China Skinny attended the debut of ITB China, the latest B2B trade show specifically for the Chinese Travel Market. Growing on the success of the travel industry’s largest trade show ITB Berlin as well as ITB Singapore, ITB China looked to service growing demand for the world’s most important tourism market with its inaugural year in Shanghai. Below are our takeaways among the Chinese travel market.
Strength of Europe
With the inaugural year celebrating Europe as the first partner destination of ITB China, European presence at the event was strong. Approximately 40% of the exhibitors were from Europe, 10% from the Middle East and 10% from the Americas. Germany, Austria, Portugal, Turkey and Ukraine were among participants that were not only marketing their country but also the unique regions within each. This reflects the move towards Chinese travellers going further afield than the regular hot spots. These efforts are likely to support the EU-China Tourism Year in 2018, which is expected to bring more focus and Chinese visitors to various destinations throughout Europe.
Finland made a good showing, with the Finnish participants celebrating 100 years of independence. Attendees were suggested to “Party like a Finn” at the evening affair organized by Visit Finland, Finavia, and Finnair. And no Finnish party is complete without Old St. Nick in the house which provided the all important opportunity for attendees to take selfies and spread the word on China’s social networks.
Middle Eastern Might
Europe wasn’t the only locale making their destinations known. The presence among Middle Eastern countries reflects the efforts by specific countries and the growing interest of the destination among Chinese tourists. In 2016 Abu Dhabi received over 226,000 Chinese travellers and have plans to attract 600,000 by 2021, a 265% increase. Dubai received 83% more Chinese tourists in 2016 compared to 2015 as they started allowing visa on arrival for Chinese tourists in late 2016.
A Small Presence from the Americas
The Americas presence was smaller than expected, but had reps from places such as Los Angeles, Las Vegas, Georgia, Bolivia, the Dominican Republic and Argentina present. The small presence among U.S. destinations was surprising as the U.S. saw a record number of 2.6 million Chinese visitors in 2015 according to China’s National Tourism Administration.
Along with Las Vegas and L.A., a surprising discovery was the Myrtle Beach contingent, who is looking to attract and accommodate Chinese travellers with tailored itineraries for both FITs and groups.
Clever B2B Activation
A notable aspect was the increased efforts to attract and engage buyers and attendees at the show. Typically trade fairs exhibitors pay a few bucks to minions to translate materials and represent the brand to Chinese speakers. These representatives typically lack the knowledge and skills to fully display a company’s offering. In the past it would be common to approach an exhibitor and receive little more than a name card and brochure. This did happen but not as often. Exhibitors at ITB China were more engaged and interactive, with several using VR in their displays. Notably WeChat was seamlessly incorporated into a handful of brands’ presence with lucky draws and free picture printing. This can be a highly effective engagement strategy, as 83% of WeChat users use the app for work.
It is great to see how destinations are positioning themselves for the Chinese travel market and their initiatives to attract the number of Chinese tourists. Chinese travellers have more options than ever with many new flight connections launched monthly and over 60 regions and countries offering visa-free travel for Chinese. Whilst many travellers are still relatively unsophisticated they are increasingly going further, taking more trips and exhibiting much more sophisticated traits. Like much else, the Chinese travel market is competitive and only going to get more so. With the right branding and approach destinations big and small can participate. Get in touch if China Skinny can assist you in understanding and reaching Chinese travellers.
The act of shopping has spread across different countries in unique ways, and each market has adopted its own local habits, trends, influences and behaviours. China is a country where shopping plays a huge role in daily life, as consumers regard shopping a higher priority in their lives compared to other markets. The graphic below illustrates to what extent shopping shapes Chinese’ lifestyles.
As recently as 2012, most Chinese consumers considered international labels categorically better than local alternatives. KFC was a good example: although consumers knew deep-fried drumsticks weren’t a super-food, they were from an American company so must be safer, and therefore healthier, than Chinese options that could be cooked in gutter oil, with additives like melamine. That perception helped fuel more than two new KFC restaurant openings a day in China that year.
Things took a turn in late 2012 when state media accused a KFC supplier of pumping toxic chemicals into chicken. Subsequent scandals such as meat on the floor and altered expiry dates have shown Chinese consumers that even foreign brands with local supply chains can’t be completely trusted.
This has seen the monumental rise of unadulterated imported food into China. It’s why Carrefour just opened their biggest supermarket in Asia in Beijing, with a strong focus on imported food. It’s why the big ecommerce platforms are putting so much effort behind promoting imported food and cross border commerce, and a large reason why Alibaba just opened offices in France and Germany.
Yet, just as Chinese consumers won’t blindly purchase a foreign brand with supply chains in China, they won’t indiscriminately purchase products just because they appear to be imported. In 2013, a CCTV journalist travelled to New Zealand to find the source of a so-called New Zealand baby formula brand. The address on the can turned out to be a panel beater’s yard in Auckland whose staff had never heard of the dairy company. The exposé further fuelled Chinese consumers’ lack of trust and reinforced their need to do extensive research before making a purchase.
In a related event on Single’s Day this year, Weidendorf milk made headlines for selling out of 250,000 cases within 24 hours. The celebrations were short lived when local media and social networks were ablaze with reports that Weidendorf was not a German brand, and unavailable in German shops. The brand was in fact, owned by a Shanghai company. It turned out that the local company sourced the raw material, manufactured and packaged in Germany, apparently to EU standards, yet many Chinese consumers were still enraged about being misled and didn’t consider it truly German milk.
With more than 600 million Chinese now armed with a smartphone at all times, it is easy for them to do a background check on a brand, and most do. There are typically more than ten online and offline touch points on a Chinese consumer’s journey before they make a purchase, so deception doesn’t go unnoticed for long, and will spread like wildfire on social media. Consumers need more than just a foreign flag or pretty foreign scene on packaging to be convinced of its authenticity. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
Despite slowing GDP growth in China, continued income growth is seeing more Mainlanders reaching the necessary standards of living to engage in travel. In 2012, Mainland China surpassed both Germany and the U.S. to become the largest spenders on international tourism. The United Nations World Tourism Organization released a report on Chinese traveller habits counting more than 83.2 million Chinese citizens travelling abroad, a 395.7% increase since 2002. The following buzzwords will help you understand the changes and massive influx of Chinese travellers, their habits and the latest trends going on in China’s travel market.
Chinese FIT (Free and Independent travellers)
For years, one could only imagine Chinese travellers as red-hat wearing masses following the umbrella adorned with the typical gold stars. The stereotype of Chinese tourists pouring out of packed tour buses is progressively becoming outdated with Chinese travellers becoming more inclined to travel independently and opting for tailor-made itineraries.
A study conducted in 2013 by the Chinese International Travel Monitor (CITM) revealed that around 70% of Chinese travellers abroad are travelling independently. The following are several reasons for this behavioural shift.
First of all, the average age of outbound travellers has steadily declined in the last decade with tourists under 45 years old composing more than 90% of China’s overall outbound travellers. Younger generations perceive group travel as old-fashioned and prefer to organize their trips independently.
Secondly, there has been a cultural shift towards freedom and authenticity while travelling mainly incentivised by social media. China’s obsession with sharing, rating and recommending online has made it possible for travellers to have a larger quantity of information in order to make travel decisions independently. In addition, social media has spread the idea that group travel is something “for dummies”, for first-timers and for 乡下人 (xiangxiaren), namely peasants, thus making it even more unattractive.
The blossoming of online travel websites has played a factor for these independent tourists. Travel websites like Qunar, Ctrip and Kuxun makes it easier to bypass agencies and organise journeys online and independently. Additionally, the easier availability of tourist visas, once only obtainable by joining a travel group, has further paved the way for this shift to happen.
中国生态游－ Chinese eco-tourism
The original definition of eco-tourism is “responsible travel to natural areas that conserves the environment and improves the well-being of local people” but the term has acquired broader connotations in China, including tourism directed to undiscovered natural areas.
