Fancy a tonic favoured by Chinese emperors that cures painful joints, frail kidneys, and weakness and anemia in women? Or how about a milk beverage that will enlarge your breasts from an A-cup to a D? Perhaps a coconut drink that whitens your skin and will make you more buxom?
Believe it or not, these are all advertising claims in China, and not by small fly-by-night operations. The cure-all tonic was a top-seller from Hongmao Pharmaceutical, who outspent P&G in 2016 to become China’s largest advertiser. The breast-enlarging milk drink was the product of China’s largest beverage group Wahaha, and the magical coconut juice comes from the producers of China’s most popular coconut milk.
Reports of such advertising and other headline-grabbing news such as hordes of Chinese tourists lured to Sydney University believing it was a setting in Harry Potter movies may have some believe that Chinese consumers are a gullible posse. Don’t be misled. Whilst some consumers in lower tier cities are making discretionary purchases for the first time and lack some confidence, most middle-affluent class Chinese are incredibly sophisticated. While we’re seeing a rise in impulsive purchases, Chinese consumers typically don’t take things at face value and do significantly more research before purchasing products and services than their Western peers.
Much of this research comes down to an inherent lack of trust. This is confirmed in virtually every project China Skinny works on, in which Chinese consumers’ purchase journey involve an extensive series of touch points across online and offline channels before a purchase is made.
Most readers will be aware of the fake vaccines, fake condoms and even fake zoo animals. Yet Chinese consumers can’t even rely on cross border ecommerce, which is held up as the beacon of trust – supposedly straight from the source from a more dependable origin. In reality this isn’t true; 40% of cosmetics sold through cross border on Singles’ Day ’17 were fake for example.
Although China updated its advertising laws in 2015 to be much more punitive, many false promises continue to slip though. China has the most fragmented bricks & mortar retail landscape of any major economy, and an online sector containing tens of millions of stores that even Alibaba and Tencent struggle to control in light of their advanced data mining and AI. The regular scams have been one of the drivers behind China’s $9 billion key opinion leader (KOL) industry, who are often more trusted than brands even though close to 70% of KOLs have fake fans and engagement. Regardless, over 60% of Chinese consumers are receptive to online influencers compared with 49% in the US and 38% in Japan.
Although China’s marketing landscape is littered with fakes, foreign brands shouldn’t take Chinese consumers to be fools – they are anything but. It is good to be aware of the misleading claims out there, but don’t dare to try it yourself. It will be found out and shared on social media en masse. Chinese consumers are unforgiving to those who disrespect their intelligence, particularly foreign brands. China Skinny can assist to ensure you can still succeed by keeping everything above board.
On another note, we’re hiring! If you’re a native English speaker based in Shanghai who is curious, intelligent and personable and happy working across diverse and fascinating projects, go ahead and apply. More information here. Go to Page 2 to see this week’s China news and highlights.
Many people in the West still believe that China’s tech giants are built on thieving IP, not creating it. Those folk will probably be startled to learn that the US-based magazine Fast Company ranked a Chinese firm as the world’s most innovative company in 2019.
Perhaps even more surprising is that the Chinese company is not the well-known Tencent of WeChat fame, or even Alibaba (they were 15th on the list), but a mere $43 billion company, Meituan Dianping, which most people outside of China have never heard of, and probably can’t pronounce.
Meituan is best known for food delivery, restaurant reviews, hotel booking, movie tickets and acquiring bike share giant Mobike. The company topped the table for “pioneering transactional super apps” making the most profound impact on both industry and culture while showcasing a variety of ways to thrive in today’s volatile world. In the first half of last year, the company facilitated 27.7 billion transactions (worth $33.8 billion) for more than 350 million people in 2,800 cities. That’s 1,783 services every second of every day, with each customer using it an average of three times a week. The company leverages user consumption data, including price sensitivity, to recommend other services they’ll like, taking advantage of its consolidation of service offerings, much like China’s other all-serving tech giants.
One of Meituan’s core services, food delivery, is representative of one of the most exciting consumer developments that has been happening in China over the past few years. We’re not talking the meandering Postman Pat or the daily milk round, these are on-demand delivery services that can have everything from noodles and coffee, to meds and adult toys, delivered around the clock in less than 60 minutes, often in half that time. It is a service that plays to a Chinese consumer who craves convenience and possesses little patience.
