Digital companies from China take innovation route for growth

Forrester Research’s Xiaofeng Wang with Frederic Giron, Dane Anderson, Thomas Husson, Diane Deng, and Bill Nagel has explained why China-based digital technology companies are winning in Asia and other markets.

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China FDI in South East Asia in 2016Tencent, Alibaba, Baidu, JD.com and Didi are some of the China-based digital companies competing in the global market. US-based digital companies include Alphabet (Google), Amazon, Facebook / WhatsApp, Netfl­ix and Uber.

Forrester Research’s analysts argue that China-based digital companies are leading in terms of innovation. Their main digital innovations are in e-commerce, social media, and mobile payments. Southeast Asia is the first battlefield.

Chinese digital giants are investing aggressively in local digital platforms like Lazada, Grab, and Go-Jek that dominate the mobile moments of SEA consumers. They can compete with Facebook and Google in SEA thanks to the scale and depth of the consumer data that China’s digital giants own at present.
Market capitalization of digital companies
These companies are winning consumers primarily because China is already the largest digital consumer market in the world. China’s online population will overtake that of the combined US and EU-7 in 2018.

China is the world’s largest e-commerce market where Amazon is yet to find success. China accounts for more than 40 percent of global online retail transactions. The value of mobile payments in China is 11 times greater than that of the US.

Digital innovation

Tencent operates WeChat, a mobile messaging platform that also boasts innovations like mini-programs. WeChat competes with Facebook-owned WhatsApp. But the $19 billion acquisition of WhatsApp did not bring much financial gains to Facebook.

Alibaba leads in digital commerce, banking, and wallet innovations like overseas tax refund services. These platforms provide sophisticated features to both consumers and marketers than their global counterparts, says Forrester Research.

Globally, China is one of the top three investors in new technologies like virtual reality (VR), drones, and autonomous vehicles.

Global marketers use technologies such as Zanadu’s VR travel experience store to engage Chinese consumers and travelers.

Chinese Internet companies like Baidu and Alibaba are investing in AI research and hiring top scientists; they have already implemented AI in marketing initiatives such as customized banner ads and personalized pages on Alibaba’s Singles’ Day.

Investment

Top China-based digital technology companies such as Alibaba, Ant Financial, Tencent, Didi, and JD.com together invested at least $6 billion in mergers and acquisitions in SEA in 2017. In comparison, their US counterparts invested less than $1 billion in the region.

China’s digital companies invested primarily in three areas: e-commerce, mobile payments, and transportation and logistics. They made investment in emerging digital platforms like Grab, Go-Jek, and Lazada because their scale and the data from traveling, shopping, and paying are relevant for marketing companies.

China’s digital players are investing in emerging technologies and applying them to business cases, such as Alibaba applying its Tmall Genie intelligent agent as an in-room hotel butler in 100,000 hotel rooms.

Forrester Research recommends that global marketers should closely follow how Chinese digital giants are using AI, augmented reality (AR), and facial recognition to transform marketing and shape the future of marketing innovation so they’re ready when disruption comes to their own market.

Baburajan K

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