Back in 2012 scouring content for the Skinny, it seemed almost every week there was another article praising KFC’s success in China. It was the Western pin-up brand; finding the much sought-after balance that tempted the masses with its alluring foreignness, but localised its offerings just enough to appeal to Chinese tastes – with the menu sporting old favourites like congee.

For every 10 bucks spent on fast food in China, KFC accounted for 4. It had almost 4,000 restaurants, with another 16,000 planned.  There were movie placements, celebs munching on drumsticks, lovebirds courting one another over buckets … then Bird Flu and a series of scandals happened.

KFC has never really recovered from the dark days of ’13. In 2014 the menu was ‘overhauled’ for the first time in 27 years, there’s been a refresh of some decor, but if you were to go into most KFC restaurants in China they still bear a stark resemblance to the golden years pre-2013.  China, Chinese consumers, and their tastes on the other hand have changed – dramatically. A simple scan of restaurants on Dianping or a stroll through a city mall or restaurant street and it becomes clear that there has been an evolution in China’s hospitality sector. La Liste’s annual ranking of the world’s restaurants noted the big trend is the rise of restaurants in China who are meticulously preparing and presenting food, and charging real money for it.

Contrast KFC with another mega-chain from America – Starbucks. Over recent years, the coffeehouse chain has constantly adapted to Chinese consumers and their ever-shifting expectations for newer, shinier offerings. They have played well to Chinese consumers’ inherent need for status from what they purchase, opening cafes in highly visible spots in city streets and premium office building foyers where they will be seen sipping on their Green Tea Crème Frappuccinos. The look and feel of cafes have also evolved to keep up with changing tastes, with some of the latest cafes having fit outs that wouldn’t look out of place against some of the fine dining establishments on Shanghai’s Bund.

Starbucks has always played to Chinese love of all things digital and typically been an early adopter and innovative user of technology. In the early days of WeChat, it cleverly used the limited functions by encouraging fans to send emoticons reflecting their mood, receiving a short music clip related to that mood. A little later in the game they accepted WeChat Pay with some alluring features such as the ability to gift friends and family a drink or two.

Last week’s launch of Starbuck’s mega reserve roastery in Shanghai is one of its most exciting initiatives yet. In addition to a beautiful fitout, complete with contemporary Chinese elements, the venue plays true to the ‘New Retail’ movement that is fast making its way into the bricks & mortar landscape. Integrating the Taobao app, augmented reality brings Starbuck’s story to life in a format that China’s millennials love. The app also allows them to skip the queue and buy merchandise, which improves both customer experience and the likelihood of increased sales and advocacy purchases.

Much like KFC was before 2013, Starbucks has become a much-cited case study – with good reason. It illustrates how brands can successfully keep up and stay relevant to the ever-changing needs of Chinese consumers through offline and online initiatives and product offerings.  Their lessons don’t just apply in the hospitality trade, but are applicable for any foreign or local brand trading in China.  Go to Page 2 to see this week’s China news and highlights.

If you’re looking for a jaw-dropping illustration of China’s growing presence in the world, go no further than the United Nations World Tourism Organisation’s outbound tourism expenditure chart from the world’s largest economies over the past 20 years.

Between 1995-2007, Chinese tourists’ total spending was similar to countries like Italy and Canada.  But over the past eight years, China’s growth projectile has been almost vertical relative to the rest of the world, leaving every other country behind.  This growth is set to continue for some time yet. 

China’s tourism growth is almost matched by the rate of change of the tourists themselves. For example, last year 53% planned or booked their overseas travel online. 80% did this year. Over the same 12-month period, the number researching and booking on a smartphone app grew from 17% to 50% of all travellers according to research.  Consequently, the number who phoned or visited a travel agent dropped from 34% to 13%. 

Changing traveller habits are being supported by improving experience from suppliers. New visa offices for European countries, 10-year visas from the U.S., and more recently Australia, are some examples of how the whole experience is improving for tourists and enabling them to travel without relying on agents to source visas.   

With experiences improving, so are expectations – at an equally swift rate.  Tourism destinations and operators who implement Chinese customer-focused initiatives are most likely to have satisfied visitors and best capitalise on Chinese tourism’s growth – China Skinny can help with that.  We hope you enjoy this week’s Skinny.

Consumers,  Chinese Consumers

China Retail Sales Up 10.4% In H1China’s consumption continues to play a bigger role in the economy with retail sales for the first half of 2015 up 10.4% compared to last year – almost 50% higher than the 7% Q2 GDP growth rate. Consumption contributed 51.2% to GDP growth in 2014, three percentage points more than 2013.

Calibrating Chinese CreativityChina as a whole may not be at the cutting edge of technology innovation, but it is now taking a global lead in two areas of innovation: improving consumer products and the business models used to sell them.  It is making manufacturing processes cheaper, quicker and better. As a result, Chinese firms now outsell foreign rivals in household appliances, Internet software and consumer electronics, to name a few. Chinese firms are inventing new business models, demonstrated by firms like Tencent who had an average revenue of $16 per user in 2014 – $6 more than Facebook.

How Brands Rode Out Uniqlo’s Sex Tape Scandal On WeiboChina’s latest social media sensation has inspired a slew of brands and users to jump on the bandwagon and produce cheeky content.

Overseas Chinese Tourists

The Explosive Growth In Chinese Spending On Tourism, In One Stunning ChartLook out world, here we come!

Half Of New Asian Hotel Rooms To Rise In ChinaNot only are Chinese tourists making their mark globally, but also in their own country. 56% of all hotels under construction in the fast growing Asia-Pacific region, are in China. That’s 452 new hotels with 145,167 rooms.

Tech-Savvy Chinese Travellers Use Mobile Devices To Book Half Of All Trips AbroadHalf of all Chinese travellers use smartphone apps to book and plan travel – up from 17% a year ago.