Given the fact that China is the world’s largest emitter of CO2 gases and 70% of China’s rivers and lakes are contaminated, Chinese tourists are increasingly developing an interest in eco-tourism, both domestically – in the few unspoiled reserves left – and abroad.
As displayed by a survey conducted by the popular travel platform Agoda, 79% of surveyed Chinese consumers are willing to pay a premium of $5-10 a night more, to stay in a hotel which engages in environmentally responsible practices. The top four characteristics that Chinese travellers value in order to assess the degree of green responsibility of a hotel are: 1) The use of environmentally friendly cleaning products (37.3%); 2) Recycling (36.8%); 3) Environmentally conscious construction and design (36.1%); and 4.Waste reduction (35.7%).
The most popular destinations for eco-tourism are New Zealand, Northern European countries and various countries in Africa (identified by the more adventurous of Chinese travellers). In Africa, eco-lodges have popped up in Tanzania, Kenya and Namibia along with organised eco-safaris to go along with the stay, all targeting Chinese travellers because of their current inclination towards this kind of leisure activity. The typical Chinese client’s age ranges from 30 to 65 years old, with a 40/60% split between male and female. Roughly 60% of them are business professionals, and 40% of them are entrepreneurs.
Given the increased attractiveness of eco-tourism, many Chinese entrepreneurs have heavily invested in green resorts located in remote areas to attract visitors. Eco-tourism spots in Zhejiang province – easily reachable from Shanghai, and spots in Yunnan province are the top-visited at the moment. These resorts feature top-tree wooden villas (ranging from ¥4000-¥5000 ($625-$780 per night), which allow travellers to enjoy eco-luxury escapes from their polluted cities.
China Super Travellers
Chinese super travellers are high-net-worth individuals spending a large portion of their income on travelling every year. Conventionally, spending more than $30,000 per year on travelling earns them this status. Super travellers are mainly resident in 1st tier cities (55%), are 40 years old on average, with a median spending of $58,000 per year on travelling.
The distinctive characteristic of this group of high-end travellers is that they prefer to spend money on customized services (62%) and exotic destinations in order to show they are able to afford offthe well-beaten track and undiscovered locations.
An interesting trend that is happening is the desire to experience the frozen lands at top and bottom of the globe. In 2014, 32% of super travellers chose Artic or Antarctica, with the South Pole being more popular than the North. When interviewed about the “most memorable” travels, 28% of super travellers identify North and South Poles. This type of experience has been valued much more than the typical journey to the US (10% considered it memorable) or to Europe (only 8% considered it memorable).
太空游 － tai kong you – Space tourism
Being a country that is home to more than four million millionaires, China is also full of crazy 富二代, second generation millionaires who would spend astonishing sums in order to be perceived as rich, powerful and exotic. This is another reason why the most bizarre and expensive trends are often registered in China first.
Space travel is a niche market, with commercialisation envisioned by Richard Branson, who decided to pour money into a venture called Virgin Galactic in 2004. Ten years later, The New York Times has described China as the world’s largest market for the incipient space tourism industry.
A survey conducted in 2014 by Hurun, highlighted that around 7% hope to engage in space travel within the next three years. This is a high percentage, given the currently low awareness of this niche market. In December 2014, XCOR Aerospace and Virgin Galactic, both owned by Branson, started pre-selling tickets for the upcoming initial thermosphere journey which will take place in 2016. Sheng Tianxing, a successful tea trader from Zhejiang, paid $100,000 or about a third of his annual income with a single click online for a seat on a rocket that will carry him into space. The long journey will eventually cost him three times as much. Tianxing, who has an extremely appropriate name literally meaning “sky walker”, said that his passion for space began when he watched Neil Armstrong land on the moon. Today many Chinese share this passion, helped by China’s heavy investment in its space programme, contributing to the curiosity and national pride.
Regarding the journey, the shuttle will bring passengers to the lower edge of space thermosphere (110km high). During the flight, passengers will be able to appreciate the space protean beauty, more than 1,000 kilometers of earth’s arc, space sunrise and sunset, and be able to experience a short weightless float. Above all, tourists can see moon craters clearly and the landing point of “Apollo 13”.
Even as the experience is designed for ‘ordinary people’, participants are required to take part in a specialised training that, only if passed, will make them eligible for the trip.
《星星》游 – xing xing you – “Star”-themed tour
Since the end of 2013 China has officially become the largest online video streaming market, with over 433 million viewers in 2014. Thanks to popular online streaming platforms such as iQiYi and Youku, American, British and Korean TV shows have become extremely popular, with the main stars gaining a lot of recognition from the Chinese public.
“Star-themed tours” are a specific type of travel tour particularly popular among young and rich Chinese fans. These tours typically involve visiting the sets of movies or TV series and often include meeting celebrities.
The first mover offering these type of tour trips were places featuring the madly popular South Korean soap opera来自星星的你（My Love from the Star). These tours banked on the craze of fans who religiously followed the hit TV series.
Few markets have experienced changes in the way that China has over the past few decades.
Just 35 years ago, more than four in five Chinese were living in the countryside, typically tending small, family-sized plots with animals and crops. Now around half of the population live in city apartments, surrounded by conveniences that they could have only dreamt of a generation ago, and earning over three times what they would if they still lived rurally. Since 1990, China’s average incomes have grown more than 10-fold, and those extra earnings usually only need to support one child, unlike the large families a few decades earlier.
China’s social changes are almost matched by its market transformation. There were no foreign FMCG brands in China until 1979 when Coca Cola launched in the Middle Kingdom, although it was only allowed to sell to tourists. Nowadays, China has truly become internationalised with products from Italy’s Moleskine stationary, to New Zealand apples, to Belgian beer all vying for China’s lucrative consumers’ wallets. More than 500 new products launch every day on average in China.
How Chinese learn about products and services has also transformed. Until recently, propaganda messages made up the lion’s share of marketing in China. Most consumers learnt about things through the traditional state-run media channels such as radio, newspapers and later, television. Now the average urban Chinese consumer is bombarded by advertising messages across a wide range of mediums, unrivalled in other markets.
China’s 668 million Internet users have become the most rampant users of social media and ecommerce globally, using online channels more than any other medium for research before and after buying things. In addition, over 100 million Chinese travel and study abroad each year, and together with the networks they influence, have created a massive consumer population that is more aware, astute and internationally-minded than ever before.
Such remarkable social, economic and market changes have created a unique consumer class. Their consumer journey and retail market are unlike the West and other Asian markets. But there are also a number of fads, social habits, fashion trends and food that are a result of this dramatic change and China’s unique culture and history. We’ve listed a few to give you a taste of just how different some Chinese consumer trends are. We hope you enjoy this week’s Skinny.
Buzzwords: Unique Chinese Consumer Trends: Those unique fads, social habits, fashion trends and food that all make China a little more interesting.
4 Strategies For Reaching The Chinese Consumer: As consumerism becomes more entrenched in China, companies will have to 1) segment more and more precisely; 2) extend modern trade channels and distribution networks to reach consumers outside the biggest cities; 3) communicate benefits of products that are unfamiliar to consumers; and 4) develop the products and services that are underpinning increases in consumer spending, and which remain relatively scarce in China.
Italy’s Luxury Firms Set Their Sights On China: On the back of a 44.7% increase in net income for the first half of 2015, high end notebook maker Moleskine will open most of its new stores in China in the second semester, a market it describes as “very interesting”.
19,470 Firms Sign Up For Three New FTZs: Three months since free trade pilot zones were launched in Tianjin, Guangdong and Fujian in April, almost 20,000 firms had signed up.
Big Brands Like Michael Jordan Are Still Losing Trademark Battles In China; Here’s How to Win: If you’re planning to launch a legal challenge against a trademark squatter in China, don’t delay, and register your Chinese brand name if you have one.
