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Out for a lunchtime stroll in most Chinese cities, you may not get that refreshed feeling you get elsewhere in the world. China’s carbon dioxide emissions have grown almost 150% since 2000. Although growth has flattened out this decade, emissions have crept 17% higher than in 2010 when Chinese power plants emitted as much nitrogen oxide as the rest of the world’s cars combined.

Similarly, there’s a good chance that the water you showered in, washed your clothes with, cleaned the dishes and rinsed your food with was less than pristine with over 70% of the watersheds that supply water to China’s 30 largest cities severely polluted. Then there is the 19.4% of farmland that’s contaminated by organic and inorganic chemical pollutants and by metals such as lead, cadmium and arsenic.

It’s not breaking news that China’s pollution has been responsible for a sharp rise in respiratory diseases such as Asthma, caused cancer rates to soar, and contributed to host of other issues as far reaching as infertility and obesity. Pollution coupled with sedentary lifestyles from more white collar jobs and gaming, poorer diets and even rice consumption has seen 11% of Chinese suffer from diabetes and a further 36% are prediabetic. There are countless other ailments on the rise in China, but you get the point.

With the above factors an everyday reality of living in China, it is unsurprising that the H-word is on almost every Chinese consumer’s lips. Health is something that Chinese have proactively addressed long before microscopic pollution particles blanketed Chinese cities. Use of yin and yang principles have dated back since at least the 3rd century BC. Considering the changes in China just over the past generation, there are more reasons than ever to balance out the yin with the yang.

Virtually every category with a health label in China has been hot over the past five years, resulting in venture capital investments in healthcare growing from $1 billion to $12 billion in China between 2013 and 2017. This has seen some innovative world-leading companies evolve from China, such as Shenzhen-based medical devices company Mindray which invests 10% of its more than one billion dollar annual revenues in research and development – a rate unheard of with Chinese companies not long ago. Mindray is the market leader globally across several segments and is likely to be helped further by Beijing’s streamlining rules for drugs and medical device approvals last October.

One of the most exciting health companies coming out of China is Tencent-backed WeDoctor in Hangzhou. Hoping to become the ‘Amazon of Healthcare’ the $6 billion dollar company already has 160 million registered and 27 million monthly active users by focusing on unclogging bottlenecks in China’s struggling health system. The company is one of many less-traditional channels that health-related companies hoping to ride China’s burgeoning health segment use to sell their products.

Beijing’s three-year action plan on air pollution control released last week is likely to improve China’s air pollution, but many other health issues will continue to plague China for some time yet, accelerated by its ballooning elderly population. Demand for localised and well-marketed health equipment and medicines, healthy food, healthy living and even healthy holidays will continue to soar in China. Agencies such as China Skinny can assist to ensure you make the most of the opportunity. Go to Page 2 to see this week’s China news and highlights.

There’s no shortage of coverage about China’s New Retail revolution, its mouthwatering rise of shared bikes and its 227 million active users, along with WeChat, ecommerce, mobile payments and other uniquely China trends such as cream cheese tea and face-kinis. Yet there are many other phenomenons happening in China that attract less attention but are also impacting consumers at a level that brands should take notice of. Here are three trends that Skinny readers are likely to be aware of, but maybe less familiar with the full scale and speed of their rise:

1. Consumer Credit

Consumption has been the most robust sector of China’s economy in recent years, with growth trucking along at double digits as long as most can remember. While other factors such as manufacturing, investment and house prices haven’t maintained the same momentum, three contributors have allowed Chinese consumers to defy the odds and keep spending more and more: record consumer optimism, soaring wage growth (with China’s hourly incomes now exceeding every Latin American country except Chile) and rising consumer credit.

Although China is well known for its high saving rates, these figures are skewed by older folk. The younger generation haven’t lived through the same periods of austerity and feel much less need to save for a rainy day. They’ve seen their wages grow every year, their parent’s real estate assets soar, and have been lured by the bright lights of consumerism – often calling on easy credit to spend more than they earn. Between 2015 and 2017 consumer credit grew fivefold, with those aged 24-35 making up more than 70% of consumer borrowers in China.

2. ByteDance’s Douyin

At a much more micro level, some brands looking for ‘the next WeChat’ could be heartened by the remarkable rise of Douyin and the overall ascent of short video. Launched less than two years ago, Douyin’s user numbers have quadrupled since January to boast more than 150 million daily active users watching an average of 82 short videos a day. The 15 second videos serve Chinese millennials’ craving of instant gratification, to fill any down-moment with cheap entertainment. Douyin’s growth has been so drastic that even Tencent has felt threatened and banned the service on WeChat last month. Douyin’s popularity and rapid rise has enabled fast-moving brands to use the platform to build awareness and preference with those indebted young consumers at a fraction of the cost of the more crowded and mature platforms like WeChat, Tmall and Weibo.

What makes Douyin, and its sister app Musical.ly, special is that they are two of the few Chinese apps that have been able to crack the elusive Western markets. Douyin, known as Tik Tok outside of China, was the most downloaded iPhone app in the world in Q1 of this year. Any concerns in the US about the Chinese Government monitoring your every move, something which has plagued brands such as Huawei and even WeChat, seems to be irrelevant for the Western millennials shooting and watching short videos on Tik Tok.

