We have just passed the 200-day mark of the US-China trade war, and what a 200 days it has been! Whilst we are finally seeing some positive signs that an agreement could be imminent, there has been plenty of commentary about the beating that America’s reputation has taken in China.
There’s no discounting that the spat has sped up the rise of nationalism in China, and there are consumers who may have directed their spending away from American businesses, but the impact has been much less severe than it could have been.
If we look back to the row between China and Japan in 2012 over the Daioyu/Senkaku Islands, many Japanese brands were hammered and some even shuttered. Similarly, the South Korean fiasco over THAAD in 2017 was estimated to cost the Korean economy $6.8 billion that year. Apple has attributed its poor results to the trade war, and Ford and GM have had better years, nevertheless all-American brands like Coke have reported no impact, and Nike saw a stunning quarter last December. Even Tiffany & Co. saw a double digit rise in Mainland China sales during November and December of last year.
One of the key differences between the US-China trade war and the disputes with Japan and South Korea is that the propaganda machine has not yet ramped up criticism of the US. China also hasn’t introduced regulations such as it did banning tour groups to South Korea. Such plays wouldn’t be well timed during the already-precarious trade negotiations with the US.
Tourism to the US was a sector that many commentators expected would take a hit as a result of the frosty relations, much like Japan’s visitors fell 34.3% in 2012, South Korea’s dropped 60% between March to October 2017, and numbers sunk at other ‘out-of-favour’ countries like the Philippines and Vietnam.
In late September, Ctrip reported that flight bookings to the US were down 42% for the October Golden Week holidays – one of the busiest weeks of the year for international travel. Other anecdotes have flooded in from travel agencies, echoing similar falls. So it will come as a surprise that Chinese tourist numbers to the US actually looked quite healthy in 2018. Although the national figures are yet to be published, Los Angeles reported a 6.9% increase in Chinese tourists last year to 1.2 million visitors. New York also hit record numbers last year, hosting 1.1 million Chinese visitors. It appeared Chinese tourism to the US took a hit in the early months of the trade war, but by November, the US Commerce department was projecting a 2% increase in Chinese tourists.
Like we’ve noted in previous Skinnies, tourism generally builds an affinity with the country, its cuisine, culture and lifestyles, which has a halo effect on preference towards many other product categories. In a world that seems to be more divided than it has been in a long time, China’s tourist growth to the US is refreshingly good news!
On the subject of tourism, China Skinny’s Mark Tanner will be sharing some insights at the beautiful Terranea Resort in Los Angeles for the Visit California Outlook Conference on February 12 & 13. Please pop by and say ni hao if you’re there. More information here. Go to Page 2 to see this week’s China news and highlights.
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.
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.
If you’re in China buying a tub of skincare online, a tray of New Zealand kiwifruit at the local fruit store, an expensive bottle of wine dining out, or even a well-known condom brand at a convenience store, there’s a fair chance you’ll end up with a fake. Unlike Western consumers who take things at face value, Chinese consumers are inherently untrusting of things for sale which contributes to them taking quite a different customer journey for products and services than consumers elsewhere.
Up until five years ago, the prevalence of fakes saw many consumers just accept it as a likely consequence of shopping in China. In 2013, China’s massive retail market saw just one million consumer complaints to relevant government departments. At the time, Americans numbered less than a quarter compared to China’s population but made more than twice as many complaints overall. The sudden rise of social media encouraged some aggrieved Chinese consumers to take complaining into their own hands. In 2011, a wealthy businessman in Qingdao disappointed with his Lamborghini’s service hired nine men to destroy his sports car with sledge hammers, and circulated the video on social media, which was followed by a run of copycats. But overall, most consumers seemed to just grin and bear it.
