One month in office and Trump’s practices remain one of the hot topics on Chinese social media. China Skinny have partnered with Findoout to gain insights into how Trump’s presidency is influencing the Chinese consumer market for American brands. While the overall consumer sentiment is declining, some categories profit from the current developments and have increased in interest. We hope you are among the lucky ones.
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.
We often talk about China’s Millennials as the most important consumer group in the world, and the impetus behind China’s consumption-driven growth. Yet, there is a subsection of those Millennials who drive more than half of sales, and an even greater share of foreign products and services: women.
Chinese women assume the role of CFO in most households and have the ultimate say for most purchases.
Although Chinese women do 2.5 times more unpaid care work than men do, China’s one-child families and culture of grandparents caring for children means Chinese women’s careers are usually less impacted by childbearing than they are in other countries.
Chinese women account for 41% of China’s GDP, the highest portion of any region in the world according to McKinsey. They hold a higher percentage of senior management positions than American and European females. Their contribution to household income has jumped from 20% when China opened up in 1979 to 50% in 2013. Although they are under-represented in Beijing’s highest ranks, they are finding success at the highest level in business, with eight of the top-10 richest self made women globally hailing from China. And they have contributed significantly more than men to China’s trophy cabinets for international sports in everything from tennis to football and even rugby.
Females are the primary decision makers in categories where imported brands are traditionally stronger, such as premium food and beverage, health, baby products and luxury goods and services. Two-thirds of Chinese cross-border shoppers on Tmall Global are women. Some have estimated that women travellers accounted for as much as 64% of China’s international tourists in the first half of last year. Even Chinese ladies who drink beer consume a proportionately higher amount of foreign brands than their male counterparts.
Yet, not all of China’s statistics about females are so positive. Last week, Rebecca Kanthor wrote an interesting piece exploring feminism in China, profiling six women and how old habits die hard, particularly in China’s rural and elderly generations.
Like any consumer segment in China, understanding China’s female consumers, where they have come from and their aspirations, will mean the greatest likelihood of resonating with them on their purchase journey. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
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.
Alibaba’s growth has been remarkable over the past few years, cementing its position the central pillar of China’s ecommerce industry. With Tmall and Taobao, Alibaba is successfully furnishing the market needs in China by providing B2C and C2C platforms.
The infograph below illustrates Alibaba’s near-monopoly.
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.
SELFIE, “a photograph that one has taken of oneself, typically one taken with a smartphone or webcam and shared via social media.”
Although not yet included in the Oxford English Dictionary, the word was awarded the dictionary’s International Word of the Year 2013 due to its 17,000% year on year increase in usage. In China, the trend has become part of everyday life.
Selfie – The Eye-catcher
Numerous apps allow users to change their ordinary looks into a fantasy version that is more attractive than in reality. The popularity is immense: the selfie-transformation app BeautyPlus exceeded a million downloads within two days of its release in 2013.The altered pictures reflect the ideal of good looks in China such as whiter skin and rounder eyes, used as profile images or posted on Wechat Moments for friends to admire.
Campaigns and advertisements have utilised selfies for themselves, often with astonishing success. China’s latest trend on Weibo of posting self-portraits showing arm-pit hair aimed to challenge the overall perception of beauty. The campaign went viral on social media, creating buzz and discussions with almost 30 million views and over 20,000 comments on the competition page. Shiseido used the phenomenon for their 2015 New Year’s campaign, releasing 50 self-shot images of Lady Gaga in Japanese newspapers. In China, Lenovo’s ad offers selfie-horoscopes with the scorpion showing its love for a dangerous life by taking a selfie with a flasher.
Selfies have taken the younger generations by storm in Asia, with four of the top ten cities for selfies photographs in the continent. A Times survey named Makati City of the Philippines as the capital of selfies, but measured this by posts on Instragram which is now blocked in China. A search for 自拍 (‘selfie’ in Chinese) on Weibo finds almost 700 million posts, illustrating the tremendous popularity in the Middle Kingdom.
Selfie – The Best-seller
The industry has been doing their best to catch up. China’s DJI’s ready-to-fly photography drones can be purchased from ¥ 5000 ($802), with the latest version allowing pilots to live-stream the footage via smartphone taking selfie-ism to a new level. There are already 20,000 drones in use in China, with the market expected to grow exponentially.
