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Few activities excite Chinese more than browsing the latest boots and blazers at the mall or on their mobile. Even as tourists, shopping continues to be the top motivator for going abroad, accounting for 30% of the trips’ total expenditure.

There’s no shortage of building going on to cater to this obsession. Of the ten cities that created the most shopping mall space globally last year, nine were in China. More than half of the world’s total mall space currently under construction is in the Middle Kingdom.

Yet, even with Chinese consumers becoming wealthier and spending more every year – retail sales grew 12% last year – simply building a mall in China does not ensure its success. Online shopping has become an alluring alternative and intense competition is seeing the bar constantly rising for brick and mortar stores.

Retail in China is no longer just transactional and is increasingly about the experience. And that experience goes beyond just great service, modern floorspace and nice window displays. Pioneering retailers such as Suzhou Village are combining art and retail in a thoughtfully crafted Italian setting, Shanghai’s IAPM happens in an architectural monument that gives New York’s Guggenheim a run for its money, and Chengdu’s Global Centre bundles shops with a 300 metre-long indoor beach in the world’s biggest building.

Another trend in retail is the integration with technology. Alibaba and Tencent have been introducing online to offline innovations into physical stores, and now Baidu has joined the party, partnering with China’s largest residential developer, Vanke, to develop tech-savvy malls that capture and analyse consumer behaviour data.

China’s retail sector is no different to many other market segments in China, with broad competition creating a host of exciting, tech-centric innovations that cater to Chinese consumer needs. More on that below. We hope you enjoy this week’s Skinny.

Consumers, Chinese Consumers

Vanke and Baidu Team Up to Build “Intelligent” MallsChina’s biggest home builder Vanke is moving into mall development, teaming up with Baidu to create malls that use location-based mobile apps to tell consumers which stores have products and promotions, and even help shoppers find a park. It will track and analyse consumer behaviour and provide insights to retailers.

IKEA Sets Sights on Building Shopping Malls in China: Speaking of malls, Ikea is changing its tack in China to build malls in Tier 1 and 2 cities. It is beginning by investing $1.6 billion in three properties in Wuxi, Beijing and Wuhan – not in central locations, but in new districts and suburbs. This new business model will bring IKEA an additional new income stream through the mall’s rental income.

China’s Wealthiest – Where Are They?There are 2.9 million US dollar millionaires, with an average age of 38. There are 67,000 super rich with wealth of at least ¥100 million ($16 million), averaging just 39 years old. Off those, 30% live in 3rd tier cities or lower.

Online: Internet, Mobile & eCommerce

Alibaba Challenges Amazon With Invitation-Only SiteJack Ma’s dream of taking on America is happening, and we expect to see more of this post the IPO cash-injection.  Alibaba is part of a growing number of Chinese companies expanding globally.

China Leads Shopping Revolution45% of Chinese consumers think of online shopping when they hear the world “shopping”. 73% believe shopping online helps them be more spontaneous, with 57% seeing themselves using fingerprints or eye scanning as payment authentication in the future.

The Third Tier – Revealing China’s Largest User Base58% of more than 780 million active smart phones and tablets are from third tier cities or below. Third tier cities and lower cities experienced 27% growth in daily sessions from 2013 to 2014 and are close to catching first tier, which grew 10%. Third tier city users downloaded entertainment and gaming apps, whereas first tier tended to focus on travel, business and education.

Premium Food & Beverage

Weetabix Eyes Chinese Breakfast Tables: Chinese-owned Weetabix launched in 4,000 retail outlets in the Shanghai region and plays on its royal roots – if it is good enough for the Queen of England, what better guarantee of safety and quality.

Chinese Celebrities Urge Boycotting Dog Meat FestivalChinese celebs are campaigning against the annual festival in Yulin, Southern China where attendees eat dog meat hotpot with lychee wine to celebrate the summer solstice.  Last year there were more than 10,000 dogs expected to be eaten in the festival.

Overseas Chinese Tourists

Chinese Tourists Still See Shopping As Top Travel MotivatorChina’s international tourists spent $129 billion on travelling in 2013, up 26% from a year earlier. Although travellers are becoming more adventurous, shopping remains the number one spending activity, estimated to account for 30% of trip expenditure. Much of it is to take advantage of tariff-free shopping.

Accor to Develop Over 30 New Hotels Near China’s Tourist DestinationsAccor hotels are nearly doubling their global hotel footprint, with new hotels in mainland China accounting for a third of their expansion plans, which will help the brand with international Chinese travellers as well.

