Ashley Galina Dudarenok is a China marketing expert and founder of ChoZan & Alarice. In the fifth episode of the NEXT – SHOW series 3, she explored how China is pursuing a decades-long vision of a digitally-enabled nation, and what the rest of the world can learn from it.
Watch the complete episode
It’s easy to underestimate the differences between what’s happening in China, and what we experience in the west. But Dudarenok has engineered herself a unique vantage point to translate between the two. Born in the Russian Far East, and exposed to Asian culture from an early age, by her late teens she was living in China. She was there in the mid-2000s, when the great digital leap forward happened in the country. In the 12 years since, she’s seen a shift from a focus on buying from China to increasing numbers of brands wanting to sell to China.
She intends to help the rest of us understand the profound differences in how digital is reshaping China.
The Chinese Ecosystems
“In the rest of the world, when people talk about ecosystems, they’re talking about connected services,” she says. “In China, when we talk about new retail ecosystems, it’s a lot more than that. It’s about being the central pull of gravity for all things to do with commerce. For example, Alibaba has a very strong delivery branch, so it’s all about last mile and next day delivery. There’s a very strong manufacturing branch, which helps small brands manufacture very fast; develop products, test them and launch them on the market.”
Alibaba has a marketing and social media presence, too. Traditional advertising is very expensive in China, to the point where each ad-driven sale may be losing money. Many brands’ only hope is to build a community of repeat customers.
“And maybe, just maybe, on their third or fourth purchase, you’ll start making money from this one customer,” she says.
The Metaverse in China
Extended reality is a major trend right now — what people elsewhere are calling Metaverse, although she describes that as an “over-used, buzzy and hot” term.
“It’s gamifying online and offline experiences,” she says. “In reality, in China, to be called an ecosystem, you need to be in these eight or nine buckets. Your main capability is in data collection and analysis, and then you venture into all these other areas that build on that.”
This different style of tech giants is attributable to the very different nature of the economies in China and the PAC region generally. This model is something the rest of the world could certainly learn from, she suggests.
However, they don’t have forever to act. These Chinese giants are starting to bring their ecosystems to other countries. For example, they’re expanding into south-east Asia, Latin America and the Russian-speaking world, with Africa in their sights, too.
“According to some estimates, 70 to 80% of the global population will be purchasing products through these ecosystems,” she says.
Freshippo: China’s better living through data collection
Freshippo, an Alibaba-developed supermarket, is a great example. “Why venture into groceries?” she says. “The answer is obvious: Chinese tech companies need to test, and they must have high frequency, high-volume purchases. What do Chinese people buy all the time, just like people anywhere else in the world? Food!”
And, of course, they’ve learnt how to collect a lot of data in physical locations. We’re seeing a merger of online and offline retail, so the physical retail stops being just a place for businesses to show off wares, or for customers to collect purchases, but a way of collecting whole new sets of data. You can see if the shopper came alone, or with a friend, and use that data. Are they smiling when they look at a shelf, or not? How did they react to the price?
Each Freshippo store serves a 3 km area, which allows the company to understand the preferences of the people in that tight geographic region. What do they buy on other Alibaba platforms, compared to what they buy in Freshippo? Based on that, the product selection, the layout of the store — and even its colour scheme, can change to maximise revenue.
The store identifies you via a QR code — or even just facial recognition — which opens up your digital wallet, ready for purchase. The prices on the shelves are digital, so can be changed in real-time as prices or promotions change. In fact, the store will be “aware” that you have, say, a pillow in your online cart, and then offers you a discount on a blanket in the store. You don’t even have to carry your groceries home, with 30-minute delivery of whatever you choose to your home. You can even buy a single can of Coke and have it delivered to home in 30 minutes — free. Or pick your ingredients, and have the cooked meal delivered within half an hour.
Hybrid online/offline experiences
Some other shops have innovations like virtual try-on rooms. You can see how you would look in an item that might be out of stock in your preferred size or colour, and have that shipped to your home if you like it.
These online/offline links both facilitate greater data collection about the customer, giving businesses the chance to give them better experiences, while making sure your business isn’t constrained by the physical footprint of your retail locations.
Partially because of the scale of the population, and the widespread implementation of this technology over the past four to five years, China is ahead of the rest of the world in using AI to derive decisions from the data. So, now the question is, ”how do we regulate and implement it?”
China’s approach to regulation
China is now starting to regulate technology that is already in place. It’s not — so far — been a case of them trying to regulate the big companies out of existence, though. Instead, they’ve announced a three-year programme of regulation, largely divided into three categories:
- Non-compete: preventing the development of monopolies – encouraging merchants to be on multiple platforms.
- Privacy & data protection: even the most trivial app right now can get access to half your digital life easily. Regulation is clearly needed.
- Industry-specific regulation: for example, plastic surgery or education.
The Chinese people have accepted that, generally, technology is good, and data collection improves life. This is in contrast with the western expectation that greater data collection just leads to being spammed more, with no accompanying quality of life improvement. In China, the link between data surrender and improved quality of life is explicit and experienced. In a Chinese airport, your face itself is enough to get you on the plane — you don’t need the boarding pass.
China’s decades-long vision for tech
China is also unique in that it has a long-term vision: not of where it wants to be in three years, but in thirty years. And that gives companies a steer. The bets they’re putting on technology and AI are more long-term, which is why they can guide the whole market.
This collaboration of consumer, government and tech giants is unique, and Dudarenok doesn’t believe that, say, Europe will ever be able to match it any time soon, in the current political environment.
However, China is not necessarily an inventor of technologies, as much as a country implementing them at mass scale. That allows them to quickly winnow out the technologies and ideas that don’t work, while focusing on improving rapidly the ones that do so. This is China Speed: “Succeed fast, or fail fast.”
Bringing digital to all geographies and demographics
The supply chain is a huge part of new retail: the ability to deliver rapidly to any part of a huge country is integral to what’s happening in the country. The economic growth is no longer in the top-tier cities, but elsewhere in the country, especially in small towns and rural areas. So, the tech giants are focusing on developing solutions for these smaller, more rural areas. They’re also focusing on bringing all generations into the digital economy.
So, yes, commercial drone delivery is a growing part of the supply chain. They’re also using cable cars to take goods both to and from the countryside. Some Chinese villages are very digital. For example, they can use drones to tell people that they shouldn’t be spraying pesticides right now. It’s not only the government trying to transform rural life, but they drive the vision of the tech companies to join in this process.
She describes the willingness of consumers to support others through purchases from rural areas as “quite beautiful”. There is a state-level focus on eradicating digital illiteracy in China.
Trading data for quality of life
The Life Change Index measures how much better people expect their lives to be than their parents. In most countries, it ranges from two to four times better. In India, it’s eight times — but for much of the past 30 years, in China it’s been 34 times better. This is an unprecedented change in quality of life, converting China into one of the most digital economies in the world. This drives the consumer optimism and positivity — they’ve only seen things getting better.
Thirty years ago, people in China looked to the west for inspiration. Now, there’s a rediscovered pride in Chinese heritage, manifesting in traditional fashion, advertising using traditional art and more.
China is a country at once pushing headlong into a digital future, while at the same time embracing its own cultural heritage. The rest of the world would do well to pay better attention to what’s happening there.
This is a summary of an interview with Ashley Galina Dudarenok conducted by Monique van Dusseldorp and broadcast on the NEXT Show on 21st April. You can catch up with Ashley and her work on her website, Twitter and LinkedIn.