If you’re already exporting to China, we’re guessing you’re probably also selling to a host of other countries – markets like Dubai and the other six emirates could be on the list. In the UAE, there’s a good chance you’ve engaged some localisation for the country – culturally sensitive and resonant branding & communications, legal & regulatory allowances, logistics & distribution, and possibly even some new product development and packaging. In China, it’s probable that you’ve also localised the mix. But how local is your localisation?
Few people come to China without hearing that the country is like Europe; made up of varied and diverse regions. Yet in the same moment of acknowledgement, many will turn around and ‘localise for China’ with a homogenous strategy that they hope will win the hearts of consumers spanning the country.
China Skinny does a lot of research across different cities and provinces in China, and we usually find notable variances between the regions. There are the obvious differences in food tastes, climates, lifestyles, pollution and even body size, but it is the emotional cues that are often the most pronounced. We only need to look at one of the most common themes in Chinese advertising – families. Even in Guangzhou and Shenzhen – two tier 1 cities just 30 minutes apart on the fast train, the reality for families can be quite different: a large share of millennials in Guangzhou live with their parents and see them most days. In Shenzhen – a city built by domestic migrants – many millennials may only see their parents every few months, or just once a year during the Spring Festival.
Whilst some overarching localisation should be implemented across China, there is often a case to get city-specific with marketing and other initiatives. Take Shanghai, it has population greater than Australia, and a 13% larger GDP than the UAE, yet unlike the UAE-specific localisation, many brands will roll out the same strategy for Beijing, Guangzhou, Shenzhen and many other cities across China.
China’s metropolises are of a scale and affluence that they justify an element of localisation. The hyper-competitive nature of marketing in Chinese cities is finding it increasingly harder to connect with consumers without it. That means localising messaging, and even sometimes the digital platforms you use to share it. In certain demographics in some cities, digital channels aren’t always the best option to reach Chinese consumers, highlighting the need to have regionally-specific plans.
Over the past few years, brands have become increasingly focused on cities beyond tier 1, and even tier 2, with good reason. These ‘smaller’ cities are often much less contested and less apathetic to interesting, new foreign products. Half of the 50 million Chinese households entering the middle to affluent classes between 2016-2020 are expected to reign from cities outside of the top-100 cities according to BCG. They’re buying more imported products, and travelling abroad more which influences more purchases. The number of direct flights between cities in China and Thailand grew from 69 to 148 over the past three years for example. Yet with such variances between lower tier cities, brands would be wise to do their due diligence before entering and localising for them.
On the subject of cities, China Skinny has launched a new tool on our site to help you make sense of it all. We’re often getting questions about which cities fall into which tier, so we have created out City Tier Calculator which provides detailed information about which tier Chinese cities are, some of the key indicators, their rankings in that tier, and even how many Starbucks they have. Use the tool here. The tool is part of an overall redesign of chinaskinny.com, which is long overdue – we’d suggest you take a look. Go to Page 2 to see this week’s China news and highlights.
There are many relatively unknown cities in China with GDPs as large as countries. For example, the city of Zibo has an economy the size of Panama’s and Tangshan’s GDP ranks up there with New Zealand by some measures. These smaller cities are helping drive China’s consumer demand, and by proxy, the global economy. Morgan Stanley forecasts that lower tier cities will account for two-thirds of the increase in consumption between now and 2030.
As China’s biggest cities have become the most crowded and contested markets on the planet, more and more brands are looking to cities like the Zibos and Tangshans where growth is often faster and competition less fierce. We only need to look at FMCG which has been growing 2-3 times faster in lower tier cities than big cities over recent years. In tourism, the 10 fastest growing airports by passenger numbers are all tier 2 cities and below. A third of all Cadillacs sold in China were bought in tier 3 & 4 cities.
Yet while it’s become common to talk about China’s less-competitive lower tier cities, brands shouldn’t just be throwing darts at maps and reviewing GDP figures in determining where to focus. Consumers in many lower tier cities don’t yet have a level of sophistication to demand many products and services.
Before looking to the hinterland, brands should critically assess consumer behaviour and preferences in those cities. Lifestyles, climate and travel habits are often as much of a contributor to demand for a product than GDP per capita. Ecommerce data, although much less developed than tier 1 and 2 cities, can also provide hints into potential demand. Even local government policy can impact consumer demand – just look to Electric Vehicles, where six cities contribute to 40% of sales.