Chinese Dominate Global Luxury Hotel ReviewsChinese travellers account for 42% of all online luxury travel reviews between 2012 and 2014. Chinese luxury social postings grew by 89% over the period versus 5% for the other AsiaPac regions.

Wellness, Health

Baidu Turns to Big Data to Forecast Flu OutbreaksBaidu is following Google’s lead and working with the Chinese Center for Disease Control to identify flu outbreaks based on spikes in searches for terms like ‘cold’ and ‘fever’.  160 million users do mobile searches on Baidu a day.

Banking, Property & Finance

China’s First-Home Buyers Shrink as Market Slows, Survey ShowsThe era of Chinese property being driven by first home owners is over. In 2000, 90% of house sales went to first home buyers, dropping to 48% in 2012 and 20% this year. 22% of urban houses were vacant in China in 2013.

Payment Service Alipay Holds Key to Alibaba’s GrowthWith Chinese paying deposits for house purchases using Alipay, it’s no surprise that Alibaba’s eCommerce sites accounted for just 37.6% of Alipay’s $519 billion worth of payments in 2013. $150 billion was transacted on mobile, almost six times Paypal.

Schools and Education

Look: Nifty Chinese Test-Cheating Devices Put the KGB to ShameThe cheating equipment seems to be getting more hi tech every Gaokao College entrance exam.

Recreation and Sports

Will China’s Golf Communities Boom or Bust?Although golf was banned in China until 30 years ago, the number of golfers grew to 1 million in 2012, 16% up from 2011. Golf is one sport where Chinese athletes are excelling, especially in younger age groups, which will be helped by the PGA China debut this year with 12 tournaments across China. Property developers appear to be profiting well from the sport’s rise in popularity.

Cars and Auto

Porsche to run 24-hour Social Media Race on Twitter and WeiboPorsche is putting Weibo users up against Twitter users with a social media version of Le Mans encouraging users to post quickly to get ahead.

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.

Mention Shanghai to a Beijinger, and there’s a good chance they’ll scoff. Talk about Beijing to Shanghainese, and there may also be some jeering.  Northern Chinese like noodles, southerners have a preference for rice.  Travelling between regions in China, differences are evident in people’s appearance, diet and aspects of their culture, as well as climate variations. Whilst most of us are aware of this, curiously a lot of our marketing efforts still treat China as one big homogenous land, or at best, separates sophisticated high tier city consumers from the smaller ones.

The Regional Differences video below, explains how we need to think about China in terms of a matrix, considering city-tier sophistication, alongside regional differences in culture, climate and diet.  There’s the often-cited example of skin care needs across China, with consumers in the humid south having different requirements than those in the dry north.  There are cities where smog-protection is most important for skin cream, and others where it is sun-protection.  

Localising your product or service’s features is just the beginning, the other elements of your marketing mix and customer experience should also take the regional differences into account.  It’s seldom practical to have a something unique for each of the hundreds of Chinese cities with millions of people, but there’s often room for improvement. Advertising in general, even at a superficial level will be more effective if it’s regionalised.  A backdrop of the Great Wall or the CCTV building and a pirate-sounding voiceover will be better received in the North, than say, The Pearl Tower.   With many of us increasingly using the web, social media and mobiles in our marketing, we can be quite specific in targeting different areas of China.  

Maturing Chinese consumers are becoming more confident, and as a consequence, are increasingly developing their own identity and unique parochial traits.  So it’s best to take that into account with your marketing.  Hopefully regionalisation, coupled with what you’ll read below, will all help with your China plans.  Enjoy!

Consumers, Chinese Consumers

Regional Differences: 17:52 video about not just grouping Chinese consumers by city tier, but working with a matrix that considers city-tier with region, to account for distinctive differences in culture, diet and weather. Regionalised examples include McDonalds, slower to localise its menu in China, but now with regional menus catering for noticeably different palates across China. Unlike those interviewed, China Skinny is a believer in regionalising advertising where appropriate, as Chinese can be very parochial. It doesn’t always have to be expensive.

American Execs Say China is Getting Expensive, and Profitable: 90% of American businesses surveyed now have profitable operations in China, but their optimism is tempered by soaring costs and finding the right talent.