3. DJI Drones

Drones, while not on the same scale as consumer finance or Douyin, are making an impact across many sectors in China. One company leading the way – DJI – has beaten out formidable American competitors such as GoPro and 3DR and now owns 70% of the world’s drone market. DJI’s confidence is represented by their new HQ being built in Shenzhen complete with a skybridge for testing drones and rings for fighting robots.

DJI is creating efficiencies in industries as diverse as agriculture and food delivery, which will have a downstream impact on supply and consumption in China. It is representative of increasing automation modernising China’s supply chain and logistics, particularly in the online-to-offline categories. DJI is symbolic of the rise of China’s ambitious mega-businesses who are investing real money in R&D, while remaining nimble and long term-focused to lead their category. Expect more to come.

Those are just three of the numerous developments coming from China daily, many which are likely to be relevant to your brand, or how you market it. Agencies such as China Skinny will ensure you keep up with those trends and develop a plan how to make the most of the opportunities they bring.

Speaking of trends, China Skinny’s Mark Tanner will be sharing more in Brisbane next Thursday July 5 speaking at the ACBC-Brisbane Airport Welcome for the Air China Direct Flights Between Beijing and Brisbane. If you’re at the event, please pop over and say ni hao. More information here. Go to Page 2 to see this week’s China news and highlights.

The strategies and recommendations that China Skinny developed five years ago were quite different than those we do today. When we cited the best examples of marketing in China, we would typically look to foreign brands. Back then, most domestic companies’ marketing plans were focused on price promotions and discounts.

Things have changed in recent years. The allure of overseas origins remains attractive with many Chinese consumers and there are some great case studies of foreign brands backing that up with a smart marketing strategy, yet our recommendations are increasingly drawing on lessons from domestic brands. We only need to look to the dairy category where imported brands have a natural perceived advantage for health and safety, yet domestic players still manage a 38% premium per litre for online sales. This is due to slicker marketing and usually a better understanding of the market overall. Our recent survey of Australian businesses with Austcham confirmed that exporters are increasingly waking up to this, with domestic brands seen as more of a source of competition than foreign brands – 50.7% versus 49.1%.

Domestic brands are also much more likely to have stronger distribution networks and more of an appetite for lower tier cities, which are the fastest growing markets in China. Of the 50 million new households that are expected to enter China’s middle and upper classes between 2016-2020, half of them are likely to be located outside of China’s top-100 cities according to a BCG-Alibaba study. Although incomes in smaller cities are less than in larger cities, the lower cost of living means more cash is available for discretionary purchases. Further, rising property prices and increased indebtedness help fund consumption from consumers starved of the choice available in China’s high-tier cities.

Traditional domestic brands are not the only source of local competition for foreign brands in China. One of the newest competitors to the mix are the key opinion leaders – the same folk that foreign and local brands are paying hundreds of thousands of dollars to endorse their brands. Just as George Clooney built his billion dollar tequila brand and Gwyneth Paltrow with lifestyle brand GOOP, China’s influencers are realising their value not just as endorsers of other brands, but to launch their own brands such as Zhang Dayi’s own fashion label and Mi Zijun’s snack shop.

The most potent new string of competition isn’t going to come from celebs though, it is likely to come from the platforms who are selling your brands themselves – China’s online giants who are becoming increasingly powerful in both the online and offline world. Although China have been late adopters of private-label brands, it is another area the big ecommerce platforms are likely to lead. Netease is the latest platform to launch its own private label, Yanxuan, selling clothing, furniture, and appliances from the same Chinese suppliers who manufacture for international brands like Kering’s Gucci, Burberry, and Deckers’ UGG. It follows Taobao’s Xinxuan which launched last year, and JD’s Jingzao in January.

The ecommerce platforms have the data to evaluate the attractiveness of the private label products coupled with the ability to test them with little risk. Just look at the 80,000 smelly Thai durians Alibaba sold in a minute. While Alibaba may be best known for its multi-billion-dollar acquisitions such as RT Mart and food delivery Ele.me, it is making plenty of smaller purchases that could add to its arsenal of home brands such as NZ dairy company Theland. Some would say it could be a conflict of interest, particularly given Alibaba’s ability to dial brands on and off, but it is the inevitable reality of supplying dominant retailers much like supermarket chains in the West.

New sources of competition all cement China’s position as the most competitive marketplace on the planet. Even categories that have been out of reach of domestic players such as the auto industry are now starting to see more and more threats from hungry and smart domestic brands – both Alibaba and Tencent have made notable investments in car manufacturers. Brands should be aware of who their competition is in order to carve out their unique place in the market and not become too reliant on one channel. Agencies like China Skinny can assist with such market mapping, gap analysis and differentiated branding and positioning. Go to Page 2 to see this week’s China news and highlights.