That is no longer. Last year consumer complaints grew 44% to 2.4 million – edging closer to America’s 2.7 million complaints. As China’s consumers have grown more sophisticated and assertive, so have their channels of recourse. Consumers are more aware and confident about the options available to them meaning brands are much less likely to get away with the things they used to. This is further exacerbated by the rise of ‘professional complainers’ who troll supermarkets for products with incorrect labelling and claims, unlawful additives and multiple production dates, earning ten times the purchase price in compensation.
As consumers have become more proactive in dealing with issues, CCTV’s annual 315 consumer watchdog broadcast has become less relevant. Once one of the most potent beacons of consumer protection, the show was notorious for bankrupting businesses it singled out. Even überbrands such as Nike and Apple took material hits after being shamed on the show in 2012 and 2013 respectively.
Last Thursday’s 315 show confirmed how much less of an impact it makes these days. Just a fraction of the media and online buzz now accompanies 315 relative to the golden days five years ago. Nike was singled out again last year, but it appeared to do little to break the label’s stride in China. Brands are also much better prepared these days with comprehensive crisis plans, illustrated by VW who apologised within minutes on Weibo after being singled out on 315 this year, again. The show has been unable to find its mojo since CCTV joined a string of other state media for corruption involving shows such as 315.
Yet with the fall of 315, the rise of complaints has been augmented with enthusiastic complaining – and praising – on digital channels such as social media and online reviews on ecommerce and travel platforms. In short, it is becoming more difficult to fix actions that annoy Chinese consumers. Much like anywhere, brands should be particularly vigilant to do what they can to keep consumers happy, within reason. Go to Page 2 to see this week’s China news and highlights.
‘Tis the week before Christmas with not a reindeer in sight,
Yet Chinese streets brim with trees and twinkly light.
Those trees are decorated with the logos of brands,
helping keep shopping atop consumers’ Xmas plans.
Like with many things in China, consumerism trumps all,
With festive themes used by brands local and foreign, big and the small.
For brands, Christmas-themed promotions showcase their international bend,
Big name KOLs similarly, are cashing in on the trend.
In the last month 600,000 Christmas trees bought on Tmall alone,
Over 3 million decorations, socks and hats with a tap on the phone.
Whilst Japanese will be celebrating Christmas with a bucket of KFC,
Chinese will be at Starbucks sipping festive mochas and teas.
Like most offices in the kingdom, we’ll be open Christmas week,
but the Weekly Skinny will be back in January sharing the insights you seek.
Silly rhyming aside, the Skinny team wishes you the Merriest of Yuletides,
Hanukkah, Kwanzaa, New Year, with your loved alongside.
圣诞快乐 – Shèngdàn kuàilè!
Go to Page 2 to see this week’s China news and highlights.
Back in 2012 scouring content for the Skinny, it seemed almost every week there was another article praising KFC’s success in China. It was the Western pin-up brand; finding the much sought-after balance that tempted the masses with its alluring foreignness, but localised its offerings just enough to appeal to Chinese tastes – with the menu sporting old favourites like congee.
For every 10 bucks spent on fast food in China, KFC accounted for 4. It had almost 4,000 restaurants, with another 16,000 planned. There were movie placements, celebs munching on drumsticks, lovebirds courting one another over buckets … then Bird Flu and a series of scandals happened.
KFC has never really recovered from the dark days of ’13. In 2014 the menu was ‘overhauled’ for the first time in 27 years, there’s been a refresh of some decor, but if you were to go into most KFC restaurants in China they still bear a stark resemblance to the golden years pre-2013. China, Chinese consumers, and their tastes on the other hand have changed – dramatically. A simple scan of restaurants on Dianping or a stroll through a city mall or restaurant street and it becomes clear that there has been an evolution in China’s hospitality sector. La Liste’s annual ranking of the world’s restaurants noted the big trend is the rise of restaurants in China who are meticulously preparing and presenting food, and charging real money for it.