Disney Unveils Tomorrowland for Chinese in $5.5 Billion ParkShanghai Disney – the largest foreign investment from world’s biggest entertainment company – will be “authentically Disney, distinctly Chinese,” trying to include as much local content as possible to appeal to Chinese consumers and avoid complaints of cultural imperialism that greeted its resort in France.

Online: Internet & Mobile

Third Of Chinese Media Time Is On MobileChinese consumers are expected to spend 3 hours 5 minutes daily on digital media this year – about half overall time spent consuming media. Over two hours will be spent on smartphones and tablets. Daily time on digital media grew 6.8% versus 3% for media overall.

China Mobile Nears 200 Million 4G SubscribersChina Mobile broke through 190 million 4G subscribers in late June. The mobile operator has more than 900,00 4G nodes across China – about 40% of the world’s total. There are close to 700 million 3G and 4G mobile users in China now, allowing richer mobile marketing initiatives.

Premium Food & Beverage

Younger And More Sophisticated Drinkers Mark A New Era For Wine In ChinaOver 40% of imported wine drinkers in China are now 18-29 year-olds, and they are increasingly moving away from the ‘mainstream’ French or Spanish wines to new regions and styles, according to Wine Intelligence.

Australian Wine Exports To China Rise In ValueWine exports to China grew 32.1% in the past year, helping pull the country’s overall wine exports to its first growth in value since 2007.

Clothes and Fashion

Burberry Sales Growth Sapped By Asian Shoppers’ ShiftBurberry’s Chinese customers globally are growing in all markets except Hong Kong and Macau, which dragged the company’s Asia-Pacific sales into negative growth over the past quarter. About 80% of the Burberry’s sales in Hong Kong come from tourists, most of whom are Chinese.

Music and Entertainment

Survey Says More Chinese Moviegoers Buy Tickets Online; Low Ticket Prices A Win-Win To ConsumersMore than half of Chinese movie goers bought tickets online in the first half of the year. Of the $4.77 billion spent on movie tickets in China last year, about $2.2 billion were online transactions.

Pollution &: Environment

Self-Protection Investment Exacerbates Air Pollution Exposure Inequality In Urban ChinaChinese consumers bought 4.5 million anti-smog products online in 2013, totalling ¥870 million ($143 million). The highest 25% income earners bought 31.9% of masks and 47.9% of air filters sold.

Autos and Cars

Changing Chinese Habits Help Mazda Outstrip Rivals In Slowing MarketMazda’s sporty design philosophy has clicked with an emerging class of Chinese drivers, pushing revenue up 17% in the first half of the year, smashing sluggish overall car growth of 1.4%. Mazda’s China-focused features include air-conditioning vents for the backseat and double horns given the heavy usage in the country.

That’s the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.

China is made of many unique markets.  Chinese consumers not only vary by geographical location but also by generation.  The young in China receive a lot of airtime, and for good reasons; but there is a consumer group in China that many brands, products and services are missing.

In China, the older generation often gets overlooked when it comes to foreign products and services. There are over 200 million Chinese over the age of 60, making China’s elderly population the largest in the world. This number is expected to rise to 243 million by 2020 and 400 million by 2050 according to China’s National Committee on Aging, yet this huge and growing segment remains relatively untapped and often wrongly marketed to. Life expectancy in China has risen from 40 years old in 1950 to around 70 years old today; with indications the trend towards longer life will continue.

The spending power of Chinese over 60 is not something to overlook. In 2014 elderly spending accounted for USD $643 billion or 8% of China’s GDP. This is expected to reach USD $17 trillion by the end of 2050. Well-intended but ineffective marketing highlighting and reinforcing the debilitating effects of aging are not going to make this group want to buy a product or service.

Chinese above 60 want to live their lives fully, and opportunities exist for well-marketed brands that can speak to these unique consumers. Whether it be about health products, health care, travel, investments, FMCG or fresh food and beverage, reaching and communicating with this target market is quite different than addressing the young and affluent.

In research China Skinny completed for a dairy product targeting elderly, one recurring theme was how to best reach this age group.  Not as active online as their younger counterparts, and often times less trusting, makes many traditional digital marketing tactics less effective.  Getting smart about targeted online channels and influencers can be effective. With this group not as familiar with foreign brands, Chinese brands have a foot up as of now, but there are ample opportunities for foreign goods and services.

One positive caveat is that like younger Chinese, older Chinese are becoming more aware of, interested in, and proactive about their health and are choosing products for health reasons. Products meeting these needs are often imported as they are usually trusted to be safer. Emphasizing this point from the younger to older Chinese is pragmatic but these are two different demographics that vary not only by age, but also by geographical location and a number of other factors.  For example, Mintel research found that 96% of Shanghainese 55 and older planned to eat more healthily compared to only 33% in Beijing.  That’s a huge variance and doing due diligence to fully understand your target market by both age and location will go a long way. If China Skinny can assist in market research or marketing execution be in touch today.

Localisation is an essential step for most businesses wanting to appeal to shoppers in China.  For some, it’s a new label and a China-optimised website.  For others, it’s taking the time to understand Chinese consumers’ unique needs, and developing products, services and marketing that cater for them.

There are many successful examples to learn from, such as Mondelez filling Oreo cookies with green tea-flavoured cream and Quaker adding lotus root starch to oats to appeal to Chinese taste and texture preferences.  A number of snack food brands create packaging and portion sizes to cater for Chinese workers’ love of sharing.  Unlike in America or France, pharmacy shelves in China are lined with face whitening and pollution-protecting moisturisers.

The need for localisation spans far deeper than the obvious FMCG categories.  Car makers provide extra leg room in the back for the high portion of China’s car owners who don’t drive their own cars. Apple’s large iPhone 6 Plus screens was in response to Chinese preferences.  Hotels around the world now offer congee for breakfast and beam CCTV into rooms to cater for increasing numbers of Chinese guests. 

