We have just passed the 200-day mark of the US-China trade war, and what a 200 days it has been! Whilst we are finally seeing some positive signs that an agreement could be imminent, there has been plenty of commentary about the beating that America’s reputation has taken in China.
There’s no discounting that the spat has sped up the rise of nationalism in China, and there are consumers who may have directed their spending away from American businesses, but the impact has been much less severe than it could have been.
If we look back to the row between China and Japan in 2012 over the Daioyu/Senkaku Islands, many Japanese brands were hammered and some even shuttered. Similarly, the South Korean fiasco over THAAD in 2017 was estimated to cost the Korean economy $6.8 billion that year. Apple has attributed its poor results to the trade war, and Ford and GM have had better years, nevertheless all-American brands like Coke have reported no impact, and Nike saw a stunning quarter last December. Even Tiffany & Co. saw a double digit rise in Mainland China sales during November and December of last year.
One of the key differences between the US-China trade war and the disputes with Japan and South Korea is that the propaganda machine has not yet ramped up criticism of the US. China also hasn’t introduced regulations such as it did banning tour groups to South Korea. Such plays wouldn’t be well timed during the already-precarious trade negotiations with the US.
Tourism to the US was a sector that many commentators expected would take a hit as a result of the frosty relations, much like Japan’s visitors fell 34.3% in 2012, South Korea’s dropped 60% between March to October 2017, and numbers sunk at other ‘out-of-favour’ countries like the Philippines and Vietnam.
In late September, Ctrip reported that flight bookings to the US were down 42% for the October Golden Week holidays – one of the busiest weeks of the year for international travel. Other anecdotes have flooded in from travel agencies, echoing similar falls. So it will come as a surprise that Chinese tourist numbers to the US actually looked quite healthy in 2018. Although the national figures are yet to be published, Los Angeles reported a 6.9% increase in Chinese tourists last year to 1.2 million visitors. New York also hit record numbers last year, hosting 1.1 million Chinese visitors. It appeared Chinese tourism to the US took a hit in the early months of the trade war, but by November, the US Commerce department was projecting a 2% increase in Chinese tourists.
Like we’ve noted in previous Skinnies, tourism generally builds an affinity with the country, its cuisine, culture and lifestyles, which has a halo effect on preference towards many other product categories. In a world that seems to be more divided than it has been in a long time, China’s tourist growth to the US is refreshingly good news!
On the subject of tourism, China Skinny’s Mark Tanner will be sharing some insights at the beautiful Terranea Resort in Los Angeles for the Visit California Outlook Conference on February 12 & 13. Please pop by and say ni hao if you’re there. More information here. Go to Page 2 to see this week’s China news and highlights.
While you may be lamenting the need to constantly evolve your marketing mix to stay ahead in China, you can rest assured that even WeChat faces a similar challenge.
Although China’s super app hit 1.083 billion monthly active users in September last year, each sending any average of around 45 messages a day, WeChat faces headwinds to stay relevant to Chinese consumers. Readership for articles referred by friends on Moments has been dropping and Tencent’s share of screen time is being cannibalised by newer, easier-to-use and more entertaining alternatives such as short video platform Douyin.
That’s why all eyes were on WeChat’s founder Allen Zhang’s four hour speech at Tencent’s conference last week, about how he plans to reinvigorate the app to mitigate the risk of it becoming obsolete. Zhang got philosophical in acknowledging that WeChat has lost the veneer of authentic discovery that endeared it to users, because people were becoming too sensitive to their online personas on Moments.
Across the board, Chinese consumers are seeking more authenticity: from the way they travel, to the brands they buy, to how they project themselves on digital platforms. Women ‘beautification’ app Meipai discovered this as user numbers plunged 55% as Chinese women sought more natural and less formulaic portrayals of themselves. WeChat is hoping to evolve from photoshopped and choreographed Moments feeds, to a more real account of what people are really experiencing. To enable this, WeChat has launched a new video-streaming feature, not unlike Instagram’s feed, so people share their lives in real time, not through carefully curated photos and messages. Even the user interface aims to keep it real, with the typical ‘send’ button, replaced with ‘this will do’ to remind people their social feed doesn’t have to be airbrushed and polished.
