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.
Chinese cuisine has a rich and diverse heritage with some notable differences across regions. Alibaba’s 2017 China Household Table Consumption Trends Report highlights some of these variances and how purchases can change with gender and by special holidays. 60.5% of all fresh food sold in China is now available online. Food scandals, quality and variety mean imported seafood, meat and fruit from New Zealand, Australia, Russia, Malaysia, Thailand, Vietnam, Chile, Argentina, the U.S. and Ecuador are increasingly popular.
Understanding the nuances and catering to occasions as well as to the ‘lowest hanging fruit’ within your target market will help building brand awareness and ultimately boost sales. China Skinny can help you with that. The infographic below should provide a snapshot of how fresh food preferences online vary in China.
“Fresh Food” has become the main theme on Chinese tables as consumers are increasingly attracted to a healthy lifestyle.
Newly released insights from Alibaba’s 2017 China Household Table Consumption Trends Report outline Chinese consumers’ preferences and considerations when buying fresh products online. 60.5% of all fresh food available in China is sold online, increasing 26% from 2014-2016.
With quality, diversity, nutrition and convenience being important criteria, foreign brands that cater to busy urban lifestyles and customers’ needs are preferred. Fruit, meat and seafood from Australasia, South-East Asia and South America are among the most popular goods with categories like beef and shrimp rising 6-fold.
These trends show great opportunities for quality food brands, but it is crucial to be aware of the differences in customer segments and regions, and knowing how to cater to them in a discerning market like Mainland China.
O2O is one of the most cost effective and engaging marketing strategies brands can adopt in China. Most aspirational brands selling in China have a strong O2O component in their marketing mix, yet many foreign brands have been falling behind in implementing O2O initiatives in China.
Online-to-Offline (O2O) is one of the most used buzzwords in China today, and with good reason. In Western markets, O2O refers to ‘click-and-collect’ items – goods bought online and picked up at a bricks & mortar store. Whilst retailers such as Ikea and Walmart are dabbling with it in China, cheap delivery and low car ownership rates mean that click-and-collect hasn’t taken off here like other countries. Nevertheless, China is pioneering in the O2O category.
Education is a major concern for Chinese parents who are eager to see their child excel in multiple disciplines. From an early age on, kids in China are attending English classes, practice calligraphy and learn instruments in order to be able to compete with millions of others. It is a rigid system that focuses on theories and teacher-centred learning with the primary goal being the big exams for the next higher school level such as the university admission exam gaokao. The pressure on the 9 million attendees is enormous with schools installing anti-suicide barriers to prevent students from taking their lives ahead of the exam.
In order to modernise the learning process, many parents are signing their children up for creative leaning courses such as Lego classes. As parents are becoming aware that creativity boosts inventiveness, sales of Lego rose by more than 50% between 2013 and 2015. In addition, alternative learning methods are becoming increasingly popular for subjects like English language.
Shanghai is one of the hubs for innovative education with many incentives for extracurricular learning. This not only entails subjects, but also communication and the learning process itself. “Chinese students are very limited in their way of learning – there is a skill gap that needs to be filled and many don’t recognise at the beginning that soft skills are as important to employers as is knowledge,” says Brian Heger, Content Development Director of TOK English, a program by Telford Education Group that combines traditional learning with interactive classes and online elements.
Cooperating with universities and companies in China, Heger also sees a need to change the way educators think in order to make an impact with Chinese students. “A lot feel threatened by online learning,” he explains. Rather than using online and interactive tools to compliment their traditional teaching, “educators wait to be told what to do instead of just doing something and taking initiative.”
New incentives are increasingly pushed by Beijing where a strong need for creative learning is seen in order to replace China’s image of a country of factories, to being perceived as an innovation hub and that can compete internationally. One of these initiatives is the Incubation Centre at Shanghai’s Donghua University which aims to connect students with companies and enhance innovations and entrepreneurship. “This trend already started five to six years ago, with the government as the main driver. Now companies are increasingly investing in students with good ideas and potential,” says Prof. Anselm Vermeulen, who is leading the program for Entrepreneurship and Innovation together with his colleague Dr. Nikola Zivlak. In a similar program, Prof. Vermeulen initiated at Shanghai Business School and cooperation with Rotterdam Business School, Chinese students are encouraged to create a business based on ideas developed during their studies.
“China’s private sector is the most welcoming ecosystem for innovations in the world.”, explains Dr. Zivlak, and names educational barriers as the biggest challenge to the development of creative thinking. “90% of our Chinese teachers are not willing to change their ways of teaching even though Donghua University is China’s 9th most international university,” states Prof. Vermeulen. Innovative minds are redirected to an exam-focused curriculum that leaves little room for trials.
But the change towards creative learning and thinking is underway in China, even within the country’s large enterprises. Training sessions with selected staff members has established new ways of managing and handling affairs that facilitate communication processes and enhance productivity. The demand for independent and inspiring graduates is increasing, offering multiple opportunities for foreign education companies and other businesses that are eager to train promising candidates into qualified staff. Contact us today to learn how.
It is indisputable that Baidu is the dominant search engine in China. Although there are other search engines such as 360 and Sogou, their market share remains small compared to Baidu’s.
Check out China’s search engine landscape and Baidu’s reign in this infographic.
The Alibaba shopping-mania continued with this year’s Singles’ Day reaching a stunning $14.3 billion sales. It not only showcases the enormous reach of China’s biggest internet retailer, but also the pace Chinese spending power is increasing. Growing by 60% compared to last year, Singles’ Day has evolved to a global shopping festival. Below is the digest on Singles’ Day 2015 in China Skinny’s newest infograph.