One of the more interesting examples of localization was developed recently by some Chinese scientists in Shaanxi province – hoping to appeal to China’s nationwide obsession with healthy eating, while maintaining a protein-rich diet. The scientists successfully bred cows with new genes that will produce steaks that are rich in omega-3 acids, typically associated with fish.

When thinking about localisation, it’s worth noting that it is often not as simple as creating goods and communications that will appeal in China – a one-size-fits-all approach is better than nothing, but it can be greatly enhanced by meeting varying needs across city tiers and regions.  Starbuck’s Chilli Mocha has created much buzz in Chongqing, but gets little airtime in Shanghai.  Skincare customers in Beijing are buying for extreme dry conditions, whereas purchases are to combat the high humidity in Guangzhou.  Travellers in Tier 1 cities are more likely to be independent and experience-focused than the less confident Tier 3 tourists.  And each of those regions have unique cultural traits and will respond to different communication strategies.

While localisation can often make products and services more appealing to Chinese consumers, they shouldn’t be altered so much that they lose touch with their core value and heritage, which is often what attracts Chinese consumers to foreign products in the first place.  It comes back to understanding what is and isn’t important to your target Chinese customers and regions – China Skinny can help with thatGo to Page 2 to see this week’s China news and highlights.

After a strong start, bringing the world the compass, gunpowder, paper, printing, loo paper and arguably football, many would liken China’s recent innovation scene to the Gobi Desert.  But scratching the surface a little provides a glimpse of the types of innovations we can expect to see coming from the Mainland over the next few decades, particularly in the consumer tech segment.

Ironically, it’s China’s ability to copy technology and reproduce it cheaply that is assisting with this innovation.  The art of reverse-engineering hardware and software is creating an army of engineers with an intricate understanding of technology.  It’s also brought down the cost of a fully-featured smartphone to well under $100 – within the realm of almost every Chinese consumer.

One only needs adoption from a small portion of China’s 527 million Internet-connected smartphones to make an innovation feasible. That’s created a slew of young and hungry engineers dreaming of creating the next Tencent or Alibaba, or selling out to them and buying orange Lamborghinis, waterfront homes in Vancouver and trips to the South Pole.

Virtually every middle class Chinese consumer now carries a smartphone wherever they go.  With 75% of them using their device to research products before buying them in store and increasingly on their mobile, it has opened up a world of opportunities for Online-to-Offline (O2O) integration.  We’ve already seen some world-first O2O innovations come from companies like Alibaba and Tencent, but this is just the tip of the iceberg.

Dalian Wanda Group, the mega property conglomerate, has teamed up with Tencent and Baidu to create O2O initiatives that they hope will challenge Alibaba’s digital retail throne.  In June, China’s biggest apartment developer Vanke announced it was teaming up with Baidu to build ‘intelligent’ malls. It’s likely we’ll see some globally significant innovations come from these partnerships.  Whereas the US is the innovation heartland for tech, China may be the country that revolutionises the way technology integrates into your shopping.

Unlike the US, where big brick and mortar retailers are leading the O2O charge, China’s big tech firms are the main players. In the US, the top-100 retailers accounted for 57% of retail sales in 2012, whereas in China’s fragmented market, the top-100 accounted for just 9%.  This means that few physical retailers have the scale to establish a national standard O2O platform. With tech companies leading the way, they are not limited to just selling their products, creating less barriers for innovation.  It will be interesting times ahead!

For our Australasian readers, and anyone else looking for a good excuse to get downunder, China Skinny’s Mark Tanner will be back at this year’s China Digital Conference in Brisbane, Melbourne and Sydney on 20-24 October.  One of the topics he’ll be covering is the opportunity from O2O integration. Last year’s event was excellent, and this year is looking to be even better.  More details here.

Consumers,: Chinese Consumers

These Men May Revolutionize How You Shop. There’s a Reason They’re All Chinese: Online to Offline (O2O) retail is touted as “the biggest cake in eCommerce” by Chinese billionaire Wang Jianlin.

The Importance of Low Income Chinese Consumers: Spending by low-middle income Chinese consumers is expected to double between 2013 and 2020, from around $2 trillion to $4 trillion according to Accenture. Overall consumer spending is forecast to grow from $3 trillion in 2013 to almost $11 trillion in 2023 according to IHS.

Sex in China: An Interview with Li Yinhe: Wages for women in China reached 85% of mens’ between 1950-79, however it is now 70%. On the brighter side, the portion of women at university has grown from 25% in the 1980s to 51% today. State media portrayal of AIDs, pornography and prostitution is changing in China according to Li.

Majority of Chinese Expect War With Japan by 2020, Poll Finds: A concerning 53% of Chinese and 29% of Japanese expect a war between the two countries by 2020 according to a poll by China Daily and Genron. 93% of Japanese reported having a negative impression of China, with 87% of Chinese having bad feelings about Japan – slightly better than last year. It’s not helping Toyota’s sales in China.

China’s Millionaire Ranks Rise By 3.8 Percent: The number of US$ millionaires in China has grown faster than last year to 1,090,000 according to Hurun. 67,000 have a net worth of more than ¥100 million ($16.3m). Beijing rules the roost with 192,000 millionaires, followed by Shanghai with 159,000, Shenzhen 50,400, Guangzhou 45,900 and Hanghzou 34,300 – likely to go up with the imminent Alibaba IPO.

Online: Internet, Mobile, Social Media & eCommerce

All About Alibaba: What Brands Need To Know: Insights into the world’s biggest shopping mall, from the fake dilemma to its ginormous advertising ecosystem.

Chinese Consumers Strong Intention for Online Purchase with Higher Buying Rates Than Browsing: Chinese consumers go online with the intention to buy rather than just to browse for goods in over half of 22 categories researched by Nielsen. Clothing, airline tickets, paper books and cosmetics has many more buyers than browsers. 86% of online shoppers read online reviews before making a purchase decision.