Another area in which WeChat is pinning its hopes to counter the app’s saturation and encourage more engagement per user is Mini Programs. The WeChat-embedded ‘light apps’ are already hugely popular, but curiously, the majority of traffic isn’t coming from the famous mini programs you may have heard of, but rather the long-tail applications used by niches such as parent-teacher groups or your neighbourhood grocery store. Given WeChat is installed on virtually every smartphone in China, app developers are not concerned with having to create separate tools for Androids and iPhones, it is one simple app, seamlessly installed and launched from the comfort of WeChat. Tencent is thinking, if ‘there’s an app for it’ wouldn’t it make sense to make it a Mini Program?
Something that hasn’t received due airtime is the impact that the new ecommerce laws will have on WeChat. Commerce is one of the areas showing great promise on WeChat, with its transactional nature providing a logical way for the platform to grow revenue. Yet many of those stores have been run by smaller vendors and daigou, attracted by WeChat’s low barriers to entry. The new laws mean that it will be a lot more trouble to set up and maintain a simple WeChat store – or any online store – with the new taxation and reporting requirements. There are already signs of changes in the way smaller vendors promote their wares on WeChat as they try and skirt the laws, but for many, the effort won’t be worth the reward.
Regardless of its challenges, WeChat remains China’s super app with no other app being better positioned to evolve and stay relevant to Chinese consumers. To Allen Zhang’s and Tencent’s credit, they have recognised that they need to do this. There are some good lessons for any brand in China – you may be ‘killing it’ in China today, but you need to constantly review your position to stay that way. China Skinny can assist you with just that. 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.
The lure of WeChat for brands is clear; last year it drove $32.9 billion of information consumption and $52.4 billion of traditional consumption including travel, food, shopping, hotels, and tourism, according to a report from the China Academy of Information and Communications Technology released this month. 34% of China’s data traffic happens on WeChat, versus the 14% on Facebook in North America.
There’s no denying WeChat’s enormous impact into everyday life in China as it has progressed to become a near unparalleled marketing tool. Yet its popularity has also made it hyper competitive. Official Accounts now number 20 million, with 3.5 million of those active, raising the bar for any brand hoping to make an impact on WeChat – seeing consumer expectations surge with it.
Last year over half of WeChat Official accounts saw less readership than in 2016. Whilst the way consumers use WeChat is continually becoming more sophisticated, many brands’ WeChat strategies haven’t done much to keep up. Few provide genuine value through entertaining and educational content. Even less build communities that engage and resonate with their target market and potential advocates. And many brands still see WeChat as a one-way communication stream to push content out to followers, and are yet to tap into the plethora of interactive functions available in the WeChat ecosystem or integrate offline touch points.
In most cases, WeChat initiatives do cost money. Many brands realise this and allocate a material budget for WeChat marketing. China Skinny gets many approaches from brands wanting a ‘WeChat campaign’, but often haven’t even defined their target market, positioning or what makes them unique from the thousands of other brands in their category. Without having these foundations, investing in WeChat will often be throwing good money after bad.
Although we hear so much about marketing opportunities on WeChat, in some cases an Official WeChat account isn’t appropriate for a brand. Take a small tourist attraction overseas for example. For many Chinese tourists, they are likely to only ever visit it once – and it will be just one of many places they’re seeing on their holiday. So few travellers will go to the effort and care enough to follow something that will fill their WeChat account with content that isn’t very relevant. Nevertheless, even if the attraction doesn’t have an Official Account, WeChat can still be very effective for that tourism business using less traditional advocacy initiatives or payments.
Brands shouldn’t blindly just invest in a traditional WeChat account just because everyone is talking about WeChat. They would be wise to ensure that they have the foundational strategy defined first and then consider the context of WeChat with regard to their product or service and positioning. Agencies such as China Skinny can assist with this.
For our British and European-based readers, China Skinny’s Mark Tanner will be in London at the Clavis Insight 2018 EMEA eCommerce Accelerator Summit on June 6 sharing ecommerce industry trends and case studies alongside GSK, L’Oreal, Unilever and PlanetRetail. More information here – we hope to see you there. Go to Page 2 to see this week’s China news and highlights.
2011-2013 felt like bad years for fakes in China. When writing the Skinny it seemed like there was a new exposé every week to include, whether it be rat meat dressed up as lamb, fake Apple stores that even fooled the staff or even fake chicken eggs.
