A quick quiz to start this week’s Skinny: What is the most valuable marketing company in the world? Most people probably couldn’t care less, but there are a few folk in the industry who would say WPP. Whilst the company hasn’t had a great year, it remains the largest marketing company in the world measured by billings and revenue. The London-based conglomerate has a market cap of $18.9 billion, putting them ahead of the other well-known marketing companies such as Omnicom at $15.3 billion, Publicis at $12.6 billion and Interpublic at $8.3 billion.
Before using your guess on the familiar marketing giants, you may want to consider the lesser-known companies, like Focus Media. Last week Alibaba acquired a 10.32% stake in the company for $2.23 billion, which as of yesterday had a market cap of ¥162 billion ($23.8 billion). Focus Media is the company behind many of the digital advertising screens in streets, subways and elevators across 300 Chinese cities.
With the acquisition, Alibaba plans to collaborate with Focus to merge offline media and digital marketing, slated as an upgrade to “New Marketing” which will support the growth of New Retail across all sectors. Focus has ambitious plans to soon control 5 million terminals covering 500 Chinese cities and reaching 500 million consumers.
Powering the evolution of Focus’s screens will be Alibaba’s vast banks of consumer data from the more than 550 million online shoppers on its platforms, 520 million AliPay users, and potentially the hundreds of millions watching Youku videos, navigating with AutoNavi maps, taking Didi taxis, browsing on UCWeb, ordering food on Ele.me, cycling on Ofo, using Weibo along with the more than 100 other businesses Alibaba owns a share in. When Alibaba figures out how to truly integrate and harness its massive data, there will be few stones unturned in consumer knowledge that can help direct what gets displayed on advertising screens or whatever they evolve to. Throw that in with their facial recognition technologies and you’ll have Minority Report-type advertising folks!
Alibaba’s investment into Focus Media will support its irrepressible expansion into physical retail and further strengthen its presence across the whole customer journey. What does it mean for companies such as the WPPs and Omnicoms of the world? The continued structural shift in marketing and advertising will force them to evolve beyond their traditional services.
One thing we have found at the Skinny is that while big data is valuable in planning, marketing and product development, it is a complement, rather than a replacement, to human creativity for determining how to best push consumers’ emotional buttons. It is likely to be a while before any machine can do that. Based on the early stage talks involving Alibaba and Tencent to buy a stake in WPP China, the big tech companies may be thinking so too. Go to Page 2 to see this week’s China news and highlights.
In April 2016, pundits were predicting the demise of China’s cross border ecommerce channel after hefty new taxes were suddenly introduced on all online cross border trade. Fortunately, some slick lobbying from Alibaba and JD saw the new tax rates ‘postponed’ the following month and good old cross border was soon back on track.
Shaking off the scare of ’16, eMarketer estimated China’s online consumers spent $100.2 billion on buying products cross border last year. This is more than ten times China’s General Administration of Customs’ value, which announced last month that cross border imports growth rocketed 116.4% in 2017 to ¥59.6 billion ($9.4 billion).
A 2017 Tmall Global Annual Consumers Report published last week (in Chinese) by Tmall Global and CBNData, forecasted the 2017 figure at around $68 billion. Enormous data disparities are not unusual in China, which is why China Skinny typically cross-references a number of sources. From what we’ve seen, the cross border figure is around the $60-75 billion mark. Custom’s low numbers are likely to indicate that many products could be slipping through customs unnoticed, values may be fudged by exporters, or there is some dubious bookkeeping at the borders.
Getting back to Tmall Global’s report, an interesting insight was consumers born in the 1990s are the biggest spenders on cross border products. Last year they accounted for nearly 50% of Tmall Global users and 40% of total sales. The three biggest motivations driving them to buy imported products are trying new things, aspiring to own luxury items and anxiety over aging.
Beauty products, food & supplements and mother and baby products were the top selling categories on Tmall Global, helped by the 60% of households – and almost 70% in high tier cities – who purchased FMCG products online last year.
The top countries selling products on Tmall Global were Japan (baby & beauty products), USA (health, baby, bags), Australia (health, baby, milk powder), Germany (milk powder, dietary & nutrition, cups & kettles) and Korea (beauty). One positive development is that shoppers are becoming more adventurous, with the purchases from outside the top-3 countries breaking 50% for the first time. In 2017 there were 16,400 products from 68 countries on Tmall Global alone.
Yet behind the pomp and pageantry from ecommerce platforms, not everything smells quite so sweet. Cross border is heralded as providing certainty of authentic products direct from a trusted overseas source, but 40% of cosmetics products purchased from cross border platforms on Singles’ Day were fake according to a consumer association report. The issue is clearly real given Alibaba’s recent announcement to push into Blockchain for the channel.
On the subject of ecommerce, for our Shanghai-based readers China Skinny’s Mark Tanner will be joining an esteemed line-up of speakers at the Clavis Insight 2018 APAC eCommerce Accelerator Summit on March 28. The event is for brands currently selling online in China and looking to up their game, it is a complementary full-day event with limited spaces remaining. More information here. Go to Page 2 to see this week’s China news and highlights.