91% of China’s638 million internet users are active social media users. A 2014 survey by Ogilvy and SurveyMonkey revealed that four out of five share content on their profiles, much higher than countries like Korea with 57%. Sharers believe their content makes them appear smart and helps to define their personality. More than one fifth of Chinese netizens also express a feeling of creativity when sharing content on social media.
Selfie – The Threat
Experts have investigated why taking pictures of oneself and publishing on social media has become increasingly popular in the last decade, but the consequences of the phenomenon remain unclear. Social scientists have found that it boosts self-esteem as the pictures are easy to alter to show the best side of a user.
Verging on narcissism, the American Psychiatric Association classified taking selfies as a mental disorder. The disease called “selfitis” can be divided into three levels, from borderline over acute to chronic selfitis where users post selfies more than six times a day. While no cure exists for the disorder, temporary treatment is available. As a response, rumours have spread online that Samsung, Apple and Nokia are removing front-facing-cameras on their smartphones for health reasons.
Whether you call it selfie-ism or selfitis: the habit of taking pictures of oneself is popular and encouraged by the industry and celebrities. Efforts to tune down the trend, such as in the smartphone industry might not have the desired effect as devices like drones can step into the gap, providing an advanced selfie-service. A London college established the class “The art of self portraiture” to master taking selfies . A strategy to increase the currently 19.8% Chinese of a total 425,000 foreign students in the UK? We will remain curious as to what else 2015 may bring.
China Skinny is pleased to announce a partnership with British research and strategy agency CrowdDNA.
The strategic partnership will see the agencies share insights, methodologies and resources to ensure their clients continue to receive cutting edge, cost effective research across China and Europe.
“The partnership with Crowd DNA is a natural fit for China Skinny given our similar values and approach to innovation,” says China Skinny founder Mark Tanner. “China is changing on a scale never seen before and we constantly need to evolve to keep up. The sharing of methodologies and other synergies will ensure that our clients will continue to understand their target markets in China better than anyone.”
China’s transition from an investment-led economy to a consumption-based economy, coupled with the soaring growth of the middle and upper classes has seen China become the most sought-after prize for European businesses expanding globally. China Skinny’s leadership in Chinese consumer research and intelligence will enable CrowdDNA to provide its clients such as Red Bull, IPC Media, Peroni, Channel 4 and Sony Music, compelling insights into China’s complex consumers.
Crowd DNA founder Andy Crysell comments: “We’re impressed with how China Skinny communicate their message and the impact of their work. Overseas research is accounting for close to 50% of our revenue now and, inevitably, China is an area of focus. The partnership with China Skinny bolsters our credibility and integrity in what is a particularly complex market.”
As increasingly confident and resourced Chinese brands look to expand beyond Mainland China, China Skinny is well placed to assist them in understanding the intricacies of the European market through its partnership with CrowdDNA.
China is growing at an exponential rate, both in terms of the middle class population and their purchasing power. However the majority of this growth is coming from China’s lesser known cities. A blanket approach for China isn’t feasible in most cases, so it is important to identify which cities are best to focus your marketing efforts. As the City-Nator illustrates, there’s plenty of cities in China to choose from.
Our friends at Fashionbi have evaluated the buzz on Weibo as a way to pinpoint locations where Chinese consumers love certain brands and their potential for physical store openings. For example, 19.1% of Forever 21’s Weibo page engagement came from Guangdong province, exceeding Beijing’s 13.8% and almost as high as Shanghai’s 19.7%. Forever 21’s only two Mainland China stores are in Beijing and Shanghai, but it appears that there could be enough buzz to look into an increased physical presence to service Guangdong’s large population.
Coach is just another brand where there’s a lot of buzz on Weibo in Tier 2 and Tier 3 cities. In August, 43% of buzz on Coach’s Weibo page came from minor cities, with consumers from cities in Sichuan and Jiangsu being particularly vocal on social media. Just 7% of Coach’s engagement came from Beijing and 15% from Shanghai. There are countless examples of consumers in the lesser known cities creating more buzz than the traditionally targeted markets like Beijing and Shanghai.