These days there is an occasional headline about a police bust of counterfeit condoms or infant formula, yet the constant bombardment of media about fakes has subsided. There has been a genuine increase in public and private resources and direction, coupled with more positive court rulings. Beijing’s clampdown on corruption and the growing number of Chinese brands with their own IP to protect has increased the focus on fighting fakes. But don’t be fooled – just because we’re not often hearing about counterfeits, the dark underbelly of fake products remains rampant in China.
Just this month four separate gangs were arrested in Guangdong with millions of dollars’ worth of fakes from wine to health supplements. This is just a drop in the ocean of the wholesale counterfeiting happening in China, noted in a 2016 US Chamber of Commerce report that Mainland China was the source of 72% of global physical trade-related counterfeiting. Add Hong Kong to the mix and you’re up at 86% – an estimated $397 billion. 12.5% of China’s 2016 exports were calculated to be fakes. Whereas some Chinese consumers are attracted to cheap rip-offs, many are duped unwillingly. As recently as Singles’ Day last November, 40% of cosmetics purchased from cross border platforms were fake.
China’s fake endemic spans far beyond products. The latest wave to sweep ecommerce sites is fake advertising using stock images of weathered old men, praying on consumers’ empathy to ‘help poor rural farmers’ selling fruit.
For brands, there are a host of steps businesses can take to minimise the risk of fakes. The first and most obvious is ensuring you’ve done all necessary trademarking in the relevant classes. Here are seven other ways businesses can fight counterfeits in China from Harvard Business Review.
One of the recommended steps is to join forces with ecommerce firms, the most obvious being Alibaba. Alibaba has long been labelled a villain in the counterfeiting world – the enabler for vendors to get their fake products to the market. While many argue Alibaba could be using more of its immense technology resources to rid its platform of fakes, listing on the NYSE in 2014 and then being booted out of the prestigious International AntiCounterfeiting Coalition in 2016 were catalysts to up its game. The company now uses algorithms to scan the 1.8 billion listings on its platforms, runs test-buying programs that seek out fakes, and assesses reports from brands and rights holders. Members of its AACA (Alibaba Anti-Counterfeiting Alliance) receive priority treatment, which has helped increase its membership from 30 last January to 105 today.
Beyond the Harvard Business Review recommendations, there are numerous smart marketing and channel initiatives to reinforce your products’ authenticity with consumers. Agencies such as China Skinny can assist with this.
On another topic, for our Shanghai-based readers in the food & beverage/FMCG categories, next Wednesday 23 May China Skinny’s Mark Tanner will joining speakers from Mondelez, Coca-Cola, Starbucks, Hema, Meituan-Dianping, Wahaha, Bain, Zespri and Yum at AmCham’s A Taste of Tomorrow: Innovation in Changing Market discussing the exciting opportunities presented by China evolution into New Retail. More information here. We hope to see you there. 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.
If you’re in China buying a tub of skincare online, a tray of New Zealand kiwifruit at the local fruit store, an expensive bottle of wine dining out, or even a well-known condom brand at a convenience store, there’s a fair chance you’ll end up with a fake. Unlike Western consumers who take things at face value, Chinese consumers are inherently untrusting of things for sale which contributes to them taking quite a different customer journey for products and services than consumers elsewhere.
Up until five years ago, the prevalence of fakes saw many consumers just accept it as a likely consequence of shopping in China. In 2013, China’s massive retail market saw just one million consumer complaints to relevant government departments. At the time, Americans numbered less than a quarter compared to China’s population but made more than twice as many complaints overall. The sudden rise of social media encouraged some aggrieved Chinese consumers to take complaining into their own hands. In 2011, a wealthy businessman in Qingdao disappointed with his Lamborghini’s service hired nine men to destroy his sports car with sledge hammers, and circulated the video on social media, which was followed by a run of copycats. But overall, most consumers seemed to just grin and bear it.
That is no longer. Last year consumer complaints grew 44% to 2.4 million – edging closer to America’s 2.7 million complaints. As China’s consumers have grown more sophisticated and assertive, so have their channels of recourse. Consumers are more aware and confident about the options available to them meaning brands are much less likely to get away with the things they used to. This is further exacerbated by the rise of ‘professional complainers’ who troll supermarkets for products with incorrect labelling and claims, unlawful additives and multiple production dates, earning ten times the purchase price in compensation.