Australia and China’s relationship has become a fascinating representation of the delicate balancing act between politics, economics and sovereignty that this modern age of globalisation presents to nations. And with no Western country more dependent on trade with China than Australia, this particular balance holds great intrigue.

To date, Australia has managed to strike a fine balance with the Middle Kingdom. It negotiated the ‘most favoured nation’ clause into the China Australia Free Trade Agreement and was a founding member of the China-led Asian Infrastructure Investment Bank (AIIB). Yet it has deviated from China’s influence in several ways. Australia has remained firmly in the US camp for defence-related policies, it is yet to support President Xi’s pet Belt & Road project and is even exploring alternatives with China foes the US, Japan and India.  It has been overtly distrustful of Huawei due to national security concerns, and its recent claims of Chinese espionage have prompted Chinese state media to call Australia an ‘anti-China pioneer’.

Regardless, Australia’s continued prosperity is becoming increasingly dependent on its relationship with China. Australian exports to China grew 25% last year to US$86 billion accounting for 29.6% of exports, with Japan being the next most important market at 12%.  China is Australia’s highest-spending source of students and tourists. Australia has also been the world’s second largest recipient of Chinese investment since 2007, accounting for more than $90 billion of accumulated investment. In short, virtually every Australian is impacted by the flow of trade, people and investment from their Asian neighbour.

There are few better barometers to gauge the continued opportunities and threats in this relationship than the diverse range of Australian businesses on the ground in China and those with strong trade relationships. China Skinny was honoured to work with Austcham on the 2018 Westpac Australia-China Business Sentiment Survey which launched in Sydney yesterday.

161 businesses generously gave their time and information to help Australia understand the direction of its connection with China, identifying positive areas, and those that need work. The resulting report is full of fascinating insights from challenges, risks and competition to macro influences impacting Australian businesses in China.

Australian business sentiment was remarkably upbeat. 78% were positive about the next twelve months – higher than similar surveys of American, European, British and Canadian businesses – increasing to 83% for the 5-year outlook. This positive sentiment was particularly striking given the survey was conducted in November and December last year, a time when the China-Australian bilateral relationship was turning awry.

For 58% of respondents, China revenue outpaced other markets. These results have contributed to over half of businesses planning to increase their investment in China this year – with more investing than in 2017 and at a greater rate than their American cousins.

Arguably the most concerning finding from the survey was engagement of digital platforms which have become an important channel for B2C and B2B segments in China. Whilst we found the majority of respondents recognised innovation in technology, media and communications as the number 1 trend shaping businesses in China for the next 3-5 years, just 16% currently have a detailed China digital/ecommerce strategy in place. Those who did were 12% more likely to turn a profit in China and were 18% more likely to see China revenue outpace other markets.

The beautifully presented report (thanks Charlotte, Kate and Stephanie) delivers a valuable perspective into the overall health and opportunities for Australian businesses in China. It also provides a benchmark for your own performance – not just as an Australian business, but any foreign firm trading with China. Download your free copy here. Go to Page 2 to see this week’s China news and highlights.

Next week sees the Year of the Rooster end as we embrace the Dog for the next 12 lunar cycles. The dawning of the pooch marks the beginning of the enormous Spring Festival holiday, which will inevitably be marked with millions of selfies from teeming transport hubs, billions of WeChat messages and red envelopes, and probably a good few fake boyfriends to keep the family at bay.

For a large portion of China’s 280 million migrant workers, it will be the one time of the year to return to the family with cases full of gifts. The mass homecoming has become well known globally as the world’s biggest annual human migration; 2.98 billion trips will be made during this year’s festival period from February 1 to March 12. This includes 2.48 billion trips in cars, 390 million in trains, 65 million by plane and 46 million boat trips – a staggering operation, even by Chinese standards.

Just seven in 10 will head home for family reunions during Chinese New Year, with 13% opting for leisure travel according to a Tongcheng-CCN survey in December. 6.5 million of those travellers are expected to head to 68 countries this festival – 7% more than the last year’s festival.

Thailand is forecasting 400,000 Chinese visitors over the week-long festival and tiny Macau is expecting 960,000 Mainland tourists as Chinese sideline tradition to serve their increasing lust for travel experiences. Even Finland will have its time in the sun with Alipay showcasing the widespread acceptance of their payments platform in the country.

The growth in Chinese investing more in decorating their homes has produced a byproduct that may be the biggest trend for Spring Festival travellers this year – empty paint buckets. Railway stations are already dotted with travellers carrying the white plastic tubs, which have become popular chairs, tables and food storage containers and an endearing reminder that Chinese trends aren’t always related to luxury handbags, shiny smartphones and quirky online campaigns.

Whilst widespread adoption of paint buckets takes a different path from Beijing’s aspiration to cultivate local tech innovation, there remains plenty of riveting trends coming from China. At China Skinny, we’ve used the New Year as an opportunity to identify what we think will be the biggest trends to watch in the Year of the Dog – ones that every brand and marketer should be aware of – here they are!

If you’re taking a break for the Chinese New Year festivities next week, we hope it is a good one. For the tourist operators in Macau, Thailand, Finland and other popular spots – we trust it will be successful and selfie-filled.  Happy New Year, we’ll back in the Dog.