Internet & Ecommerce
PayPal Aims to Connect More US Merchants with Chinese Consumers: One of two pieces of research by Paypal studied how Chinese consumers learn about products they purchase cross border. Search engines were the most common way, followed by word of mouth and social media. Alibaba has just recruited a former vice chairman at Goldman Sacks to lead its cross border drive. The company has partnered with Kobe Bryant to sell his documentary and products on Tmall.
Apple Loses Top Market Share In China As Xiaomi And Huawei Take Over: After leading for two quarters, Apple has been beaten out of the top spot for market share in China by Xiaomi at 15.9% and Huawei at 15.7%. Apple’s share was estimated at 12.2%.
Food & Beverage
What’s Going Wrong With Chinese Juice?: After accounting for 61% of global juice volume growth between 2009-2014, the volume of juice sales declined last year, with value only slightly growing. A few big safety scandals didn’t help. There has also been an overall shift to healthier beverage options with better ingredients such as fortified/functional juices and reduced sugar juice.
China’s Top Wine And Beer E-Tailer Nabs $80M Funding To Get Everyone Drunk: Jiuxian adds $80 million funding to take its total funding to $225 million since 2011. It comes at a time when China overtook Japan to be the top consumer of Belgium beers in Asia, with imports growing 140% last year and 850% since 2008.
Ctrip Goes On A Round The World Trip: China’s largest online travel agent faces challenges in expanding globally, in addition to more aggressive domestic competitors backed by the big boys such as Tencent and Baidu. 53% of Chinese travelling internationally book on websites or over apps.
Fakes Are Costing Europe’s Fashion Industry 10% Of Its Sales And Thousands Of Jobs: Two thirds of the worlds fakes are said to originate in China, with Chinese counterfeits are estimated to cost European fashion brands €17.5 billion ($19.2 billion) a year and result in 242,000 lost jobs according to OHIM. Italy is the hardest hit, followed by Spain, the UK, Germany and France.
Chinese Consumers Most Satisfied With Their Looks Among Asians: 9.8% of Chinese consumers are completely satisfied with their looks, while 44% are fairly satisfied, making them the most contented among the AsiaPac countries surveyed by GfK.
China’s Once High-Flying Internet Money Market Funds Are Now Barely Better Than Traditional Banks: Interest rates on Internet funds are less than half what they have been since 2013. In early 2014, Chinese International Capital Corp estimated that online money-market funds could soak up 8% of total consumer deposits in three years. Jack Ma’s Yu’ebao, is the market leader with more than $98 billion in assets and 200 million users to date.
Chinese Consumers More Upbeat On Buying Cars: Despite the slowdown of car sales in China, 20.7% of respondents in an MNI Indicator survey said they were planning to buy a car in the next 12 months – the highest rate since the series began in March 2012.
Luxury Consumer Price Index Falls For First Time In Eight Years: Price declines in luxury properties, overseas trips and products drove the overall luxury price index down 1.8% this year according to Hurun. Yachts and private jets witnessed the largest price drops of 10.5%, as a result of foreign exchange differences.
It’s easy to spot grim news about China with a quick scan of the headlines these days. News of plummeting stocks, slowing GDP and sales growth could be interpreted as the end of China’s golden run.
However, there’s been plenty of headlines to smile about in the past week or so. Last Wednesday, Westpac Bank announced the results from their latest monthly consumer sentiment index, which closely monitors consumer confidence in the Mainland. July’s survey was taken at the height of the stock market turmoil, but found consumer confidence was actually 1.9% higher than the previous month. The results reflect just how disconnected China’s stock markets are to the average consumer on Main Street China, who still have plenty of wind in their sails.
Similarly, Nielsen’s Consumer Confidence Index for the second quarter found Chinese consumer’s desire to spend was increasing, with China’s massive consumer base rating the seventh most confident globally.
One of the more interesting pieces of news, was that LVMH sales to Chinese consumers increased 10% globally in the first half of 2015, amid all of the ‘doom and gloom’ of China’s luxury sector downturn. Of particular note was that sales of its iconic ‘monogram’ items – often reported being shunned for being too flashy – were “strong.”
China is a challenging market, but it is also abound with opportunities. It’s where there is a large – and growing – affluent demographic who are prepared to drop $11/litre for safe milk and almost $450/kg for Wagyu Beef at the supermarket. It’s where new opportunities arise every day, such as the anticipated rise in skiing, snow fashion, accessories and mountain culture, as the Government actively promotes winter sports after being awarded the Winter Olympics in 2022. It’s also where brands who adapt their positioning to the constantly changing market, such as BMW, are likely to come out on top. China Skinny can assist with that. We hope you enjoy this week’s Skinny.
Most Chinese Consumers ‘Laughed Off’ Stock Rout: McKay: 6 minute vid: Westpac’s latest consumer sentiment survey taken at the height of the stock market turmoil found consumer confidence rose 1.9% from a month earlier. The results indicate how little impact stock prices have on most mainstream consumers, unlike the housing market which is the key investment most Chinese have.
Global Consumer Sentiment Is Souring, Except Where You’d Expect: China and Europe are two regions showing improving consumer sentiment according to Nielsen’s global survey. Chinese consumers’ desire to spend is growing, especially in the lower-tier cities and in the rural parts of the country, with the seventh highest willingness to spend of the 60 countries surveyed.
What Stock Market Slump? Louis Vuitton Sales Are Thriving Among Chinese Shoppers: Louis Vuitton’s sales were up about 10% among Chinese consumers, who were doing more buying in Japan and Europe, with revenue accelerating over the second quarter.
Internet & Mobile
Chinese Consumers Go Online To Slake Their Thirst For Imported Goods: 26% of Chinese online consumers buy imported goods on foreign sites according to Paypal research. A further 17% plan to in the coming year, with 35% saying they’ll do it more often. They often consolidate their orders to minimize the impact of shipping costs, with the average order for clothing $485, consumer electronics $1,229 and cosmetics $512. USA, Hong Kong and the UK are the top-3 destinations.
WeChat Censorship Report: 1.5% Of Posts Get Censored: University of Toronto’s Citizen Lab tracked 36,000 Official Account posts on WeChat and found 1.48% of accounts were suspended and 1.55% of posts were censored by the system.
You What, Guv? Cortana Gets A Regional Makeover: Microsoft is localising its personal assistant with its Windows 10 launch. Research in China found consumer preference for a personal assistant who sounded like she was smiling, and tracked air pollution data.
Buzzwords: China’s Tech Trends: Making sense of those tech buzzwords we’re increasingly hearing, and their relation to China.
Some Chinese Grandparents Are Making Their Grandkids Fat: Chinese children who are primarily cared for by grandparents are twice as likely to be overweight or obese. Those who had two or more grandparents living with them are 70% more likely to be.
Tourists From China Empty Japanese Pharmacies: “Miracle medicines” made in Japan have been widely discussed online in China. Kobayashi Pharmaceutical sales have grown 5-fold in the last year. Products such as cooling patches for fevers, mosquito bite ointments and other vitamins have all sold out largely due to Chinese tourists.
Food & Beverage
Danone Gives Up China Formula Brand For Larger Mengniu Stake: Danone has sold its local Dumex infant formula, as locally-produced brands struggle to compete with safer imported brands. The market is increasingly challenging, particularly as China’s “mini baby boom” between 2008-2014 has ended because of lower numbers of women of childbearing age, and a decreasing or delayed willingness to have children despite the government’s easing of its one-child policy.
Tmall.com Promotes Same-Day Grocery Delivery in China: Tmall’s supermarket has launched a ¥1 billion ($161 million) online grocery promotional campaign targeted at Beijing users, offering same day delivery in the city. 40% of Chinese consumers have bought food online according to McKinsey.
Thinking Beyond Drinking: Blending Wine Into Chinese Consumers’ Daily Life: Four in five Chinese wine drinkers agree that drinking wine can better reflect their taste compared with other types of alcoholic drinks according to Mintel. Food pairing could be a good way to promote wine, with 91% of drinkers having drunk alcohol while dining out, and nearly three-quarters of out-of-home drinkers agreeing that it is important.