As consumers have become more proactive in dealing with issues, CCTV’s annual 315 consumer watchdog broadcast has become less relevant. Once one of the most potent beacons of consumer protection, the show was notorious for bankrupting businesses it singled out. Even überbrands such as Nike and Apple took material hits after being shamed on the show in 2012 and 2013 respectively.
Last Thursday’s 315 show confirmed how much less of an impact it makes these days. Just a fraction of the media and online buzz now accompanies 315 relative to the golden days five years ago. Nike was singled out again last year, but it appeared to do little to break the label’s stride in China. Brands are also much better prepared these days with comprehensive crisis plans, illustrated by VW who apologised within minutes on Weibo after being singled out on 315 this year, again. The show has been unable to find its mojo since CCTV joined a string of other state media for corruption involving shows such as 315.
Yet with the fall of 315, the rise of complaints has been augmented with enthusiastic complaining – and praising – on digital channels such as social media and online reviews on ecommerce and travel platforms. In short, it is becoming more difficult to fix actions that annoy Chinese consumers. Much like anywhere, brands should be particularly vigilant to do what they can to keep consumers happy, within reason. Go to Page 2 to see this week’s China news and highlights.
Next week sees the Year of the Rooster end as we embrace the Dog for the next 12 lunar cycles. The dawning of the pooch marks the beginning of the enormous Spring Festival holiday, which will inevitably be marked with millions of selfies from teeming transport hubs, billions of WeChat messages and red envelopes, and probably a good few fake boyfriends to keep the family at bay.
For a large portion of China’s 280 million migrant workers, it will be the one time of the year to return to the family with cases full of gifts. The mass homecoming has become well known globally as the world’s biggest annual human migration; 2.98 billion trips will be made during this year’s festival period from February 1 to March 12. This includes 2.48 billion trips in cars, 390 million in trains, 65 million by plane and 46 million boat trips – a staggering operation, even by Chinese standards.
Just seven in 10 will head home for family reunions during Chinese New Year, with 13% opting for leisure travel according to a Tongcheng-CCN survey in December. 6.5 million of those travellers are expected to head to 68 countries this festival – 7% more than the last year’s festival.
Thailand is forecasting 400,000 Chinese visitors over the week-long festival and tiny Macau is expecting 960,000 Mainland tourists as Chinese sideline tradition to serve their increasing lust for travel experiences. Even Finland will have its time in the sun with Alipay showcasing the widespread acceptance of their payments platform in the country.
The growth in Chinese investing more in decorating their homes has produced a byproduct that may be the biggest trend for Spring Festival travellers this year – empty paint buckets. Railway stations are already dotted with travellers carrying the white plastic tubs, which have become popular chairs, tables and food storage containers and an endearing reminder that Chinese trends aren’t always related to luxury handbags, shiny smartphones and quirky online campaigns.
Whilst widespread adoption of paint buckets takes a different path from Beijing’s aspiration to cultivate local tech innovation, there remains plenty of riveting trends coming from China. At China Skinny, we’ve used the New Year as an opportunity to identify what we think will be the biggest trends to watch in the Year of the Dog – ones that every brand and marketer should be aware of – here they are!
If you’re taking a break for the Chinese New Year festivities next week, we hope it is a good one. For the tourist operators in Macau, Thailand, Finland and other popular spots – we trust it will be successful and selfie-filled. Happy New Year, we’ll back in the Dog.
Who are China Skinny? We are a marketing agency on the ground in Shanghai conducting research, building strategies, and executing them for over 100 multinational brands both big and small, across 20 categories. What’s your biggest China problem? Contact us to see how we can help. Go to Page 2 to see this week’s China news and highlights.
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.
Years ago, China’s sprawling network of street-noodle vendors began utilising the curious new commerce features of an app called WeChat. A willingness to embrace change signifies the innovative spirit that pulses through modern China. From those polystyrene bowls of late-night fry up all the way to billion-dollar-plus bike loan schemes a now near necessity in the lives of many Chinese, there is no shortage of inspiring innovation coming from the Middle Kingdom.
China’s rich history spans 5,000 years. Yet few periods have seen the velocity at which China has evolved as these 4 decades past. In a little over a generation Chinese consumers have seen mass urban migration, internationalisation, globalisation, a fast-track to modernity, the effects of a one child policy and steady episodes of cultural upheaval and redirection. Moulded by constant flux, the resultant consumer class is not only unfazed by change but expects and embraces it.
