Frank DesvignesAXA Lab Asia (2016-2018)
January 14, 2016
In Shanghai to set up a new AXA Lab, Frank Desvignes - AXA’s Global Digital Transformation Director for Asia, talks about how China has fully embraced tech startups and the mobile ecosystem.
6 minutes
Following the success of the original AXA Lab in San Francisco, a digital transformation initiative set up by AXA in 2014, I was tasked with creating a Lab in Shanghai to identify the most promising startups in Asia with whom to set up cooperation agreements, and scan the market for emerging trends and exceptional entrepreneurial talent.
Initial research has yielded a wealth of positive insights, as well as some surprises, about digital commerce in China.
Some would argue Chinese companies are known for their success in copying products from international competitors. Soon, this will no longer be the case. Businesses have accumulated an immense amount of knowledge and are rapidly moving into innovation across the board, from manufacturing to logistics. Electronics giant Xiaomi is a good example. The company is taking up hardware development and currently manufactures smartphones that are as good as those produced by their main competitors, but are three times less expensive.
WeChat is a fascinating mobile case. The messaging app has collected 600 million active users in China, which is almost half as many as Facebook has worldwide. And WeChat combines messaging with other features and is something like a combination of microblogging service Twitter, social network Facebook, online payment portal PayPal, and the dating application Tinder. As if that wasn’t enough, the company is about to get into the next explosion, the Internet of Things.
Asia, and particularly China, are breeding grounds for expansion of the internet. Almost half of the world’s internet users and 37 percent of the world's social network users live in the Asia-Pacific region.
China has about 1.35 billion inhabitants, with 668 million connected to the internet, mostly via their smartphone (about 89%), according to recent figures published by the government’s China internet Network Information Center.
For a bit of perspective on the mobile question, last year Eurostat (the EU statistics office) put internet usage while on the move for the 28 European member states at just 51%.
Mobile is so huge in China, cities create sidewalks dedicated to mobile phone use
According to marketing consultancy Incitez’s blog, China Internet Watch, at least one out of two Chinese have made one or more online purchases this year, an increase from 2014, meaning China is likely to overtake the EU this year in terms of sheer numbers. The Chinese love buying things online, and usually do it via smartphone.
Alibaba, the main Chinese online shopping portal, does a huge portion of its annual business on Singles Day (or Guanggun Jie, literally bare sticks holiday
), a celebration of being single in China. This shopping day (one of the largest in the world) takes place November 11th, as the number 11.11 looks like single people standing up, and in 2014 brought in sales of US $9.3 billion for Alibaba alone. 35% of these total sales was done via mobile.
And the numbers are growing. This year, just weeks ago, Alibaba’s sales on Singles day totalled a massive US $14.3 billion, with 70% of sales via mobile.
That’s a doubling of mobile sales in just one year.
And it’s not just a question of statistics. Here, there is a distinct physical-world perception that your personal mobile phone is your wallet.
On one of my first mornings in downtown Shanghai, I went to a Starbuck’s and immediately saw almost everyone paying for their order with their mobile (through Alibaba’s AlibaPay or via WeChat). Even more surprisingly, it wasn’t just the teens and millenials. Seniors were paying for their coffees via mobile too.
Another example: you might start booking a flight on a desktop, choosing from a variety of options on a large comfortable monitor. Once you create your booking, the website generates a ticket with a QR code, that is then displayed on the monitor. You snap a picture of the QR code with your mobile and pay with it directly. Quick, personal, mobile and secure. The best of all worlds.
And it’s not just about payment: mobile has infiltrated every part of life in China.
Voicemail, as its traditionally known, doesn’t exist. Telco operators just don’t provide the service. Most Chinese use WeChat on their mobile for talking and chatting, and, one of the most surprising features for westerners, asynchronous conversations. Shanghai’s streets are full of people walking around, staring at their smartphones, talking directly to them. They’ll say a few words, put the phone back in their pocket and, later on, receive a brief voice reply to what they said.
And in terms of the entire digital business cycle, including communication with customers, essentially everything happens via mobile, from initial customer acquisition to after-sales service, even at the local level.
One day, I saw someone riding an electric scooter nearby that was just the sort of thing I needed for my commutes around town. I discreetly stopped the woman (who turned out to be an Italian ex-pat, of all things) and asked her where she got the scooter. Seconds later I had the vendor’s contacts via WeChat and began chatting with him about the scooter, looking at photos of different models right on the platform. A few hours later we met at my home and he brought me my brand new scooter.
And that’s not all, a few weeks later I was struggling with the electric battery and sent him a snapshot of the dashboard via WeChat. Two hours later, he showed up at my door with a new battery, installing it immediately, and I was again happily on my way.
Countless examples of this mobile approach happen every day. After assisting me with opening my bank account, my bank teller even provided me with his WeChat nickname for help with future transactions.
And if you go into a clothing or shoe shop and they don’t have your size, you simply ask for the shop owner’s WeChat name and chat until he finds you the right size, perhaps at another location across town.
All fluid, all instantaneous, all mobile.
As a result of both economic and mobile booms, China’s tech startups are growing fast.
The country has about a dozen unicorns (startups with a valuation of at least US $1 billion), with the three most famous being Alibaba, WeChat-owner Tencent, and Baidu. The latter is the Chinese equivalent of Google, albeit with many more features and services, like a dedicated encyclopedia and very popular messaging service (if you want to try out your Mandarin, check it out here).
To get an idea of how far these startups
are stretching, Baidu just launched development of a set of connected chopsticks that test the quality of food in real-time. With a possible market of over 1 billion people, that’s a lot of chopsticks.
Companies throughout their entire supply chain use the internet as their primary marketplace. Producers, suppliers and wholesalers all meet in the online commerce galaxy Alibaba, which brings together websites from a wide range of backgrounds.
A remarkable startup is Didi Kuaidi, a booking app for both cabs and private hire cars that brings together two of China’s largest taxi-hailing companies, Didi Dache and Kuaidi Dache. Announced as a surprise merger in February 2015, Didi Kuaidi’s size and scope push the very limits of the concept of startup. By September 2015, they managed to increase their market share of private cars to 80%, and their market share of taxis to a whopping 99%.
Of course, new markets mean adapting your business.
A main competitor of Didi Kuaidi is, not surprisingly, Uber. Unlike in other Uber cities, however, streets in Shanghai are incredibly crowded and always busy, so GPS proved not to be enough for locating fares. Therefore, when you open Uber in Shanghai to book a car, you get a phone call to ask for your exactly worded location. Before doing this, however, make sure you speak Mandarin.
China’s digital business ecosystem relies on private Chinese and overseas capital, no surprise there. It’s the numbers that are shocking: total venture capital investiment in China for the first nine months of 2015 was recently valued at US $28.6 billion.
However, the real surprise for Chinese startups is their newest backer: the government. Though the Chinese government has traditionally poured heaps of money into huge infrastructure projects such as high-speed rail, highways and big state-owned enterprise, it just announced a US $6.5 billion startup fund, bringing the numbers higher and higher. 2016 should be interesting.
With expanding mobile markets, great entrepreneurial spirit and openness to investment, China and Asia are set to be the future engines of digital growth. AXA Lab Asia is poised to take advantage of this growth, to increase market share exponentially, bring knowledge and know-how to other markets, and learn from the Chinese learning curve, which will take several years to play out.
Stay tuned for more, as AXA Lab Asia begins to partner up with the best people and startups in China and across Asia.