Last week’s four-day Fifth Plenary Session in Beijing saw China’s leaders meet to determine the blueprint for China’s policies over the next five years. Although the full details won’t be released in March next year, below are 13 highlights from the communique published following the session:
1. Lowering GDP Growth to a Switzerland a Year
Beijing has lowered its GDP growth targets to 6.5% a year until 2020 in hope of doubling 2010 GDP and per capita income by 2020. This is more sustainable than the freakish growth of previous years, particularly as the economy has matured and much of the rest of the world is still volatile. In saying that, it is still adding the equivalent of Switzerland’s economy every year, and in absolute dollar terms, that growth is higher than the 10.3% in 2010.
We may be reading something wrong, but the goal to “double 2010 GDP by 2020” doesn’t seem like much of a stretch. Using the World Bank’s measures, 2010 GDP clocked in at $6,040 billion and 2015’s figure is expected to be over $11,000 billion, meaning it would take less than two years at 6.5% growth to reach the target.
Industries affected: All.
2. Increased Urbanisation
One of the drivers of China’s economic growth has been urbanisation. With around 54% of China’s 1.35 billion people living in cities, there is still plenty of room for growth. Urban consumers earn over three times more than their rural equivalents and are much more likely to buy products and services, and build innovative businesses. The wording in the communique is quite dubious: “urbanization ratio calculated based on the number of registered residents will also rise at a faster pace,” which may not mean increased rates of people moving to cities, but a loosening of the Hukou policies, providing basic rights to migrant workers who are currently treated like second-rate citizens. Whichever it is, it will be good for China.
Industries affected: Consumer products and services, tourism, construction.
3. No More One-Child Policy
One of the most talked about changes from the plan is the ending of one-child policy. We believe this is more symbolic than anything else. There have been a number of policy changes over recent years making it easier to have more children, but the increase in birth rates has been much lower than expected. It has become socially acceptable to have one child and the cost of raising additional children is prohibitive to many. If we look to Hong Kong, which has no such policy, birth rates are actually lower than Mainland China. Child-related products and services are already some of the fastest growing categories in China, but don’t go building extra infant formula factories just yet.
Industries affected: Baby & toddler products, tourism, education.
4. Opening Up to the World
China has been steadily opening up since 1979, however this 5-year plan specifically states it will do more. This includes providing clearer rules that apply to foreign investment. It will also adopt a “negative list” which clearly states sectors and businesses that are off limits to foreign investment, which will provide more certainty. We can expect to see the continued drive for more free trade agreements and projects such as the Belt and Road Initiative.
Nevertheless, there have been a number of trends that are contradictory to China’s mandate of opening up. Over recent years there has been a increase in anti-foreign brand sentiment driven by state policy and media. The Internet has also become more closed than before, although Mark Zuckerberg has been posturing the Chinese and allow a censored version of Facebook. In short, we expect it to become more open in some ways, and more closed in others.
Industries affected: All, particularly those making investments into China.
5: Anti-Corruption: Less Golf and Gluttony
Luxury brands who target gifting and Government officials are likely to be disappointed that there is no sign of the anti-corruption drive abating in China. Luxury brands need to adapt to target everyday consumers with less brash and mainstream products that Chinese are increasingly demanding. Golfing and gluttony industries were singled out as additions to the no-go list for ambitious bureaucrats.
Industries affected: Luxury, golf, banquet restaurants
6. The Innovation Drive
Companies such as Alibaba, Tencent and Huawei have pioneered innovation to create world-leading technologies from China. We’ve already seen Chinese brands make an impact in some industries such as smartphones, where Chinese brands accounted for less than 30% of the domestic market in 2011, but now hold more than 80%. 20% of all home appliances sold globally are Chinese brands. China wants to see more of it to push China’s economy up the value chain, and is encouraging systems that nurture innovation and see better allocation of resources including labour, capital, land, technology and management.
Industries affected: All, but those specified are political theories, science, technology and culture.
7. Integration Between the Internet and Traditional Industries
China’s online giants are leading O2O integration with Alibaba buying a host of offline assets to integrate with its online ones, and Tencent & Baidu teaming up with Wanda Group to create smart malls. The Government wants to grow this trend integrating the Internet of Things into a lot more things, which will drive innovation, efficiencies and provide a valuable source of big data.
Industries Affected: All, particularly retail, technology, entertainment and transport.
8. Harnessing Big Data
With a country as large and varied as China, one of the most reliable ways to understand the population is through big data. Any Internet company operating in China already needs to allow the Government access to its data, but expect to see a more concerted effort to interpret and harness those insights. In late 2013, we saw early signs of this, with cooperation between the Government and companies such as Baidu, Alibaba and China Unicom to assist with data collection for Chinese statistics. We are hoping that the reference to the ‘sharing economy’ will mean more of this data will be publicly available, providing valuable insights to businesses selling in China.
Industries affected: Any Internet company or organisation with a lot of data. All businesses can benefit if data publicly available.
9. Entrepreneurism & SOEs
Five years ago, most people in China wanted a cushy Government job. The most desirable spouse was a public servant. The combination of the anti-corruption drive and pin-up entrepreneurs such as Jack Ma has turned the tides, with many of China’s youngest and smartest wanting to start their own business. The Government is pinning their hopes on these types to help drive China up the value chain. Hopefully this is backed up with policies such as easier finance for smaller businesses. At the other end of the spectrum, State Owned Enterprises will be retooled, with less state interventions. Expect consolidation, with fewer, but larger SOEs and potentially outside shareholders. More efficient SOEs and entrepreneurs will provide further competition to China’s already fiercely competitive market.
Industries affected: All.
10. Education for those Who Need it Most
Education has been a key pillar of Chinese society since Confucius and this year’s Five Year Plan continues this in earnest, with the Government striving to improve the quality of education. Core to this plan is enabling China’s poor to attend high school for free, and providing them access to vocational secondary schools through subsidised tuition. This is unlikely to have a significant impact on students studying abroad, however as the general standard of education rises, more students may look to overseas education as a point of difference.