WeChat payment is one example. The seamless purchase of goods, services and content that can be integrated almost anywhere online and offline has opened the door for infinite new ways to buy and consume things. Similarly, live streaming, virtual reality and augmented reality from innovators like Alibaba has merged with ecommerce.
Yet innovation in China spans far beyond the well-known smartphone apps and ecommerce platforms. China Skinny is seeing it across every piece of the marketing mix. From packaging to pricing models, brands are localising best practice from overseas, and some even innovating in a way that is native to China.
One of the more interesting pricing models is subscription-based. Whilst we are yet to see any game changers like the Dollar Shave Club, burgeoning niches are constantly developing. Each initiative helps lock in consumers who are well known for their promiscuity.
Chinese consumers find subscription models attractive for a number of reasons. Van Diemen’s Land’s subscription to fly in fresh milk from Tasmania ensures a stable supply of healthy, tasty, fresh milk for those families aware of the benefits of drinking it. Another interesting initiative is the Drinking Buddies scheme which sends members a box of six different craft beers every month and offers access to tastings and workshops. It appeals to craft beer drinkers as they can try niche beers that they may not have been able to get elsewhere – something that China’s craft beer enthusiasts crave. It’s a great low-cost way for the brand to get in front of grassroots influencers who will gain social credit from sharing new undiscovered beers among their beer drinking friends.
There are obviously plenty more innovative and cost effective ways to reach and appeal to Chinese consumers beyond the traditional distributor model. Agencies like China Skinny can assist in developing such plans.
On the subject of milk, beer and food & beverage in general, China Skinny’s Mark Tanner will be joining a host of excellent speakers from the industry to speak about food and beverage trends in China at AmCham’s Future of Food Conference on Wednesday 24 May. More information here. Go to Page 2 to see this week’s China news and highlights.
The advent of towering office buildings, glitzy malls and unending super highways will quickly capture the eye of any traveller looking for signs of the new China. Yet beyond the glamour and scale, the day-to-day lives of China’s people best signify the huge advancement of the nation since its reformative years four decades ago.
In 1979, the average Chinese person lived in 9 metres of space with a shared tap, kitchen bench and neighbourhood john. Over the next 38 years the average living area has grown by almost 400%, and with it kitchens adorned in shiny appliances and bathrooms of a much more private nature.
The average Chinese home is no longer just a functional place to sleep but a valued feature of their lives. This evolution has been embraced by Chinese consumers and has seen living spaces across the country transform into increasingly comfortable and aesthetic abodes. This is reflected by some of the fastest-growing categories in last quarter’s robust 10.9% retail growth. Building and decoration materials purchases rose 17.8%, furniture increased 13.8% and home appliances grew over 12% in the year to March. The growth contributed to the overall rise in consumption which accounted for close to 80% of China’s higher-than-expected 6.9% GDP growth.
Freshly painted walls, plush new armchairs and smart appliances are all representative of a trend which is seeing more Chinese eating at home, entertaining at home and even baking at home. A few years ago consumption of most premium food items took place in public. Premium purchases were a chance to display your superior status, and consuming one privately would just be a waste. However today’s consumers can happily power through a tub of Haagen Dazs on the sofa just for the pleasure of it, and many more consumers are driven to more discrete locales for indulgence following Xi Jinping’s anti-graft campaign. All these elements culminate in a significant shift in home consumption.
Another contributing factor is the abundance of products available to consumers and finding their way into more and more fridges and pantries across the country. An average of 160 new consumer products hit store shelves every day for the past 12 months according to Mintel. Add that to the host of new apps, cross border commerce listings, new restaurants, cinemas, theme parks and airline routes, and Chinese have never had more to choose from. It is little wonder they keep spending more.
The good: Chinese consumers just keep buying more. The bad: direct and indirect competitors all vying for a share of China’s wallets are growing too. The prize is getting bigger, but it is also much harder to obtain. Something that may assist is China Skinny’s free five day email course to ensure that you have the main areas covered, know what to watch out for, and it may just help you tap into that increased spending, both in the home and out. The course starts on 2 May, so best to sign up today. For our Dubai-based readers, China Skinny’s Mark Tanner looks forward to meeting some of you at the Dubai Chamber’s Navigating China’s B2C e-Commerce Landscape workshop next Monday on 1 May. Go to Page 2 to see this week’s China news and highlights.