Delta To Buy 3.55% Stake Of China Eastern For $450m: Delta and China Eastern plan to invest in making a seamless experience on the airlines, which share flight codes on 80 routes. The deal comes as China is announced as the second-biggest source of foreign-tourist spending within the US, spending an average of $10,800 each.
How The UK Can Capitalise On The Growing Wealth Of Chinese Consumers: Research found three quarters of Chinese tourists to the UK bought luxury items worth at least £500 in the past year, with 46% planning to spend more next year. Almost half of those surveyed plan to spend 75% or more of their luxury budget in the UK next year, although this isn’t representative of the Chinese traveller overall. Oxford Street was the top destination for Chinese shoppers, with 64% wanting to visit the West End, followed by Bicester Village and Heathrow Airport.
Beijing Wins Winter Olympics Despite Lack of Snow, Human Rights Protections: Beijing will become the first city to ever host both the Summer and Winter Olympic Games, narrowly beating Kazakhstan to host the 2022 Winter Games. It is hoped the games will help promote skiing and other winter sports to hundreds of millions of Chinese consumers.
BMW Revamps China Marketing To Focus Less On Status: BMW will increase spending on online marketing in China and emphasize its technology as part of its efforts to target younger buyers, who care more about a car’s latest features than its emblem as a status symbol.
If you’re looking for a jaw-dropping illustration of China’s growing presence in the world, go no further than the United Nations World Tourism Organisation’s outbound tourism expenditure chart from the world’s largest economies over the past 20 years.
Between 1995-2007, Chinese tourists’ total spending was similar to countries like Italy and Canada. But over the past eight years, China’s growth projectile has been almost vertical relative to the rest of the world, leaving every other country behind. This growth is set to continue for some time yet.
China’s tourism growth is almost matched by the rate of change of the tourists themselves. For example, last year 53% planned or booked their overseas travel online. 80% did this year. Over the same 12-month period, the number researching and booking on a smartphone app grew from 17% to 50% of all travellers according to Hotels.com research. Consequently, the number who phoned or visited a travel agent dropped from 34% to 13%.
Changing traveller habits are being supported by improving experience from suppliers. New visa offices for European countries, 10-year visas from the U.S., and more recently Australia, are some examples of how the whole experience is improving for tourists and enabling them to travel without relying on agents to source visas.
With experiences improving, so are expectations – at an equally swift rate. Tourism destinations and operators who implement Chinese customer-focused initiatives are most likely to have satisfied visitors and best capitalise on Chinese tourism’s growth – China Skinny can help with that. We hope you enjoy this week’s Skinny.
China Retail Sales Up 10.4% In H1: China’s consumption continues to play a bigger role in the economy with retail sales for the first half of 2015 up 10.4% compared to last year – almost 50% higher than the 7% Q2 GDP growth rate. Consumption contributed 51.2% to GDP growth in 2014, three percentage points more than 2013.
Calibrating Chinese Creativity: China as a whole may not be at the cutting edge of technology innovation, but it is now taking a global lead in two areas of innovation: improving consumer products and the business models used to sell them. It is making manufacturing processes cheaper, quicker and better. As a result, Chinese firms now outsell foreign rivals in household appliances, Internet software and consumer electronics, to name a few. Chinese firms are inventing new business models, demonstrated by firms like Tencent who had an average revenue of $16 per user in 2014 – $6 more than Facebook.
How Brands Rode Out Uniqlo’s Sex Tape Scandal On Weibo: China’s latest social media sensation has inspired a slew of brands and users to jump on the bandwagon and produce cheeky content.
The Explosive Growth In Chinese Spending On Tourism, In One Stunning Chart: Look out world, here we come!
Half Of New Asian Hotel Rooms To Rise In China: Not only are Chinese tourists making their mark globally, but also in their own country. 56% of all hotels under construction in the fast growing Asia-Pacific region, are in China. That’s 452 new hotels with 145,167 rooms.
Tech-Savvy Chinese Travellers Use Mobile Devices To Book Half Of All Trips Abroad: Half of all Chinese travellers use smartphone apps to book and plan travel – up from 17% a year ago.
Disney Unveils Tomorrowland for Chinese in $5.5 Billion Park: Shanghai Disney – the largest foreign investment from world’s biggest entertainment company – will be “authentically Disney, distinctly Chinese,” trying to include as much local content as possible to appeal to Chinese consumers and avoid complaints of cultural imperialism that greeted its resort in France.
Internet & Mobile
Third Of Chinese Media Time Is On Mobile: Chinese consumers are expected to spend 3 hours 5 minutes daily on digital media this year – about half overall time spent consuming media. Over two hours will be spent on smartphones and tablets. Daily time on digital media grew 6.8% versus 3% for media overall.
China Mobile Nears 200 Million 4G Subscribers: China Mobile broke through 190 million 4G subscribers in late June. The mobile operator has more than 900,00 4G nodes across China – about 40% of the world’s total. There are close to 700 million 3G and 4G mobile users in China now, allowing richer mobile marketing initiatives.
Food & Beverage
Younger And More Sophisticated Drinkers Mark A New Era For Wine In China: Over 40% of imported wine drinkers in China are now 18-29 year-olds, and they are increasingly moving away from the ‘mainstream’ French or Spanish wines to new regions and styles, according to Wine Intelligence.
Australian Wine Exports To China Rise In Value: Wine exports to China grew 32.1% in the past year, helping pull the country’s overall wine exports to its first growth in value since 2007.
Burberry Sales Growth Sapped By Asian Shoppers’ Shift: Burberry’s Chinese customers globally are growing in all markets except Hong Kong and Macau, which dragged the company’s Asia-Pacific sales into negative growth over the past quarter. About 80% of the Burberry’s sales in Hong Kong come from tourists, most of whom are Chinese.
Survey Says More Chinese Moviegoers Buy Tickets Online; Low Ticket Prices A Win-Win To Consumers: More than half of Chinese movie goers bought tickets online in the first half of the year. Of the $4.77 billion spent on movie tickets in China last year, about $2.2 billion were online transactions.
Self-Protection Investment Exacerbates Air Pollution Exposure Inequality In Urban China: Chinese consumers bought 4.5 million anti-smog products online in 2013, totalling ¥870 million ($143 million). The highest 25% income earners bought 31.9% of masks and 47.9% of air filters sold.
Changing Chinese Habits Help Mazda Outstrip Rivals In Slowing Market: Mazda’s sporty design philosophy has clicked with an emerging class of Chinese drivers, pushing revenue up 17% in the first half of the year, smashing sluggish overall car growth of 1.4%. Mazda’s China-focused features include air-conditioning vents for the backseat and double horns given the heavy usage in the country.
New Balance has done some great work positioning itself as an aspirational, but affordable fashion brand in China. It’s hard to walk a block in China’s hipper urban suburbs without seeing young fashionistas sporting NB shoes. But for those sitting in the Boston HQ, that success would have been slightly tarnished by the recent ruling that New Balance’s Chinese brand name, XīnBǎiLún, was violating a Guangdong businessman’s trademark.
The ¥98 million ($16 million) fine and order to stop using the brand name is another stark reminder of the importance of trademarking in China. Last year, after failing to trademark its Chinese name, Australia’s rock star wine brand Penfolds found itself locked in a legal battle with a trademark squatter, which saw them lose sales of at least 5,000 cases a year and valuable exposure in premium IHG hotels. Even Pfizer was beaten to trademark the most commonly used Chinese name for its Viagra, “WěiGē”.
One of the more interesting examples of brand theft was from California’s In-N-Out Burger, who had no immediate plans to expand to China. Four California-educated law graduates trademarked the chain’s legendary menu items throughout Asia and Europe. Opening their restaurant Caliburger in Shanghai, they promised many of the well-known In-N-Out staples such as Double-Double, Animal Style, and Protein Style burgers and fries, and even an iteration of the iconic palm tree on their branding. Following a confidential settlement – rumoured to involve a significant sum of money – Caliburger changed their burger names and decor.