Who are China Skinny? We are a marketing agency on the ground in Shanghai conducting research, building strategies, and executing them for over 100 multinational brands both big and small, across 20 categories. What’s your biggest China problem? Contact us to see how we can help. 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.

If you believe the press, there is only one show in town for selling your wares in China – ecommerce. Yet behind the hype, ecommerce accounts for just 15.5% of retail overall, and an even smaller percentage for categories such as food and luxury. That leaves over 80% of goods bought through the good old brick and mortar stores – albeit a very fragmented network, and one growing at less than half the pace of ecommerce. Even Mr. Ecommerce himself, Jack Ma has said “pure ecommerce” will soon vanish, replaced by more holistic retail strategies.

That’s not to discount the influence online shopping and China’s overall digital sphere is having on traditional retailing. 61% of online consumers start their product research on an ecommerce platform according to PWC and it is a vital touchpoint in the customer journey of both online and offline shoppers. Yet it’s about time the downtrodden shopping centre got some rightful airtime.

One of the positive outcomes from ecommerce’s disruption is that it has forced traditional retailers to up their game. That, with a host of other factors, has seen China’s retail space evolve to something unrecognisable from as recently as 2013.

China’s most successful shopping malls have become ‘lifestyle centres’, drastically changing their tenant mix and crafting a much nicer experience for shoppers to maintain a point of difference over the oft-cheaper and better ranged screens of the ecommerce stores. A typical centre in China is up to one-half food and beverage and can have cinemas, ice skating rinks, spas, gyms, children’s play places, language schools, bowling alleys, horse riding centres on the roof, indoor beaches, and amphitheatres and other areas devoted to public events.

The most savvy physical retailers also integrate online strategies to attract shoppers to their stores. One example is the popular utilisation of key opinion leaders to help build buzz for physical stores through their digital channels, be present at stores to wow shoppers and offer incentives to fans that can only be redeemed at the stores.

Distributors can often be incredible assets to get products into stores.  Whilst they are likely to reassure you that they offer full digital marketing strategies and services, few have deep literacy in digital marketing and nouse to fully capitalise on the opportunities the channel brings. Many don’t even have a true view of what consumers are seeking, as some recent Australian research into the common nectarine recently discovered.

Any retail, tourism or services brand selling in China can learn from the way successful brick and mortar retailers have evolved to understand current Chinese consumer preferences. The moral of the story: physical retail should be a key pillar in most China strategies. Yet few bricks and mortar strategies will be successful without a robust and differentiating digital strategy to support it. Agencies such as China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.

The latest consumer confidence index shows a Chinese consumer who is more upbeat and optimistic about the future than any other time in the last two decades. Yet with an already enormous base of goods and a maturing market, such a positive outlook is unlikely to bring back the mouth-watering consumer product growth rates of yesteryear.

Nevertheless, certain segments ripe with growth and potential bubble away amongst China’s overall 10-11% retail growth rate. The fitness and health category is one in particular. We only need to look to gym memberships which are expected to almost triple in the next five years, the number of marathons which grew from 22 to more than 400 in six years, or Lululemon’s 350% year-on-year growth.  Many of the most impressive achievements fly under the radar such as Les Mills which now has 1,000 Chinese gyms paying for their programmes and thousands of influencers attending their events and passionately filling their WeChat feeds about them.

Many trends in China start with the most affluent demographics. A Hurun survey found wealthy families spend about a quarter of their household budgets on health and well-being – boding well for the future of the industry. Interestingly, the young, single, male millionaires are paying the least attention to their health, while their more mature, married female peers are the most committed.

With so much potential, there has been a significant uptick in brands across the spectrum of fitness, health and nutrition-related categories. Many are becoming more sophisticated in how they appeal to Chinese consumers, following some of the successful strategies from other segments in China and abroad – such as fitness personalization and technology integration.

Like most countries, the fitness movement still has a long way to go before it will woo everyone. In recent weeks in an unnamed city in Hubei province, more than 55% of the 1,233 youngsters who tried out for the army failed. One 20-year veteran of the tests noted a significant decline in fitness levels during his tenure.

The problem has become so widespread that the PLA Daily posted on social media last month saying too many video games, not enough exercise and excessive masturbation were among the 10 reasons so many failed. With the current focus on expanding the Chinese military, this is likely to provide further impetus for Beijing’s push to get the nation exercising reinforcing its inclusion in the 13th Five Year Plan and 22 other related documents to support the cause.

The beneficiaries of a more fitness-focused China won’t just be the obvious categories. Brands involved in tourism, food and beverage, entertainment, clothing, accessories and others should explore if and how they can tap into the trend.  It will only get bigger, particularly among the affluent segments. Agencies such as China Skinny can assist with some exploration. Go to Page 2 to see this week’s China news and highlights.

At the dawn of the decade China was very much a cash-based society. Most transactions were untraceable exchanges of notes and coins and it wasn’t unusual for consumers to have stacks of red bills stashed away under their mattresses.