With over a month since inauguration day, we can all agree that the Donald Trump administration has been anything but routine. Although threats of tariffs and the ensuing trade war remain unrealised, the ripples of Trump’s tumultuous tenure have reached Chinese shores. As history tells us, when fluctuations in Chinese consumer sentiment materialise, the resultant effect on trade can be “yuge”.
Chinese consumers’ sensitivity to geopolitical issues cannot be understated. In the wake of the Diaoyu Islands dispute in September 2012 Japanese brands felt the full force of this phenomenon. Japan’s top three auto companies saw their sales plummet 35%-49% y.o.y. in a market that was growing overall. South Korea is currently dealing with a similar backlash. With news of the THAAD missile deployment reverberating throughout China, state media has called for a boycott of South Korean goods, with Lotte hit particularly hard.
America’s soft power has long been its greatest asset for many of its exporters, so China Skinny teamed up with Findoout in a joint study to quantify how this has been impacted by Trump after his first month as President. The survey of 2,000 consumers across China found that 41.2% of Chinese had a more negative view of America than before he was president with 8.1% more positive and 50.7% neutral.
The categories most negatively impacted were investing in U.S. property and stocks, travelling to America, and studying there, with a net 17.7%, 13.9% and 10.0% of consumers respectively. Whilst the U.S. education industry benefitted from the 329,000 Chinese students who studied in America last academic year, and the travel industry from the 3 million Chinese tourists, countless other exporters benefitted from food to fashion to Fords. Many Chinese students and visitors develop an affinity with US brands; sharing them on social media, giving them as gifts, promoting them through the daigou trade and buying them after returning to the Mainland. It’s in America’s interest to ensure they hold favour with Chinese students and tourists.
Nevertheless, Trump hasn’t been all bad news for American exporters. Of the 15 categories we evaluated, Chinese were more positive about four of them: movies (11.8%), music (5.4%), media (3.5%) and sport (1.5%). It appears Trump has piqued curiosity among Chinese consumers and increased interest in American culture overall.
In an obscure way, this could help American brands who understand these motivations and can tailor their marketing mix to them. Hyatt did great job of tapping into Chinese consumers’ interest in Hollywood. Utilising commercial breaks during the Oscars they launched their 12-month campaign all-the-while cleverly highlighting that they don’t agree with some of Trump’s policies – hence the theme song, “What the world needs now is love”. China is a main focus of the campaign. Agencies such as China Skinny can ensure that you understand and appeal to Chinese consumers too. Go to Page 2 to see this week’s China news and highlights.
In January 2013, Bloomberg reported that Beijing’s pollution was worse than the average US airport smoking lounge. The study was one of the most polarising accounts of the severity of China’s pollution at the time.
By 2014, the Chinese Government, state organisations and consumers were talking much more openly about the problem. State organisations such as the Shanghai Academy of Social Sciences, published statements claiming that Beijing was “uninhabitable for human beings” and the China Agricultural University suggested that China would suffer conditions “somewhat similar to a nuclear winter” if smog persisted. Consumers became more aware that the soupy mist wasn’t fog, but a toxic vapour that could harm their health.
Sales growth of products such as air purifiers, face masks and even canned air soared into triple figures. China Skinny started noticing a wholesale movement of consumers seeking healthier products, of which pollution was a strong contributor.
In addition to the obvious effects of pollution such as lung cancer, asthma and other respiratory diseases, there have been a number of other harrowing side effects such as increased obesity, Alzheimers and lower sperm counts. A recent study found bacteria in Beijing smog can lead to antibiotic resistance. Gulp.
Whilst China’s water and soil pollution continues to worsen, the result of Government policy and enforcement and slowing manufacturing, energy and construction sectors has seen air pollution improve slowly since 2014 – it’s gone from really, really, really hideously bad, to just really, really hideously bad.
So what does this mean for brands selling to Chinese consumers? With every new study revealing something evil about China’s pollution, it provides more emphasis on being proactively healthy – growing consumption of supplements and vitamins, healthy food grown in clean environments, and sports and fitness products. Tourism is also a beneficiary, where Chinese choose clean spots over polluted domestic destinations to enjoy their free time. Parents see overseas education institutions more attractive and migration increases – and foreign real estate sales as a consequence.