Advertising on WeChat Moments can get your brand into Chinese consumers’ most personal of feeds, yet it is not cheap, with the CPM (cost per thousand impressions) north of $20 in bigger cities, with a 20% premium on short video ads.
With costs like that, brands really want to make sure their ads resonate with Chinese consumers to ensure they’re not spending a whole lot of money on campaigns that return very little. In developing ads, it is important to understand one’s target market’s motivations and emotional buttons to push (China Skinny can assist), and to marry that up with learnings from the most popular ads.
Last month, WeChat launched a poll asking users to vote for their ‘Your Favorite WeChat Moments Ad’ in 2017 – incentivising participants with random red envelopes. Below are the top ads as chosen by more than 600,000 WeChat users casting 1,378,948 votes.
Ads are listed in alphabetical order by Chinese name – click on the ad image to see the full video version:
#Original is never finished
Launched on 15 August, using a short video with local and foreign celebrities including HK singer Eason Chan, Chinese visual artist Chen Man, and American model and TV personality Kendall Jenner. The ad linked to a longer video with the celebs explaining how they pushed themselves to keep original. Viewers were invited to follow the account at the conclusion of the video.
Launched on 8 June, Tourism Australia was one of two winners who used a static image with accompanying text that translated to ‘Let’s explore the coastline in Australia’. Clicking on the ad took the user to a stunning a 30s video with a voiceover from Australian actor Chris Hemsworth, AKA Thor. Viewers were invited to follow the account.
Launched on 29 August, the short video promoting the 2018 BMW X1 combined fun visuals of the car with strobe shots of beautiful scenery and outdoor activities. Clicking on the ad, viewers are shown a longer video and car features, with a link provided at the conclusion of the ad where viewers can link to the BMW website to make an appointment to test drive the X1.
Launched on 13 October, a short video used alluring pink hues and eye catching shots of lips with designs and letters drawn from the new Dior Addict lip tattoo, long-wear coloured tint. Viewers could click on a link in the ad to purchase the lipstick.
Launched 28th Feb, an image showed the Millennial ‘models’ for Spring & Summary fashion photography with the ad linking to a WeChat post that explaining story behind each of the photos from famous Italian street photographer Franco Pagetti.
Launched on 28 April, the ad was an image for a pair of fancy wedding shoes, leading to a WeChat post with embedded video introducing their customized wedding shoes for both bride and groom.
Launched on 23 June, a high-action short video utilized Transformers to announce the Brand Day for Hasbro’s Transformer toys on JD. Clicking on the ad, viewers were taken to a longer ad with embedded links to purchase toys with exclusive discounts.
Australia took out another of the top spots with this ad launching on 27 June. A short video showed that Trip Advisor takes you to view a different Australia with animal, coastal and undersea shots. Viewers who clicked on the ad were taken to a detailed video showing how the featured KOLs experience Australia differently. When the video concluded, viewers are encouraged to download the Trip Advisor app and visit Tourism Australia’s 360-degree visual map.
#Love is everywhere
Launched on 7 September, a short video showed what makes the passengers travelling on metros look up, encouraging people to care about the world and discover the beautiful things around you. Clicking on the ad takes viewers to a longer video which educates viewers about the work Tencent charity is doing such as wildlife protection, poverty reduction and education. Following the ad, readers can find out how they can participate in upcoming charity events.
Launched on the auspicious day of 8 August, a short video introduced Montblanc’s Summit smart watch marking the exclusive WeChat launch. Clicking on the would provide viewers a link to order the watch, with the first 10 customers also receiving a special gift from the Montblanc.
Key themes and learnings from the top WeChat Moments ads:
- Video resonates with WeChat users. Although it costs 20% more, it is much likely to be noticed and engaged. 7/10 of the top ads were short video, and nine of the ads linked to a longer video.
- Recognisable brands are most likely to resonate on WeChat Moments feeds – other brands will need a stunningly creative campaign for breakthrough
- The top brands all had beautiful imagery/video, which is a fortunate characteristic of the popular beauty, fashion and tourism categories
- Call to action was varied: purchase, book/reserve, download the app or just follow the WeChat account.
WeChat Moment ads and other Tencent advertising is likely to continue to become ever more relevant for brands as the platform evolves. In Q3 last year, advertising revenue grew 63%. There’s still plenty of room for growth when you consider Facebook makes 97% of its revenue from advertising versus just 17% at Tencent.
Late last year Tencent announced they would bring together their seven internal units such as WeChat, QQ, gaming and finance to offer smarter, more targeted advertising using better coordinated user data and profiling. This will only grow Moments advertising effectiveness for brands.