Number of Chinese Billionaires Skyrockets: China ‘officially’ now has 6% of the world’s ultra rich (although the actual number is likely to be much higher) – those with a net worth of over $50 million – higher than every country except the USA. USA accounts for almost half of the total.

CCTV Interviewed Chinese on Streets: “What is Patriotism?”Although Chinese receive systematic patriotism education from day one, there are some interesting responses when they’re asked what patriotism is [not viewable inside the Great Firewall].

Haier, Sina Weibo, ZTE in New Foreign Tie-Ups: Three quite different tie-ups between Chinese and American organisations is likely to be an increasing trend which sees Chinese brands make more of a mark abroad.

Consumers, Internet, eCommerce, Mobile & Social Media

Mobile Use Differs Markedly Between Cities: 54% of 18 to 32 year olds in China’s Tier 1 & 2 cities use social media apps on their smartphones, versus 41% in Tier 3 & 4. In China’s big cities, consumption, sports, tourism and navigation apps are hugely popular, whereas entertainment is a focus in smaller cities.  It would be interesting to see how it differs regionally.

China’s Online Retail Turnover Rocketed 70% YOY To 880 Billion Yuan In 2013 H1: A cool 271 million Chinese shopped online in the first half of 2013, 29 million more than the six months before. That number doesn’t even count consumers who have someone else do the shopping for them.

Trending in China: Cross-border E-commerce: Still a minnow compared to the local sales, but cross-border online shopping from China is picked to grow from $35 million this year to $160 million by 2018. Chinese consumers are the most worried about product safety and authenticity when buying online.

Macy’s Shelves Internet Expansion Plans In China, But It Isn’t Worried About Slowing Chinese Economy: Macys is holding off on big China plans as it needs to learn more about Chinese shoppers.  It hopes to get some insights from it’s minority shareholding in local online retailer VIPStore.

Chinese Food and Beverage

China’s Coffee Industry is Brewing: Chinese consumers drink an average of four cups of coffee a year, with instant coffee accounting for 80% of that. Nevertheless, the number of cafes has doubled in the last 5 years with more than 30,000 in 2012. Coffee drinking is growing 10-15% a year.

Trends and Developments in the Confectionery Sector in China: Quality and taste have become the primary motivations for Chinese consumers buying chocolate. Dark chocolate’s low sugar and fat content and rich taste has helped drive chocolate sales in China. Women eat the most.

Sausage Ceasefire May Not End War Between China’s Noodle Kings: China’s $8.8 billion a year instant noodle industry has seen competition heat up so much, margins have taken a big hit. Firms have been giving away sausage, drinks, extra seasoning and gifts to get a larger share of the 44 billion packets of noodles consumed in China each year. Another reason to position yourself as a premium brand in China if you can.

Chinese Losing Taste for Fried Chicken: Once the darling of Western businesses in China, KFC sales in China have plunged 11% in the past three months, following a disastrous quarter before that. Chinese consumers are opting for cheaper, healthier and more Chinese. Curiously, there’s nothing in the article about the string of scandals and negative press from Government media that hit KFC around poor products and the birdflu outbreak, something KFC has never been able to claw back from. Apple, Fonterra, Nike and Japanese car brands will be watching with interest.

Tourism and Travel

China Gambles on Theme Park, Whale Sharks to Lure Punters from Macau Casinos: Construction of a $5 billion resort and theme park development is well underway, 10 minutes drive from Macau, said to be China’s answer to Orlando.  The park hosts a mega rollercoaster and whale shark tank, hoping to capitalise on the 30 million tourists who went to Macau last year.

The Online Travel Industry in China is Booming, as China’s Largest US IPO in 2 Years Shows: 20% of Ctrip’s hotel bookings and 15% of flights were booked through its mobile app in Q2 2013.

Air China’s Expired Food Causes Dozens Vomit, DiarrheaChina’s only national flag carrier, Air China, served up expired food causing at least 30 passengers to get really crook.

Learning and Education

In China, Parents Bribe to get Students into Top Schools, Despite Campaign Against Corruption: Want to get your precious only child into a good Chinese school? Maybe gifting the school an elevator or telescope would help. Almost everything, from admission to grades to teacher recommendations, is negotiable if you have the right contacts and the cash, parents and teachers say.

Recreation and Sport

In China, Golf Has a New Hazard: Killer Smog: Players’ health has been sacrificed for the financial benefits of establishing golf tournaments in China’s lucrative market [not viewable inside the Great Firewall] .