Industries affected: Education in the short term, all industries in the long run.
Health is the top concern across most demographics in China, reflected in a Xinhuanet online poll prior to the Five Year Plan which saw 72.6% of Chinese caring about health. Health was a key component of the 12th Five Year Plan, which saw basic medical insurance rolled out to the majority of the population. The elderly stand to benefit from the latest policy which will see old-age insurance provided to the full population. The critical illness insurance system will also be implemented at full scale. A lot of the increased expenditure on health equipment is likely to be purchasing low-priced medical gear which is dominated by local manufacturers, however the overall trend of improving health standards is seeing increasing opportunities for higher-end foreign medical equipment. Demand for pharmaceutical products will continue to rise, and with it, new innovations to help reduce fakes in circulation.
Industries affected: Health services, medical equipment, pharmaceuticals, old-age care.
12. Modernising Agriculture
One of the main health concerns in China is related to food safety, which is dragged down by an inefficient and often rudimentary food supply chain domestically. Modern China was built on the back of small peasants farming plots, but Beijing is increasingly introducing technology, corporatisation and transparent supply chains to increase safe food produced in China, which it hopes will both improve the self sufficiency ratios and perceptions about locally produced food and beverage.
Industries affected: Agriculture, food & beverage, technology.
13. A Cleaner China
A Xinhuanet online poll into expectations for the next five years found the environment to be the most important subject for Chinese, with 73.8% caring about it. China’s horrendous environment remains the elephant in the room, although increased focus since 2013 has seen some green shoots of hope. In 2014, emissions of five key heavy metal pollutants (lead, mercury, cadmium, chromium and arsenic) dropped by 20% from 2007 levels. Air pollution improved slightly in 71 of the 74 cities recorded last year, but water and soil pollution continues to get worse. Beijing still has a lot of work to do, and we have been promised developments that will be green and sustainable, a further reduction in coal consumption and a ‘more exacting environmental protection system.’
Industries affected: Construction, manufacturing, energy, technology and transport.
China has had an enviable track record of delivering on what it promises in each Five Year Plan, which is why their direction and policies are significant for everyone doing business in China. This Five Year Plan is particularly important given China’s slowing economy and the lead-up to the 100-year anniversary of the founding of the Communist Party of China in 2021. We will be following its progress closely, so stay tuned.
It is upon us! Anyone travelling in China over the next seven days, and at many tourist spots abroad, will know that this is no ordinary week.
Unlike the Lunar New Year, when most Chinese travel home to their families, October’s National Day Golden Week is when they get out sightseeing and shopping en masse. It is the biggest single week of the year for leisure tourism. Last year, an estimated 480 million travelled between October 1 and 7 and, if the growth rates continue, it will be over half a billion this year.
Beijing first introduced Golden Week holidays in 1999 to expand the domestic tourism market. And expand it has. During each holiday, state media and social networks are flooded with photos of major sightseeing spots and transport hubs experiencing what has become known as a tourist apocalypse.
Overrun local tourist attractions and an increasing wanderlust for international destinations has seen more Chinese use the holiday to travel abroad. The most popular ‘overseas’ destination, Hong Kong, is seeing changing tourism trends which represent the wider market overall. Although international tourism is growing every October Golden Week, 15% fewer Mainland tour groups are expected to travel to HK this holiday, following falling numbers last year. It reflects slowing demand for group tourism as more Chinese opt to travel independently, but also an increasing desire to travel to more exotic, farther flung destinations. Many tours to Japan have long been booked out and there aren’t many seats left on planes to Australia, Europe or the U.S.
Tourism operators can obviously expect a boon from the tourist week, but a lot of other businesses will as well. Luxury retailers are likely to see their tills ringing, with as many as 80% of all luxury purchases by Chinese estimated to be made abroad.
There are also less obvious beneficiaries of tourism. When Chinese travel abroad, they become more familiar and build affinities with many of that country’s products and services, such as education, fashion and food & beverage. This is illustrated in research commissioned by Tourism Australia, which found 39% of Chinese overall rate Australian food and cuisine favourably; however, of those who had visited Australia, 76% were fans. Many more brands could capitalise on the opportunities that increasing outbound tourism brings to sell their wares in Mainland China – it is one example of how different sectors are related and something that China Skinny can help with. If you are based in China, we hope you have a wonderful Golden Week holiday. We’ll be back after the break.
What China Slowdown? Nike Scores a Sales Slam Dunk: Nike’s June-August sales jumped 30% year-on-year in Greater China, following a string of strong growth stories for brands that have adapted to Chinese consumer needs including Apple, Starbucks and Mercedes-Benz.
Three Ways Chinese Companies Are Winning with the Customer: Chinese brands aren’t just becoming formidable competitors in the Chinese market, but globally, accounting for 39% of household appliance sales revenue, 15% of Internet software and 10% (or more) of smartphones. They are doing this through: 1) solving consumer problems; 2) rethinking business models; and 3) moving from “good enough” to “cheaper and better.” Nevertheless, many believe than China won’t be able to compete until its research institutions are more open to the world.
6 Facts About How Americans and Chinese See Each Other: Xi Jingping’s first official state visit to the U.S. as the leader of China, has created a flurry of U.S.-China relations coverage, including his meeting with U.S. Tech’s top brass in Seattle. But everything isn’t rosy between the two countries. 39% of Americans have a favourable view of China and 44% of Chinese give a positive rating to America according to Pew Research Center. Young people in both countries have a much more positive view of each other, with 59% of Chinese adults under 30 giving the U.S. a positive rating, compared with 29% of those over 50.
Internet, Mobiles, Social Media & Ecommerce
Ecommerce Drives Retail Sales Growth in China: Emarketer remains bullish on China’s ecommerce growth in 2015. China will account for 40% of the world’s ecommerce sales this year, with mobile accounting for around half of all sales compared to 33% in the UK, 22% in the U.S. and less than a fifth in other developed countries including France, Canada and the Netherlands.