Glance across any Chinese park, restaurant or subway and it becomes quite clear that online video is one of the most popular channels in China. It is also one of the most dynamic. This is reflected by user numbers which has seen former market leader Youku-Tudou’s 325 million active monthly mobile users fall far behind market leaders Tencent Video and iQiyi with 457 million and 442 million respectively.
One of the interesting trends in online video is the paid subscribers. Whilst Chinese consumers have traditionally been used to getting much for free online (either by well-funded startups trying to acquire users or through pirated means), the masses are becoming increasingly prepared to pay for video content. A recent survey by China Netcasting Services Association found nearly 43% of online video users were paid subscribers to some form of video service – over a fifth more than last year. The main reasons are to get exclusive content and to skip advertisements. This represents the overall trend of a much-freer spending Chinese consumer who is prepared to pay a premium for things that will make their lives better.
For brands hoping to reach Chinese consumers, developing video content can be one of the richest and most engaging channels. There are a number of other possibilities for online video too – particularly for those who are prepared to spend. Advertising has long been an option, but it is about to get a lot more interesting on Tencent Video following the company’s announcement to bring together the wealth of data from its seven main business units. This will allow much deeper insights and targeted marketing – not just on Tencent Video, but WeChat and Tencent’s other apps.
As powerful as video advertising can be, KOLs can provide a more persuasive and seemingly authentic way to spread and amplify a message if done well. Although brands can drop significant budgets on KOLs, the return can be questionable on many campaigns as they don’t utilise KOLs’ channels as well as they could. Video blogging and related live streaming can be some of the most powerful channels where online influencers can bring your brand, products and services to life.
Some 470 million internet users in China follow these online influencers – 20.6% more than last year. 65.7% sought out videos with humorous and fun content from them. Videos through online ‘celebs’ can also help brands get to otherwise difficult-to-reach consumers, with 54.1% (257 million) of those followers living in third- or fourth-tier cities. Although those big name vloggers are mainly Chinese, there are a handful of Mandarin-speaking foreigners who are gathering quite a following.
A look at the formats for popular vlogs provides an insight into the overall psyche of Chinese consumers. Whereas vlogs in the West can be quite long, they are usually less than 2 minutes in China; representative of local consumers’ love of instant gratification and shorter attention spans for content. Many of these rules apply for other video formats that can be valuable in China’s market place, such as internal and B2B comms where video can be used to train staff, agents and retailers in an engaging format. Agencies such as China Skinny can ensure you maximise the online video opportunity.
On a slightly different topic, China Skinny is working with Westpac and the Australian Chamber of Commerce in Shanghai on the 2018 Westpac Australia-China Business Sentiment Survey. We’d encourage all of our readers who are Australian businesses working in, or with, China to participate in the Survey. The survey aims to provide a valuable insight into the health of the Australia-China economic relationship and provide you with a useful benchmarking tool to inform your business strategy. The collective view of Australian businesses will also help identifying areas that can be built upon and improved to assist Australian businesses in China. Click/tap here to participate in the 15-20 minute survey. We appreciate you taking the time to complete it! Go to Page 2 to see this week’s China news and highlights.
When you are just one out of a heaving mass of 1.4 billion, feeling special or unique is a treasured experience not often received. As China’s cities swell and lives become increasingly homogenised brands are finding ways to make their consumers feel that unique touch. Tailored communications, product add-ons and loyalty programmes are amongst the touchpoints which brands are personalising to engage the increasingly selective Chinese consumer.
Most successful personalisation initiatives are happening online where consumer behavioural data allows brands to cater to the unique tastes and habits of customers in real time.
Nevertheless, it is physical locations that lend themselves to the greatest gain from personalising the experience for consumers. With the rapid rise and subsequent disruption of ecommerce, physical retailers have been forced to soul search to understand their points of difference to compete with evermore savvy online channels. The most obvious area where bricks & mortar cannot be matched is the tactile experience that comes from authentic touching, feeling, smelling and physical social interaction that online alternatives are still a long way from matching, even with much-touted technologies such as virtual and augmented realities
Yet to maximise that experience, personalisation needs to be a component to ensure increasingly diverging preferences and needs are being met in bricks and mortar. The only tangible way to personalise en scale in the physical world is to incorporate that smartphone in every potential customer’s pocket or handbag. This allows brands to identify individuals, understand what they like and ensure their experience best meets that.
Providing such an experience effectively is no easy task, but even the basic foundation work is still not being done by most brands in China. For example, just 14% of fashion brands in China offer in-store product availability online, while 5% allow users to pick up online purchases in the store and none allow in-store returns of online purchases. Only 19% of fashion brands and 15% of watch and jewellery brands offer international locations on WeChat store locators. These services not only improve the customer experience, but also provide a great data source for consumer behaviour and lay a foundation to implement personalised services.
