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The singular selling secrets of the online "Double 11" winners

"Double 11" or Singles Day is now the biggest event on the mainland online calendars. Three very different companies share their experience of dominating their respective e-tailing sectors in the hard-fought run-up to the 2013 event.

Photo: ‘Hunger marketing’ – Xiaomi’s route to ‘Double 11’ success.
'Hunger marketing' – Xiaomi's route to 'Double 11' success.

The significance of E-commerce is now widely-acknowledged in all of the developed world's retail sectors. From its early days in book and music distribution, online retailing has now moved into a huge variety of product areas, including mobile phones, fashion and furnishings. In many of these areas, it has found itself in direct competition with more traditional sales channels. In terms of the mainland, a number of online brands – most notably Xiaomi, HSTYLE and Linshi Muye – have not only countered the challenge of their conventional rivals, but have now emerged as market leaders across the board. There is much that can be learned from the approaches and marketing strategies of these three successful online companies.

Xiaomi mobile phone: Winning fans with customer engagement

The success of these three online enterprises was underlined by their sales performance in the run-up to November 11 last year – the mainland's so-called "Double 11" or Singles Day and one of the biggest occasions for online spending on the Chinese calendar. According to the league of single-store sales drawn up by Tmall [the mainland b2c e-tailer formerly known as 'Taobao Mall'], Xiaomi was the last year's big Double 11 winner, with its flagship site achieving sales of Rmb541 million.

It is a remarkable success on the part of the online smartphone manufacturer. The company relies entirely on online sales, has no physical outlets and virtually no advertising spend. This has seen it come to adopt a unique marketing strategy.

As a tribute to the success of its strategy, virtually any mention of Xiaomi among mainland consumers inevitably elicits a "good value for money" response. Unlike conventional mobile phone manufacturers, many of whom attach considerable importance to securing a high profit margin on each handset sold, Xiaomi operates on a high volume sales/low profit margin model. It attracts customers through its good value-for-money reputation, with positive word of mouth driving its sales and building its customer loyalty.

"Hunger marketing" is Xiaomi's most characteristic strategy. Counting on consumer demand for scarce products of a high quality, the company regularly sets out to create a "buying mania", with purchasers encouraged to buy limited runs of Xiaomi products.

Naturally, the success of this strategy lies very much in the powerful allure of the company's good-value-for-money products. Should this appeal ever diminish, the company would have to drastically re-think its business model.

In many ways, Xiaomi's success is rooted in its ability to judge the mood and the needs of the market. There are two particular points of its strategy that are worth noting in this regard:

Firstly, from its early days, the company made a considerable effort to develop a platform that would allow it to both engage consumers and win "fans". It did this through the launch of a dedicated Xiaomi forum. Today, the forum has 10.59 million registered users, with more than 500,000 new messages posted every day.

In QQ's Qzone, Xiaomi's official account has a user community of more than 10 million. Visitor traffic to Xiaomi's official WeChat and Weibo accounts is also said to be growing rapidly. Through its investment in developing these platforms, the company has attracted and consolidated a substantial fan base, subsequently converting many of these online admirers into regular purchasers.

Secondly, the company also seeks to frequently engage its target consumers at the product development stage, thus creating zero distance between itself and the market. Another key difference in terms of consumer engagement is that Xiaomi updates its operating system every Friday, unlike many of its rivals that offer upgrades only once every few months or, even, years.

As an extension of this, Xiaomi's online followers can now vote to steer its product development team. By monitoring this feedback, the company can target its product innovation appropriately, adding or removing features to its handsets depending in line with the weekly vote.

In terms of motivating its own in-house team, Xiaomi's product development staff are rewarded (or otherwise) in line with the online approbation (or not) received via the forum.

HSTYLE fashion: market-driven, quick response

HSTYLE, an online retailer specialising in Korean-style fashions, was another big winner in last year's Double 11 stakes. As well as recording a growth rate in excess of 100% per annum over recent years, the company also scored the highest level of traffic flow on the Taobao website in the weeks immediately preceding Singles Day. Ultimately, its online sales were in excess of Rmb100 million mark, ranking it second among all ladies' wear brands.

Compared with mobile phones and consumer electronics, clothing prices are hugely flexible. With low-price garments ubiquitous online, cost competitiveness is hardly a distinguishing feature for clothing e-tailers. In light of this, HSTYLE forefronts its stylish designs, rather than its cost advantages.