Contrast KFC with another mega-chain from America – Starbucks. Over recent years, the coffeehouse chain has constantly adapted to Chinese consumers and their ever-shifting expectations for newer, shinier offerings. They have played well to Chinese consumers’ inherent need for status from what they purchase, opening cafes in highly visible spots in city streets and premium office building foyers where they will be seen sipping on their Green Tea Crème Frappuccinos. The look and feel of cafes have also evolved to keep up with changing tastes, with some of the latest cafes having fit outs that wouldn’t look out of place against some of the fine dining establishments on Shanghai’s Bund.
Starbucks has always played to Chinese love of all things digital and typically been an early adopter and innovative user of technology. In the early days of WeChat, it cleverly used the limited functions by encouraging fans to send emoticons reflecting their mood, receiving a short music clip related to that mood. A little later in the game they accepted WeChat Pay with some alluring features such as the ability to gift friends and family a drink or two.
Last week’s launch of Starbuck’s mega reserve roastery in Shanghai is one of its most exciting initiatives yet. In addition to a beautiful fitout, complete with contemporary Chinese elements, the venue plays true to the ‘New Retail’ movement that is fast making its way into the bricks & mortar landscape. Integrating the Taobao app, augmented reality brings Starbuck’s story to life in a format that China’s millennials love. The app also allows them to skip the queue and buy merchandise, which improves both customer experience and the likelihood of increased sales and advocacy purchases.
Much like KFC was before 2013, Starbucks has become a much-cited case study – with good reason. It illustrates how brands can successfully keep up and stay relevant to the ever-changing needs of Chinese consumers through offline and online initiatives and product offerings. Their lessons don’t just apply in the hospitality trade, but are applicable for any foreign or local brand trading in China. Go to Page 2 to see this week’s China news and highlights.
Earlier this month Beijing released a discussion draft of its Ecommerce Law that has sent China watchers and businesses searching earnestly for some clarity. It promises to dramatically tighten up the cross border commerce opportunities that make up one of the most important and fastest growing channels for foreign brands exploring the China market. Like many government mandates, it strikes a confusing contradiction; adhering to the trend of increased control over China’s online consumer space in the face of all the talk of China opening up to the world from its helmsman.
Whilst some details of the discussion draft are uncertain, it will send shudders to some imported brands selling in China. Foreign retailers will be unable to sell online in China without going through a platform controlled by a Chinese-owned entity with the relevant licenses. Whereas the vast majority of online sales currently go through these channels anyway – Taobao, Tmall, JD, etc – it doesn’t look positive for Amazon’s ecommerce business in China, who this month sold their China-based cloud computing hardware due to the new cyber security laws. It also provides little hope for foreign brand.com stores.
The draft also seeks to shut down online sales as a way to import illegal products into China. If ‘illegal’ includes products currently not allowed to be sold in Mainland China, it will dramatically impact the most popular cross border category: cosmetics and skincare, where foreign products can’t be sold in China if they aren’t tested on animals. Only approved products will make it through the gate so it is likely to affect many categories.
As the China Law Blog eloquently put it, “the plan is to funnel all cross-border e-commerce through a limited number of processing centers, all of which are controlled by the national government”. Daigou traders are unlikely to be tickled pink by the rules.
The unfortunate reality of the draft regulations is that they will make the already dominant platforms such as Alibaba and JD even stronger. As their listing and support fees can be a prohibitive expense for smaller brands and the platforms are getting more crowded by the day, it is becoming increasingly harder to even get a listing on the platforms, let alone be noticed.
The wonderful thing about China’s current cross border commerce environment is how sales are spread across many more channels – Alibaba’s platforms account for just a third of sales, versus three quarters of China’s ecommerce overall. Although most of the other cross border platforms are Chinese entities and won’t be negatively affected by the new rules, those foreign-based sites may not fare so well – a real shame given many successful foreign brands now in China first sold into the market from their own foreign-based sites.