What makes China such a fertile ground for such initiatives is the infrastructure already in place to support them, in addition to a consumer who embraces it. This is represented by the two brands that topped China’s Brand Relevance Index – Alipay and WeChat who bridge the online and offline worlds better than anyone. Integrating the digital will only become a more important factor in the consumer world – building preference, advocacy and creating greater opportunities for meaningful personalisation for everything from supermarket shopping to driving a car. Agencies such as China Skinny can assist you to ensure you are making the most of the opportunity and are ahead of the curve.
One area that lends itself to more offline and online integration and personalisation is tourism. For our New Zealand readers in the tourism industry attending the Kiwi Link event in Foshan next week, China Skinny’s Mark Tanner looks forward to discussing this further. Please come and say ni hao if you’re there! Go to Page 2 to see this week’s China news and highlights.
This time last year bike lanes in China’s big cities were the realm of migrant workers, with the occasional expat or hipster local on a single speed pedalling among the peasant peloton. For many Chinese, bicycles were for poor people and a cold or sweaty reminder of when few could afford a car and cities had no subways. In Beijing, just 12.5% of residents cycled in 2015, versus 38.5% in 2000.
Thanks to investments of more than $200 million, technology advancements and widespread adoption of mobile add-ons such as payments, China’s bike-sharing schemes have changed the face of city streets. Bike lanes in cities like Shanghai and Beijing are unrecognisable from 12 months ago.
At least eight bike-sharing start-ups have come to the fore. Launching just eight months ago, Mobike already has four million monthly active users of its 100,000 bikes across five cities. Urban middle class Chinese in suits and Hello Kitty knits now ride among those migrant workers and foreigners, in streets that resemble a Copenhagen with Chinese characteristics.
The overnight adoption of cycling is a testament of just how open Chinese consumers are to new things, particularly when they conveniently fill a need or want, and are assisted by some sort of mobile tech.
Talk of the orange, yellow and other jelly bean-coloured bike sharing schemes seems like a fitting prelude to talk about what else is changing in China and trends for 2017, particularly in the marketing and sales space. Of all the years that China Skinny has been crystal ball gazing, 2017 is looking like the most exciting yet. Here are our top-8 predictions.
We’ll leave you with that to ponder as this will be our last Skinny for 2016. The China Skinny office will be open for the rest of the year so please get in touch if there is anything we can do to help grow your brand and sales in China. For our readers who are celebrating, we wish you the Merriest of Christmases, and a Happy New Year to all! Go to Page 2 to see this week’s China news and highlights.
An article in the Sydney Morning Herald last week highlighted some common misnomers about localisation and translation for China: After researching in China, an Australian vitamin brand found that their Mandarin-speaking Chief Science Officer would be most compelling speaking English in the brand’s promotional videos for the Mainland market.
For some, it may be a strange concept that communicating to the Chinese target market in Chinese can hurt sales. But it comes down to authenticity. If you are trying to promote yourself as an Australian brand, or from another English-speaking country, you appear to be the real thing if your communications are in English.
Similarly with packaging. If a brand’s labels are translated in Chinese, many consumers are less likely to associate the product with the positive attributes around that country of origin and will question how the Chinese supply chain has been involved. The less similar it looks to the same products in the supermarket of an item’s home country, the less Chinese consumers will trust it.
Notwithstanding, there are countless touch points where translating into Chinese is advantageous. Even though over 300 million claim to have English skills, it is rudimentary for many. And even fluent English speakers will instinctively turn to Chinese and be more comfortable in their native tongue. Chinese language is often preferred in the details, such as searching for facts on a website, or reading a visitor guide on holiday.
Whilst some videos look more authentic with spoken English and Chinese subtitles, there are many examples where videos in Chinese or with a Chinese speaker translating on the fly are hugely successful, such as Tmall’s streaming video service.
Getting the mix of English and Chinese language right, and in the correct places is just the start – localisation should be much more than just translating messaging word for word. Chinese consumers often have completely different buying behaviour and motivations which is best reflected in positioning and communications. And those motivations regularly differ from region to region. Go to Page 2 to see this week’s China news and highlights.
Keeping up with the dynamic Chinese consumer is essential for anyone selling in China, but it’s also a good idea to stay abreast of ever-changing regulations. We obviously need to comply with the laws, but also understanding the regulations’ nuances provides interesting insights into how Beijing wants to shape things, which affects almost every component of selling in China.
Many exporters are familiar with last month’s introduction of cross border and daigou regulations which provided further evidence of Beijing’s support for local products. In addition, there has been a string of recent introductions of new laws that foreign brands should be aware of. There’s the possible ¥1 million ($154K) fine for using superlatives in communications, such as the “highest”, “best” or “national level,” reminding brands to be humble when operating in China.
New food and beverage safety laws were launched last October in hope of addressing one of China’s most pertinent challenges – the lack of trust in food. The evolving rules will impact many exporters, covering everything from pre-imports to selling online.