What China Thinks: Why Chinese Consumers Love Online Shopping: 3 minute video from Alibaba who talked to Chinese online shoppers in Tier 1 and 2 cities and villages about why, when and how they shop, including their views on foreign products [not viewable inside China].
Using the 3 C’s for Online and Offline Commerce in China: Brands should no longer view digital as a marketing channel, but see it as a way of life in China. The three most important factors when considering O2O solutions are 1) Connectivity; 2) Context; and 3) Content.
WeChat Offers 8 Solutions for Smart Devices: WeChat has cast the net wider, publishing solutions to integrate the app into air conditioners, toys, routers, home appliances, televisions, recharge equipment, health care and wearable devices.
Strong Demand For Overseas Trips During Golden Week: Tokyo, Hong Kong and Bangkok are the most searched for destinations on Hotels.com, with Paris being the only non-Asian destination in the top-10. Trips to Rome and Florence are the fastest rises growing 116% and 96% respectively from last year.
Losing its Shine: Chinese Tourists Skipping Hong Kong During ‘Golden Week’ Holiday: Hong Kong is expecting ‘just’ 10 million mainly China visitors this Mid Autumn Festival and Golden Week period – including 15% fewer Mainland tour groups than last year. Chinese travellers are looking to longer haul destinations, taking advantage of easier-to-obtain visas and 11 days off, by taking three days of annual leave.
EU Sees Number of Chinese Tourists Triple in Ten Years: The number of Chinese tourist nights in Europe has grown 282% since 2005, versus 75% of tourists overall.
Food & Beverage
The Strictest “Food Safety Law” in China: Sweeping changes to China’s food and beverage laws will come into force on 1 October. Critical issues include infant formula and milk powder, health food, food for special medical use, online food sales and small food manufacture and processing. Food safety supervision and enforcement will also be tightened up in a bid to improve China’s food safety record.
China Conundrum for Meat Importers: China represents huge opportunities for meat exporters, but it is often necessary to educate Chinese consumers who can be unfamiliar with Western meat cuts and cooking methods. 62% of online food shoppers said food safety is a top priority, and 43% said the sell-by date of food is.
Buzzwords: Education in China: The fascinating economy of China’s fiercely competitive education industry, including drones, bootcamp, seaweed and its importance to Chinese as a whole.
VW Seen Losing Trust Among Chinese Consumers With U.S. Scandal: Although fewer than 1,000 of the 3 million VWs sold in China are diesel, the car company is likely to lose trust with Chinese consumers after admitting cheating on U.S. air pollution tests. VW has already been singled out in the past by CCTV for faulty parts. 35% of VW’s global sales currently occur in China, and the company is increasing its production capacity there from 3.5 million vehicles last year to 5 million by 2019.
While all of us have enjoyed the results of Chinese inventions from paper, printing, tea and porcelain, to the less-cited toilet paper, pasta, ice cream and football, it’s likely we’re going to benefit from many more in our lifetimes, particularly in the technology category.
China’s modern transformation has been led by engineers. A late-90s study found that more than 80% of the mayors of China’s large cities, Party leaders and Central Committee members held degrees in engineering or the sciences. Many of those engineers are steering all-important Government policies such as the “Internet Plus” strategy, which will see increased focus on developing world-leading innovations related to the Internet.
Market-raised cash injections are also fostering tech innovations in China. There are now more than a dozen Chinese tech businesses worth over $1 billion, with venture capital growing more than 300% last year to $15.5 billion. On the surface, most Chinese tech companies look similar to Western companies. Yet dig a little deeper and you’ll see Chinese firms pioneering mobile, ecommerce, finance, microtransactions, social commerce and O2O features that are making the West’s tech companies take notice – and even copy.
China is a fine breeding ground for innovation. Decades of state capitalism has led to some very inefficient ways of doing things, creating the perfect environment for disruptive technologies that meet the needs of increasingly sophisticated and demanding Chinese customers. China’s massive population of tech-savvy consumers, who together account for 59% of the world’s smartphone app downloads, have the scale to tempt many aspiring engineers. More than 10,000 new companies are registered each day in China.
Building efficiency, isn’t just about creating shorter queues in hospitals, making paying for things easier, or more efficient ride sharing. It’s also servicing those softer, but still important needs such as customer service.
China’s phenomenal rise of ecommerce can be attributed to competitive pricing, convenience and range, but also for providing consumers with a level of service that most haven’t experienced before. Service isn’t always great in China’s brick and mortar stores, but if you drop the ball on ecommerce, your store, brands and products will be slated with negative online reviews. This effects both consumers’ perception of your brand during their research, in addition to search result positions on ecommerce platforms. With so much at stake, online vendors bend over backwards to please their customers, which has seen ecommerce platforms such as Taobao, Tmall and Jingdong have the highest satisfaction and consumer loyalty of any brand in China.
In short, Chinese consumers are receiving technology-assisted service and convenience. This has helped build an ecosystem of innovations that are increasingly moving beyond Chinese borders, and it is also a reason Chinese have growing expectations when buying a product or service, which need to be met or exceeded. China Skinny can help with that. We hope you enjoy this week’s Skinny.
The Wild, Wild East: China’s urban consumption will almost double from $3.2 trillion today to $5.6 trillion in 2020 according to BCG. Whilst many are talking up inland China as the biggest untapped opportunities, there are still many up-and-coming cities in eastern China such as Suqian, Xuzhou and Wuhu, and still lucrative niches in the crowded Tier 1 markets of Shanghai, Beijing, Guangzhou and Shenzhen.
Chinese Trade Data Latest Indicator of Sluggish Growth: While food imports to China in August increased 25% year-on-year, overall imports decreased 13.8%, with demand for commodities such as iron ore and aluminium drying up.