China has a “first to file” policy for trademarking, meaning little emphasis is placed on the rightful owner of a brand. The cost to trademark in China can be surprisingly inexpensive. Even foreign brands who are unsure if they will ever launch in China, should consider taking the simple steps to register their trademark here.
When China Skinny localises branding for a client, in addition to creating something that resonates and is relevant to the target market, we also ensure that the proposed trademark is available and filed before investing in the brand. In addition to brand trademarks, regional branding for food and beverage can be protected, and even shapes such as Toblerone’s triangle chocolate. Best get onto it if you haven’t already. Go to Page 2 to see this week’s China news and highlights.
The folk in Beijing are working hard to continue to raise the standard of living of Chinese consumers, aiming to transition the economy from low value manufacturing to higher value innovation, service and consumption.
A key component of their success will be creating brands that compete globally through innovation and marketing, rather than just price. Although brands such as Lenovo, Huawei and Haier are making inroads, China still has a long way to go before its brands start to make a real impact, reflected in the 94% of US consumers who couldn’t name a Chinese brand in 2013. Chinese brands’ success in the domestic market is helping to build capital and infrastructure to expand abroad.
Recent news that the official number of foreigners living in Shanghai decreased 2% to 170,000 isn’t helping the cause, and should be concerning for China’s policy makers. Walking around central Shanghai, you could be mistaken for thinking the place was overrun by laowai – in reality they account for about 0.7% of the population. That would be the equivalent of 58,000 non-Brits in London, whereas there are 3 million, including more than 2 million non-Europeans. 36% of people living in New York are born overseas.
Shanghai shouldn’t, and doesn’t, try to replicate everything that New York or London is doing, as it has a host of characteristics that need to be approached differently. But to be a truly global and innovative city, a few more foreigners wouldn’t go astray.
One only needs to look to Silicon Valley for inspiration. A study in 2012 found that 44% of all startups in the high tech capital were founded by at least one immigrant. Migrants/expats are typically hard working, bring a different perspective, and face more and varied daily challenges which drives innovation. We’ve personally found that having a mix of locals and foreigners at China Skinny fuels creativity.
China’s pollution and locals increasingly filling roles that were once done by expats aren’t bolstering China’s multiculturalism. Yet probably the biggest contributor to the falling number of foreigners are regressive visa policies, particularly with the young, who are often the source of the most innovative ideas, and those who are best placed to build positive sentiment about China internationally, which will assist its brands.
Beijing has its concerns about Western ideologies creeping into society. That horse has bolted. But discouraging foreigners, coupled with xenophobic Internet policies will not only throttle innovation and branding, but also suffocate the free flow of ideas that could help build and share their own wonderful culture.
Next Thursday 14 May, China Skinny’s Ann Bierbower will be speaking at the launch event for Shanghai Travel Massive, giving an in depth view of Chinese travellers and sharing lessons from our projects. We’d highly recommend it for readers in Shanghai working in the tourism segment. More info here. Go to Page 2 to see this week’s China news and highlights.
109 million Chinese tourists travelled ‘abroad’ last year – a particularly impressive number given just 31 million did so in 2005. Yet, what many reports don’t highlight is that more than two thirds of those travellers were visiting Hong Kong, Macau and Taiwan.
Nevertheless, those travellers staying close to home are part of the normal tourist life cycle, which sees them whetting their appetites in Greater China and travelling further afield in the future. This is represented in the rising trend of long haul travel such as the 25-30% growth in Chinese tourists expected in the U.S. this year.
Long haul travellers influence their peers in many ways. Chinese consumers are inherently curious, and are interested in learning about other countries. Those who visit exotic locations are often closely followed by family, friends and colleagues back in the Mainland, helped by the 84% of travellers who share their experiences on social media during and after their trip according to Hotels.com research.
Holiday moments shared on social media aren’t just the hotel foyers, trips to the zoo and bungy jumping, but a slew of local experiences and products from food to fashion to fancy apartments. With shopping still accounting for the largest share of Chinese spending abroad, retailers and brands who cater well to Chinese tourists can raise awareness of products back in China.
China’s tourism growth can be mainly attributed to rising affluence, more confident travellers and fewer visa restrictions. This is most noticeable in China’s fast rising tier 2 and 3 cities, especially its lesser-known mega cities. Whereas many of their Tier-1 cousins have had the ability to travel for years, hundreds of millions of potential travellers from lower tier cities are coming on stream for the first time, supported by dozens of airlines flying them direct to foreign locations.
With more and more cities now genuine tourism markets, travel operators are expanding across China. Yet tourist needs vary from region to region, requiring marketing to be targeted and localised to be most effective. China Skinny can assist you with this. We hope you enjoy this week’s Skinny.
China Has Even More Megacities Than You Thought: The UN counts six Chinese cities as ‘megacities’, however a new OECD study calculated 15 cities with more than 10 million people. The bigger city in China, the higher its average GDP per capita, however cities with a population of 1.5-5 million have the fastest growth rates.
China60: Assessing Real Estate Dynamics and Opportunities in China’s 60 Secondary and Tertiary Cities: Infograph summarising JLL’s report on China’s 60 most important Tier 2 and 3 cities. Of the top ten forces for change, five are new to the list this year including: (1) slower, but smarter economic growth; (4) the digital revolution; (5) rising city regions; (6) a new era of city competition; (7) growth of private domestic competition; and (9) anti-corruption measures.
Segway’s Second Chance in China: Segway has a second chance to revolutionise transport after its purchase by Chinese competitor Ninebot, who sees it as a solution to China’s much-needed urban transportation problems. A 2011 UBS study into the average speed of traffic in five Chinese cities found Wuhan’s average speed of 12.7km/h was the only city to exceed Segway’s basic model’s top speed of 12.5km. Beijing was 7.5km/h.
5 Ways Entrepreneurs Get It Wrong With China-Expansion Strategy: Some good basics to remember in China: (1) understand China’s culture and history; (2) Localising strategies from other markets; (3) resolve conflicts effectively; (4) ensure the Chinese Government is a friend; and (5) realise change starts at the top.
Chinese Tourists’ Luxury Spending Soars: The weaker Euro has helped spending by Chinese tourists soar by 122% in March after a 52% rise in February, bringing the increase for the first quarter to 67% according to Global Blue.
Budget Airlines See Booming Business from China: 94% of potential travellers in the Asia Pacific region would consider budget airlines according to Expedia, with the number of budget airline flights growing 9.5% in the past year. Airlines such as TigerAir are expanding to second and third tier cities, where they face less competition and receptive consumers.
IHG Targets Chinese Guests With New Service Initiative: IHG has trained more than 10,000 employees globally to be ready for Chinese tourists, with the programme expected to be rolled out in 250 hotels by the end of 2015.
Internet & Social Media
This Chart Explains Everything You Need to Know About Chinese Internet Censorship: A nice illustration of what trips up the 13%-16% of online content that’s removed in China. Fame has a different price in China.
Daily Reading Time Over 40 Minutes on WeChat in China in 2014: 72.9% of WeChat users read articles shared on WeChat Moments and 67.1% read articles published by WeChat Official Accounts. Of those reading articles, they read twice a day for more than 40 minutes on average each day.
Food & Beverage
China’s Growing Appetite for Luxury Seafood Will Push Up Prices: Rising demand for premium seafood in China is seeing significant increases of aquaculture in countries such as Ireland, Scotland and Norway, and across Africa, Latin America and Australasia. China’s advantages as the world’s largest producer of seafood are diminishing.
Maps That Tell You When It’s Safe to Breathe: China’s three biggest Internet companies, Baidu, Alibaba and Tencent are innovating to attract users to their free mapping tools to draw larger mobile users and the data they provide. Local pollution readings allow users to plot cleaner routes inside about 2,000 commercial buildings, with Baidu Maps experimenting with indoor routes by mapping shopping malls. Real-time traffic patterns and public-transit alerts are available too.