In March this year we were again reminded how conservative China’s law makers remain, when they banned homosexuality, drinking and vengeance on television. Last month, new legislation prohibited reality TV from featuring celebrities’ kids, halting production of shows such as the uber-popular Daddy Where Are We Going, which has been used by international destinations New Zealand, Fiji and Western Australia to promote their attractions. Even the big budget Tang Dynasty drama was pulled and edited after it was considered that A-lister Fan Bingbing showed too much cleavage.
Trade shows haven’t been immune either, with female models in tight dresses and miniskirts banned from last year’s Shanghai Auto Show.
Whereas online has traditionally been less regulated than traditional channels, this is changing. New rules are constantly introduced by digital channels such as Tmall, WeChat and Youku which reflect direction from Beijing; the most recent ban on eating banana’s sexily on streaming video.
New online search engine regulations were also swiftly introduced this week, following the outcry from the death of a 21-year old student who had found ineffective treatment after clicking on a paid medical advertisement on Baidu. The tragedy may also further impact Chinese consumers’ search behaviour, which is already different from the West due to limited trust in Baidu results. #BringBackGoogle.
No product or service selling in China is immune to Beijing policy, so best to keep on top of it. Go to Page 2 to see this week’s China news and highlights.
Many people, including some of the big media houses, still refer to China’s population as 1.3 billion. This was true five years ago, but since 2012, the number of people living in China has been closer to 1.4 billion.
China’s latest census results were released last month, showing the population is edging even nearer to the 1.4 billion figure at 1,373,490,000. Between 2011 and 2016 that number grew 0.5% or 34 million, the slowest growth in recent history, but still similar to the population of Canada.
The census highlighted the concerning trend of China’s declining working-age folks. Those aged 15-59 dropped by 15 million, from 70.1% to 67.3% of the population at 925 million. Whereas the number of Chinese over-60 grew by almost 45 million people from 13.3% to 16.2% in just five years. Under-15 year-olds increased by 4.5 million from 2011 to 227 million. Whilst China’s aging population and the One-Child Policy haven’t helped birth rates, the portion of youth remains virtually unchanged at 16.5%.
China’s urban population rose 6.2% over the past five years to 767.5 million – 55.9% of the population, although migration growth is slowing.
Nevertheless, whether China has 1.3 or 1.4 billion people, the total population is not overly relevant for most brands selling into China. The percentage of the populace with the means, and the will, to buy most imported products is currently only a fraction of that. That fraction is growing however, and fast.
Although China is already the largest market for luxury goods, cars, tourism, international education, foreign property and countless other categories, what we are seeing today is just the tip of the iceberg. The number of Chinese urban households with earnings of at least $25,200 annually is expected to soar from 4% in 2010 to 54% by 2030 according to McKinsey. In addition to rising incomes, the willingness to spend on consumables is also increasing. Brands that are already building a presence and channels, and an understanding of China, are best placed to tap into that opportunity.
For our Shanghai-based readers, China Skinny’s Mark Tanner will be explaining who those relevant consumers are and how to best reach them next Tuesday May 10 in association with the Canadian Chamber of Commerce. Click here for more information. Go to Page 2 to see this week’s China news and highlights.
It is indisputable that Baidu is the dominant search engine in China. Although there are other search engines such as 360 and Sogou, their market share remains small compared to Baidu’s.
Check out China’s search engine landscape and Baidu’s reign in this infographic.
To make waves in the China market, you need more than just the right sales agreements and communications platforms. Having a China-optimised website, solid social media channels, and sales channels doesn’t necessarily mean consumers will come running. So, what will entice the ever-morphing Chinese consumer?
One essential aspect is using those channels in appealing and engaging ways to represent and promote your brand story. Consumers today are looking for something more than ordinary marketing strategies. They are looking for brands and items that not only understand them but also speak to them and their key concerns and to be a part of their lives.
Relevant to Your Target Market
Chinese consumers are bombarded by countless commercials every day. Between ads popping up on their phones, fliers being handed out and commercial breaks interrupting their streamed TV shows, they are no stranger to advertisements. To break through the clutter your message must really speak to the consumer, and ensure that it is in the right context.
Whether your target market is a tech-savvy millennial, a busy working mother, or grandpa Zhou, speaking to your target market in a way and on platforms familiar to them is vital. For example, the older generation is not as familiar with social media so using more traditional means to reach them can lead to success. The 80’s and 90’s generation use their phone as an extension of their body, but mobile ad messaging can be competitive.
To find out what truly matters to your target market, it is necessary to understand not only modern day mind sets, perceptions, and views, but also historical and cultural influencers.
With the amount of messaging received by consumers, hitting them at the right time is vital. Not many have time to check their phone and spend time reading their WeChat messages at 10am, but come lunch time, 5pm and 10pm, the peak time for using WeChat, everyone is face down in their screen. To allow maximum exposure plan your messages accordingly. Regardless of your location, your messaging must be conveniently timed to target the consumer and not only what is convenient for you.
Don’t be afraid to try a few different timings when posting. Track and analyse to see what receives the most views and engagement. But don’t stick to just one time forever on, try a few things to see what works and what doesn’t.
