China's social media usage continues to grow exponentially, and with it, the growth of the local e-commerce industry which is set to surpass that of the United States by 2015. However, companies in China still face challenges harnessing the use of social media to influence buying decisions of consumers in their favor.
According to a McKinsey study released Thursday, some 95 percent of Chinese Internet users are registered on a social media site. They are also the world's most active social media population, with 91 percent of respondents saying they visited a social media site in the previous six months, compared with 67 percent in the U.S. and 70 percent in South Korea.
Of more importance to businesses, the study revealed that social media had a greater influence on purchasing decisions for consumers in China than for anywhere else in the world. People were more likely to purchase products or services if these were mentioned on social media sites, or recommended by friends and acquaintances on these online platforms, the study stated.
"Chinese consumers prize peer-to-peer recommendations because they lack trust in formal institutions," noted the authors of the study. 'In general, the Chinese populace is skeptical of information from news sources and advertising; people rely more on word-of-mouth from friends, family, and key opinion leaders, many of whom share information on social media."
Ari Silverman, Davis Lin, Cindy Chiu of McKinsey & Company surveyed 5,700 Chinese Internet users in Tier 1, Tier 2, and Tier 3 cities to gauge the size of the social media landscape, as well as the distinct ways in which Chinese consumers were adopting e-commerce.
Lucrative e-commerce market
The study also showed that China's e-commerce market was expected to triple by 2015, with sales hitting 2.7 trillion yuan (US$420 billion). This was 20 percent more than the U.S. market which was estimated to be 2.2 trillion yuan (US$348 billion), it noted.
However, many companies in China have yet to fully utilize social media to increase their sales revenues. The study cited three reasons for this. First, some executives might lack familiarity with these online social platforms and not know how to mine consumer insights from this "ocean of data", McKinsey said.
Another reason was that companies that had mined and analyzed the information might not act on the data gathered, the study said. Lastly, executives might be unsure how to fit social media insights into traditional brand planning processes, who should "own" social media within the organization, or how to measure its impact, the authors noted.
"The eager adoption by Chinese consumers of homegrown social media sites has created unique opportunities for companies that want to gain insights about, and engage with, a vast and increasingly affluent market," the study stated. "And companies should be prepared to make significant organizational and operational changes, including shifting mindsets to capture the full value of social media for the future of the business in China."