As the middle class continues to emerge and grow in China, we will see emerging cities that are buzzing about brands from the Luxury segment to the mass-market segment. Now is a crucial time for brands to understand which locations present the greatest opportunities for expansion in China, and they may not always be where you thought or in places you’ve even heard of.
Any business with a presence in China or thinking about one, should be identifying which cities are best to target. China Skinny and tools such as Fashionbi are a good place to start to better understand consumers’ behavior and gage the potential growth of cities that will provide the most potential growth for your brand. By 2020, 75% of China’s 220 million affluent consumers will be living in China’s ‘smaller’ cities, so it’s a good idea to start planning for them now.
See how your city compares at chinaskinny.com/tools/city-nator.
There’s no shortage of jaw-dropping numbers in China, however it’s the speed those numbers are changing that’s most fascinating. Since Adam first met Eve, the world has never seen changes on the scale that are currently happening in China. In 2000, just 4% of Chinese households were considered middle class. By 2022, three-quarters of China’s urban dwellers, 630 million, are expected to be middle to upper class.
In 1990, China had a total of 5.4 million vehicles on the road. Fast forward 22 years, and 19 million cars and trucks were sold in China in 2012 alone. As recently as 2010, Nokia had a 70% share of China’s smartphone market. In the first six months of 2013, 150 million smartphones sold in China and less than 5% of them were Nokias. Even with all the food scandals, Chinese consumers are eating almost three times more meat than they were in 1990, including 1.7 million pigs a day. But it is urban migration that’s really changing consumer habits. Since 1990, China’s urbanisation rate has more than doubled to 53% and there are now more than 123 Chinese cities with more people than Barcelona.
All the big numbers aside, China is still behind the USA for overall consumer spending. Nevertheless, with a growth rate of 14.3% last year, Chinese consumers are poised to take the top spot by 2018. This is obviously good to know for any business selling in China, but also relevant to consumers everywhere. Chinese consumers will have an increased influence on many of the products and services everyone consumes. We’ve already seen Hollywood blockbusters pampering to Chinese audiences, smartphone manufacturers are now developing big screen devices for Chinese tastes and many tourist spots around the world are now quite China-focused. Because of China’s growing consumer classes, fruit lovers in Arkansas may be paying more for cherries. And that’s just the start of China’s influence everywhere, so it’s best to stay abreast of this ever-changing market.
Below you’ll find a few more of those staggering statistics and growth rates, as well as the usuals. Hopefully the insights will be helpful. Enjoy!
China Will Overtake USA as World’s No. 1 Consumer: China is set to become the world’s largest consumer market in five years according to a new report by Standard & Poor. Retail sales of consumer goods in 2012 grew 14.3% to $3.29 trillion.
Will China’s Little Emperors Become Little Consumers: Balinghou- Chinese born from 1980-1990, are increasing consumption by more than 20% annually. An overview of their characteristics those of other generations.
5 Eye-Popping Numbers Behind China’s Rise : China’s staggering population numbers, consumption of steel, Internet users and car buyers.
Tesco Didn’t Understand Differences Between Chinese and Western Shoppers: Tesco failed to understand the Chinese consumer and how unsuited they are to its so-called secret weapon – the clubcard. Almost all Chinese consumers are in at least one loyalty programme and 63% had loyalty cards from four or more retailers.
China’s Crackdown on Pricing by Foreign Companies is Getting Public Support: Beijing is showing its might across industries from luxury cars, to drugs, to baby formula, which is driving down costs for consumers and slowly helping local brands build cred [paid subscription required].
Internet, Mobile & Social Media
All the Facts and Stats on China’s Web Users: An infograph showing a nice overview of China’s 591 million web users.
236 Million Users Active on WeChat Every Month : WeChat’s active monthly user count now stands at 235.8 million, up 177% in 12-months. With almost 400 million registered users, 100 million are now outside of China. From Vodka companies inviting VIPs to events, to Durex using WeChat’s unique features, WeChat has become an effective marketing tool for businesses in China.
