search results in Google's eyes, but they have to be legible, meaningful, and memorable. This is difficult when we are dealing with internationalized domain names (IDNs), which are illegible to many search indexing crawlers.
Only about 10% of the 1.357 billion people in China understand English to a degree that they could use it for searching. The important point to keep in mind with all domain names used in China is that the syntax must not be mixed up. It makes little sense to register a domain name that uses ASCII as the keyword and then contains a punycode to the right of the period for the TLD. Keep this in mind from the user's point of view - you can't expect them to change halfway through the search query using the input keyboard. Additionally, the Chinese government has mandated that all national websites use a Chinese IDN, with many organizations using the IDN as a secondary domain name rather than a primary domain name.
The new gTLD has completely revolutionized the world of domain names. Not only do over 40% of all registrations have been made by Chinese registrants, but more Chinese-language IDNs are published than any other language. Using keywords to the left and right of the dot can give a brand owner an advantage in the eyes of Baidu and Qihoo 360, although we haven't seen evidence of it yet due to a number of extenuating factors. Keywords such as online, network, business, website, webstore, brand, world, group, and mobile phone now exist as IDN domain names in Chinese, with the most popular to date being the IDN for the website, which is over 165,000 by the end of December 2019 Registrations are available.
Although there has been some huge registration numbers in China in 2019, in part due to aggressive pricing promotions offered by a number of registrars, companies cannot actively use the domain names unless the registrar has a license to operate dated Ministry of Industry and Information Technology (MIIT). Many registry operators have successfully applied for their MIIT license, while dotCO was the first ccTLD to receive a license in 2018.
If the plan is to introduce a new brand in China, then it is advisable to consider a mix of existing TLDs such as dotCom and dotCN as well as a mix of brand-relevant IDNs including dotCN in the local language. Based on the first come, first served, trademark registration rules in China, it is important that you register your digital assets once you have clarified your plans for the region. It is important to understand what registrations are currently in place for new or existing trademarks and whether acquisitions are necessary to protect your branding strategy and presence in China.
What are the greatest opportunities for my brand in China?
The current trends in the Chinese e-commerce industry represent a great opportunity for retailers around the world. Chinese consumers spent $ 100.2 billion on goods from sellers in other countries in 2017, with the average spend per buyer, according to the research company eMarketer are $ 882.
It is estimated that roughly 25% of the population will shop online from overseas-based websites - combined with Forrester's forecast that the amount consumers in China spend online will reach $ 1 trillion by the end of 2020.
As difficult as it may seem to acknowledge this, social media is driving consumer behavior more than anywhere else in the world, despite the Chinese government's official blockade of giants like Facebook and Twitter. Instead, Chinese consumers use WeChat (1.15 billion users) and Sina Weibo (480 million users). WeChat is the fastest growing of these two services and has the greatest impact on online behavior as it not only offers messages between users, but also mobile payment options that enable seamless online shopping.
What are the main threats to my brand in China?
Aside from fear of the unknown, there are a few obstacles every brand owner needs to know before devising a strategy for the Chinese market.It is important that thorough research of the brand, its message and the distribution chain be carried out in full. Many organizations have failed because they simply did not change their existing channels for the market after entering China and did not understand the key lessons we covered in the previous sections about registering digital assets and brands. In addition, it is impossible for a brand to be taken seriously if it is not present in China.
The influence of the Ministry of Industry and Information Technology (MIIT) cannot be underestimated. It is responsible for regulating and developing the postal service, the Internet, wireless communications, broadcasting, communications, the production of electronics and information goods, the software industry, and the promotion of the national knowledge-based economy, which sounds scary. In essence, what they say applies especially in the online environment.
The main threat facing virtually every brand owner in China is the proliferation of counterfeit products. A 2016 report by the US Chamber of Commerce titled "Measuring the Magnitude of Global Counterfeiting" estimated that China alone is the source of more than 70% of global counterfeiting activity. As Coco Chanel once said, "If you want to be an original, you have to be prepared to be copied". At least the growth of the AACA (Alibaba Anti-Counterfeit Alliance) is a step in the right direction for the brand owners.
Another aspect for a successful introduction to the Chinese market is the lack of customization of the online user experience. Most of the big brands are represented at Tmall, one of the subsidiaries of the Alibaba Group. The concept is a virtual mall, but before you get too excited, you need to understand how Chinese online shoppers behave. Most of the retailers that are represented at Tmall have their backend integrated so that a consumer has a central shopping basket with a user account and a checkout process independent of the retailer.
Social media could be the key to the future of e-commerce in China. WeChat allows users to get product recommendations from like-minded people and then buy those products directly on the website, while Weibo now has more active daily users than Twitter.
"Online reviews have a major impact on customers' purchasing decisions," said Ben-Shabat. "For example, 40 percent of online shoppers in China want instant 'buy or not buy' advice and reviews; a much higher rate than other countries. Online retailers, particularly Taobao, have user rating systems in place; dianping.com has become a popular online review site for Chinese consumers.