In many cases, the hyper-competitive cities like Shanghai and Beijing can still be the most lucrative markets to target. They have become incredibly wealthy with GDP per capita adjusted for purchasing power now comparable to Switzerland. They have been wealthier longer, were allowed to travel abroad sooner, and as a result, have much more mature and sophisticated tastes. As a result, they are more ready for some Western products and services.
With both cities having more than 20 million people, just focusing on specific demographics or districts can itself produce material sales and a beachhead for further expansion.
A good example is American wholesaler Costco. Four years of testing the water with cross border commerce has given them confidence in demand for their products and formats. This month they announced they will launch two large Costco bricks & mortar stores in Shanghai. Unlike most of the 226 brands who opened their first stores centrally in Shanghai last year, Costco is opening in the outer districts of Minhang and Pudong New Area.
The bulk sales model like Costco hasn’t really taken off in China yet. Consumers have smaller kitchens and less storage than in the US, lower car usage for shopping, and a preference for freshness. However Costco is likely to have evaluated the last 4-years of ecommerce sales data to make informed decisions. If it will work anywhere, Minhang and far-flung Pudong are good bets. They are affluent areas with many large villa residences and a population who is more reliant on driving for daily needs. Costco’s first 33,000 square metre store opening in April 2019 will have 1,000 carparks. One would hope that they are integrating New Retail into their stores to ensure they are relevant and engaging for consumers.
Whether you are Costco, a fashion brand or selling vitamins, there is no consistent answer about which city is best to target. Brands would be wise to analyse different cities and regions before making a call. The cities a brand chooses to target should be an important factor in developing localised marketing strategies, selecting distributors and even lawyers familiar with local laws and regulations. Agencies such as China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
When an estimated 500 new products and services launch in China every day, separating your brand from the rest can be an endless struggle. Of course an informed and intelligent approach to the market is vital in driving success, but recent times have seen high-performing brands begin to move towards more collaborative methods to open up opportunities.
Some of China Skinny’s clients and other aspirational brands are increasingly opting not to tackle China alone. New trends, business models and changing influences and touch points are constantly emerging, giving rise to the effectiveness of partnerships. They have allowed brands to more easily build meaningful and emotional connections with their target markets by engaging and accessing new channels previously out of reach for them.
Many of the highest profile b2b partnerships include China’s big tech companies. It seems there are almost daily announcements of an FMCG brand, car brand or retailer signing a partnership deal with Alibaba or Tencent. The Ford-Alibaba car vending machine is a novel example which captured imaginations across China and the world. Similarly, Tencent recently teamed up with Lego to develop games, videos and a social network for Chinese children.
Beyond the well-publicised and more obvious partnerships, there are many lesser-known collaborations that are sure to surprise those both in and out of China. With China’s sought-after millennials constantly looking for more ways to express themselves, fashion and music are at the heart of the most popular cross-industry collaborations. Unexpected partnerships have blossomed, including Lipton Tea joining forces with designers in a streetwear-inspired fashion show to reach a completely new body of consumers, and TripAdvisor who partnered with Beijing-based handbag brand Rfactory to create handbags emblazoned with the online travel firm’s logo. Blackmores have teamed up with top-20-world-ranking Tsinghua University to develop a health communication curriculum course for natural medicine. In addition to the aspirational associations and the perceived commitment to China, the course puts Blackmores in good stead, set to reach some of the industry’s most persuasive future influencers during their formative years.
Like anywhere, partnerships in China allow plenty of scope for creativity and can produce much higher returns than mainstream marketing initiatives. Yet they should be well-considered, appropriately executed and kept relevant to both the existing consumer and those targeted to justify the investment and risks that come with such collaborations. Agencies such as China Skinny can assist in identifying and maximising such partnerships.
On another note, China Skinny’s Mark Tanner will be joining an esteemed line up of experts at The Secrets To Doing Business In China forum in Shanghai on Friday May 18. Mix and mingle with China-based businesses and a large delegation of visiting Australian businesses in town for the Aussie Rules and SIAL. For more details tap/click 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.
Glance across any Chinese park, restaurant or subway and it becomes quite clear that online video is one of the most popular channels in China. It is also one of the most dynamic. This is reflected by user numbers which has seen former market leader Youku-Tudou’s 325 million active monthly mobile users fall far behind market leaders Tencent Video and iQiyi with 457 million and 442 million respectively.