China Emerging as ‘Mobile Only’ in Sharp Contrast to the U.S. Multiscreen Market: 32% of Chinese use their smartphones for web browsing, versus 21% of Americans. Chinese are more likely to forego TV and print media to use their mobile, with 23% using it for at least 3 hours a day. The most popular use is entertainment.
Tablet Users in China Accepting of Ads: 84% of Chinese tablet owners use their devices for watching videos, 50% read online magazines. 39% of them were open to clicking on ads on their tablets, 60% more than ads on their PCs.
Chinese Consumers Leaning Towards Samsung and Local Brands as Apple Loses its Charm: When Chinese consumers were asked which smartphone brands immediately comes to mind, 80.6% thought of Apple and 79.6% thought Samsung. However Samsung is trending up, and Apple is spiralling downwards as the “most anticipated smartphone purchase” and “most used smartphone brand”.
Over Half of Activated Android Devices Installed Wandoujia App Store: The Wandoujia app store has been installed on more than half of Chinese Android smartphones, with almost 200 million users.
Mike Tyson Joins Weibo: But Chinese sardonic sense of humour may be a little over his head.
Food and Beverage
Bottled Water Market Quickly Turning Chinese: Increasingly health conscious Chinese have seen mineral water rise to 42% of China’s soft drink market.
China Beer Market Insights 2013: China’s beer market is seeing an upturn in premium beers. Innovative packaging is also on the up due to environmental concerns, cost-saving initiatives, convenience and novelty elements. Constant investment is required to stay ahead in the market [report for purchase].
China Travel Market Gained Strength in 2012: Long haul trips by Chinese tourists are picked to top 20 million by 2015. Travel agents are still involved with 90% of Chinese long-haul trips, either through bookings (63%) or research (27%).
Auckland Airport Announces Weibo Travel App: From Weibo’s ‘540 million’ registered users, 62 million are travel enthusiasts with 2 million users daily posting 2.6 million posting about overseas travel. Auckland Airport has launched a new Weibo travel app enabling potential visitors to create their travel itineraries and share them with their followers and find travel deals.
Health & Beauty
Practical Advice for Doing Business in China: China’s dietary supplement market is worth ¥135 billion ($22 billion) supported by China’s massive aging population, rising upper middle class, poor external health conditions, and increasing levels of acceptance of western healthcare brands.
Body paint sells homes in China: Chinese property developers are using models giving away gold bars, girls scantily clad in flowers and now ladies with body paint showing floor plans to sell houses.
China Retail Trends Q2 2013: International retailers continue to expand in Shanghai as new projects come on stream, but competition for space in the best spots remains fierce. Supply in Beijing is still tight with pent up demand. Most foreign retailers are focusing on a core 12-15 cities, compared with 30 a few years ago. Developers in smaller cities are giving away space to foreign brands to fill vacancies.
Keanu Reeves Stars in VW Sponsored Chinese Microfilm: Nice creative piece of brand building to win Chinese car-buyers preference: A 16-min short film starring Keanu Reeves, Chinese singer Jing Boran and Hong Kong actor Lam Suet features VW Group’s Bentley, Audi, Lamborghini, Bugati and a Volkswagen Scirocco R.
In China’s Luxury-Auto Market, More-Affordable is in Fashion: Hopefully that can help the slowdown in high-end luxury car sales in China, with Ferrari’s growth down 12.5%, Bentley’s growth slowing 23% and Lamborghini’s growth at zero. A little further down the value chain is faring better: Audi, BMW and Jaguar-Land Rover all have growth in the teens [paid subscription required].
Only 20pc of Chinese Consumers Prefer to Buy Luxuries at Home: 44% of Chinese luxury consumers prefer shopping in HK and Macau while 15% would like to buy in the U.S. 15% prefer Europe, down from 23% last year.
Weird & Wonderful
Lyin’ zoo’s deceitful ways: A whole new class on fakes in China: Henan Zoo passes off a Tibetan Mastiff as a lion, discovered when the ‘lion’ started barking. Next time you’re at the panda enclosure, double check it’s not one of these.
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 email@example.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.