Like many previous ecommerce-related laws in China, the devil will be in the finer details and enforcement, but the draft should send a clear signal about the direction of ecommerce in China and highlight the importance of not relying on one precarious sales channel. Agencies such as China Skinny can ensure you are best prepared for such a risk. Go to Page 2 to see this week’s China news and highlights.
Welcome back to our China-based readers; we hope Golden Week panned out well.
China’s dynamic startup scene typically takes a consistent path. New ideas usually follow innovations that have been successful overseas, then quickly morph to serve the unique needs of Chinese consumers; capitalising on the distinct ecosystem of embedded mobile payments, devout smartphone usage and lack of privacy concerns.
Any sniff of success and a slew of others will follow. Close to five million Chinese graduate with science, tech, engineering and mathematics degrees every year, many who are optimistic about becoming the next Jack Ma. Most who launch startups will fizzle, but a select few will get funding, followed by more, and more capital, often from one of the big gorillas Alibaba, Tencent or Baidu – bringing the crucial support and channels to scale up to the next level.
Over the past few years China has been awash with investment capital, and with so much money sloshing around these startups can shower consumers with subsidies, discounts and freebies ensuring they get hooked. What follows is a war of attrition, where startups fiercely compete with incentives, burning through cash with unprofitable business models until the less-resourced competitors fall away or are swallowed up by a better-funded player. Mergers and consolidation always follow with the winner usually taking all.
When just one dominant player remains, the sweeteners lessen. We saw this with Meituan and Dianping in 2015, which provided an estimated ¥58 billion ($9 billion) worth of discounts and subsidies for restaurants and movies in 2015 combined. Since announcing a merger late that year, incentives have dropped off. Similarly within three months of the ride hailing apps Didi-Kuaidi-Uber merger, a typical ride that cost ¥8 climbed to ¥13. If we look across almost every online category in China – much like other places – they are dominated by a single player. Ctrip-Qunar control around 80% of the online travel market, Alibaba accounts for a similar amount of ecommerce, likewise Tencent and social media.
We’re starting to see similar consolidation for the latest hot sectors in China’s tech world. Baidu recently bowed out of the food delivery space selling its Xiaodu subsidy to Ele.me. And on the bike sharing front, where over 30 companies vie for pavement space, riders and critical mass, players are starting to drop off. Market leaders Mobike and Ofo are already said to be in merger talks.
Fortunately China’s tech scene isn’t just evolving to one big network of monopolies. Some areas are still passionately contested driving innovation and deals for consumers. In what would be a surprise to many, Baidu isn’t the leading search tool in China for products. In mature categories such as online travel there are flourishing niche sites that can be better-targeted than the leader. In ecommerce, less price-sensitive and more sophisticated consumers tired of trawling through the expanses of Alibaba’s platforms often swap to niche platforms in areas such as luxury, food and cross border, where Alibaba accounts for just a third of sales. Brands would be wise to consider them.
On the subject of cross border commerce, China Skinny’s Ann Bierbower will be sharing advice about effectively reaching and selling to Chinese consumers at the Reach Global Customers Through Ecommerce seminar in Los Angeles on October 24. More information here. 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 way. Contact us to find out more. Go to Page 2 to see this week’s China news and highlights.
If you’re looking for trends in the Chinese consumer market, the tourism industry should be your first stop. Whether it’s trading-up in food & beverage or the health & fitness craze seizing the domestic market, China Skinny sees China’s affluent international travellers particularly influential in shaping these trends back home. A quick glance at five trends stemming from tourism:
1: Make it special. Wealthy travellers have been ditching the standard travel packages in favour of finely-tuned and customizable ones for a while now. Across virtually every category brands are looking to create more personalized offerings to meet the increasingly specific wants and needs of Chinese consumers.
2: Get adventurous. Affluent travellers are also getting more adventurous on their holidays, seeking a more authentic experience – a theme replicated in individual tastes across other categories. Based on the number of tents and outdoor equipment sold on Alibaba platforms last year, adventure of a less comfortable nature also looks to be trending in China.