Three Reasons Why Chinese Consumers Love the Queen – and Why Britain Should Too: When Chinese consumers were asked which words they associate with Britain, top of the list was the Queen. 27% of Chinese shoppers said they get their inspiration for fashion and home style from the Queen and the royal family, with the royal warrant important for increasing desirability of British lifestyle and brands from more than half of those surveyed, according to Qing Wang from the University of Warwick Business School.
Best CRT Post Today? Not in China: China’s advertising laws have been overhauled this month, imposing fines of up to ¥1 million ($157,350) for brands that use superlatives such as the “highest”, “best” or “national level”. Brands are also banned from using child stars under the age of ten to promote their products.
Internet, Mobiles & Ecommerce
Buzzwords: Ecommerce and Digital Payment in China: Ecommerce is the talk of the town in China, and here are a few buzzwords that are good to know.
It’s All Go: Venture-capital investment in China reached a record $15.5 billion in 2014, more than triple 2013’s level. China has more than a dozen tech businesses with a valuation of over a billion dollars. “Chinese consumers are now so demanding and globally minded…you need to be world-class to serve China,” says Gary Rieschel of venture-capital firm Qiming Ventures.
China is Buying About One-Fifth of the World’s Apple Watches: Just over one million Apple watches are estimated to have been sold in China since they launched in May – about 22% of global sales. That’s lower than the 26% that China contributes to Apple’s revenue overall. 40% of Apple watch sales are estimated to come from Apple stores, 28% from Apple’s online store and the remainder from third party stores and overseas vendors. Apple is hoping the new rose-gold coloured iPhone 6S will hold special appeal to Chinese consumers. The brand looks to be out of favour with state media again: the iPhone along with the Samsung Galaxy were the focus of a poor quality report on CCTV, whereas top local players Xiaomi and Huawei weren’t even mentioned.
How to Buy a Xiaomi in Two Short Months: Xiaomi may be the world’s second most valuable startup after Uber, and China’s top selling smartphone brand, but it still isn’t straight forward to buy one of their devices. How long will the flash sale marketing tactic work for them with brands like Huawei nipping at their heels?
A Day in the Life of a Chinese App Addict: Last year, Chinese smartphone users downloaded 185 billion apps, 59% of all downloads worldwide. Gaming apps were the most popular category in China but shopping, video-streaming, and image-and-video apps for social media are catching up quickly.
Food & Beverage
Finding Yin Yang Balance In Your Food Choices: Duck is cooling, chicken is heating: some of the fascinating yin yang traits Chinese associate with food.
Intellectual Property in China’s Food & Beverage Industry: Trademarks, including 3-D marks such as packaging or containers, and trade secrets are all vastly important in China’s food and beverage market where reputation is everything.
China Plows Big Money Into Australian Agriculture: Chinese consumers perceived Australian-grown food to be three times as safe as food grown in China, and 50% healthier than food grown in the U.S., Brazil or France according a Reputation Institute survey in 2013.
Ambient Drinking Yoghurt to Achieve $5.6 Billion in Sales by 2017: Since its launch in 2010, sales of drinking yoghurt have soared, accounting for 13% of China’s yoghurt category in 2014. Convenience, taste and nutritional benefits have contributed to its popularity.
Robust Growth Forecast for China’s Outbound Tourism: 42% of Chinese tourists surveyed said they were willing to spend as much as 20% of their living expenses on travel according to World Tourism Cities research. While outbound tourism numbers grew 11% last year, their spending increased 28%.
Dutch Villages, Small Cities Look to Attract More Chinese Visitors: Dutch villages such as Giethoorn are seeing two thirds of their hotel guests coming from China. They’re catering for the visitors with initiatives such as Chinese language travel cards, smaller bicycles, firmer beds and noodle cookers. Chinese visitors to the Netherlands grew 15% last year and are expect to grow 18% this year, spending almost twice as much per person on average.
Toads Skin, Herbs Feed China’s $2.7 Billion Cancer Fight: Sales of traditional cancer treatments, with ingredients such as toad skin and turtle shell, surged 35% to almost ¥17 billion ($2.7 billion) last year in China. That’s twice as fast as the 17% growth for the overall ¥65 billion ($10.2 billion) cancer drug market. A new cancer case occurs every 10 seconds in China.
Your brand has locked in favourable deals with the top-10 retailers in China, including the best in-store placement and positioning of your merchandise and regular point of sale promotions. You’re well placed to reach China’s 1.36 billion consumers, or at least a couple of hundred million middle class customers, right? Unfortunately not.
In a market like the U.S. things would be looking peachy. Between 2010 and 2012, the top-100 American retailers made up 57% of all consumers sales. By comparison, China’s top-100 retailers accounted for 11% of sales in 2010, and just 8% last year. The differences reflect how fragmented China’s retail market is, made up by many ‘Mom and Pop’ stores and small, regionalised chains; further reiterating the need for a region-specific strategy. Most of us know how different the customer journey is in China, but we may not appreciate the extent of dissimilarities in China’s retail structure.
Ecommerce makes up 11% of China’s retail market – not yet a large share overall – but by far the biggest and only truly nationwide channel to reach China’s masses. Sales on Alibaba’s Taobao and Tmall now supersede China’s top-100 physical retailers’ turnover.
Companies such as Unilever have been caught off guard, and are now placing a significant focus online.
In some ways, online shopping levels the playing field for retailers, as everyone has the same storefront and pages to work with to woo consumers. But in many other ways, multi-platform players still have an edge over the pure play online brands. Chinese consumers often look to physical channels when making purchasing decisions, even when buying on the Internet, so it is advantageous to be present online and offline. Big brands also get ‘sweeteners’ by online retailers, such as JD wooing LVMH’s Sephora to launch its first Chinese online store on the platform and Shangpin giving Top Shop special treatment. Unilever is likely to have been given incentives to launch on JD as well.