Apple Fans in China Disappointed: No iPhone 6 for Now: After all the launch event buzz around the iPhone 6, Apple’s new smartphone won’t go on sale in China on 19 September as expected. No reason has been given for the delay, but it is believed that China’s telecommunications regulator has not granted Apple a permit allowing it to sell the iPhone 6 in the Mainland. Plenty of links are up on Taobao allowing purchases from Hong Kong and other markets launching this week. UnionPay is said to be partnering with Apple to localise its Apple Pay system for China.

Canadian Embassy’s Social Media ‘Fans’ in China Mostly Zombies: Just 12.9% of Canada’s Beijing Embassy’s 1.1 million Weibo followers are estimated to be real. Canada claims to have never bought a follower, and some believe the zombies may have been gifted by Weibo itself. By comparison, 45.8% of the US Embassy’s 900,000 followers are real as are 51.2% of Japan’s 289,000 followers.

Weibo Sold Over 60,000 Cars Worth $1.5B within 14 Days: Meanwhile, Weibo’s real followers are busy buying cars on the platform. 30 brands, including Mercedes and BMW, were selling 100 models below market price to help cover a traditionally low season in the auto world. Weibo offered limited time offers, cash rebates and a lucky draw to attract almost 17 million visitors to its promotional page.

Premium Food & Beverage

A Bordeaux Importer Selling Wine in China: Insights from a wine importer from Bordeaux covering Northern China. Since 2012, wine demand has shifted from expensive to cheaper wines, ideally less than ¥100 per bottle. Distributor margins as high as 200-300% charged in 2012 are also coming down as demand softens. Tastes and price points vary across region, with white wine being much more popular in Guangzhou than Beijing. Exports of Bordeaux wine fell 28% in the first half of 2014. French wines were down 7%, but buoyed a little by growth in Champagne exports.

Overseas Chinese Tourists

Five Trends Defining the New Chinese Outbound Traveller: The Chinese traveller is rapidly changing, becoming more independent, sophisticated, experimental, emulative and online.

UK to Refund Chinese Tourist Visas: In a bid to attract more Chinese tourists, the UK Government plans to refund up to 25,000 visas. Curiously, they’re targeting the organised tour groups, and not the independent tourists who spread their spending around more British businesses. £1.6 million ($2.6 million) will be spent on marketing Britain in China.

Precious Little Emperors

Want to Raise a Kid in Hong Kong? You’ll Need $700,000: The average cost of raising a child in HK ranges from US$700K to US$890,000 if you throw in the popular tertiary education abroad. The frightening costs are leading to young couples raising cats and dogs instead. Birth rates have dropped from 2.0 per women in 1980 to 1.3 in 2012, lower than China’s one-child policy influenced 1.7. Are soaring child-raising costs in the Mainland likely to lead to similar trends?

Recreation and Sports & Fitness

Monitoring Fitness a Major Sales Area for Wearable Devices: Recording health data is a priority for Chinese consumers using activity tracking on wearable devices, whereas fitness monitoring is the most important application in the West. 19% of Chinese consider compatibility as the most important factor in choosing a device, 17% cite accuracy and 16% brand. China was the only country in the study that did not consider price to be the most important factor when buying a smart watch.

Lululemon Targets Lucrative Chinese Yoga Market in Global Expansion Plan: 10 million people are estimated to practice Yoga in China.

Wellness, Health

Chinese Drug Company Wins Approval to Make Generic Version of Viagra: 50 million Chinese men suffer from sexual dysfunction, contributing to a ¥1.7 billion ($277 million) a year market for remedies. Worsening performance from pollution and the aging population could grow the market to as much as ¥5 billion ($810 million) by 2018. Pfizer’s patent on Viagra expired in China in May, and the Chinese Government has granted its first license to a local manufacturer. The new competitor expects to price its “Jin Ge” (Golden Dagger-Ax) pills at ¥30-¥50 ($4.89-$8.15) versus Viagra’s current ¥90 ($14.70). A local company beat Pfizer to registering the China trademark for its most-commonly used Chinese name “Wei Ge”.

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.

Every other week, there’s a report of a new WeChat feature allowing businesses to advertise or sell to the 400 million+ active monthly users on the service. 

While WeChat’s transition from a communication tool to a transactional one won’t happen over night, and sales of products are currently only a fraction of platforms like Tmall, there are plenty of signs that Chinese consumers are warming to the idea of shopping through their favourite app. 

In January this year, more than 20 million users received a virtual hongbao as part of WeChat’s innovative Chinese New Year campaign.  The following month, 21 million taxi rides were booked through WeChat. In the first quarter of 2014, WeChat contributed a sizable share of the $2.95 billion that Tencent earned from its games.  The service’s popularity has fostered an industry of developers creating apps just for WeChat and China Skinny works with businesses that are very happily selling on the service. 

But WeChat has to tread carefully.  Much of Weibo’s fall from favour can be attributed to its news feeds being clogged with spam and advertisements (which it has recently tried to address).  WeChat’s one-to-one personal nature makes it even more important to keep things relevant to its users. 

WeChat has had the luxury of learning from Weibo and has done a better job of separating businesses from personal accounts.  But commerce’s creep into the app is blurring the boundaries and will be an ongoing balancing act.  Last month, WeChat deleted 20 million messages and 250,000 accounts related to the sex-trade.  This month, there’s been reports of fake accounts Photoshopping ‘Verified’ symbols onto their WeChat logos, burying the real accounts down the list.

Above everything else, WeChat needs to keep its users happy and safe from the scammers.  And equally important, it needs to keep Beijing satisfied. There are increasing reports from state media about misdemeanours on WeChat, and earlier this month the Government went as far as amending its Food Safety Law to ban personal WeChat accounts from selling food.  It will be an interesting time ahead for the service.

We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

Chinese Tycoon Guo Copying Buffett Rises From Bread to Club MedChina’s eighth richest man Guo Guangchang has made his billions from investing in assets that China’s growing middle class can buy to upgrade their lives: health, travel, leisure, education and the Internet.