3: It’s the little things. Little comforts like bottled water, kettles and slippers have long been an important feature in hotel rooms and are key to keeping an ever-more discerning Chinese traveller happy. Similar hygiene factors and little surprises will go a long way for any brand in ensuring Chinese consumers are happy and potentially prompting all-important advocacy for your brand.
4: Convenience is king. Tourism operators have been quick to identify the short attention spans of Chinese tourists, with some notably shortening the duration of the activities they offer to Chinese tourists. This trait is mirrored by the general consumer who is seeking convenience and instant gratification from what they buy.
5: Domestic brands know best. Domestic players are upping their game in every category. From the National Tourism Administration’s “Toilet Revolution” which has seen over 50,000 of China’s toilets upgraded since 2015, to intricately restored (and sometimes rebuilt) historic wonders, to epic theme parks, to deep-pocketed online travel apps. Across all categories it pays to research and learn from domestic counterparts when delivering products are services that are tailored for the Chinese market.
An example of domestic learnings is the point of difference Tujia holds over Airbnb as it tries to establish a foothold in China. Beijing has a jumble of business districts often defined by a certain specialty. If you want to stay in a commerce, tech or arts area Tujia gives you the ability to narrow your search accordingly. With Beijing’s hospitals driving a huge amount of short-term accommodation, users can look for areas around certain medical facilities. Beijing’s traffic is a known hassle, so sorting by proximity to subway lines and specific attractions is a much appreciated feature. Not only do Chinese consumers have unique needs, but they are often specific to different locations in China.
Improving domestic competition is mostly a good thing for tourism. Like with many categories, from wine to furniture, a good local experience will whet travellers’ appetites for more and often lead to farther-flung holidays, particularly to destinations catering to Chinese needs.
One of the most powerful channels to reach not just Chinese tourists but all consumers is digital. For our Shanghai-based readers, China Skinny’s Nadja Rauscher will be on stage at Austcham’s Clicks to Commerce event next Tuesday 27 June providing some great tips and tricks to best stand out in China’s crowded digital market. More info here. 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.
Five years ago the Chinese idea of an exotic getaway encompassed strutting glitzy Hong Kong shopping malls with arms adorned in Gucci bags. At the time destinations in Greater China accounted for around two thirds of Chinese outbound tourists.
Of the lucky few who travelled further afield, most were in groups shuttled between shopping spots and Chinese food halls with a few stops for photo opportunities. A group holiday made everything easier; not only the most practical way of getting a visa but a reassuring method of removing the mystery and uncertainty from outbound travel. At the time 60% of Chinese tourists complained about the lack of travel information available to them.
Today, Chinese travel has been flipped on its head. The allure of 122 million high spending travellers has seen countless destinations, operators and tech entrepreneurs create a storm of travel information bombarding prospective visitors. 46% now believe they have too many travel options and information sources. That isn’t a good thing. A 2000 study by psychologists Sheena Iyengar and Mark Lepper found that too much choice can cause “choice paralysis”, meaning consumers are less likely to buy anything, and if they do buy, they are less satisfied with their selection.
Whilst there may be some information overload in travel, the increasingly less one-dimensional Chinese tourist is seeking more diverse information. More tourists, in particular the millennials, are researching and travelling to destinations beyond the traditional city breaks, culture and shopping. Their interests are straying more towards ‘Western-style’ sun and beach holidays, sports, wellness and relaxation.
Increasing sophistication of Chinese travellers is being complemented by easier travel. The number of visa-free countries and regions has grown from 18 in 2010 to 61 last year. Direct air links expand almost daily, and not just in the well-known cities. Changsha’s Huanghua International Airport, for example, has direct flights to 20 international destinations in 13 countries including Sydney, Melbourne and Los Angeles. ‘Tiny’ Yinchuan in Ningxia Province, whose urban population is less than 1.3 million, is serviced by direct flights to Kuala Lumpur, Bangkok, Taipei and Dubai. Even those every day habits that have become embedded in Chinese lives such as Alipay and WeChat Pay are making travel abroad much more convenient for the average millennial.