One of the interesting trends in online video is the paid subscribers. Whilst Chinese consumers have traditionally been used to getting much for free online (either by well-funded startups trying to acquire users or through pirated means), the masses are becoming increasingly prepared to pay for video content. A recent survey by China Netcasting Services Association found nearly 43% of online video users were paid subscribers to some form of video service – over a fifth more than last year. The main reasons are to get exclusive content and to skip advertisements. This represents the overall trend of a much-freer spending Chinese consumer who is prepared to pay a premium for things that will make their lives better.
For brands hoping to reach Chinese consumers, developing video content can be one of the richest and most engaging channels. There are a number of other possibilities for online video too – particularly for those who are prepared to spend. Advertising has long been an option, but it is about to get a lot more interesting on Tencent Video following the company’s announcement to bring together the wealth of data from its seven main business units. This will allow much deeper insights and targeted marketing – not just on Tencent Video, but WeChat and Tencent’s other apps.
As powerful as video advertising can be, KOLs can provide a more persuasive and seemingly authentic way to spread and amplify a message if done well. Although brands can drop significant budgets on KOLs, the return can be questionable on many campaigns as they don’t utilise KOLs’ channels as well as they could. Video blogging and related live streaming can be some of the most powerful channels where online influencers can bring your brand, products and services to life.
Some 470 million internet users in China follow these online influencers – 20.6% more than last year. 65.7% sought out videos with humorous and fun content from them. Videos through online ‘celebs’ can also help brands get to otherwise difficult-to-reach consumers, with 54.1% (257 million) of those followers living in third- or fourth-tier cities. Although those big name vloggers are mainly Chinese, there are a handful of Mandarin-speaking foreigners who are gathering quite a following.
A look at the formats for popular vlogs provides an insight into the overall psyche of Chinese consumers. Whereas vlogs in the West can be quite long, they are usually less than 2 minutes in China; representative of local consumers’ love of instant gratification and shorter attention spans for content. Many of these rules apply for other video formats that can be valuable in China’s market place, such as internal and B2B comms where video can be used to train staff, agents and retailers in an engaging format. Agencies such as China Skinny can ensure you maximise the online video opportunity.
On a slightly different topic, China Skinny is working with Westpac and the Australian Chamber of Commerce in Shanghai on the 2018 Westpac Australia-China Business Sentiment Survey. We’d encourage all of our readers who are Australian businesses working in, or with, China to participate in the Survey. The survey aims to provide a valuable insight into the health of the Australia-China economic relationship and provide you with a useful benchmarking tool to inform your business strategy. The collective view of Australian businesses will also help identifying areas that can be built upon and improved to assist Australian businesses in China. Click/tap here to participate in the 15-20 minute survey. We appreciate you taking the time to complete it! Go to Page 2 to see this week’s China news and highlights.
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.
Here’s some further encouraging news for China’s consumer market: in the first eight months of this year more babies were born into families with multiple children than those without – some 52% versus 45% in 2016. That will hearten the folk in Beijing who are seeking solutions to support its top-heavy population demographics, and should be music to the ears of brands peddling everything from infant formula to shared accommodation. During last weekend’s enormous Singles’ Day festival, baby products were among the top-selling categories.
Despite the increases, Chinese mothers continue to have one of the highest workplace participation rates globally, with 63% of females in the workforce versus 56% in the US and 50% globally. This is the result of a generation of the one-child policy, differing family structures which see grandparents caring for young ones and an admirable cultural belief that “women hold up half the sky.”
Even with the spike in those procreating, many Chinese remain uninformed on the subject. For example, more than 80% of adults in China have misunderstandings about contraception. This is the result of limited sex education and ‘birds and bees’ chats between parents and their kids. Sexual references are taboo in mainstream media and other channels. It was in 2015 when the big budget empress TV soap was taken off air to have Fanbingbing chest shots photoshopped out. Homosexual references are completely banned and even leggy models were even banned from car shows as Beijing does what it can to keep its population pure and innocent. This is reflected in consumer tastes and confirmed in numerous China Skinny research projects which has found an aversion to certain images deemed too sexy, with distinct preferences for the cutesy.
Yet behind the Hello Kitty knits and gaming youth, sexual innuendos are becoming more commonplace in China. Any visit to the local convenience store is a testament with battery operated devices, lubes and contraceptives taking prime real estate in point of sale displays by the counter. In a movement that represents greater self-confidence towards previously frowned upon areas, lingerie has become one of the fastest-growing fashion categories in China growing 20% annually for almost a decade.