5 Key Takeaways on Global Views of the U.S. and ChinaResearch from Pew has found that 49% of people globally have a favourable opinion of China, versus 65% of the USA. 49% believe China has/will replace the USA as the world’s leading superpower, 34% think this will never happen.

The Flow of ThingsAlthough Shanghai has the world’s busiest container port, the third-biggest handler of air cargo, more than 200,000 kilometres of expressways and railways and cashed-up eCommerce players trying to fix it, China’s logistics is still far from world class. While the U.S. has 7,000 trucking operators, China has 700,000, most of them one-man bands. The top 20 firms barely account for 2% of the market.

Online: Internet, eCommerce, Mobile & Social Media

WeChat First: a New Frontier in China Beyond Android and iOSWeChat is turning into an industry of its own, with two of the nine startups in China’s premier accelerator programme focusing solely on developing apps for WeChat.

Weibo Started News Feeds Filtering to Improve QualityWeibo is looking to make its news feeds more relevant with a Facebook-style filter that boosts posts that get higher engagement and reduces airtime for low-engagement posts, spam and auto-published posts.

The Power of Women in China’s Booming eCommerce MarketIn 2013, 60% of Chinese online shoppers spent more than ¥3,000 ($454) online, with the majority being female. 50% more ladies than men spent over ¥100,000 ($16,118) last year. Females tend to view ecommerce as a fun way to entertain themselves and relax. On the subject of profiling, mobile commerce penetration rates are highest in far flung locations such as Tibet, Inner Mongolia and Qinghai.

Rough Week for Apple in China: Court Case Tanks, Media Brands it a National Security ThreatCCTV slammed Apple again earlier this month for its location-tracking function, saying it constitutes a national security threat.  Apple has since refuted this claim. The company also lost its claim against China’s Patent Review Committee that a Shanghai-based tech company’s Siri-like chat robot patent was invalid.  It will be appealing the decision.

Premium Food & Beverage

Food Vendors Using Weibo and WeChat Warned ‘You Will Be Held Responsible for Food Safety’Beijing has made a draft amendment to the Food Safety Law, promising tougher rules on food production, sales and regulation. WeChat and Weibo personal accounts are not considered to be ‘trading platforms’ and will be banned from selling food. Customers would be entitled to claim compensations from food websites if they failed to provide authentic information.

China’s Wine Market Shifts Toward Entry LevelOffline, wine accounts for 5% of the value of alcohol sold in China. Online, it makes up 34%. Consumers are especially price conscious online, but even offline few are drinking the ¥5,000 ($805) bottles any more.

Pizza Express sold to Chinese firm Hony Capital for $1.54 billionChinese investors have paid big bucks for another British household food brand, Pizza Express, as Chinese consumers demand more Western-style food and beverage. The investor plans to expand the chain in both the UK and China.

Fast-Food Chains Reinvent Themselves as Chinese Tastes EvolveIn addition to fast food chains ramping up their menus, their restaurant decor is being given a makeover. One of the first examples is a KFC in Beijing, which has lost the bold red and white colour scheme, replaced with beige walls, modern paintings, wooden chairs and potted plants, with the aim of creating a relaxing environment.

China Food Scandal Drags in Starbucks, Burger King and McNuggets in Japan: Let’s hope the beige walls aren’t in vain following the latest exposé into foreign fast food chains serving expired meat and meat from the floor. McDonalds, Starbucks, Pizza Hut, Papa Johns, Burger King and even Dicos were all supplied questionable meat by Shanghai Husi, a unit of a US company. Fast food restaurant chains in Japan and Thailand have also been affected.

Overseas Chinese Tourists

G’Day Mate: Australians the Most Welcoming to Chinese TouristsAustralia has been rated as the most welcoming country for Chinese tourists and top of the wish list for places to visit. France and New Zealand also scored highly on both counts. For tourist operators hoping to get repeat visitors, you may want to think again.

Chinese Tourists Traveling More but Less SatisfiedAn estimated 3.7 billion trips are expected to be made by Chinese this year, 1.2 billion of them overseas. 54 million tourists travelled overseas in the first 6-months of the year, up 18% on last year, with spending increasing 20% to $1,086 a day excluding accommodation costs. But they’re not all happy campers, both domestically and overseas.

Schools and Education

A Majority of Chinese Online Education Consumers Spend Less than US$8039% of Chinese consumers surveyed last November claimed to have taken a course online, with 54% planning to in the future. 23% spent more than ¥500 ($81), with the most popular online courses being vocational training (14.3%) and English (8.7%).

Banking, Property

Chinese Lead $92 Billion of U.S. Home Sales to ForeignersChinese buyers spent $22 billion on homes in the USA for the 12-months through March, up 72% on a year earlier. A year ago, they bought 12% of houses sold to foreigners.  This year it was 16%, accounting for 24% of total value.

Cars and Auto

Auto Expo Reveals Close Competition in Chinese MarketDiscounts on cars are becoming an increasingly important factor in the purchasing decisions for Chinese consumers. 11 million automobiles were manufactured in China during the first half of 2014, up 9.6% from a year earlier. 50% more new energy vehicles were manufactured – a total of 20,962 units, in line with the whopping 20,477 sold.

Innovation to Keep Carmakers TickingChinese consumers may not be taking to new energy vehicles, but SUVs are the flavour of the month, with more than half of respondents in a Nielsen survey planning to purchase one – up from the current 20% owned. 40% aspire to own a ‘connected car’. The number having a preference for Chinese auto brands grew from 11% to 13%. American cars had the biggest growth in preference, rising from 6% to 16%.

That’s another week and another Skinny!  On the to-dos this week, why not contact China Skinny to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.

Over the past couple of years, there’s been no shortage of Western brands in the Chinese Government’s dog box. Some of the market’s highest profile foreign players such as Apple, KFC, Starbucks, Nike, P&G, European carmakers and milk powder brands have been singled out for their ‘misdemeanours’ by state-run media.