China is a vast and varied land. From the western deserts of Xinjiang, to the factory sprawl of the Pearl River Delta, there are 700 cities with more people than Geneva. That’s a lot of consumers. However, it’s the consumers in Shanghai, Beijing, Guangzhou and Shenzhen and maybe Chengdu, Chongqing, Qingdao, Hangzhou, Suzhou, Wuhan, Dalian and Tianjin who get most of the attention in China. What about the other 98% of cities? By 2020, 75% of affluent Chinese consumers – those with the disposable income and inclination to make discretionary purchases – will hail from smaller Chinese cities that most people reading this will have never heard of.
Even the world’s mega-retailers cannot feasibly build and manage brick & mortar stores in all of those cities. Those consumers in Guiyang in Guizhou Province or Hengshui, Hebei don’t have a Zara shop to try on that summer dress or a GAP store for a new pair of kicks. But thanks to this beautiful thing called the Internet, they can be wearing them within a day or two. eCommerce is turning these cities around, allowing them to buy what they couldn’t before. In the landlocked Xinjiang for example, there’s not a surf shop in sight, but more bikinis are bought per capita on Taobao than any other province. Tier 4 cities spend 50% more of their disposable income on eCommerce than Tier 1 cities spend. On top of that, eCommerce in Tier 3 and 4 cities is growing 50% faster than Tier 1 cities.
China’s eCommerce platforms are just one example of how the Internet is opening up hundreds of millions of new customers to savvy businesses. Websites and social media are the channels most consumers turn to when seeking information about a product, brand or business. Below you’ll find the usual roundup of info that we hope will help you make more informed decisions about marketing in China, not just online, but the other channels as well. Enjoy!
Why Have Flagship Stores In China When Online Sales Are Soaring?: Online retail grew at 55% in 2012, more than 3 times faster than high street retail growth. It accounts for 6% of retail sales, although it’s picked to be 30% within 5 years. Nevertheless, flagship stores will still be a key piece of the marketing pie to build brand and complement other channels such as online retail.
9 Most Popular USA Brands Sold In China: The AsiaPac region is picked to have 2/3rds of the world’s middle class consumers by 2030, with 1 billion of them from China according to Ernst & Young. Today, Chinese consumers are worth $250 billion to American companies, and that figure is picked to soar. The current US brands best taking advantage of the market: (1) GM – 14.7% market share, (2) Apple – 83% of tablets, but not so dominant in the smartphone space; (3) Nike – 12.1%; (4) Starbucks – 61%; (5) Microsoft Windows – 91%; (6) KFC, although it’s taken a hammering lately; (7) Gillette, not that Chinese consumers have the same shaving needs as say Greece; (8) Coke – 16.6%; and (9) Intel 85.2%.
Internet, Mobiles & Social Media
The ‘I’ of the Tiger: Internet Purchasing Holds Ferocious Potential In China: eCommerce is bridging the consumption gap between China’s big and little cities. In Tier 3 & 4 cities, ecommerce grew 60% last year, versus 40% in the largest cities. 36% of Taobao users are from Tier 2 cities, the largest demographic. Apparel is the most popular item online, purchased by 77% of shoppers, due to younger consumers getting more variety and lower prices. 59% also go online to read customer reviews about apparel, 59% compare prices and 58% browse the latest styles. Chinese consumers said they spent an average of ¥2,244 ($355) on clothes a last year, 32% more than in 2011.
Tech Companies Banking On More Smartphone Shopping: Alibaba & Tencent are both investing in Location Based Services smartphone apps to target consumers with advertisements and comparison shopping. An IBM survey found 24% of Chinese consumers look at goods in retail stores, then buy them online afterwards. In the US it’s 7% and the UK, 5%. 45% of those Chinese consumers used a mobile when shopping to compare prices, read reviews or learn more about products. 36% of Chinese shoppers were aware whether a retailer offered a smartphone app, versus 2% globally.
5 Habits That Set Chinese Online Shoppers Apart: What unique traits do Chinese online consumers have? 1) Good price is the top reason Chinese purchase online, in the West it’s convenience; 2) Access to products they can’t buy elsewhere (the top consumer of bikinis per capita on Taobao is the dry, landlocked western province Xinjiang); and 3) Presentation – Chinese consumers almost want a novel to explain products; 4) The homepage in China is about promotions and showing off as much of the stock as possible; 5) Payment systems, where a lack of trust in quality and vendors is more prevalent online in China.