Like any market, whether brands are big or small, it will be the nimble, creative brands who understand their customers and channels that win. China Skinny can help with that. We hope you enjoy this week’s Skinny.
Western Firms Caught Off Guard as Chinese Shoppers Flock to Web: Consumer-goods sales from the top 100 retail chains dropped from 11.2% of total sales in China in 2009 to 8% in 2014 – less than 80% of overall ecommerce sales.
China’s JD.com Adds Unilever to its Stable of Global Brands: Unilever launches on JD Worldwide giving consumers access to products not formerly available in China. It follows Sephora launching its first online store in China on the platform – the brand was likely to have had all sorts of incentives from JD to do so.
Why Louis Vuitton, Gucci and Prada Are In Trouble: Changes in consumer tastes which took 20 to 30 years in the U.S., took two to three years in China.
Internet, Social Media & Ecommerce
How To Borrow Mobile Moments To Engage Chinese Consumers: ‘Borrowed moments’ are essential to winning over Chinese consumers according to Forrester research because: 1) WeChat and a few mega apps dominate the time Chinese spend on their mobiles; 2) “Owned” mobile moments are less likely to work in China; and 3) Top Chinese apps have evolved to provide more features that marketers can borrow from.
Digital Commerce in China: Cheap Tricks or Deep Love?: “If managed skilfully, digital commerce can enhance – rather than degrade – value perceptions. High-tech cheap tricks can morph into deep love. When marketers harmonize digital and offline assets, online transactions blossom into intimate relationships,” says Tom Doctoroff.
Food & Beverage
Why China Shops Online for Groceries: Online grocery sales grew almost 50% last year in China, versus hypermarket and supermarket’s 6.7%, with much of that growth coming from new store openings. 40% of Chinese buy food online versus 10% in the U.S. according to McKinsey. Online shopping and delivery suits many urban Chinese consumers who still don’t have cars.
Chinese Wine Drinkers Prefer Contemporary Labels: Although traditional wine labels donning gold and red and pictures of castles and chateaux dominate Chinese wine aisles, Wine Intelligence research found consumers are becoming more inclined towards original, contemporary labels for both formal and informal occasions.
Cainiao Launches Three Fresh Food Distribution Centers: Alibaba’s logistics affiliate Cainiao will establish fresh food distribution centres in Beijing, Shanghai and Guangzhou to support cold chain delivery within 24-hours. The news comes soon after Alibaba’s announcement that it will seek more Latin American food suppliers, particularly fresh fruit and vegetables. Last month there were 10,000 orders for avocados on Alibaba’s platforms.
The Increase In ‘Artificial’ Intelligence: More than half of Chinese consumers say they prefer snacks to meals, compared to just 9% in Japan according to Innova Market Insights.
The New Conquistadors: Chinese Tourists Turn to Latin America: Chinese tourists to Latin America are increasing rapidly, albeit from a low base. Tourists to Mexico grew 58% last year to over 75,000 arrivals. Interest in Latin America is rising, with exposure like leading Chinese online travel agency Ctrip naming Peru as its destination of the year this January, and China’s Top Travel magazine selecting Chile as its featured destination of 2015.
Airbnb Says Chinese Travelers Are Fastest-Growing Users: “The future of international travel is really the Chinese tourist,” says Airbnb CTO.
German Fashion Brand Under Fire For Racist Slur On Chinese: Philipp Plein’s plans to expand in China took a knock after social media users reminded their peers of the brand’s limited edition T-shirt from 2007 which contained the words “F**K YOU CHINA.”
Health & Beauty
Waist Wars: China Belly Button Challenge Gets Trending: China’s Weibo sensation this month is checking if you can touch your belly button by reaching behind your back and around your waist. The topic has been mentioned almost 150 million times, with more than 100,000 active discussion threads. Many have posted photos trying it, while others claim it promotes eating disorders and those who could do it haven’t completed the evolution from monkey to human. Following on, is the collarbone challenge, urging women to snack coins in the gap beside their neck to indicate how defined their collar bone is. The topic received 34 million hits in 24 hours on Weibo.
Chinese Entertainment, Tech Execs Grow More Confident: Furious 7, Avengers: Age of Ultron and Jurassic World have sold almost $750 million in tickets in Chinese theatres since April, but Chinese movies are also riding on the back of the 40% box office growth in Q1 with lower budget local movies like The Taking of Tiger Mountain and From Vegas to Macao 2 grossing about $150 million each. Chinese movie execs are walking with a swagger these days with little talk of co-productions or partnerships with U.S. studios, and a lot of focus on leveraging Internet technology to understanding consumer tastes, crowdfunding, marketing, ticket sales and streaming.
A Chinese consumer’s purchase journey is like no other. It begins online for most, with 85% using search engines, brand websites, or social media as their first step for researching a new product or purchase, according to a PWC survey.
Whilst online research is not unique to Chinese consumers, the way they do it is. For a start, they are less trusting of products and services, and investigate more, across a wider range of online channels before making a decision.
Globally, 56% use a search engine as their first port of call for doing research, whereas just 33% do in China. When Chinese search, it isn’t just on Baidu as it is on Google elsewhere. Consumers are more likely to research products on ecommerce platforms like Taobao, particularly when they are getting closer to making a purchase decision.
Food and beverage is one illustration of Chinese search habits. For example, consumers do twice as many searches for wine on Taobao/Tmall than on Baidu. And wine is a product most consumers still require further education about. Products such as packaged snack food – which consumers are more familiar with – often account for ten times more searches on Taobao/Tmall than on Baidu.
32% of Chinese will go directly to a brand’s website – much higher than the 19% globally, and almost as many as those who will use a search engine initially.