Delivery in China takes advantage of its densely-populated cities, allowing a concentration of delivery people. In addition, the broadening of products being delivered that are core to the New Retail explosion means delivery is no longer just at meal times, or located around ecommerce logistic hubs. Instead, this revolution is creating economies of scale across wider geographies, spreading the costs of delivery workers throughout the day.
One of the most powerful innovations in delivery is what happens behind the scenes. Like many things in China, companies are utilising their enormous pools of data, and making sense of it with Artificial Intelligence. Meituan’s Smart Dispatch system, for example, calculates 2.9 billion route plans every hour to optimise the delivery for its 600,000 electric bike riders to pick up and drop off up to 10 orders at once in the shortest time and distance. Since Smart Dispatch launched in 2015, it has reduced average delivery time by more than 30%, and riders complete 30 orders a day, up from 20, increasing their income.
Whilst economies of scale and tech systems are increasing efficiencies in the delivery space, this is accompanied by challenges forcing companies to continue to innovate. Labour costs of delivery folk seem to be increasing every few months and new laws are being rolled out to protect the workers. In answer to this, JD has been making deliveries by drone and is testing unmanned vehicles. Mckinsey estimates that autonomous vehicles and drones will deliver 80% of all products within 10 years.
For brands selling in China, the penetration of delivery is another example of the unique way that Chinese consumers shop and their expectations. This and other distinct purchase behaviour in China should be factored into development of marketing strategies. China Skinny can assist with this. Go to Page 2 to see this week’s China news and highlights.
‘Tis the season to be jolly. Well maybe not in Langfang, in northern China’s snowy Hebei province where folk can be arrested for selling Christmas apples and Santa suits. The parishioners of the renowned 40-year old Rongguili Church in Guangzhou may not be feeling so festive either after a children’s bible class was raided in the third unregistered Protestant church to be shut down in China this winter. Last year, it was a Chinese university banning Christmas to avoid “corrosive” Western culture that made it into the annual anti-Christmas headlines fuelled by a small brood of emphatic nationalistic types in China.
On a grander scale, the raining down of Christmas tree emojis that have brightened up WeChat message feeds for many Decembers are notably absent this year. Tencent has had a tough year with its stock price almost halving between January and November, and the new cool kid ByteDance eroding its share of screen time and now talking about launching a messaging competitor to WeChat. Perhaps Tencent is trying not to rub Beijing the wrong way by celebrating western holidays, in hope of them lifting the new game ban, but come on Tencent, cheer up!
For those of us who still love the magic of the festive season, fear not. Aside from a few sensational stories and WeChat policy-makers, a stroll down the streets of China appear as Christmasy as ever. Christmas trees that match China’s skyscrapers for architectural pizazz and neon brace the public plazas and shopping malls.
Online, smartphone screens are again filled with countless brands from Starbucks to H&M peddling their Christmas jeer, KOLs sharing their Christmas list ideas, kids showing off their advent calendars, and millions of Christmas paraphernalia bought from the ecommerce platforms, hopefully some of it in sustainable packaging.
For the vast majority of Chinese, Christmas isn’t a time to acknowledge newborns in mangers millennia ago. There remains little understanding of its religious or cultural associations, with most festival-thirsty consumers viewing it as an excuse to party and shop in the void between Singles’ Day and the Year of the Pig.
One thing we’ve noticed this year is how cities outside tier 1 are embracing Christmas. The China Skinny team has been crisscrossing the country on research projects and were out in Chengdu two weeks ago where they noticed more ceremony around Christmas than even in Shanghai this year. Most of the big hotels – Hilton, Waldorf Astoria, Wanda, Kempinski – had a grandiose celebration for the ‘lighting of the tree’, complete with VIPs, children’s choirs, elaborate Santas, and a host of delicate Christmas-themed foods. In the ‘lower’ tier cities – like for many things – celebrating Christmas en scale is a more recent tradition than in Shanghai, and therefore more of a novelty.
This will be the last Skinny for 2018. Thanks for reading this year. To our clients and partners, thanks for working with us – you’re awesome! The Skinny team wishes you the Merriest of Yuletides, Hanukkah, Kwanzaa and New Years. We’ll be back again in 2019. Go to Page 2 to see this week’s China news and highlights.
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.