Chinese Consumers Among the Most Environmentally Conscious in the World: 72% of Chinese consumers claim they only buy products which match their values, beliefs and ideals, with 80% feeling that brands and companies have to be environmentally responsible according to GfK. With that in mind, there is no evidence of consumers paying more for an environmentally friendly product like they do for safe or healthy products.
Volkswagen Is No. 1 Brand for China’s Auto Buyers: Volkswagen is the top pick for Chinese consumers considering buying a vehicle, followed by BMW and Buick according to MNI. Price and safety are the most important factors for choosing a car.
Alibaba Makes an Advanced Move in China by Partnering with Shanghai General Motors: Alibaba is spreading its net wider by inking a deal with GM to sell and offer financing for its vehicles through Tmall, and using big data to better target Chinese buyers.
In a country where more than 500 new products launch every day, celebrities can help your brand get noticed in China. They can also give your products credibility, when many other goods go untrusted.
Chinese have long looked to the voice of a few to reinforce their decisions. A little over a generation ago, framed portraits of Chairman Mao hung in many homes where residents studied the leader’s quotations in their Little Red Book. Nowadays, residents look to video downloads and social media accounts of their idols on Xiaomi smartphones.
Chinese tennis star Li Na became the world’s second highest paid female athlete in 2011 after winning just one major tournament, as brands swarmed for the positive association in China. A Yao Ming-led campaign to stop the slaughtering of sharks helped sink demand for shark fin soup 82% in a couple of years. Tasmania’s Lavender Bears became an overnight sensation after celebrity Zhang Xinyu posted pictures on social media, and actress Yao Chen’s endorsement of New Zealand and subsequent wedding there, helped the country become one of the most aspirational destinations for Chinese tourists.
Local celebrities aren’t the only ones with sway in China. Louis Vuitton invested $80 million in a Korean artist management agency last year, given K-Pop’s influence in China. When Kobe Bryant visited China, 15,000 fans were already at the venue seven hours before his scheduled appearance.
David Beckham is another celebrity who is worshipped in China, further fuelled by his Chinese tattoo. So it’s no surprise that he is cashing in, launching a line of Beckham-branded products in China. He has some catching up to do – David Bickham inflatable adult dolls have been selling on Taobao for some time now.
For products without a huge budget to attract A-list celebrity associations, all is not lost. Chinese consumers are becoming more and more sophisticated and will often see through such endorsements, and smarter marketing campaigns will resonate more than those who’ve just thrown a lot of cash at a famous person.
Many of the greatest celebrity endorsement success stories happened over Weibo, spreading like wildfire to the tens of millions. But with consumers sidelining Weibo for the less-viral WeChat, the celeb multiplier-effect has lost some of its mojo.
Whether you use celebrities or not to promote your wares in China, like anything, it will be greatly enhanced with some insights-based tactics and creativity. We hope you enjoy this week’s Skinny.
How David Beckham Plans to Become an Even Bigger Star in China: Beckham-branded products such as sportswear, footwear, casual wear, high-tech and skincare will be available in China this year in partnership with HK-based Global Brands Group. He may be playing catchup, with David ‘Bickham’ blow-up dolls are already being sold on Taobao for ¥480 ($77).
Watch OK Go’s Crazy Commercial for a Chinese Furniture Store: Chinese furniture retailer Red Star Macalline has enlisted Grammy Award winning American alternative rock band OK Go for its latest ad – another high standard commercial to come out of China.
Internet, Social Media & Mobile
Marketers in China Lag Behind Consumer Mobile Adoption: Mobile has completely shifted expectations with consumers now wanting to get anything they need immediately, in context. Chinese consumers average mobile expectation score of 62 is much higher the 39 in U.S. according to Forrester research.
WeChat Tests Out Banner Ads and Promoted App Installs in Article View: Readers of WeChat articles are likely to see more ads, with WeChat testing banner ads on the service with promoters able to select from a list of categories to make their ad relevant.
Food & Beverage
COFCO Adjusts Fine Wine Message to Target ‘Mass Consumers’ at China Food and Drinks Fair: State-owned food and drinks giant COFCO showed 100 ‘accessible, reliable and good value’ ¥80-¥200 ($13-$32) wines from nearly 20 international producers to the China Food and Drinks Fair in Chengdu last week, amid a period of market adjustment.
Paying the Price For Rice: Chinese experts are claiming that local rice is just as good as the Japanese stuff, yet Chinese are prepared to pay up to sixty times as much for the safe, imported alternative. Chinese brought in 160 tons of Japanese rice in 2014, roughly triple the 2013 figure.
Disney in Fruit e-Retail First: Disney has recognised the growing importance of online food and beverage sales in China through its first partnership with an online seller of fresh produce. The company has teamed up with Fruitday to offer Chinese consumers Cinderella-themed oranges online as part of the movie promotions.
Chinese Tourists Shun Package Trips in Favour of Independent Travel: 71% of China’s 109 million outbound tourists travelled independently in 2014, versus 65% in 2013 – an increase of 13 million tourists overall according to Qyer.com. Europe was the ‘favourite’ destination that 29% of independent travellers want to visit, with the U.S. at 10%. Women accounted for 62% of overseas travellers overall last year.
Report from IHG Unveils Scale of China Outbound Opportunity: IHG and Oxford Economics research found 62% of outbound Chinese will be leisure travellers by 2023. Over 85% will be visiting major global cities, accounting for 92.5% of spending. The study forecasts that Hong Kong and Macau will account for almost half of all spending, although they may not have factored in the recent dive in spending in the two regions.
Airlines Unveil New Deals, Services: Five new start-up and low-cost carriers entered China last year with new Boeing planes as more airlines compete for the lucrative Chinese tourist market. Delta is trying to appeal to Chinese needs, becoming the first U.S. airline letting Chinese travellers use Alipay when booking flights on their website.
Alibaba, Other e-Retailers May Foray into Rx Drugs in China: The China Food and Drug Administration could approve Internet sales of prescription drugs by the end of the year breaking Chinese hospital’s virtual monopoly of China’s $149 billion prescription drug market.
Xbox Boasts its Education Function: Xbox has teamed up with education provider New Oriental to develop preschool education products. The tools will help children aged 2-8 learn English in an entertaining way, as many Chinese parents place focus on education in purchases for their children. China’s preschool education market is valued at around ¥100 billion ($16.1 billion) a year.
Alibaba-Affiliated Money Market Fund Yu’ebao Users Hit 185 Million For 2014: 185 million Chinese were using Yu’ebao by the end of 2014, 430% more than 2013. After shrinking last autumn, the fund’s asset base bounced back to grow 200% from a year earlier to ¥579 billion ($93 billion).
China Relaxes Mortgage Rules for Second Home Buyers: To help kick some life into China’s slumping house market, the Government has dropped downpayment levels for general second home buyers to 40% from the current 60 to 70%.
Tesla to Localize Production in China in 3 Years: Tesla Motors plans to localize production and engineering in China as soon as 2017. The company is still committed to China after having excessive stock due to speculators and scalpers misleading the company about “extremely high” demand.
It wasn’t long ago when any Chinese city with a Starbucks was considered Tier 1 or 2. How things have changed. Starbucks will have more than 1,500 outlets in almost 90 cities by the end of this year, with many of the new openings in Tier 3 or lower areas.
Although average disposable incomes in China’s Tier 3 and 4 cities are two thirds of Tier 2 and just over half of Tier 1 cities, a lower cost of living and soaring growth is seeing many ‘small town’ folk get out and spend. 65% of FMCG sales come from Tier 3 or lower cities according to Euromonitor.
Consumers in lower-tier cities aren’t just buying everyday household groceries. Of China’s top-10 cities by per capita GDP, seven are Tier 3 or lower. Four of China’s top-10 cities for disposable income don Tier-4 status and are mostly underserved by premium brands.