A Field Guide To China’s Online Shoppers: Taobao shopper infographic: Females make up 2/3rds or more of bargain hunters, window shoppers, food buyers, bulk buyers, products from past eras, groceries and trend setters, although double the number of males spend more than 50K RMB a year.
Lenders Look To Tencent’s WeChat App To Cut Customer Service Costs: China Merchants Bank launches a WeChat application to cover basic account queries. More complex tools such as bill payments and sales of wealth management products may be launched by the end of the year. Great for consumers and saves the bank on service fees.
Delaying The Onset Of Aging: Some Chinese consumers are refraining from using the iPhone button, to keep it from looking tatty. They’re going for the ‘Assistive Touch’ on screen alternative. Interesting perspective when considering product design for China.
Health & Beauty
To Estee Lauder, Growth Prospects In China Look Beautiful: Estee Lauder’s future in China is looking pretty solid, with the growth of existing customers and new consumers coming into the business at the same time. The company is investing in Tier 2, 3 and 4 cities. Sales increased 40% in 2012, 2/3rds coming from eCommerce, mostly from cities where Estee Lauder doesn’t have a physical presence.
Food and Beverage
Guangzhou Oysters Contaminated by Cadmium: In this week’s food scandal, it seems Chinese oyster consumers are getting a little more than just an aphrodisiac with the local mollusks.
Good Morning China! Starbucks Will Soon Be Selling Frappuccinos In Your Grocery Stores: Starbucks is widening the net, offering foodstuffs, packaged drinks and coffee beans in grocery stores in addition to the 1,000 planned stores by the end of the year. They’ll be cheaper and covering a lot more locations than prior Starbucks offerings. Starbucks marketing and localization has lead to their highest per-store loyalty with 2,000 members in each store.
International Fast Food Needs A New Mentality To Grow In China: American fast food chains no longer have their exotic appeal and first mover advantage in China – the key to succeeding in the market is getting the right price points, products, locations differentiation and expansion model.
Yum’s China Sales Slump 29% In April On Chicken Safety Concern: April sales in China’s KFC dropped 36% amid bird flu concerns and negative press around pumping chicken with antibiotics – China accounts for 51% of Yum’s global revenue.
South Africa Wine Exports Setting Records On China Demand: South Africa is on track to have its biggest year ever for wine exports. Although shipments the UK and US have fallen in the past 5-years, China has stepped up to fill the gap, increasing consumption of SA wines six-fold over the same period.
Milk Powder Trademarked Abroad Dupes Consumers: A legal loophole in China allows Chinese companies to trademark a brand in the West, then produce in China and label as foreign brand.
Chinese Credit Surge Raises Property Fears: China’s house prices continue to rise with April seeing prices up 4.3% from a year earlier. Surging credit has been blamed for some of the rise with total credit, much of it spent on real estate, up 64.7% from a year ago for the first four months of 2013.
A Structural Comparison Of Conspicuous Consumption In China And The United States – Statistical Modeling, Causal Inference, and Social Science: A brief insight into some research that discovered Chinese consumers care twice as much about beliefs of their peer group than Americans.
Chinese Consumers Shift View On Luxury Goods: More about the shifting view of luxury goods in China – with consumers are putting a lot more emphasis on quality & function, not just the label, with brands focusing increasingly on memorable customer service and exclusive products.
Weird & Wonderful
China Officials Seek Career Shortcut With Feng Shui: China may be governed by Marxist ideology, but ancient mystical beliefs, once banned by the Communist Party, are now a huge industry and on the rise. A 2007 report found 52% of China’s county-level civil servants admitted to believing in divination, face reading, astrology or dream interpretation.
Fake-Condom Factory Busted In Fujian: There’s been fake meat, wine and walnuts lately, but now condoms? Millions of them being sold on taobao for 1RMB (US16c), although they cost a fifth of that to produce in a network of tiny workshops. And people thought their biggest faking concern was the meat on their kebab?
That’s the skinny for the week!
If you’ve missed earlier news or need to learn more, there’s a stack of information about Chinese consumers in prior China Skinny Weeklys 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.