From belly button challenge to face-kinis China does not shy away from the strange, weird or wacky. Finding unique ways to promote your content without being obnoxious or offensive is a good way to gain exposure in the China market. Don’t be afraid to get weird, but make sure that weird is aligned with Chinese likes and trends. For example, Durex is a leader in innovative offerings and marketing. To market their intimate product, they created a character called Little Dudu, who promoted brand communications with messages, pictures, video, sexual health information, and emotional support. Dudu provided a fun channel to reach consumers in a way that was comfortable and not confronting to them.
Content entirely about products or services will likely bore consumers who see right through blatant sales promotions. This type of behaviour can also drive consumers away as it does not attempt to connect with them on a personal level. Sydney Airport is using engaging WeChat content to connect with the influx of Chinese travellers coming through. Their content ranges from fun cartoons featuring a Chinese couple and their travels to Australia and products coveted after by Chinese consumers to useful information addressing key concerns such as how to apply and obtain tax refunds after shopping up a storm.
Getting on the right channels is one of the first steps to reaching the Chinese consumer. To make waves with your target market means understanding their wants and needs and how to deliver these in a style comfortable, appealing and engaging to the consumers. To understand your target market or assist with your marketing needs be in touch today.
Few markets have experienced changes in the way that China has over the past few decades.
Just 35 years ago, more than four in five Chinese were living in the countryside, typically tending small, family-sized plots with animals and crops. Now around half of the population live in city apartments, surrounded by conveniences that they could have only dreamt of a generation ago, and earning over three times what they would if they still lived rurally. Since 1990, China’s average incomes have grown more than 10-fold, and those extra earnings usually only need to support one child, unlike the large families a few decades earlier.
China’s social changes are almost matched by its market transformation. There were no foreign FMCG brands in China until 1979 when Coca Cola launched in the Middle Kingdom, although it was only allowed to sell to tourists. Nowadays, China has truly become internationalised with products from Italy’s Moleskine stationary, to New Zealand apples, to Belgian beer all vying for China’s lucrative consumers’ wallets. More than 500 new products launch every day on average in China.
How Chinese learn about products and services has also transformed. Until recently, propaganda messages made up the lion’s share of marketing in China. Most consumers learnt about things through the traditional state-run media channels such as radio, newspapers and later, television. Now the average urban Chinese consumer is bombarded by advertising messages across a wide range of mediums, unrivalled in other markets.
China’s 668 million Internet users have become the most rampant users of social media and ecommerce globally, using online channels more than any other medium for research before and after buying things. In addition, over 100 million Chinese travel and study abroad each year, and together with the networks they influence, have created a massive consumer population that is more aware, astute and internationally-minded than ever before.
Such remarkable social, economic and market changes have created a unique consumer class. Their consumer journey and retail market are unlike the West and other Asian markets. But there are also a number of fads, social habits, fashion trends and food that are a result of this dramatic change and China’s unique culture and history. We’ve listed a few to give you a taste of just how different some Chinese consumer trends are. We hope you enjoy this week’s Skinny.
Buzzwords: Unique Chinese Consumer Trends: Those unique fads, social habits, fashion trends and food that all make China a little more interesting.
4 Strategies For Reaching The Chinese Consumer: As consumerism becomes more entrenched in China, companies will have to 1) segment more and more precisely; 2) extend modern trade channels and distribution networks to reach consumers outside the biggest cities; 3) communicate benefits of products that are unfamiliar to consumers; and 4) develop the products and services that are underpinning increases in consumer spending, and which remain relatively scarce in China.
Italy’s Luxury Firms Set Their Sights On China: On the back of a 44.7% increase in net income for the first half of 2015, high end notebook maker Moleskine will open most of its new stores in China in the second semester, a market it describes as “very interesting”.
19,470 Firms Sign Up For Three New FTZs: Three months since free trade pilot zones were launched in Tianjin, Guangdong and Fujian in April, almost 20,000 firms had signed up.
Big Brands Like Michael Jordan Are Still Losing Trademark Battles In China; Here’s How to Win: If you’re planning to launch a legal challenge against a trademark squatter in China, don’t delay, and register your Chinese brand name if you have one.
Internet & Ecommerce
PayPal Aims to Connect More US Merchants with Chinese Consumers: One of two pieces of research by Paypal studied how Chinese consumers learn about products they purchase cross border. Search engines were the most common way, followed by word of mouth and social media. Alibaba has just recruited a former vice chairman at Goldman Sacks to lead its cross border drive. The company has partnered with Kobe Bryant to sell his documentary and products on Tmall.
Apple Loses Top Market Share In China As Xiaomi And Huawei Take Over: After leading for two quarters, Apple has been beaten out of the top spot for market share in China by Xiaomi at 15.9% and Huawei at 15.7%. Apple’s share was estimated at 12.2%.