Whereas China’s older generations have lived through austere periods that have hard-coded an inherent need to save for a rainy day, a tribe of younger consumers has surfaced who have only ever known prosperous times, lured by the bright lights of consumerism and with it, a much more liberal view towards spending.

Chinese born after 1980 are the most educated and urban consumers, and as a result earn more on average than older age groups. Whilst their incomes are rising faster than in any other major economy, their retail spending is growing even faster. Much of the gap is being filled by consumer credit. Short term consumer lending is growing at 35% annually, often unserved by traditional lending channels, providing opportunities for some 1,800 online credit platforms as at the end of July this year.

Arguably more influential in driving consumer spending has been the ease and convenience of mobile payments where daily transactions now number 50 times that of the US. Much like credit cards have done in the West, China’s mobile payments marginalise some of the visible and psychological barriers consumers faced physically taking cash from a wallet.

Mobile payments have driven spending both in physical and ecommerce stores, and also created new categories for spending. Payments are now embedded in social media and other apps allowing purchases for services, games, gifting, tipping KOLs and plenty more. Alibaba’s new ‘Smile to Pay’ doesn’t even need a smartphone to pay. Beijing is an avid supporter of mobile payments as it backs its agendas of fostering innovative industries and transitioning to a consumption-based economy, and also provides a detailed footprint of citizens’ movements and habits.

One of the relatively new frontiers for China’s mobile payment platforms is overseas. It is expanding by targeting emerging markets through investments and using the all-important 135 million Chinese outbound tourists as a Trojan Horse to penetrate mature markets. Alipay’s parent Ant Financial alone has penned 24 major overseas investments or partnerships since 2015 and is now accepted by 120,000 overseas merchants in 26 countries. WeChat Pay is hard on their tail, growing almost three times as fast overall.

So what does all this mean for brands hoping to attract Chinese consumers? Quite a lot. For a start, any ecommerce site, social media account or app would be wise to enable transactions through Alipay and/or WeChat Pay. Similarly, sales are likely to increase for physical retail both in China, abroad, and in between – Finnair has seen sales of onboard purchases increase over 200% on China routes since introducing Alipay. There are added benefits such as gaining new WeChat followers with WeChat Pay and integrating into the popular AliPay app and receiving improved consumer insights.

Payments are another example of essential triggers brands should have covered to maximise the opportunity for Chinese consumers. Agencies such as China Skinny can ensure you have them all covered off, and utilised in the most effective wayContact us to find out more. Go to Page 2 to see this week’s China news and highlights.

A quick Google image search for ‘dogs in China’ will return row after row of horrifying snaps that you wouldn’t show your kids. Yet the reality is quite different in most of China’s cities.

Wandering through urban Chinese streets it is hard for even the most macho of men not to find China’s pets adorable. Poodles sporting puffer jackets jostle for pavement space with pugs wearing penny loafers. China’s immaculately groomed pooches would leave many folk in Western cities for dead on the fashion stakes, representative of just how much Chinese dote on their pets.

China’s pets, numbering more than 100 million, have become the centre of one of the country’s fastest growing retail categories. Last year Chinese consumers spent ¥122 billion ($18 billion) on pets and related purchases, with spending expected to rise on average 20.5% each year between 2017 and 2020 – around double retail growth overall. It is no surprise given 99.8% are prepared to spend on their pets; 40.9% take their dogs to a beauty salon, 25% pay someone to wash their pets and 4.5% have had professional photos with them. Although the hounds have more profile, average spending on felines is even higher.

China’s pet industry has a lot of similarities to other categories. For a start, the majority of owners aren’t empty nesting oldies with a lot of time on their hands, but the urban female millennials who are driving China’s overall retail sectorTwo thirds of pet owners are female and 73.2% are aged 20-35 according to Goumin.

It’s little wonder pets are pampered so much in China. 41.4% of owners are single and 23.8% are married without kids, so in many ways the bichon frises and shih tzus are the child of the house. China Skinny sees pet owners showing much of the same buyer behaviour as Chinese parents do with their precious child. Pet food is a good example, where many owners have a strong resistance to additives with natural food accounting for quarter of the market and growing at 55% a year.  The need for quality sees foreign brands account for the majority of the market.

Like every category, Chinese do their research to get the best product for their furry friends. 46.9% actively search for product information, with product quality and what others say about the products being what owners care about most, ahead of price.

One recent development in the pet industry is relevant across most industries in China. An online pet food vendor in China has been successfully sued by Alibaba for selling fake Royal Canin cat food on its Taobao platform. It is the first ruling of its kind and, whilst only a spit in the sea, it will hopefully be followed by many more, possibly making counterfeiters think twice before selling fakes online. Go to Page 2 to see this week’s China news and highlights.

If we asked Skinny readers to name some differences between a consumer in Beijing and Shanghai we’d be likely to get many responses. There are the obvious observations such as different food preferences, disparate climates, pollution readings and daily commutes. Beijingers pack a few more pounds around the waist and are a little taller.  On a deeper level, emotional cues in communications that resonate in Beijing are often markedly different to Shanghai.  What they do for fun, the TV shows they talk about, even their ideal weekend or trip abroad are often dissimilar.