Whilst almost half of travellers appear to be a little overwhelmed by the information and options available, it doesn’t mean that destinations and operators should be pulling back on communications. Instead they should focus on ensuring that the content is relevant, high quality and in the right places to break through the clutter and simplify travellers’ decisions. Chinese consumers continue to do more research into travel than their peers abroad as 74% express that they are willing to spend time and energy researching and planning their travel.
Tourism is a metaphor for all industries in China – an increasingly sophisticated consumer and ever-more contested market requiring a much smarter, targeted marketing strategy. Agencies like China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
The advent of towering office buildings, glitzy malls and unending super highways will quickly capture the eye of any traveller looking for signs of the new China. Yet beyond the glamour and scale, the day-to-day lives of China’s people best signify the huge advancement of the nation since its reformative years four decades ago.
In 1979, the average Chinese person lived in 9 metres of space with a shared tap, kitchen bench and neighbourhood john. Over the next 38 years the average living area has grown by almost 400%, and with it kitchens adorned in shiny appliances and bathrooms of a much more private nature.
The average Chinese home is no longer just a functional place to sleep but a valued feature of their lives. This evolution has been embraced by Chinese consumers and has seen living spaces across the country transform into increasingly comfortable and aesthetic abodes. This is reflected by some of the fastest-growing categories in last quarter’s robust 10.9% retail growth. Building and decoration materials purchases rose 17.8%, furniture increased 13.8% and home appliances grew over 12% in the year to March. The growth contributed to the overall rise in consumption which accounted for close to 80% of China’s higher-than-expected 6.9% GDP growth.
Freshly painted walls, plush new armchairs and smart appliances are all representative of a trend which is seeing more Chinese eating at home, entertaining at home and even baking at home. A few years ago consumption of most premium food items took place in public. Premium purchases were a chance to display your superior status, and consuming one privately would just be a waste. However today’s consumers can happily power through a tub of Haagen Dazs on the sofa just for the pleasure of it, and many more consumers are driven to more discrete locales for indulgence following Xi Jinping’s anti-graft campaign. All these elements culminate in a significant shift in home consumption.
Another contributing factor is the abundance of products available to consumers and finding their way into more and more fridges and pantries across the country. An average of 160 new consumer products hit store shelves every day for the past 12 months according to Mintel. Add that to the host of new apps, cross border commerce listings, new restaurants, cinemas, theme parks and airline routes, and Chinese have never had more to choose from. It is little wonder they keep spending more.
The good: Chinese consumers just keep buying more. The bad: direct and indirect competitors all vying for a share of China’s wallets are growing too. The prize is getting bigger, but it is also much harder to obtain. Something that may assist is China Skinny’s free five day email course to ensure that you have the main areas covered, know what to watch out for, and it may just help you tap into that increased spending, both in the home and out. The course starts on 2 May, so best to sign up today. For our Dubai-based readers, China Skinny’s Mark Tanner looks forward to meeting some of you at the Dubai Chamber’s Navigating China’s B2C e-Commerce Landscape workshop next Monday on 1 May. Go to Page 2 to see this week’s China news and highlights.
A cute little penguin with a scarf, a curious pussycat and a floppy-eared pooch. Not the beginnings of a children’s story but the iconic logos of three gargantuan powerhouses in the Chinese market. A brief survey of China’s top brands and the gulf in branding ideology from the West is clear. Where some may argue for Apple, the realm of cutesy logos remains confined to the Middle Kingdom.
With China’s rising horde of shoppers spending increasingly at home and abroad, it is best not to underestimate the contribution that China funnels to a brand’s value. Baijiu exemplifies this. Barely consumed outside of China, 37.5% of the world’s top-50 spirits brands are Baijiu brands. For the first time the value of Baijiu brands eclipsed that of Whiskey on the list.