There are much less subtle indicators of a trend towards an increased liberalness. Durex is leading the revolution by tiptoeing around the sensitive subjects to create engaging and timely communications that resonate with consumers online and get shared en masse. And while Durex and other foreign brands lead the category, a host of local condom makers are coming up with new innovative products to break into the fast-growing category.
Like everything in China, what appeals and is acceptable to consumers is constantly shifting. Hit the mark, and a brand can attain a cult-like following. Miss it, and there can be an anti-following. Agencies such as China Skinny can assure you are on the mark. 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.
Visit any popular tourist spot in China or abroad next week and you’re likely to appreciate the scale of China’s tourist machine operating in top gear. October Golden Week is the yearly climax of leisure travel in China; for many, it concludes as much as 6-months of deliberating and planning for the big annual holiday. The Chinese Tourism Academy expects 710 million trips will be made by Chinese between October 1-8. That’s 10% more than 2016 with spending up 23% to ¥590 billion ($90 billion).
Whilst the large majority of trips may be domestic, they can provide a glimpse into travelling preferences which are likely to follow for outbound travel. One of those trends is self-driving holidays. 560 million road trips are forecast to be taken – 10% more than in 2016 – providing no respite to last year’s ‘Carmageddon’ which saw 50-lane traffic jams as travellers returned home to Beijing.
Over 6 million Chinese will travel abroad during the festival, with more and more travelling beyond the traditional Hong Kong, Macau and Taiwan destinations. Parts of Thailand, Singapore, Japan and the US are likely to be inundated, but the once-popular South Korea won’t see a lot of love. China’s trade diplomacy remains in full swing over the US missile defence system THAAD fall out as package holidays to the country remain suspended. CTrip expects a 70% drop in Chinese visitors to South Korea over Golden Week, following a 20.9% drop between January to July this year against a 5.1% increase of outbound tourism overall.
With the exception of a few long haul destinations and ‘red tourist‘ hotspots, most Chinese visitors are likely to be fresh faced millennials. Just one in ten international trips from China are made by travellers 45 or older, with 60% of seats filled by 18-34 year olds.
Young, independent and Chinese travellers are driving change beyond those traditional Chinese traveller stereotypes of bus tours and shopping holidays. As proof of their increasing sophistication, dining, sightseeing and leisure activities took out the top spots in terms of daily expenditure, displacing shopping from its throne this year according to Hotels.com research. Chinese travellers born in the 90s spent an average of 35% of their income on international travel in 2016 versus 28% overall.
Across all age groups Chinese are taking more trips and for longer, with days per trip increasing from 3-4 and from 5-7 days over the past year. 80% of travellers surveyed are visiting multiple cities while away, presenting opportunities for lesser-travelled regions.
Fortunately, the growing wave of sophisticated Chinese travellers won’t just benefit the travel industry. Education, investment, migration and a slew of well positioned consumer products will also profit from the halo effect of tourism.
Las Vegas will be one of the popular destinations for Chinese tourists over the next couple of weeks, and for Skinny readers in the dietary supplement, beverage, functional food, personal care and sports nutrition industries who will also be there for Supply Side West, ensure you attend the China Opportunities Workshop on Friday September 29 at 8:30-noon. China Skinny’s Ann Bierbower will be opening the workshop, covering the what, why and how of trends in China. Please pop by to say hi! More information here.
For our China-based readers, we hope you have a great Golden Week holiday and manage to escape the crowds. We’ll be back after the break in the second week of October. 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.
Chinese Valentine’s Day Qixi fell on Monday with the usual barrage of schmaltzy ads and online deals. Yet not everyone was out spending a month’s wages on heart-themed handbags or posting romantic dinner snaps on WeChat.
There are more than 200 million singles in China, with the number of Chinese adults living alone growing 16% since 2012 to reach 77 million. By 2021, they’re set to rise to 92 million according to Euromonitor. China’s much-publicised shortage of 30 million females has been exacerbated by ‘left over’ women in urban areas whose evaluation of Mr. Right has become more rigorous, while careers are increasingly more important and eligible bachelors get distracted with gaming (although girls do find love on Honour of Kings and other games).
China’s singledom trend is being led by higher tier cities: Women in Shanghai average 30 years old when they first marry, up from 27 in 2011. They’re also twice as likely to get divorced than a decade ago. In universities – where many Chinese traditionally meet their spouse – 70% remain single, with 68% of them wishing they weren’t.