Food & Beverage
What’s Going Wrong With Chinese Juice?: After accounting for 61% of global juice volume growth between 2009-2014, the volume of juice sales declined last year, with value only slightly growing. A few big safety scandals didn’t help. There has also been an overall shift to healthier beverage options with better ingredients such as fortified/functional juices and reduced sugar juice.
China’s Top Wine And Beer E-Tailer Nabs $80M Funding To Get Everyone Drunk: Jiuxian adds $80 million funding to take its total funding to $225 million since 2011. It comes at a time when China overtook Japan to be the top consumer of Belgium beers in Asia, with imports growing 140% last year and 850% since 2008.
Ctrip Goes On A Round The World Trip: China’s largest online travel agent faces challenges in expanding globally, in addition to more aggressive domestic competitors backed by the big boys such as Tencent and Baidu. 53% of Chinese travelling internationally book on websites or over apps.
Fakes Are Costing Europe’s Fashion Industry 10% Of Its Sales And Thousands Of Jobs: Two thirds of the worlds fakes are said to originate in China, with Chinese counterfeits are estimated to cost European fashion brands €17.5 billion ($19.2 billion) a year and result in 242,000 lost jobs according to OHIM. Italy is the hardest hit, followed by Spain, the UK, Germany and France.
Chinese Consumers Most Satisfied With Their Looks Among Asians: 9.8% of Chinese consumers are completely satisfied with their looks, while 44% are fairly satisfied, making them the most contented among the AsiaPac countries surveyed by GfK.
China’s Once High-Flying Internet Money Market Funds Are Now Barely Better Than Traditional Banks: Interest rates on Internet funds are less than half what they have been since 2013. In early 2014, Chinese International Capital Corp estimated that online money-market funds could soak up 8% of total consumer deposits in three years. Jack Ma’s Yu’ebao, is the market leader with more than $98 billion in assets and 200 million users to date.
Chinese Consumers More Upbeat On Buying Cars: Despite the slowdown of car sales in China, 20.7% of respondents in an MNI Indicator survey said they were planning to buy a car in the next 12 months – the highest rate since the series began in March 2012.
Luxury Consumer Price Index Falls For First Time In Eight Years: Price declines in luxury properties, overseas trips and products drove the overall luxury price index down 1.8% this year according to Hurun. Yachts and private jets witnessed the largest price drops of 10.5%, as a result of foreign exchange differences.
The impact of the spectacular rise and fall of China’s stocks is anyone’s guess. It would appear that China is imploding if you read some news reports – stories of a weaking China attracts readers in some countries. Discuss it with Chinese consumers buying food for their kids in high end supermarkets, and they will shrug it off, unphased; China has made it through bigger economic challenges.
Of course some consumers will be feeling less confident, but it is unlikely to have the same impact on consumer spending as a crash would in markets like America. In January this year, following a 122% rise in the Shanghai Composite Index over 12-months, retail sales grew at their slowest rate in five years. At the time, just 6% of Chinese households owned stocks versus 55% of Americans. The latest spike would have drawn a few more in with Beijing’s encouragement, but as a whole, fewer Chinese consumers gamble on stocks – China’s reputation for being conservative with their high savings is well deserved. Although consumer investors make up a large portion of the owners of China’s stocks, their share of the overall market value is estimated to be 5% or less.
China needs healthy capital markets to finance the ongoing development of its economy, and will need a different approach to what we have seen recently. Nevertheless, the biggest impact on consumption growth in both the US and China is wage growth, which has been rising faster than GDP in China. IMF is keeping its pre-crash China GDP forecasts from April, as it believes China’s stock exchanges are so disconnected to the wider economy, and are small relative to the overall economy.
The rate of growth across many categories is slowing in China, but that was happening before the market meltdown. We expect Chinese consumers, particularly those born post-80s and 90s, will carry on in the consumer groove. Consumption will continue increasing in areas such as premium food and beverage, tourism and experiences, health and wellbeing, affordable and some niche fashion, overseas investments and anything to do with the precious only child – food, clothing and education – just look at the 50% growth that Lego has experienced in China over the past two years, despite counterfeits costing a quarter of the price.
China’s affluent and middle class base will continue to grow -an extra million USD millionaires came on board in China last year, despite the reports of doom and gloom. One loser will be state media who have been cheerleading the stock market, further eroding trust in traditional media and driving even more consumers to objective digital channels. We hope you enjoy this week’s Skinny.
The Chinese Stock Market and the Chinese Economy Have Literally Nothing To Do With Each Other: “We don’t see it as a major macroeconomic issue,” said IMF’s research chief Olivier Blanchard referring to China’s recent market meltdown, citing many examples of the disconnect between China’s stocks and its wider economy. Despite the recent drop, Shanghai stocks are still up more than 80% over the past year, and the Chinese stock market is small compared to the overall economy, the world’s second biggest.
Landmark Trademark Victory for Menswear Designer Michael Bastian in China: A trademark squatter has lost its ability to use the Michael Bastian brand that it registered in China. It is the first time a trademark registration application has been rejected in China in favour of a non-Chinese individual or entity. Nice work Foley & Lardner!