Although Chinese consumers aren’t always trusting of what they see and hear in the all-present state media, there’s no disputing the negative effect the bad press can have on sales.

Last week, another well-known achiever was singled out by the state media, this time it wasn’t a foreign brand, but the local success story WeChat. People’s Daily and a slew of other local rags criticized WeChat for not being as “pure” as before.

In the past, almost all of the coverage of WeChat in China’s state media has been unequivocal praise, so it will be interesting to observe if this criticism continues.  The negative press for Tencent won’t do any harm for its most formidable competitor, Alibaba, so close to its IPO, and the day before Tencent announced that more WeChat accounts can sell goods online.

WeChat has been treading a relatively fine line in China. Although the Government works closely with Tencent to track inappropriate content, the network’s closed nature can make it more difficult to identify and suspend communications than the open platforms such as Weibo. Other features such as WeChat’s QR-scanning mobile payments have been suspended following lobbying from state-run banks. The service has also cannibalised the state-run telecommunication companies’ revenue streams.

There is no shortage of Chinese tech companies that have had to toe the line for not aligning with the Government mandate. Negative press is often followed by new laws. China’s successful taxi apps, which skirted around the state taxi regulation, have had all sorts of rules imposed. Laws threatening jail for spreading rumours on Weibo also affected usage on the network. WeChat has already reduced the maximum number of friends allowed on a personal account to 5,000, and it’s likely there’ll be other new rules imposed.  We can be certain that Tencent will be working especially close with the Government right now, as anyone operating on scale in China should be.

We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

China Online Spending Power UnmaskedChina’s retail spending for the first four months of 2014 were up 12% from a year ago. Online shopping grew at 52%, with growth expected to continue at 20-30% over the next 3-5 years. China’s per-capita retail floor space was 0.6 square meters in 2013, compared with 2.6 in the USA, 1.3 in the UK and 1.3 in Japan.

Consumers’ Outlook Brightens in MayWestpac Bank’s latest Chinese consumer sentiment indicators shows rising confidence as personal finance and job conditions pick up. The measure rose to 121.2 in May from 117.3 in April. Similarly, Nielsen’s Chinese consumer confidence index remains at a record high for the first quarter. 

Wildlife Consumption and Conservation Awareness in China: a Long Way to Go52.7 % of Chinese agreed that wildlife should not be consumed, compared to 42.7 % in 2004. Nevertheless, the proportion of respondents who had consumed wildlife only decreased slightly from 31.3 % down to 29.6 %

Online: Internet, Mobile, Social Media & eCommerce

Tencent Criticized by China State Media as Some Accounts LimitedInteresting coverage in China’s state media that isn’t singing WeChat’s praises.

Top Chinese Messaging App Makes Big eCommerce Leap with Opening of WeChat StoresFollowing a trial with major brands and retailers, verified service accounts can now set up stores on WeChat with transactions processed through the WeChat Payment platform.

Weibo CEO: Clutter is Good for Us, and Microblogging Can Thrive Alongside Messaging AppsWeibo knows it can’t compete with WeChat head-on for communications, so it is focused on challenging the traditional media channels for news, information and gossip. Weibo sees key opportunities coming from the integration with Alibaba, adding value for its users through music, video and games and attracting new users from China’s lower-tier cities and rural areas.

Crocodile on the Yangtze: An Insiders Look at Alibaba16 min vid interviewing former Alibaba VP, Porter Erisman about his Alibaba documentary. The biggest lesson from his time with Alibaba was the importance of localising the Internet, and not just the advertising or packaging. Some great footage of Jack Ma belting out the Lion King. China Skinny was at the Yellow Dragon Stadium for Taobao’s 10th birthday celebrations last May and we can attest that Jack Ma is quite the performer in person.

Wellness, Health & Beauty

Estee Lauder First Day Tmall Sales Data LeakedEstee Lauder launched its official Tmall store on 21 May, and within 24 hours had clocked 7,941 transactions averaging ¥339 ($54). The day’s takings totalled ¥2.7 million ($430,000), more than the average offline store does in a month.

One in Every Two Cigarettes Will Be Smoked by Chinese Consumers by 2018Of the ten biggest markets for cigarettes, China, Indonesia and Vietnam are the only ones not in decline. Their increase in volume will more than offset the declines in the other markets, adding a combined 60 billion cigarettes in 2013.

In China, There’s Now a “Xiaomi of Condoms” Startup. And it Just Got $5M in FundingOnline condom brand Daxiang, meaning “big elephant”, has $5 million to spend on developing more features such as the one-handed application. It is planning to constantly launch new products based on user feedback. A trial is currently aiming to deliver condoms in a Beijing neighbourhood in under 45 minutes.

Overseas Chinese Tourists

Hong Kong Mulls Curbing Tourist Arrivals Amid DiscontentWhile most countries are falling over themselves to attract more Chinese tourists, Hong Kong is considering following Taiwan in restricting numbers. 75% of the city’s 54.3 million tourists in 2013 were mainlanders, who accounted for more than a third of the territory’s entire retail sales.

Premium Food & Beverage

Wine: New Roads to ChinaCase studies from Australian, French and German wine businesses approaching China in different ways.

Instruments and Music

Middle Class Status Symbols: Beyond Cars and WatchesPianos are becoming a new status symbol of wealthy Chinese families, partially because there is prestige associated with those who have homes large enough to house them. They are also an investment in a child’s future as talented young musicians have a greater chance of getting into the top universities. In Europe about 40% of Steinway grand pianos are bought for amateur player use, whereas it is over 65% in China.

Premium and Luxury

Economist: China Luxury Slowdown ‘Short Blip’ in Big PictureThe Economist Intelligence Unit is predicting a bright future for luxury goods in China given rising wealth and an appreciating RMB. The number of Chinese households earning more than $150,000 a year will grow from 384,000 currently to 10.3 million in 2030. By 2020, there will be 61 Chinese cities with more than 100,000 residents that have an income greater than ¥150,000 ($24,500) a year, up from just Beijing and Shanghai in 2012.