Fine Art

Chinese Buying Frenzy Helps Sotheby’s to $540 Mln Record: More collectors from China and elsewhere in Asia helped Sotheby’s HK break records with US$540 million, including a $3 million Zeng Fanzhi painting, a $3.9 million bronze Buddha and a $2.4 million Chenghua-era “Palace” Bowl. China’s new wealthy “don’t just want to collect and enjoy, they want to be No. 1,” says HK-based dealer, William Chak.

Is Chinese Contemporary Ink Painting the Next Big Thing?: Traditional ink paintings are picked to be the next big thing in Chinese are as art dealers and auction houses look to expand and diversify the art market in the Mainland.

Auto and Cars

Chinese Auto Marketing Shifts from TVCs: More than 100 auto companies organised micro-movies in the last quarter of 2012, and had product placements in close to 500 micro-movies. 60% of Chinese surveyed believe it helps brand image, with 33% believing it made people more likely to purchase a car.

Premium and Luxury

Luxury Companies Are Making Budding Aficionados of Chinese Consumers: Including luxury experiences as part of the luxury goods offering ensures a much stronger proposition. Good examples are Johnny Walker “experiential brand centres” and Porsche multi-city road show, with support online activity.

That’s The Skinny for the week!  China Skinny would love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.

Outside of China’s once-every-four-year Olympic gold medalists, China is starved of global sports stars. When one of their own does make it, the patriotic Chinese are quick to elevate them to Messiah status, with the riches inevitably following. Much of the NBA’s runaway success in China can be attributed to Yao Ming’s presence in the league, which helped him become one of China’s youngest yuan billionaires. When Li Na won her first Grand Slam title at the 2011 French Open, almost overnight, sponsorship deals saw her become the 2nd highest paid sportswoman in the world and tennis’ popularity soared in China.

Golf in China is looking like it could produce a lot more international stars than basketball and tennis. Last month, 14-year old Guan Tianlang became the youngest player in PGA tour history to qualify for the final two rounds of the Masters – two years younger than anyone before him. Barely a teenager, he already has 183K Weibo followers. Ye Wocheng, at 12-years old, recently became the youngest to play in the European Tour. 14-year old Andy Zhang gained entry to the 2012 US Open. But the real depth of golfers from the Far East was on display at the Junior World Golf Championships. Last year, 11 out of 12 age groups were won by Asians or players of recent Asian descent. In 2011, it was nine.

Golf is ideally suited to the Chinese gene pool. It doesn’t require the fast twitch muscle fibres of a Jamacian sprinter, brawn of a Polynesian rugby player, flair of a Brazilian footballer or the mongrel of a Mexican boxer. Golf is less about physical attributes and more about constant practice, dedication and commitment, much like playing the piano, memorizing Chinese characters or the general way Chinese kids learn from a young age.

As an individual sport, golf is suited to the one-child generations who don’t take as well to team sports as some cultures. And with parents treasuring their one-child, the non-contact nature of the sport holds a lot of appeal.

Some would say Chinese golf is being held back by its inaccessibility. Although a new golf course opened every 10 days in China last year, developing golf courses is expensive and plagued with red tape. There are less than 600 courses in China; more than 2 million people per course. New Zealand’s 4.4 million people, by comparison, enjoy almost 400 golf courses.

However that inaccessibility translates to exclusivity. In the same way Chinese are ravenous consumers of luxury goods and services as a way to demonstrate their success and status, one of golf’s biggest strengths in China is that it is an aspirational sport. There are already one million golfers in China, and with the fast-growing affluent classes and more international successes, that number will grow.

Growth will be further helped by China’s Citic Bank, one of Golf’s biggest supporters in the land, who together with Forward Group, sponsor a golfing project called “Stick for Kids”, offering free golfing lessons for 30,000 kids. Golf will also be an Olympic sport again in Rio de Janeiro in 2016. China invests in Olympic sports where it stands a fighting chance at bringing home golds, and the recent results of China’s rising golfing stars will see some money channeled its way.

Although the expansion of golf courses in China has slowed down from the frenzy a few years ago, we expect golf to be one of the fastest growing sectors in China in the coming years. The market for personal golf equipment is expected to be worth $1.4 billion in China by next year, but that’s just the start of it. Everything from golf tourism, to merchandise, to brand association through sponsorship, to smartphone games and apps is on the rise. Expect a China golf explosion.