Most China marketers appreciate that the country is akin to Europe in its diversity, yet many still employ a fairly homogenous strategy for marketing across China.  Even adapting marketing to different city tiers will usually miss an opportunity to be meaningful and relevant to consumers.

Shanghai’s GDP is similar to Thailand’s and its population is greater than Australia’s.  Most brands selling in either of those countries would localise, whereas Shanghai often gets the same generic treatment as Beijing, Guangzhou, Shenzhen, and the other eight megacities with a GDP greater than a trillion RMB.

The size of the China prize has seen her cities become the most contested markets on the planet. As a result the average consumer in Shanghai is bombarded by more than three times the advertising of their British equivalent.  With such clutter, brands that miss key functional and emotional cues are unlikely to win and maintain any mindshare.

Fortunately there are big and small initiatives that brands can do to localise their marketing. Online, ecommerce, social media and search platforms all allow clever geographic-specific initiatives.  Similarly, in the physical world there are plenty of quick wins and more significant ways to tailor sales, marketing and product development by city and region.  Agencies such as China Skinny can assist with understanding differences and developing a strategy to best service these. Go to Page 2 to see this week’s China news and highlights.

A little over five years ago a fledgling Shanghai-based marketing agency was unable to find relevant and reliable marketing information about China. Hopeful of filling that gap, that agency started the Weekly Skinny. Our goal was to aid busy marketers with concise, transparent and timely insights to assist them in making decisions, as well as demonstrate China Skinny’s understanding and expertise in the China market.

Since then, around 250 newsletters have been sent, equating to over 300,000 words – the equivalent of 25 Master’s theses – covering the latest news, trends and advice that is consumed weekly by readers from thousands of brands, public organisations and journalists.

Over that same period China Skinny has worked with over 100 brands on research, trend analysis, market entry and market growth strategies. The projects, together with authoring the Weekly Skinny has helped us intimately understand Chinese consumers and the China market. Marketing in China is barely recognisable from five years ago, with changes and trends that would happen over decades or generations in other markets transpiring over the past five years.

To mark half a decade of the Skinny, we thought it would be fitting to list five key observations we’ve noted over that period:

1. Digital China

China was late to the Internet game, but it has made up for it over the past five years. At the turn of the decade, Chinese consumers started coming online in droves.  They were finally given a voice through social media such as Weibo, bulletin boards, forums and review sites, and they took advantage of it.  Users started to leave the confines of Internet cafes with connected smartphones costing less than $100 a pop.

Yet much of what was online in China was a rudimentary rip-off of popular Western apps. Weixin (which had just been rebranded WeChat for international markets) was one of the more innovative startups with a few features that weren’t available on WhatsApp or Kik.  It had well under a tenth of the active users it does today, who used it for a fraction of the time. Even ecommerce was primitive, with almost all shopping happening on C2C platform Taobao and the majority of sales being cash on delivery.

Oh how things have changed. Ubiquitous smartphone ownership with mobile payments at 50 times the rate of in the US has enabled applications to easily monetize almost anything, creating sustainable innovations that are now leading the world. WeChat’s popularisation of the QR Code has helped heave the offline world into the digital sphere cementing O2O, the sharing economy and the Internet’s place at the heart of marketing in China.   More advertising yuan is now spent on digital than any other channel. Online sales of goods and services is now double that of China’s top-100 physical retailers.

2. Experiences

The maturing Chinese consumer is placing much more emphasis on experiences, whereas in 2012 it was all about accumulating nice things to show off status. Accessible experiences such as frothy frappuccinos at Starbucks, gaming or going to the cinema, to more aspirational travel have become a hot ticket for many consumers.  The number of overseas tourists has doubled over the past five years and a much larger portion travel beyond Hong Kong, Macau and Taiwan.  Group travel has been superseded by free independent travel, placing less focus on shopping while there, although it remains the top activity. Chinese also look for experiences in their homes, which have become larger, more modern and less of a place for functional habitation, but for enjoying the finer things in life such as nicer furniture, higher quality food and beverages and even activities such as baking.

3. Local players

All that time ago when the Weekly Skinny began, most Chinese consumers wouldn’t be seen dead with Chinese branded products. Around 70% of smartphone sales were Nokia, Samsung and Apple for example. Now over 80% of smartphones are local brands which provide owners plenty of street cred. The popularity of Japanese rice cookers and toilet seats in China was a catalyst for Beijing to introduce their Supply Side Reform to improve the standard of Chinese products.

Local movies have edged their way into bigger market shares which has a halo effect for many categories. The film industry has been helped through Government regulation and opening cinema chains in more nationalistic smaller cities, yet a lot of it is a result of Chinese movie makers upping their game. The same could be said across most sectors, where local manufacturers have learnt the trade making things for international brands, and investing in marketing, research & development and evolved to true contender status. Local brands often understand the market better than foreign competitors, and have wider-reaching distribution networks across China, which has seen them outdo foreign competitors across many categories.

