China strategy built on digital marketing and home delivery could drive US growth for McDonald’s

The use of digital marketing, electronic payments and delivery have helped McDonald’s develop a unique growth strategy in China that could serve as a role model for its home market in the United States, said the head of Citic Capital Holdings, the financial services arm of the group that co-owns 52 per cent of the fast-food chain’s China and Hong Kong business.

Zhang Yichen, the Citic Capital chief executive and chairman, told the Asian Financial Forum in Hong Kong on Monday that the use of digital marketing, combined with delivery services, had been an important growth driver for the Chinese market.

Last year, deliveries accounted for a quarter of the sales in tier one cities such as Beijing and Shanghai. Overall in China, sales from delivery grew by 81 per cent last year, said Zhang, adding that these growth rates were on the rise in 2018.

“Our colleagues in the US have mentioned how [digital marketing] is something they could learn from China. What the Chinese government has done is also important, as it has put in place a lot of regulations to facilitate an environment for digital payments to prosper,” he said.

In China, the use of mobile internet payments has been integral to the growth of e-commerce. Dominant mobile payment operators such as Alipay and WeChat Pay have facilitated delivery services in China not only by fast-food chains such as McDonald's, but also increasingly by bricks-and-mortar retailers of fresh produce, such as fruit and vegetable retailers.

Aside from electronic payments, digital marketing has also been instrumental in McDonald’s growth strategy. Zhang said one such example, which has worked well in China, is the use of digital coupons, with which customers can redeem discounted food items by scanning a QR code on their WeChat app, on their mobile phones. Owned by Tencent Holdings, WeChat is a multipurpose mobile social media app and China’s predominate mobile messaging app.