For a large share of high-spending urban millennials, Me is the new We. Brands are showing ever-more love to appeal to the valuable single demographic’s functional and emotional needs. The best-known example is Tmall’s Single’s Day but on a smaller scale, there are a host of examples brands can learn from to ensure their products and services are relevant to this lucrative segment.
Hot pot chain Haidilao offers solo diners a choice of large, cuddly soft toys to join them for dinner to help them feel less lonely. Qixi saw legendary snack brand Three Squirrels target China’s “single dogs” by crafting a promotional campaign to let their voices be heard. Japanese chain Muji has introduced smaller rice cookers, ovens and kettles aimed at Chinese singles. Food & beverage brands are increasingly offering single-serve formats for dinner and other meals and the explosive rise of food delivery has been largely driven by singles with 65% of food delivery orders on Meituan-Dianping going to unmarried folk.
Tourism is a segment that stands to benefit from having single-focused offerings for Chinese travellers. Solo travellers are much more likely to prefer sightseeing and experience local culture than groups, and safety is more important than ever. Accommodation and activities that strike a chord with this are likely to experience the greatest growth.
With China’s consumer market now the world’s most contested, brands that take a broad brush approach to appeal to everyone are likely to appeal to few. More targeted marketing to specific segments such as singles is likely to have a greater impact. Agencies such as China Skinny can assist with that.
For our readers in Southern California, the esteemed Ann Bierbower will be sharing valuable China marketing tips and insights at the Export 101 workshop in Los Angeles next Wednesday September 6 organised by the CalAsian Chamber, US Department of Commerce and DHL Express. For more information and to register, tap/click here. Go to Page 2 to see this week’s China news and highlights.
Next time you indulge in a good hearty serving of ravioli or fettuccine, spare a thought for the Chinese. Tracing the origins of Italian pastas will likely find you in China in the 13th century, following the routes of Marco Polo who brought back tales of dumplings and noodles from his epic adventures in the Far East.
Similarly, the European colonists who amassed incredible wealth from faraway lands discovered by compasses of Chinese design; planned, mapped and recorded on paper of Chinese roots; and conquered with the help of weapons resulting from China’s invention of gunpowder.
After a short hiatus, China is again making its mark on one of the most significant innovations of modern times – the mobile phone. The cradle of the smartphone isn’t China, but the other side of the world in Manhattan, where it was made by a Motorola employee named Martin Cooper. That was 1973 and it took a few decades before China really entered the mix.
Firstly, Motorola is now owned by China’s Lenovo, a move echoed across many industries as Chinese companies acquire patents, technology and brands to expand their global aspirations.
More significantly, Chinese consumers have become the largest consumers of smartphones on the planet – both in volume and individual usage, which sees Chinese consumers leading the world in adoption of mobile services such as mobile commerce and payments, fuelling innovation by Chinese companies and influencing product development from brands globally – just look at large screen iPhones.
Thirdly, many of China’s manufacturers have migrated from cheaply manufacturing devices for foreign brands, to utilising their engineering capabilities to produce their own brands, some with world-first innovations. Much like the Italians did with noodles and dumplings, Chinese are bringing their own form of mobiles to the world. China’s brands now account for almost 1 in every 2 smartphones sold globally, and are on track to be in the hands, pockets and purses of the vast majority of cellphone users around the world within a few years.
Mobile phones are just one example of how China is pushing itself higher up the wealth curve, closer to where it used to be. In the 1820s, China accounted for 32.9% of the world’s economy. Today it is 15% of the global economy but it contributes around 30% of its growth. 200 years ago China’s GDP was 124% of Europe’s GDP whereas it’s less than two thirds today. China’s population was just 58% higher than Europe’s at the time, today it has 86% more people.
Although it will be a long time, if ever, before China accounts for a third of the world’s economy again, it has lofty ambitions and is on track to get much closer. As a result, Chinese are by far the most likely to believe their country is heading in the right direction, and are skipping along with the highest consumer confidence they’ve had in years.
Whilst Chinese consumers are much more likely to buy a Chinese-branded smartphone, or even a Chinese jacket than ever before, many imported wares remain aspirational. Foreign movies – a barometer of how Chinese view the West – still dominate the box office. Although Chinese invented the mechanical clock around 725 A.D., they’d still shell out significantly more for a timepiece that is authentically Swiss. Even the rate of growth for Italian pasta and other food imports continues to be enviable, particularly those that are marketed well. Agencies such as China Skinny can ensure that you are on track with that. 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.
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.
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.
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.