Of course building a successful brand goes beyond mere words and symbols. Yet the name and logo make up the company flag that flies atop the mast, forever present across a brand’s dealings and communications – so its success is imperative. Having a Chinese brand name is crucial. For those foreign business yet to lock one in, there’s a good chance your distributor/s have adopted one, probably trademarked it and are trying to establish it as the accepted reference point. If they haven’t trademarked it, someone else may have, which can lead to all sorts of problems down the line.
Chinese brand names will generally roll off the tongue more naturally than foreign ones and be easier to share on social media and other digital platforms. Whilst it shouldn’t replace your recognisable foreign brand and in most cases not be displayed on the original packaging (otherwise consumers will question if your products are authentically foreign) it should be used on the Chinese label and in communications.
With its plethora of characters Chinese is a beautiful language presenting plenty of opportunities to develop a name with a clever meaning that resonates with Chinese consumers. However it can also go pear-shaped if taken out of context. AirBnB learned of the importance of getting your Chinese name right last month, launching a name that was both hard to pronounce and sounded like a love shop.
As part of developing a Chinese name, brands should be tested with consumers, ideally verbally as well as written, across different regions to account for cultural, slang and dialect differences. Agencies like China Skinny can assist with every step of the process. Go to Page 2 to see this week’s China news and highlights.
Happy 2017 and welcome back to those who enjoyed a holiday over the break. The past few weeks have seen countless China forecasts for the year ahead, including China Skinny’s own humble 2017 China marketing predictions. Like every year, many are predicting major slowdowns in China’s GDP growth, spending and everything that goes with it. Whilst some sectors in the Chinese economy have continued to show cracks, China’s consumers seemingly can’t get enough stuff, with retail spending keeping China’s economy on its enviable growth path.
In the first 11 months of 2016, consumers spent 10.4% more than the same period a year earlier. During this month’s three day New Year holiday spending surged 46.9% compared to 2016, with outbound travellers shelling out 40% more and going further afield to do it.
As we roll into 2017, we should pay homage to the consumers who are driving this growth – the Millennials. Under-35s’ consumption is rising a third faster than Chinese consumers overall. While older generations lament vanishing traditional values of frugality, China’s youth are celebrating the sense of freedom and independence it brings. They haven’t experienced the austere periods like those before them and lack the same instinctive necessity to save for tougher times. Instead, much of what they’ve known has consumerism at its core.
Millennials have long been the force of China’s consumption growth, but what is changing is how they are funding it.
Although the average official Chinese salary is rising fast, it is still low by Western standards. Even for those who have spent tens of thousands of dollars on an overseas education, less than a third earn more than ¥70,000 ($10,100) a year – that doesn’t go far in a society obsessed with shiny gadgets, premium food, Western athleisure and overseas travel. Nevertheless, Chinese youth with the bug for spending are a feeding it with debt like never before. Consumer credit has grown 300% in the last 6-years alone, with the average Millennial having debt 18.5 times their income.
Will soaring consumer debt lead to the fall of China’s consumer classes? Not likely. There is much less risk of that happening than for the debt-laden shoppers of the West. China’s one-child families are a reason for that. Many Millennials are the sole heir to parents and grandparents’ freehold properties worth millions, and are likely to marry an only child in a similar position. They are starting to come to the realisation that saving a salary of a little over $1,000 a month isn’t overly relevant; in fact, neither is some debt on top of that.
So in short, unless something radical happens across the Pacific, we think 2017 will continue to see healthy consumer spending growth in China – unfortunately some of it fuelled by debt – but not at a level that will cause a catastrophic collapse. We hope your fortunes in China will tap into this year’s growth – agencies like China Skinny are here to help you achieve that. Go to Page 2 to see this week’s China news and highlights.