For those pinning their hopes on a positioning strategy revolving around ‘clean and green’ to lure Chinese consumers, there are a million other brands doing the same. Whilst it is important, you probably want to include other points of difference as well – China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
The average consumer in Shanghai is bombarded with 3-4 times more advertising than consumers in most Western countries. With so much noise, it can be difficult for even the most established brands to be noticed.
If the competition and clutter hasn’t made it hard enough already, keeping up with constantly evolving marketing channels and understanding how to best utilise them also adds to the pickle.
WeChat is a good example. Many brands know that it is a powerful marketing tool, but many only use a small portion of its capabilities. WPP’s China CEO Bessie Lee recently summed up some of the challenges foreign brands face. She noted that “when more and more Chinese brands are using WeChat as a distribution platform to sell products, most multinational companies are just using the messaging app as a content-marketing tool.”
In addition to the limited awareness of the marketing opportunities, some foreign brands rigidly stick to marketing mandates and mindsets from their home markets. These directives rarely work and often aren’t even relevant in China’s unique marketing environment.
Some of the most rewarding things about working in China’s market are the exciting, world-leading innovations constantly launching. There are the well known channels, such as WeChat taking social media to a whole new level and China’s o2o leadership. Yet there are also many new marketing channels that are currently underutilised and not optimised to target markets’ needs.
One of the most exciting new marketing platforms we’ve seen at China Skinny is Tmall Live – Alibaba’s innovative take on the popular TV shopping, which is likely to help it wrestle back some social commerce from their WeChat foe. We recently worked with Comvita and their Chinese distributor to deliver an engaging Tmall Live campaign to build brand awareness, engagement and education around the usage and benefits of their products. Here’s more info about it.
Next week marks the long-anticipated October Golden Week holiday, which will see the China Skinny HQ closed for the break. There will be no newsletter next Wednesday, but we’ll be back on 12 October. For our China-based readers, have a great break – we hope you are doing something nice and find somewhere that isn’t too crowded! Go to Page 2 to see this week’s China news and highlights.
Every day this year, an average of more than 120,000 new Chinese consumers signed up to the Internet. Most of them on their smartphones, and many of them using it to run a big part of their lives.
Growth in internet users coupled with an evermore online savvy population has contributed to an impressive rise of Chinese who are active online. In the past year, 18% more consumers shopped on Alibaba platforms, 65% more bought on JD and Weibo’s active social media users surged by 36%. Yet the most interesting growth story is the convergence of commerce and social media on WeChat.
Although WeChat sales are small relative to traditional ecommerce channels, its growth potential is enormous. Every official and personal account has the ability to sell to their followers and friends. This has prompted tens of millions of enterprising WeChat users to try and pry a few bucks out of their WeChat networks – a subtle version of Amway if you like.
There are now more than five times more stores on WeChat than there are on Taobao, Tmall and JD combined. Although individuals make up the majority of stores, brands such as Dior – who don’t even have their own ecommerce store yet – are dipping their toes into social commerce. WeChat’s all-in-one nature is creating a whole new level of commerce-related sharing opportunities that is unrivalled globally.
On top of trading products on WeChat, app usage rates for services such as ride sharing, food delivery, cinema, massage booking and health, to name a few, are among the highest globally.
The phenomenal uptake and usage rates of smartphone commerce has been driven by massive sweeteners – for example Meituan Dianping was estimated to have provided ¥58 billion ($9 billion) worth of discounts and subsidies for restaurants and movies in 2015. Such incentives have been enabled by countless sums of investment cash utilised to grow users, often with little regard for profits. Last year over $20 billion dollars was invested in Chinese internet businesses – quadruple that of 2012.
A result of the investments are some significant mergers and consolidations, including ride hailing apps Didi-Kuaidi-Uber, group buying and food apps Meituan-Dianping, classified ads Ganji-58.com and online travel Ctrip-Qunar. The mergers have created virtual monopolies and, by proxy, less incentives to subsidise and discount. The most recent example is the Didi-Uber merger which has seen a typical ride that cost ¥8 in May, now costing ¥13.
Fewer subsidies may slightly slow down the adoption rate of many apps, but Chinese consumers will continue their deeply-embedded habits of using smartphone apps in most facets of life. Brands should factor this into their marketing strategies and creative tactics as a powerful way to engage Chinese consumers. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.