4. Health & Environment

In early 2013, much of China experienced unprecedented air pollution. In Beijing for example, the air quality in January was 17% worse than smoking lounges in American airports. The Airpocalypse prompted the Government to take a more transparent stance to acknowledging pollution and helped locals realise that ‘fog’ was different to ‘smog’. China Skinny had done research in 2012 into why Chinese migrate, with a child’s education being the top reason, by far. The same research in 2013 saw pollution become the primary motivation. Living among air pollution, water and soil pollution, constant food scandals and more sedentary and stressed lives in the city than the countryside caused consumers to become a lot more health conscious overnight. Products like Oreo cookies went from doubling sales every couple of years to virtually no growth by the end of 2013 as consumers opted for healthy, and safe, food and beverages. This drove demand for good, clean imported products. The focus touched everything to an explosion of sports and fitness, with around 5 million new gym memberships signed up every year since.

5. Premiumization & Substance

In a few short years, Xiaomi became the pinup brand for smartphones, bringing fully featured smartphones to the masses for a low cost, coupled with glitzy flash sales and Apple-esque ads. Sales soared and in 2014 it became the market leader, and then growth suddenly halted. An increasingly affluent consumer class no longer just wanted something because it was cheap, they wanted value and quality. In 2015 sales of smartphones costing over $500 grew at 45% versus 2% for the market overall. The same premiumization applied to almost everything – even rice which saw 25% trade up versus 3% trade down over four years to 2015. High- and mid-end products on Alibaba’s platforms grew from 26.2% in 2012 to 34.4% in 2016. Even humble instant noodles saw sales drop by billions of tubs as consumers of all demographics opt for better quality fare.

Yet unlike a few years ago where a foreign brand with a high price tag would likely see double-digit growth, Chinese are increasingly shrewd in their evaluation of brands, both local and imported. Brands need to have substance, backed up by values that align with consumers’ own. Although Chinese consumers still love a deal, they are prepared to pay more if it is backed up by quality and value.

And that’s five. Our apologies that this week’s intro was longer than usual – we’ll try and keep it short until we’re celebrating 10 years! Go to Page 2 to see this week’s China news and highlights.

A glance at any air quality index will reveal that China’s notorious pollution problem persists. Yet while Washington wavers on its environmental commitments, Beijing is implementing policies to reduce its reliance on fossil fuels, investing trillions of yuan into renewable energy and improving smoggy cities, toxic waterways and filthy farmland.

Government policy, regulations and investments are in no doubt vital to improving both China and the world’s environment. Yet within China lies a much more potent force that remains relatively untapped – its 1.4 billion people. The mobilisation of even a small share of Chinese consumers will have immeasurable long-term benefits for the environment.

For the most part, Chinese consumers still largely leave the responsibility of fixing the environment to the Government. The product of a system that couples consumers’ belief that all-powerful Beijing will solve its macro problems and the futility of trying to make a difference as 1 of over a billion people. The odd beacon of hope emerges to educate and engage the masses, the most notable being the Under the Dome documentary. Initially promulgated by the Government it spread like wildfire before being banned just days later.

Alibaba has also driven some initiatives. On one side, it has led the rise of ecommerce in China which is creating significant emissions through packaging, delivery folk and a host of other factors. So to help counter that, the company is using its scale and reach to make positive change environmentally. In 2014 it aimed to build awareness and participation about China’s water pollution but achieved limited coverage. Late last year it launched its Ant Forest Program which uses its established base of 450 million Alipay users to build awareness about carbon footprints, deforestation and planting trees.

In just 9 months the initiative has attracted 200 million users to gamify their carbon footprint tracking. Users are awarded “green energy points” with scoring based on how environmentally friendly a purchase is – such as paying a bill online instead of travelling to a store to do it, or buying a metro ticket instead of fuel for a car. Points allow users to grow virtual trees. They can invite, share and compete with friends in their tree-growing escapades. Virtual trees can be converted to real trees, which saw over one million trees planted by the end of January 2017.

The Ant Forest Program is a step in the right direction to engaging mass awareness as to how individual behaviour can impact the environment. It also provides a few takeaways that can be applied to marketing strategies that aim to engage with Chinese consumers. The first is the gamification of the initiative; making the whole exercise fun, fuelling consumers’ craving for mobile entertainment. The next is the social aspect; the ability to share, invite and build status amongst peer groups. The social factor drives the sense of gratification from doing something they think good. Lastly, using an already-established app with little effort to partake offers the chance to feel like they are making a difference with a minimum of effort.

The initiative also highlights how apps such as Alipay have evolved from one-dimensional payment tools, to much wider social, interactive and marketing platforms. We obviously see it with WeChat, and a host of other apps such as Ctrip, which is not just a holiday booking tool but a powerful communication channel for reaching Chinese tourists on holiday, to health apps that can be used to promote food and lifestyle products. They are all good channels to consider when developing a marketing strategy for China – we can help with that! Go to Page 2 to see this week’s China news and highlights.