Although China’s GDP is expected to slow to 7% this year, it is still on track to be the world’s largest retail market by 2018. Lower tier cities will contribute significantly to the expected 7.9% retail growth in 2018 – almost double North America’s rate and more than five times Western Europe’s according to PWC and the Economist Intelligence Unit. By 2020, 75% of China’s estimated 280 million affluent consumers will call a smaller city home.
Thankfully, many foreign businesses in China are cottoning on to the potential of the less-saturated markets of China’s hinterland. China Skinny has had a sharp increase in projects over the past 12-months working with brands to evaluate and create opportunities in China’s lesser-known cities. We are still surprised how much consumer habits and trends can vary between locations.
You can’t beat feet on the ground in a city for analysis, but it is further enhanced by some of the analytical tools that are now available. One of the great by-products of China’s soaring online and ecommerce habit is that it enables big data to provide valuable and reliable insights into consumer behaviour in different cities. China Skinny can help with that. We hope you enjoy this week’s Skinny.
American-Made Products Sell Big with Chinese Consumers: Chinese consumers’ demand for Western goods has seen a sharp rise in Chinese companies investing in U.S. businesses over the past two years. Agriculture & food, ICT, real estate, energy, pharma & biotech, and auto are the top six sectors, with private firms making the largest investments.
Luxury Discount Malls Bring Gucci Within Reach of More Chinese: There are currently 80 outlet malls across China, and an additional 100 expected to open in the next five years according to CBRE. Many luxury brands are relying on outlet malls to boost China sales following the clampdown on corruption. Value Retail’s Suzhou Village claims their average transaction for fashion and luxury brands exceeds $700, more than those brands make at the Chinese tourist-frequented Value Retail outlet in the UK.
Uber’s Official WeChat Account Blocked in China: Uber’s Official WeChat and a number of local accounts have been temporarily banned for allegedly violating the rule of ‘incentivizing sharing by offering deals or “enticing” users to share things with their friend groups’.
Internet, Social Media & Online Video
WeChat: Half-a-Billion Users and Growing: WeChat’s active users numbered 500 million at the end of 2014. That’s 41% more than a year earlier, although growth slowed over the last two quarters to a steady 6.8%.
China’s Top Video Streaming Site Now Getting 900M Views a Day: 150 million active users watched an average of six videos a day on Youku and Tudou in Q4 2014, with the number of videos viewed tripling over the past 15 months.
Food & Beverage
China’s Demand for Juice Rises: Low Cost and Low Quality is What They’re Drinking: China’s juice consumption grew 34.3% between 2009 and 2014 to 14 litres a year per person, accounting for almost a quarter of global consumption. Unlike in the West, China’s juice market is currently dominated by relatively low-cost, low-fruit concentrate juice drinks according to Euromonitor.
Chinese Drinkers Consume More Alcohol than the Brits and Australians, Says Study: Chinese alcohol consumption per capita almost trebled between 1978 and 2010. A slightly dated, but still interesting, 2010 study found that 42% of men and 71% of women in China 15 years or older didn’t drink alcohol. Of those who did, average consumption was just over three standard drinks a day, more than those in Britain, the U.S., Sweden, Germany, Australia, New Zealand, and many other countries. In related news, the inaugural World Baijiu Day on August 8 looks to be building momentum.
Bacardi Launches Tea-Distilled Liquor in China: Bacardi is launching “Tang,” a China-inspired, light-green alcohol made from green tea leaves costing around ¥1,600 ($260) for a 500ml bottle. Although Bacardi is launching the drink in high end restaurants, its China strategy is to appeal for in-home consumption – where most Chinese consumers drink spirits. China’s spirits and liqueurs sales were $97.3 billion in 2014, up nearly 10% from 2013.
Fly Cathay to Asia from Boston; Budapest-Beijing Flights Return; Visa-Free to Fiji: The Pacific island paradise of Fiji expects to see a bump in last year’s 28,000 Chinese tourists following 30-day visa-free travel between the countries.
Chinese Tourists Push Back Against Rant About Poor Manners: Following a bad experience at a South Korean airport, Thai model Phichitamphon created an online video about Chinese tourists who push and shove, and blamed them for dirty airport toilets. The video has had more than two million views, creating mixed reactions on China’s online video sites and social media.
How a Foreign Entertainment App Captured the Kids Market in China: Brazilian app Playkids cracked China’s top-five grossing apps for kids by licensing local content, understanding the differences, moving fast, and translating and localising content, marketing, channels and culture.
A $250,000 Tour With One Aim: Get Chinese to Buy a Home: Good chart illustrating the soaring growth of Chinese outbound real estate investment, with Australia going from barely a blip in 2012 to the leading destination in 2014. The U.S. was number two, just ahead of the UK. Property brokers like Erik Coffin in Los Angeles are hoping to capitalise on the trend, selling $250,000 villa tours in the US via private jet and Rolls Royce, complete with consultations on plastic surgery, picking the sex of a child and wealth-management.
Why Chinese Tourists Are Wild Over Japanese Drugs (It’s Not Just the Quality): The Chinese Government is looking to lift a cap on drug prices in a bid to stop manufacturers using low-quality ingredients to save on costs. In addition to quality reasons, many consumers are buying drugs abroad as they aren’t approved in China yet. Last year, 501 drugs were approved for sale to consumers by the China Food and Drug Administration, including 70 imported drugs. There were 18,597 on the waiting list.
Why Chanel’s Price Cuts in China Could Boost Its Brand: The falling Euro has seen prices of luxury goods vary as much as 70% between Europe and China. Chanel is addressing this by dropping the prices such as its signature flap bag by $1,300 to $4,800 in Mainland China, while increasing prices in Europe by 20%. They aim to keep prices within 10% globally and minimise China’s gray market online. Tag Heuer, Patek Philippe and Cartier are also lowering prices in China.
Knife-Wielding Watch Thief Robs Cartier Store in Wangfujing: Cartier’s lower prices and the state austerity measures didn’t dampen the enthusiasm of one masked thief from stealing 11 watches in Beijing’s busy Wangfujing. The getaway vehicle: a taxi. Anyone who has sat in a taxi in Beijing traffic should be able to guess his fate.
Success in China can depend on how the Government feels about your industry or brand. At the opening of China’s annual parliamentary meeting in Beijing this month, Premier Li Keqiang outlined the Government’s “Internet Plus” strategy, increasing support for China’s ecommerce industry and its international expansion – if it wasn’t growing fast enough already.
One of the hot topics for ecommerce in China is Cross-border commerce, which grew from 11.9% to 14.8% of China’s total foreign trade last year, and is expected to account for a fifth by 2017 according to iResearch. Alibaba was in the game early with its B2B platform and more recently, Tmall Global for consumers. JD.com is following suit, launching a run of international promotions.
Among the fastest growing categories for cross-border shopping is food and beverage, due to lower prices and concerns about fakes locally. The Dutch postal service cited a 13% increase in milk powder sent to China last quarter, expecting it to rise further following recent publicity about fakes on China’s domestic platforms. Food and beverages are the most-frequently bought goods online – some 34 purchases a year per person versus 22 apparel buys according to a McKinsey survey.
Tmall Global has capitalised on this trend well, courting over 5,000 businesses to its platform last year. It has promised easier access to the massive Chinese market, without the need for a Chinese business license and less hoops to jump through. Organisations such as Australia Post, NZ Post and recently Britain’s Royal Mail and Neteven have launched on the platform to assist small and medium businesses into the market.
Alibaba rarely publishes data about Tmall Global sales, instead promoting a few individual success stories such as Costco’s impressive launch on the platform. In reality, most merchants have performed poorly versus stores on Tmall proper, due to the additional steps for consumers purchasing on Tmall Global, slower delivery times and limited advertising opportunities.
Foreign businesses on Tmall Global may see their fortunes improve with initiatives such as China’s first cross-border ecommerce pilot zone approved for Hangzhou, and as more realise they also need to promote their goods on other mediums such as social media, websites and targeted offline channels to be noticed in the ocean of products sold online in China. Contact China Skinny for help with that. We hope you enjoy this week’s Skinny.