China: Luxury Fashion Still in DemandDaily search volumes for luxury brands on Baidu increased 36% between 2013 and 2014, with Chanel becoming the most searched-for brand. Fashion searches on mobile increased 110% versus 26% on desktops.  Mobile searches for jewellery were up 60%, versus 10% on desktops.

Kooky, Weird & Wonderful

The Sphinx: Didn’t the Egyptians think to Trademark it in China?China has just created one its most monumental fakes: a bogus $1.3 million Sphinx 50% taller than the original. On the subject of imitations, Starwood Hotels is opening a faux Bavarian castle in Dalian later this year.

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.

China’s pollution is one tough nut to crack.  Although the Government has pledged ¥1.7 trillion ($270 billion) for pollution control as part of the current Five Year Plan, it’s unlikely that more than 1% of urban Chinese will be breathing safe air any time soon.  Coal consumption grew 2.5% last year, increasingly wealthier consumers are using more electricity, and the Government is hopeful that of the 25 million+ vehicles expected to sell in 2015, 500,000 will be hybrid and electric – just 2% of all sales. 

The health effects of China’s pollution are sobering.  Lung cancer deaths grew 400% in three decades, asthma rates are up 40% in five years, and even infertility is on the rise.

Consumers are now making a stand with their wallets. 59% of Chinese consumers now consider environmental quality as important when buying food and beverages, boosting demand for imported food.  Air quality is a major factor in domestic Chinese tourists becoming increasingly less satisfied, contributing to more travellers heading abroad. And many of China’s brightest and wealthiest are leaving because of it.  When China Skinny did research into Chinese migrants in early-2013, we found education was the main reason for migrating, by far.  Just 12-months later, 80% of Chinese considering moving overseas cited pollution as the primary reason.

Big China problems such as pollution have traditionally been left to the Government to fix.  But imagine if 1.35 billion Chinese consumers really worked together to fix it as well. A good place to start would be the water given 90% of Chinese cities’ ground water is polluted, two thirds of it severely. 

Alibaba’s Jack Ma is hoping to harness the power China’s half a billion smartphone users to raise awareness of China’s water pollution, and create a massive database that can help pinpoint and ideally help fix trouble spots.  What a dude.  If anything could prompt Chinese consumers into action, smartphones would be it. Go to Page 2 to see this week’s China news and highlights.

Consumers, Chinese Consumers

A Billion Shoppers: China has about 200 buildings more than 250 metres high, more than four times America’s count. It also has the world’s biggest building, Chengdu’s Global Centre, complete with a 300-long indoor beach; a monument to the increasingly essential ingredient of China’s economic development: Consumption. The building is representative of the rising wealth in Western China. By the late 90s, GDP per capita in the West was around one-third of the fast-growing coastal Eastern China provinces, by 2012, it had recovered to more than half.

What Makes a Tier-2 City in China? Count the Starbucks: Higher-tier cities are generally considered more sophisticated and mature in their consumer tastes, but there is no set definition of what a Tier 2+ city is. Some suggest a good measure would be the number of Starbucks cafes.

No One Tops Chinese Consumers In Thirst For Brand Knowledge: Making Chinese consumers ‘curious’ about a brand can increase the likelihood of purchase by 58%, with 42% likely to talk to others about the brand. The article contains some dubious stats around Chinese smartphone and Internet usage, but the rest is interesting.

Home Shopping in China: Although they charge large commission, home shopping networks can be an effective way to reach Chinese consumers, with the industry growing 31% between 2011 and 2012 to ¥58 billion ($9.3 billion).

Almost 10,000 Divorces Each Day in China’s Breakup Boom: There were 3.1 million divorces in China in 2012, up 133% from the golden years of 2003. In bigger cities the rates are even higher, with a 65% jump in Beijing from 2011 to 2012. Extramarital affairs, domestic violence, and an inability to communicate, in addition to simplified laws are cited as the top reasons for untying the knot. No mention of the limitations on multiple home ownership as a reason, which anecdotally, is a sizeable contributor.

Pollution and Environment

Alibaba Recruits Users to Identify China’s Polluted Water: Jack Ma leads the battle against China’s water pollution calling on 500 million smartphone users for help. A great initiative using smartphones, water testing kits and some digital mapping will raise awareness, action, and possibly some eyebrows in Beijing.

Overseas Chinese Tourists

New Zealand to Vietnam: Where Chinese Tourists Feel Most Satisfied: New Zealand, United States, Canada, Australia and Singapore were rated as the destinations where Chinese tourists were most satisfied according to a survey by the Chinese Tourism Academy. Overall atmosphere, transportation and urban management in these countries got the highest marks, with travellers least satisfied with safety, poor Chinese language services and the cost of travel. Satisfaction from domestic travel is the lowest it’s been since 2009, with air quality a big factor.

A Chinese Travel Powerhouse in the Making?: China’s two online travel gorillas, Ctrip and Qunar, are in partnership talks as intensive price-based competition will require efficiencies. China’s online travel industry is expected to grow from ¥‎131.4 billion ($21 billion) in 2011 to ¥‎465 billion ($75 billion) by 2017. On the subject, WeChat adds flight booking to its feature list.

Online: Internet & Social Media

China Social Sharing Report in 2013: WeChat friends, WeChat Moments and Sina Weibo accounted for more than two thirds of social shares in China last year – 25.6%, 23.4% and 19.2% respectively.

Jesus More Popular Than Mao on Weibo: Although it isn’t always easy to talk about religion on Chinese social media, Jesus has yielded over 18 million mentions. Officially, the Government estimates that there are 25 million Christians in China, however outside observers believe the number could be closer to 60 million.

Premium Food & Beverage

Fake Duck Blood Investigation Leads to More Chinese Consumer Anger: Sacred duck blood, faked and laced with artificial additives. Yet another food scandal in China affecting consumers’ perception of local produce.