In 1990, Greater China’s metro systems covered just three cities. By 2020, over 40 cities will sport modern, efficient underground commuter networks. In that same three decades, Beijing has gone from a couple of lines and Shanghai from nothing, to the two largest and busiest networks in the world.

Anyone who has immersed themselves in the swarms of China’s metro systems will have noted that subways are playing their part in fuelling the mass movement of consumers. Even with barely any room to move, heads are fixed on smartphones – be it social media, ecommerce, playing games or watching video, all consciously and subconsciously feeding China’s consumption machine. Yet more importantly, the zealous expansion of China’s subways represents something much bigger. It signifies the rapid rate of change and progress altering Chinese consumers’ cities and as a result, their residents’ lifestyles, behaviour and expectations.

While [often highly indebted] local governments are funding the expansion of subway networks, private enterprise is driving another transport phenomena that makes the metro expansions look slow. By Q1 this year China’s bike loan schemes accounted for more trips than all on-demand transport in North America, Europe, Middle East, Africa and India combined with their Ubers, Lyfts, Olas, etc. Two thirds of China’s bike-loan users now ride three or more times a week.

China had just a few small single-city bike loan schemes until last year, when funding allowed them to expand nationwide and internationally. The rest is history. Ofo alone is said to have 20 million registered users and 6 million yellow bikes in 100 cities. Mobike claims to be even larger. And another 30 rivals vie for market share in yet another example of how spoilt for choice Chinese consumers are, and how quickly they embrace new trends.

No one saw it coming.  Brands looking to build long-term strategies for China should keep that in mind. Everything from the types of holidays Chinese consumers choose, to the food they buy, where their health budgets go, to their preference for cars is changing as quickly as the adoption of new transport options.  Add that to the regular stream of new regulations and sales channels and a China strategy is hard to pin down.

It is not unusual for foreign brands to want to build 5 or 10-year plans for China. While it is important to have a long-term focus in China, rigid plans will very quickly become irrelevant. Things that have taken 5-10 years to evolve in some markets can take 12-18 months in China.

Chinese entrepreneurs have been brought up in a constantly changing environment and many run their businesses with the same expectation, ensuring they maintain the agility to adopt new initiatives in weeks that bureaucratic corporations can take years to do. Anyone in the China market is competing against such companies, meaning staying ahead of the trends is imperative. Agencies like China Skinny can assist with just that. Go to Page 2 to see this week’s China news and highlights.

China Skinny works with clients across 17 industries which has given us a well-rounded perspective of Chinese consumer behaviour. It’s been a helpful way to identify what works in one category, how it can be applied in others and any affinities between them.

One of the most dynamic industries we work in is food & beverage, which has welcomed some of the most innovative and exciting marketing we’ve seen in China. There are mega-brands with annual marketing budgets exceeding a billion dollars, to niche players that cleverly hone-in on specific target markets. Costly celebrities and KOLs are a regular feature in campaigns; 39% of Chinese food & beverage ads have celebs in them, versus 10% in the UK and US, according to Millward Brown.

Premiumisation has become a commonplace buzzword in China and its effect is seen at every level. Even rice saw 25% of consumers trade up between 2011-2015 versus 3% who traded down, according to McKinsey. Premiumisation and health concerns have also led sales of the workingman’s favourite instant noodles to drop by billions of tubs. Buzzwords such as healthy, natural, organic, GMO-free, functional and probiotics are increasingly making their way onto Chinese labels and with it, heftier price tags. Between 2012 and 2016 the portion of high- and middle-end product sales grew from 26.2% to 34.4% on Alibaba’s retail platforms.

The one thing almost all successful food brands have in common is their adoption of digital channels. Food & beverage has become the fastest growing ecommerce category and will continue doing so following significant investment in cold-chain and cross-border logistics. 60.5% of fresh food is now available online versus 26% in 2014. What makes the online food & beverage category interesting is that it is much less dominated by Alibaba and JD, with niche food-specific platforms accounting for a larger share of sales. With ecommerce now as much a marketing channel as a sales one, food & beverage brands are embracing it and the diverse opportunities it brings.

Traditional offline food brands are also embracing technology. China’s giant ¥3.5 trillion ($507 billion) eating out industry is taking to mobile payments. 45% of McDonalds China’s sales are now paid for through a smartphone. China’s insatiable appetite for food delivery has seen a storm of food delivery apps surface, which prompted KFC’s parent Yum China to buy a controlling stake in Sherpas this month. Apps developed by food brands provide a host of useful tools and are now used by 60% of Chinese consumers, according to Kantar.

No mention of online channels would be complete without the good old fashioned Daigou purchasing agents promoting their wares through WeChat, Taobao and other niche platforms. Although the fear of regulations was circulating again online in China last week, enthusiasm doesn’t appear to be waning for the grey channel.  Countries like Australia, New Zealand and the US have seen an army of Daigou on their shores. A NY Times article earlier this month reported that as many as eight in 10 of the 136,000 Chinese students in Australia are involved in Daigou businesses in some form.

Food & beverage is abound with opportunities in China, particularly for brands that embrace China’s unique and exciting channels. Agencies such as China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.