Shanghai, Beijing and China’s other first tier cities probably spring to mind when you’re thinking about opportunities in China. Their consumers have more western tastes, buy more western goods and are generally easier to reach than consumers in China’s ‘smaller’ cities. The megapolies also have better networks, infrastructure and facilities for western businesses. However, China’s smaller cities, most you’ve probably never heard of yet, often hold much more opportunity for western businesses with Chinese aspirations, here’s why:
1. Most Chinese urbanites live in the ‘smaller’cities
Shanghai and Beijing have a combined population of around 44 million people. Not to be sneezed at, but given more than half of China’s 1.34 billion people live in cities, there are about 650 million urbanites living in other Chinese cities. China’s has about 700 cities with more people than Geneva, so there are plenty potential markets.
2. There are more rich consumers in China’s ‘smaller cities’ than the larger cities
The most relevant measure of perspective customers for most western businesses are the affluent consumers. Those earning between $20,000 to $1m a year; enough to have some income left over to make discretionary purchases. There are currently 120 million affluent consumers in China, expected to grow to 280 million by 2020 – 75% whom will live in the ‘smaller’ cities.
3. China’s smaller cities are less competitive
There aren’t many well known businesses who don’t have a presence in China these days, but the most common path into China is through the biggest cities more accustomed to western brands and products. That’s made those cities some of the most competitive markets in the world. Many brands are yet to venture into the smaller cities.
The Seaside city of Qingdao with almost 9 million residents is a potential gold mine for western businesses
4. Consumers in China’s smaller cities generally have lower expectations
With all the brands competing in China’s bigger cities, their consumers realise how valuable they are and are often more assertive than western consumers. Many cities don’t have the big-name western stores, and have lower expectations as consumers. They still work hard for their money and expect value.
5. Most first time buyers in China are in smaller cities
Chinese consumers in first tier cities have been consuming for over a decade now and many of them are not buying product categories for the first time and are more likely to have developed brand preferences. The majority of first time purchasers in China are in the smaller cities and they’re more open to new brands.
6. Selling online is a great way to reach smaller city consumers
Chinese consumers are increasingly buying their wares online, especially in smaller cities where many goods aren’t available in stores in their city. In categories such as luxury and western goods, the portion bought online is much higher in smaller cities than First Tier cities. With the high price of well-located retail in China, online sales can be a cost effective way to reach the masses.
If you’re not already targeting China’s smaller cities, you should be thinking about it. A word of caution though, marketing landscapes differ considerably from province to province, even city to city. Make sure you’re aware of this and do you homework in whatever market you’re targeting.
Facts about China’s Smaller Cities’ Consumers
- 700 cities in China have more people than Geneva
- 120 million Chinese consumers currently earn $20,000-$1m a year
- 280 million Chinese consumers will earn $20,000-$1m a year by 2020, 75% living in smaller cities
- The portion of luxury and western products bought online is higher in smaller cities than First Tier cities
The China Internet Network Information Center published a report last month outlining how Chinese consumers search on Sina Weibo.
Unsurprisingly, hot trending news is the most popular topic, looked up by 70.4% of all Weibo users who search. Thankfully, finding friends is more common than celebrities as many Weibo users now use the network to connect with their nearest and dearest.
The most relevant statistic for businesses is the 27.4% of users searching for brand information, and 19.6% searching for factories and producers of goods. This further cements Chinese consumers’ usage of Weibo to find information and opinions about businesses and products.
55% of Chinese Internet users say they’ve contributed to an online discussion about a foreign company. The ease of posting information about a brand or product on Weibo means Chinese consumers trust a brand 95% more if they have seen it on Weibo. Much more than if they’ve seen it on the state-controlled television, newspaper and radio networks. This further emphasizes the importance and relevance of Weibo to anyone selling, or hoping to sell to Chinese consumers.
The Weibo Facts
- 27.4% of Weibo users who search, search for brand information and opinions
- 19.6% of Weibo users who search, search for factories and producers of goods
- 55% of online Chinese claim to have contributed to conversations about foreign brands
- 95% of Chinese consumers trust a brand more if they’ve seen it on Weibo