When we talk about online research in China, it’s a good idea to be thinking about mobiles. Wherever Chinese are thinking about making a purchase – in a store or online – they will always have their smartphones with them, so it is important to factor this in to customer touchpoints.
PWC’s findings are polarising: 85% are online for their first step of research, whereas just 11% of retail sales happen over the Internet. This signals a disconnect in the customer journey and represents an opportunity to further integrate online and offline channels to better tailor to consumer preferences. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
520 – a special day in China and a special day for China Skinny. Attending the Global Conference on Women and Entrepreneurship hosted by Alibaba in Hangzhou, our team is part of the 800 participants. With 640 million female consumers in China, bringing female entrepreneurs together shows the importance of women’s power for China’s economy.
Excited to be here, we will find out shortly what Jack Ma has to say about Alibaba’s role in this century’s She Era. The room is filled to the roof with a few of the 231 million female customers that shop on Taobao and Tmall.
Arianna Huffington spoke of the importance of women finding their inner self to prevent burnout. With 100 million Chinese suffering from stress and mental diseases, Huffington points out that success lies in staying focused and gives tips and advice how to reach this goal.
Actress and Entrepreneur Jessica Alba emphasized to the importance of understanding your target market and how to reach themthe right way. Producing safe and healthy baby products and detergents, Alba plans to launch on the China market in the near future. With more than 9 out of 10 of Chinese moms having absolute control over what their babies are consuming and 86.5% of spending on children going towards healthy, safe and foreign products, women are the driving spending power in the Chinese baby and toddler market.
Short snack in between: a decorative reminder of the event’s host.
Along with these celebrities, the audience discussed the role of women in China with Chinese stars like Chinese actress Zhang Ziyi, Su Mang, UK Ambassador Barbara Woodward, and Goldman Sachs Vice Chairman Mark Schwartz. Marriage was a topic of discussion – a big concern for many of China’s “left-over women”, often ambitious women who remain single after 30. With women contributing to just 10% of global GDP growth, there is room for improvement across all industries and countries.
All speakers consistently stated that mind-sets have to change as there is no country worldwide with gender equality. Given the status quo, it will take 81 years to reach economical gender equality. Women are 9% less likely to have saving accounts, assets or take out loans, and building the right infrastructure is one of the Jack Ma’s objectives for leading China into the She Era Economy of the 21st century.
Two interesting days with dozens of speeches, hundreds of questions and hot discussions. With this event pointing out discrepancies and bringing entrepreneurs from all over the world together, the trends towards the independent, strong business women in China is on the rise. China Skinny can help you play your part in reaching and appealing to this large and powerful consumer group.
Earlier this month, Apple’s Tim Cook and Indian Prime Minister Narendra Modi opened accounts on Weibo. Modi’s selfie with Premier Li Keqiang and Tim Cook’s chronicles of his four day trip to China, helped attract almost a million followers between them, providing further validation of Weibo’s relevance in China.
While WeChat hogs the spotlight in most commentary about social media in China these days, Weibo is still an influential marketing tool. This is reflected in the 11% growth in its active users over the last quarter.
Before purchasing goods and services, Chinese consumers do significantly more research than Westerners, across a greater number of channels. Understanding how each of these channels tie into the customer journey can help you optimise your marketing at each touch point to increase engagement, sales and advocacy.
Consumers are most likely to personally engage with a brand on WeChat; but before engaging, they will often do research on platforms such as Weibo. Weibo is the most open channel in China. If a brand, product or service is on Weibo, it can be praised or panned by anyone, providing a level of transparency that untrusting Chinese consumers crave. For that reason, 95% of online Chinese trust a brand more if they have seen it on social media such as Weibo. Traditional state-run media doesn’t instil even half of that level of trust.
Weibo is also the first port of call for Chinese seeking breaking news. Whether it is finding out about what Tim Cook or another celebrity is doing, or the latest food scandal, Weibo has become the de facto news source for many of its 198 million active users, and the friends and colleagues who they influence. If consumers have a complaint or compliment about a brand, they will often say it on Weibo for all to see, so it is a vital channel for fire fighting and steering customer sentiment about your brand and wares.
Weibo’s viral nature also makes it a great channel for promotions and contests. Tmall’s brillantly-executed Apple promotion this month, is case in point.
So instead of choosing either WeChat or Weibo, it’s a good idea to look at each channel’s unique benefits and how they are complimentary, and where they fit with other marketing and sales channels too. We hope you enjoy this week’s Skinny.
Why China’s Consumers Will Continue to Surprise the World: Although China’s consumption rates have decreased over recent decades, absolute consumption has soared, from $650 billion in 2000 to almost $1.4 trillion in 2010. Spending on non-essentials is forecast to grow at a faster rate than necessities, with the share spent on recreation, culture and education expected to rise from 13% in 2013 to 21% in 2030 according to McKinsey.
Alibaba Unveils a Mobile App that Enables Physical Stores to Market to Shoppers: Alibaba’s new app, Miao Street, is free for brick & mortar stores who accept Alipay. The app enables shops to send out personal messages and coupons to shoppers based on their location and demographic. A McDonalds pilot sent 2 million free sundae coupons to 18-35 year old women within 3km of a McDonald’s restaurant and had a 32% redemption rate within 20 days. Alibaba plans to roll it out to 500 shopping malls in 15 cities this year.
Playboy Hopes China Can Help Rev Up Its Brand: Playboy magazines have never been sold in China, but the brand has an estimated 97% brand recognition with Chinese consumers. Playboy is increasing its distribution to 3,500 outlets across China to sell bunny luggage, belts, wallets and casual wear.
Internet, Social Media, Mobile & eCommerce
Apple’s Tim Cook Becomes Latest Celebrity to Join China’s Weibo: Within 24-hours of opening his Weibo account, Tim Cook had more than 400,000 followers. His first post received almost 50,000 comments, 66,000 likes and was forwarded 40,000 times. Lei Jun, Xiaomi’s chairman, and Yu Chengdong, Deputy Senior Executive of Huawei Technologies both retweeted Cook’s first post.