The 451 Research Global Unified Commerce Forecast report predicts that China will be the world's first digital commerce market in 2020 with a volume of $ 2 trillion. If you're not ready for China just yet, or feel like you've conquered it, it is certainly worth exploring and planning other international e-commerce markets. Here's a look at 2020 forecast ecommerce revenue around the world:
- United States: $ 600 billion
- United Kingdom: $ 137b
- Japan: $ 114 billion
- South Korea: $ 87 billion
In January 2020 it was announced that the Indian retail giant Reliance Industries had launched an e-commerce platform to use its JioMart brand to challenge retailers Taobao, Amazon and Flipkart and to connect local shops with customers via an app.
The lure of Chinese e-commerce is great, and while there are still major hurdles to overcome, the promise of tapping into a multi-trillion dollar economy is reason enough for any retailer with the will and the resources to join. It is important to bring together the collective knowledge of competitors, customers, friends, industry players, salespeople, and anyone else with significant sales experience in China. Understanding the consumers you want to reach is the first step in entering this promising market. Regardless of whether you are asserting yourself on a path you have created yourself or are participating in an existing marketplace, it is certainly a good time to get started.
While the black market-related issues are widely reported, the gray market is also a major challenge for some brand owners. There is a practice known as 代购 where some popular products that are not officially sold in China have one Shopping agents can be bought on behalf of a consumer. For example, certain brands of English breakfast tea can be purchased through some of the more popular Chinese marketplace websites through agents who source the products from overseas. These items are not counterfeit - they are real products, but they are sold in markets that are not necessarily approved by the brand owner. If a brand wants to enter China, an investigation of this gray market is of course very important.
China remains the greatest opportunity and threat for most brand owners when it comes to their 2020 digital goals. The rapid growth of the digital economy is underscored by eye-catching spending on events such as Chinese Singles Day (November 11th), which generated over $ 38 billion in revenue in 2019. For the brands that have a strategy and resources for the Chinese market, it is worth understanding what major trends we will see in 2020.
It is worth saying that the Chinese market is one of the most dynamic in the world and that change is a given. It is therefore important to have someone in the country who is able to interpret changes in the law and put them in an appropriate context.
Listed below are the main topics that BrandShelter believes will be the top discussion points in China's digital economy in 2020:
- DotCN and DotCOM registrations will continue to grow in 2020 while the growth of new gTLDs will remain relatively slow. This is because the number of new gTLD registrations that either already have or are applying for MIIT accreditation has slowed. If a registry does not have MIIT accreditation, it cannot sell domain names through Chinese registrars. In 2019, the number of new gTLD registrations in China soared, thanks in part to the phenomenal growth of the .ICU, which now has around 3.6 million domain names registered for Chinese registrants. While a small number of TLDs will continue to buck the trend, the rest of the gTLDs will remain relatively static. In 2018, the first ccTLDs received their MIIT (.CO) license and it is hoped that this trend will continue in 2020.
- The Chinese government remains concerned about its reputation for IP abuse issues and will continue to crack down on fake activity and put pressure on the major marketplaces to develop their own surveillance services. The Alibaba Anti-Counterfeit Alliance (AACA) now has over 450 members from nearly 20 countries and continues to work to create best practices and procedures for overseas brand owners looking to increase their revenues while reducing the number of violations.
- The Chinese government banned the use of all foreign cryptocurrencies in the country a few years ago, but it seems they are warming to the idea of developing their own technology and using BlockChain once again. On January 1st, a new law came into effect that made it easier to "develop the cryptography business and ensure the security of cyberspace and information". Rumor has it that this will lay the foundation for the introduction of a state-backed cryptocurrency later this year.
- The adoption of 5G mobile infrastructure will continue at a pace as more and more mobile devices adopt 5G technology in 2020, which will result in service providers adopting new, complementary services. The three state-owned telecommunications companies (China Mobile, China Telecom and China Unicom) have already rolled out services in over 50 cities. From the brand owner's point of view, this means opening up new regional markets, with users sometimes being able to access content for the first time - there are currently over 850 million people using smartphones in China - over 60% of the population.
- Understanding the Chinese market, consumer behavior, and local culture will continue to be very important for any overseas company or brand that has no experience in the Chinese market. Working with local partners or hiring a trustworthy consulting firm is seen as an essential first step towards entering the market.
China is the largest potential market for any ambitious brand today. However, it is also the toughest market to enter and remain competitive in. There are a number of obstacles any organization must overcome before they can legally start trading online in China, and it is important to work with an expert like BrandShelter who has on-site domain name experts. and IP market that can provide the right advice in accordance with the latest government legislation.
Why use BrandShelter?
For over a decade, BrandShelter has worked with some of the world's best-known brands to provide, advise, and create effective and risk-reducing policies for domain name, security, and trademark protection solutions. Our priority is to help our customers achieve their digital and business goals by leveraging our industry knowledge and knowledgeable people to develop solutions that achieve those goals.
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