Megalopolis: the Future of Urban Planning in China: A massive new economic area encompassing 100 million people living Beijing, Tianjin and the province of Hebei is likely to become a model for China’s future urbanisation. One joint plan will cover economic and social development; urban and rural planning; and land use for the area larger than Uruguay, with a population roughly the size of Japan.
Uber Said to Seek Up to $1 Billion Funds for China Carveout: Uber has been claiming a $7 to $8 billion valuation for its Chinese unit, which has been marred by police shutdowns and volatile regulations. Investments from local, Beijing-connected firms such as Baidu will help their cause.
Foreign Brands Losing Lustre in China: Local FMCG brands gained more ground than foreign brands last year, with local market share growth strongest in skincare, fabric softener, colour cosmetics and infant formula, juice and biscuits. Foreign brands increased their share in the toilet tissue, beer, chewing gum, hair conditioner and chocolate segments.
Lego Builds on Strong Success in China as Playful Children Discover Their Creative Side: Lego’s Mainland sales have surged more than 50% over the past two years as parents recognise that playing with interlocking plastic bricks boosts inventiveness.
Internet, eCommerce & Mobile
A Significant Group of Consumers is Ditching Android for the iPhone: 53% of Chinese who own an iPhone switched from an Android according to a CLSA survey. 32% of Android users who plan to buy a new phone in the next 12 months will switch to the iPhone. This is representative of Chinese consumers upgrading their products across a number of categories. It comes at a time when Android-based Samsung is facing more bad news in China, with lawsuits for loading its mobiles with unneeded and unwanted apps.
Chinese E-Commerce Loophole Set to Close: Many Western companies have been avoiding strict Chinese consumer laws, such as the requirements for animal testing, by selling to consumers for “personal use” directly via e-commerce. This loophole is likely to be closed by the Chinese Government.
Food & Beverage
McDonald’s, KFC Go High-Tech In China With Customization, E-Payments: KFC is hoping to resonate more with China’s lucrative youth segment by accepting Alipay, rolling out Wifi and launching a menu app. Likewise, McDonald’s is piloting its “Create Your Taste” burger customisation in three Shanghai stores.
Top Chinese Wines Have Gone From Bad to Good. Will They Become Great?: China now has more acres of vineyards than France. Locally grown wines are getting more impressive too.
Xu Jinglei Being Sued for Making False Health Claims About Cookies: Actress and director Xu Jinglei is being sued for endorsing “river monkey mushroom stomach cookies,” claiming they are good for the stomach, when they are no different from other cookies.
JD.com’s Richard Liu Buys Into Australia’s Biggest Milk Processor Murray Goulburn: JD.com snapped up 4.6% of Australia’s dairy cooperative trust for A$20 million, not long after launching an “Australian Mall” on the platform while CEO Richard Liu was in Australia.
U.S. Tops Chinese Tourists’ Satisfaction List in Q2: Chinese travellers are most satisfied in the United States – 3.1 points higher than the average rating of 77.86 for 24 countries, according to a China Tourism Academy survey. Singapore topped Asia, with Mongolia and India reaching record highs. Complaints mainly focused on public services and travel agency services, such as a lack of Chinese translations of public information and poor transportation.
Opportunities for Growth In Challenging China Market: Chinese consumers expect to spend more on children’s clothing, women’s casual, shoes, men’s casual and health, beauty & accessories over the next 90 days according to analysis by Prosper China.
Have Chinese Consumers Started to Look Beyond Beauty Products?: By 2013, only 5 million Chinese women had some form of cosmetic surgery. By the end of this year, an estimated 7 million will have, and 11 million by 2018. 15% of Chinese women are considering using plastic surgery for anti-aging, with the highest rates in Tier 1 & 2 cities.
Eight Surprising Facts About The Chinese Luxury Consumer: Eight characteristics about Chinese luxury consumers: 1. They’re younger than you think; 2. They’re not as well off as you’d expect; 3. Most are married and have children; 4. They’re mobile natives; 5. They all have WeChat; 6. They prefer Chinese brand names; 7. They like to shop at retail; and 8. Alipay is an important method of purchase.
With 55.2% of its 549 million monthly active users opening WeChat at least 10 times a day, the app is China’s most popular social network. Being perceived as the “Chinese Whatsapp”, WeChat offers far more features and many opportunities for brands to interact with their target market. Besides the regular user accounts, businesses can register official brand accounts to promote their products. Additionally, there are a number of functions that effectively support marketing to Chinese consumers. If you want to know more about how to effectively leverage those services, be in touch.
For our infographic about WeChat user demographics and habits, tap here. To find out more about the day-to-day lifestyles of WeChat users, tap here for the infographic.
There’s obviously plenty more to WeChat, which we’d love to share with you. Contact China Skinny today for WeChat and overall digital strategies and execution for China.
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.