The 4Ps and Tmall’s New Zealand Seafood Promotion: Some relevant lessons about Tmall promotions, not just applicable to food.

McDonald’s to Give China Restaurants a Makeover: McDonalds is overhauling a number of its restaurants in bigger cities using a local designer. It is also launching an advertising campaign that focuses on Chinese aspirations and has signed up LeBron James for China-based commercials later this year.

Banking, Banking & Investments

China Enters a New Era of Consumption: Just 13% of Chinese have ever held a loan according to a Nielsen survey. The main reasons consumers aren’t borrowing is because they “don’t like the feeling of carrying debt” and high interest rates.

Chinese Citizens Have Their Eyes on the Bubble: Chinese consumers big purchases are often influenced by anticipated Government policy. Beijingers have been known to buy two cars to get around potential every-other-day-road-space-rationing. Investors have been buying multiple apartments in anticipation of future ownership limitations – helping to drive the per capita housing area from 9 to 32 metres in 35 years.

Premium and Luxury

Selling Luxury Online in China: 27 min vid: Chinese luxury consumers are much more aware of worldwide pricing of luxury goods through travel and the web, so the price online in China is likely to be more expensive than abroad, even when discounted.  This means discounted prices aren’t always a good option for luxury online. Finding unique and differentiated products online has strong appeal. Reverse logistics, enabling simple return of products is almost as important as normal delivery in sales.

Kooky, Weird & Wonderful

Fun With Baidu Autofill: “Eating Sperm Can Lead To What?”: Another interesting insight into Baidu’s autofill, and what appears when someone types the character for ‘eat’. Does it really make one pretty?

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.

Welcome to this week's skinny on China. The Chinese have enjoyed a tipple for more than 5,000 years. Baijiu, the white spirit distilled from sorghum or rice, has been the mainstay of many festive evenings in China.  Following the arrival of the Germans in the late 1800s, beer consumption has increased at such a rate, China is now the world's largest beer market. There was once a time, when China's borders were pretty well closed, when Tsingdao beers accounted for more than 90% of China's total exports; predominantly supplying Chinese restaurants housing thirsty Chinese expats around the world.

Fermented grapes aren't yet consumed with the same enthusiasm as baijiu or beer. Just 1 in 70 Chinese consumers are currently wine drinkers, but it's growing as Chinese tastes and lifestyles become increasingly western. This week the Skinny is swimming in news, views and advice about wine in China. For those with other interests, we've also got the skinny on wooing many of the other 69/70 Chinese consumers. Hopefully it won't make you too thirsty. Enjoy!

Chinese consumers Chinese Consumers

Luring China’s Little Emperors: McKinsey's 15 minute podcast on luring China's younger consumers: about 14% of the market but a big spending subset with 30% to 35% loyal to one brand (versus 20% in China) – good ones to lure.

CCTV's Ad Haul Tops Forecasts: CCTV's prepaid ad spend increases more than expected, up 11% from last year- an indicator of the confidence in China's domestic consumer market. Retail sales growth of 14.2% in Sep and 14.5% in Oct from a year earlier, undoubtedly contributed to the confidence.

What do Chinese Consumers Want? Not Barbie: The old Barbie-China-Failure story has reared its head again. How could they resist her beauty? Some good general pointers on Chinese consumers.

Rabobank: Are Brands too Late to go into China?: Is it too late to break into China if you're not already? Not according to Rabobank, especially in the food and beverage sector.

Chinese food and beverage Food & Beverage

China's Wine Consumers – Research: Chinese wine drinkers estimated at 19 million. That's just 1 in every 70 people, so plenty of room for growth. The prestige seekers who just sip Bordeaux and Burgundy are picked to have peaked with more adventurous, who are more likely to drink other European and New World wines, on the rise.

Where Is China's Wine Market Going?: Insights into the Chinese wine industry from the expert CEO of ASC Fine Wines including the importance of good people, Government & knowing China.

Louis Vuitton Descendant Launches Wine for Chinese Consumer: Will Chinese consumers take to Louis Vuitton wine, like they did to their bags? It's aimed at the Chinese palate favoring "fruit-driven notes and softer tannins in red wines".

Nestle Moves to Congee from KitKat for Chinese Palates: "In China, you need Chinese people to develop products for the local market." – Nestle and Pepsi Co both set up research centers in China to develop products that truly resonate with Chinese palettes and use Chinese ingredients.

Starbucks in China Plays to Local Tastes: "Like Nestle and Pepsi Co, Starbucks has also opened a design, research and development centre in China, to help localise their products. Their focus is not just about appealing to Chinese customer tastes and lifestyles (sweeter drinks and more places to sit down), but also Chinese staff for retention by inviting parents to hear from managers who've worked up the career ladder. Starbucks sales grew 52% year on year in China.

Chinese Internet Internet

5 Reasons Why You Should Sell Online in China and How Best to Do It: Excellent motivations for selling goods online in China and some good tips on how to do it. Our view.

Chinese auto Automobiles

China Car Market to Expand 8% on SUV, Small-City Demand: China is getting all big & American on us – SUVs are picked to be fastest growing car segment, picked to grow 8% a year until 2020. 'Smaller' cities expected to account for 60% of sales, up from 40% currently. That'll make biking fun.

Analysis: China Car Market may Require Two Fords: Ford is looking at a separate strategy for China, deviating from the current 'one-Ford' strategy – I'm amazed it's taken this long. Ford's cheapest car, the Feista, starts at $12,300 – whereas around 20% of new cars sold in China this year were less than $12,000

Chinese adult entertainment Adult

China's Toys for Grownups Market to be Worth 40bn RMB by 2014: Chinese art, much of what was lost during the cultural revolution, is not the only formerly-taboo category making a comeback in China.

That's the skinny for the week!

If you've missed earlier news or need to learn more, there's a library of information about Chinese consumers in prior China Skinny Weeklys right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.