In 2017, an estimated 1.66 billion people around the world purchased a product online, amounting to US$2.3 trillion in global e-retail sales. That figure is expected to skyrocket to US$4.48 trillion by 2021, which means over the next couple of years, we can expect the online retail landscape to become a very different place.
Dr Lingling Gao, a lecturer at the Tasmanian School of Business and Economics, is at the forefront of research into online retail strategy, and has been tracking the key trends emerging from the largest and most innovative e-commerce market in the world: China.
"What’s happening in China is so successful, you couldn’t even imagine,” said Dr Gao, whose PhD investigated how social media strategies can build trust between online buyers and sellers.
“I’ve been exploring the unique ways that online sellers can present the qualities and benefits of their products,” she said.
I want to understand how online sellers communicate with customers, and how they establish trust with them through social media.
Dr Gao couldn’t have picked a better place to set her research focus. China’s online retailing sector is expected to grow from 17% of total retail sales in 2017 to 25 per cent by 2020, with online retail sales approaching US$1 trillion. That’s almost half the current amount of e-retail spending worldwide.
The secret to China’s online retail success isn’t just the country’s population size; the secret lies in doing things that e-shoppers elsewhere can only dream about.
Case in point: live-selling
Hosted by a platform developed by Alibaba
https://www.alibaba.com/countrysearch/CN/live-selling.html, the second biggest e-commerce company in the world after Amazon, live-selling is like the infomercial of the future.
Imagine online sellers spruiking their wares on YouTube, only it’s 100 per cent live, and customers are free to interact with the seller at any time by sending a text message with a question or a comment.
And we’re not just talking about smiling models presenting a product and reciting a carefully crafted description. We’re talking live cooking demonstrations, supermarket runs, Q&A sessions, and even tours of far-flung kumquat farms by the store-owners and producers themselves.
It’s hard to describe how much content is being generated every day by live-sellers in China.
“Retailers can show customers their clothes or healthcare products, and talk about all the benefits, and also the things that customers might be worried about. It’s easier to generate people’s purchasing intention when you’re directly interacting with them.”
For her PhD project, Dr Gao set up two online stores selling the exact same Australian-made products. One of the stores used social media to attract and maintain its customer base, and the other didn’t.
Not surprisingly, the store using social media grew very fast, and has so far been very successful. The other one, not so much.
Last year on ‘Double 11 Day’ – the world’s largest annual online shopping day – Dr Gao’s social media-friendly store made roughly ¥750,000 (AUD$155,000) in sales more than 24 hours. The other store made just ¥100,000 (AUD$21,000).
Dr Gao plans on running her stores concurrently over the coming months, to see how their differences manifest as the stores and their customer base become more established.
The study is the first of its kind to uncover the impact of social media on consumer trust and purchaser intention. Dr Gao hopes the insights will have a positive impact on online retailers in Australia – particularly those who aren’t so versed in things like live-selling.
"It’s a marketing strategy that many companies in Australia and in the US should use.
It’s so successful in China, I don’t think Australia realises the true benefit of live-selling.
“It’s important that we provide practical outlines for online stores in choosing social media strategies. That’s how they’re going to achieve more growth and success.”
Find out about studying Business and Economics at the University of Tasmania here.