Photo: Korean-style at affordable prices: the HSTYLE strategy.
Korean-style at affordable prices: the HSTYLE strategy.

Back in 2006, HSTYLE launched on taobao.com offering exclusively Korean-style fashions. Its launch coincided with Korean style being very much in vogue across the mainland, seeing the site prove an immediate hit with young consumers.

Although not leading on its price offer, purchases made via the HSTYLE website still remain highly-competitive, with its branded clothing typically priced around Rmb100, far lower than the cost of comparable items at high street stores. HSTYLE bills its online collection as "high in style, low in price", and this positioning has proved potent in terms of appealing to young, fashion-conscious online shoppers.

For web-based garment manufacturers/retailers, there is a greater requirement to keep pace with changing market preferences than for physical stores, many of which are a little insulated by their older target consumer demographic. In light of this, it is incumbent for many of these online retailers to develop internal systems that keep abreast of these market changes, while also maintaining an interactive rapport with target consumers. This requirement has seen HSTYLE adopt a "merchandiser system", similar to the strategy pioneered by Zara, the Spanish-owned clothing brand.

This has seen the company establish a five-member merchandiser team, comprising a style selection officer, a style selection assistant, a copywriter, an order-inventory officer, and a clerk. This group is responsible for tracing the product movements of a vast array of Korean brands and then selecting the appropriate styles from these brands. It then proceeds with sample purchasing and test sales. Following the successful completion of these trials, the company then puts the chosen styles into mass production through its retained mainland manufacturing facilities.

While the merchandiser system strategy involves, in effect, copying the styles of leading brands and launching copycats items, it is, nevertheless, an effective means of rapidly assessing market trends. At the same time, this system allows HSTYLE to place orders directly in line with market sales, helping it avoid the problem of maintaining excess stock, a problem that has long beset most traditional garment manufacturers. As a result of this, HSTYLE's overall sell-out rate can be as high as 95%.

Linshi Muye Furniture: clear pictures on webpage to dispel worries

The furniture industry has proved more impervious to the allure of etailing than most sectors. Despite this, Linshi Muye, a furniture company that sells solely online, is achieving considerable success. Double 11 2013 saw the company achieve sales worth more than Rmb100 million, the highest figure recorded by any furniture brand.

As part of its online offering, Linshi Muye stresses both its low price appeal and its assurance of high product quality. This strategy has clearly struck a chord with its target consumers – young online shoppers, who are price sensitive and keen on simple, but stylish, furniture.

In the furniture sector, the biggest challenge for e-tailers is the difficulty of persuading customers to buy without directly seeing or – crucially – handling the items on offer. To try and counter these concerns, the company has set up a dedicated photography company. This allows it to upload crystal-clear, multi-angle images of its furniture onto its site. While it may not fully compensate for the traditional 'touchy, feely' shopping experience, it seems to provide enough reassurance to consumers to allow them to commit to a purchase.

Photo: High-quality, multi-angle photography lures Linshi Muye buyers.
High-quality, multi-angle photography lures Linshi Muye buyers.

As with HSTYLE, Linshi Muye was quick to realise the importance of both building a dialogue with consumers and staying ahead of market trends. This saw it establish an internal information management system as an early priority. Currently, this system holds all of the company's product and sales history, with the data updated on a frequent basis. This allows the company to see – in real time – just what is selling and which direction the market is heading in. It can then adjust its sales and marketing strategy accordingly.

Recently, its sales data indicated an upturn in demand for Japanese and Korean style furniture among young consumers. By being ahead of the market, the company had time to develop its Lin Garden Furniture range (using its "imitation + improvement" mode) and capitalise on this shift in consumer preferences. Its monitoring of purchase trends has also allowed it to develop a clear understanding of keywords ("French-style", "garden-style" etc) and how to use them effectively to drive purchases.

Three principles for successful e-tailing

Based on the experience of these three highly-successful online entrepreneurial businesses, three clear points emerge. In order to trade effectively in the digital environment companies need to offer value-for-money, understand their customer's expectations and be able to react quickly to market changes. In many ways, this is not hugely different to the practices adopted by successful conventional retailers. The difference comes, however, in the speed with which online operators have to respond to market changes, as well as the huge price sensitivity created by the consumer's ability to instantly make online comparisons.

Shen Mu, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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