Weibo Kicks Off 2015 With Renewed Growth: In the past three months, Weibo’s monthly active users grew 11.2% to 198 million. 89 million are active every day, 34% more than a year ago.
Apple Top In China As Smartphone Market Dips: 98.8 million smartphones were shipped in China in Q1 this year, 4% less than the same quarter 2014 and the first contraction in the market since 2009 according to IDC. Apple led the pack with a 14.7% share (8.7% in Q1 2014), followed by Xiaomi on 13.7% (9.2%), Huawei at 11.2% (7.8%) and Samsung at 9.7%, less than half of last year’s 19.9%.
Tencent Profit Rises to Record as Games Lure Users to Spend: Active monthly users on Tencent’s WeChat have grown to 549 million, helping Tencent’s mobile online gaming revenue grow 82% in the last quarter, accounting for 20% of all revenue. Online advertising revenue rose 12%. Mcommerce still doesn’t appear to be making an impact on Tencent’s income statement.
Alibaba Seeks International Expansion, Hitches With ‘Avengers’ in China: Alibaba’s new CEO, Daniel Zhang, says international expansion is the company’s top priority. Meanwhile, the company teamed up with Walt Disney to handle marketing and merchandise sales on “Avengers: Age of Ultron”, aligned with the film’s record opening this month.
Anger as Racy International Nurses Day Promotion Misfires in China: On the day that is meant to honour the hard work of the often unsung profession of nursing, JD’s promotion of racy nurse outfits and lingerie, vibrators and condoms unleashed a storm of criticism. One Weibo post from a doctor mocking the campaign received more than 14,000 reposts.
Food & Beverage
Tmall’s Clever Apple Campaign Sells Out of 60,000 Units in Two Hours: Tmall’s beautifully-executed and low budget Weibo campaign sold out of 60,000 units of New Zealand imports.
Chinese Consumers Shifting Towards Mainstream Wine: Wine Intelligence’s 2015 report has found there are less ‘adventurous connoisseurs’ and ‘prestige-seeking traditionalists’ than before among China’s 38 million wine drinkers. A new classification of ‘developing drinkers’ accounts for 19% of the market. Consumers in this category are typically in their late 20s and early 30s, university educated and in high earning professions. They’ve usually picked up the wine habit through business dinners but are now branching out on their own, drinking wine as part of their personal life.
Consumer Trends Driving Innovation on Show at SIAL China : Asia’s biggest food and beverage show SIAL China saw a 20% increase in attendance this year from 2014. Health, wellness, organic, convenience and Westernized food and snacks were out in force. Dairy’s presence increased, following the 50.7% growth in imports between 2013 and 2014.
Farmers Markets with Chinese Characteristics: Farmers’ markets may be considered ‘progressive’ and fashionable in the U.S. and other Western countries, but in China they are increasingly viewed as problematic and ‘backward.’ A survey found consumers trusted dried goods, oil, and processed foods more in supermarkets, but prefer farmers’ (wet) markets to buy fresh produce.
Strawberries and the Hype Over Unsafe Food: Anhui’s Changfeng County Strawberry Growers’ Association is one of the groups planning to file a lawsuit against China Central Television following losses of more than ¥150 million ($24.17 million) in their county. A report on CCTV in April found eight random samples of strawberries in Beijing contained excessive amounts of the carcinogenic herbicide Acetochlor. Subsequent tests from Beijing agricultural authorities found no traces of the herbicide, however strawberry sales have not yet recovered.
As Chinese Tourists Spread Their Wings, the Benefits Fall to All: French officials went the extra mile to tempt a Chinese billionaire to bring 6,400 of his employees to visit. The Louvre museum was closed for them to have a private tour, and luxury department store Galeries Lafayette shut for a morning so that they could shop uninterrupted. The French also helped with travel arrangements such as booking 140 four and five star hotels in Paris and 79 in Cannes and Monaco.
Health & Beauty
China’s Vitamin Market Harder to Crack for Western Companies: China’s market for vitamins and supplements almost doubled between 2008 and 2014 to ¥101.7 billion ($16.4 billion), with 49.8% of consumers regularly buying them. While Pfizer’s Centrum brand is the most popular in Tier 1 cities, Amway’s Nutrilite tops the Tier 2 and 3 cities. Local brands such as By-Health are catching up thanks to high profile marketing campaigns and expansive distribution networks. Revisions to China’s food safety laws on October 1 should simplify the approval process for new health and wellness products, opening up more competition.
Investment & Migration
Chinese Prefer Fiji to Australia for Expensive Property: Although Australia is the second most popular destination for Chinese second home buyers, it doesn’t feature in the top-10 list of highest average prices according to Juwai. The average price Chinese paid for an Australian property was US$444,000 versus the overall average Australian house price of $358,000. Saint Kitts and Nevis in the Caribbean has the highest average of $9.7 million. Indonesia, Monaco, Saint Barts, Fiji and Jamaica were also in the top-10.
The potential of China’s wine market has lured wine brands from almost every wine growing region in the world. Chinese consumers now drink more red wine than in any other country in the world, and per capita consumption is one the rise. One of the interesting trends for wine purchasing in China is the rise of online customers. Although wine accounts for just 5% of total alcohol sales in China, it makes up 34% of alcohol sold online. And unlike physical retail sales, where around four domestic wines are sold for every import, 84% of wines sold online are imported.
Unfortunately, it isn’t just a case of opening an online store and buyers will come. There are more than 170,000 wine products available just on Tmall and Taobao, so it helps to have insights into the market to compete. Hopefully you’ll find a few in the infograph below.
Contact China Skinny to see how we can help you reach and resonate with wine consumers, and create brand champions.