The Three Elements of a Good Brand Story in Asia or Anywhere: Story telling is a key component of communications and should connect with the target market at a deeper, emotional level. Engagement is vital, encouraging the audience to share their experience as everyone relates and connects to stories told by “someone like me”. A universal spirit or theme to break the cultural barrier is vital for businesses with global aspirations.
China Shows its Teeth with P&G Fine Over Crest Advert: The Shanghai Municipal Administration of Industry and Commerce have hit P&G with a ¥6 million ($958,000) fine for false advertising using digitally-altered images to make teeth look whiter. It is the largest penalty of its kind in China.
Chinese Businesses Eye Purchasing Power of LGBT Community: Mainland China’s “Pink Economy” is estimated to be worth $300 billion, with China’s lesbian, gay, bisexual and transgender consumers having above-average brand loyalty for companies they see as friendly. Although homosexuality was decriminalized in 1997, the market is still undeveloped, with companies like Alibaba and gay dating app Blued – with its 15 million users – leading the way.
Male Undergrad Hits the Streets to Sell Sanitary Pads in DRAG: A male student in Sichuan province is getting creative with a frock, cosmetics and high heels to sell sanitary pads to fellow students on campus, making more than ¥10K ($1,600) a month.
Chinese Consumer Rights Show Slams Foreign Firms’ ‘Inferior Cars’: One of the categories where foreign brands’ lead keeps getting bigger in China – automobiles – was featured on CCTV’s annual 315 Gala show as part of World Consumer Rights Day. Mercedes, Volkswagen, Range Rover and Nissan were slammed for poor vehicle quality and after sales service. China’s three mobile operators and WeChat’s confusing AA payment feature were also criticised.
Internet, Social Media & Ecommerce
China Backs Ecommerce Expansion in Win for Alibaba, JD.com: The China Government’s “Internet Plus” strategy will promote cloud computing, online banking, mobile internet and ecommerce, in addition to increasing state investment in the Internet industry.
Ecommerce Giants, Gov’t Create New Markets in China’s Rural Areas: Alibaba estimates China’s rural ecommerce market was worth ¥180 billion ($29 billion) in 2014 and will soar to ¥460 billion ($74 billion) in 2016. The company is not only promoting the benefits of buying online to villagers, but also how to sell their goods such as radishes, cabbages, chestnuts and tickets to tourist sites. Although China’s rural areas have just 19% Internet penetration, 64% of those make purchases online.
Weibo’s CEO Gaofei Wang on Q4 2014 Results: Weibo’s monthly active users grew 36% to 176 million in 2014, with daily active users up 31% to 81 million. 80% of users were on mobile.
WeChat City Services: WeChat’s new City Services tool being tested in Shenzhen, Guangzhou and Foshan allows users to book doctor appointments, view traffic camera feeds, pay power bills, book long distance transport, monitor air quality, pay traffic fines, make police reports and more, all from the app.
Food & Beverage
Guide to Geographic Indications in China: Protecting your region’s brand, such as ‘Champagne’, ‘New Zealand Manuka honey’, ‘Scotch whiskey’ or ‘Parma ham’ is as important in China as anywhere. Registering as a collective or certification trademark under China’s Trademark Law should be a priority, and if resources allow it, registering with the Administration for Quality Supervision Inspection and Quarantine (AQSIQ) will further secure your brand. At the start of 2013, 1,745 trademarks had been registered, although only 42 were foreign. By 2013, just 12 regions were registered with the AQSIQ.
Chinese Tourists Are Headed Your Way With $264 Billion: 174 million Chinese tourists are picked to travel overseas by 2019, spending $264 billion according to Bank of America Merrill Lynch. Travellers aged 15-34 will account for 62% of passengers. Spending from China’s 109 million overseas tourists topped ¥1 trillion ($163 million) last year.
The Colossal Strangeness of China’s Most Excellent Tourist City: “Ordos, a magical land in the just north of China, is a dazzling pearl in the world history and culture,” so the plaque says. In reality, it is a tall claim, but Ordos is a fascinating place to visit as a monument of China’s instant cities and rampant urbanisation.
Chinese Consumers Are More American Than Americans: Retail deliveries of passenger vehicles grew 16% in China in January and February. SUV sales surged 66%.
Why Land Rover Leads Among China’s Second-Tier Luxury Brands: While it’s hard for any luxury automaker to challenge Audi, BMW and Mercedes’ combined 70% share of China’s luxury auto market, Land Rover leads the rest of the pack. It has tapped into soaring demand for SUVs, its locally made models are 22% cheaper than imports, and the exterior styling such as muscular bumpers, clamshell hood, floating roof and the continuous waistline appeals to Chinese buyers.
Affordable Luxury Comes to the Fore in China: 2013 buzzwords defining China’s luxury industry were ‘outlet’, ‘quality’, ‘traditional brands’, etc. In 2014 they became ‘fashion’, ‘style’, ‘value for money’, ‘exclusivity’. 80% of luxury consumers expressed a willingness to buy lesser-known brands in the next three years. Of the ten luxury brands who opened the most new stores last year, four were emerging brands.
It’s upon us. No sooner have the Christmas decorations come down, and the red lanterns, woolly sculptures and giant inflatable sheep have popped up in every corner of China with even more gusto. The excitement is further fuelled by infinite fireworks explosions, gushy television commercials, and the biggest consumer spend-up of the year.
19 February will mark the start of the Year of the Sheep (Yang). Its auspicious placing as the eighth sign in the 12-year cycle counts for little for many superstitious Chinese, who rank the animal lowly versus the luckier Dragon, Tiger, Horse and even next year’s Monkey. Would-be parents often hold back, believing kids born as sheep are destined to be docile followers, rather than leaders. An old Chinese idiom remarks that only one in ten born in the Year of the Sheep will find happiness.
Nevertheless, countless businesses in China have some form of Spring Festival promotion and sheep symbolism. Online shopping platforms, to the NBA Chinese New Year uniforms and TV commercials, and sheep-themed Reebok Pumps are all jumping on the wagon to play their part in commercialising the traditional festival.
The current Year of the Horse (Ma) has been a two horse race between the namesakes – Tencent’s Pony Ma and Alibaba’s Jack Ma, whose companies were rated the two most valuable brands in China in 2014. Some may recall that Tencent was quick out of the starting gates with its hugely successful WeChat Virtual Hongbao campaign, used by more than 8 million people during the week of Spring Festival, fast tracking the adoption of WeChat Payments for millions.
The Virtual Hongbaos are back again this year, yet not without a spat between Tencent’s WeChat and QQ and Alipay, who are not accepting each other’s virtual hongbaos – taking some of the shine out of the holiday tradition. It won’t be the last drama between China’s online giants this year, in what is destined to be another colourful and dynamic year in China’s online sphere.
China Skinny wishes you the happiest of Chinese New Years. If you’re on one of the 2.8 billion trips over the festival period, we hope you travel safe. We’ll be back with the Weekly Skinny in the Year of the Sheep; until then, we hope you enjoy this week’s Skinny.
For Chinese New Year 2015, Brands Are Getting Their Ram/Sheep/Goat On: Another Chinese New Year rolls around with the usual slew of zodiac wares, from sheep-themed Reebok Pumps, to thermoses, to watches and purses.
The Two Worst Lies About Chinese Consumers: Before you put a dragon on your label to sell to the Chinese market, it’s best to note a couple of common myths: 1. You should Sinofy your brand for China; and 2. The Chinese only pay more for “face”.
JLL City Momentum Index 2015: Five of the world’s ten most dynamic cities are in China. Rounding out the top-20 Chinese cities and their global ranking are 3. Beijing; 4. Shenzhen; 5. Shanghai; 8. Wuhan; 10. Chongqing; 19. Tianjin; and 20. Nanjing.
Internet, Mobiles, Social Media & Ecommerce
What WeChat Account Is Best For My Business: A Service or Subscription Account?: WeChat is the most popular social network in China, providing businesses plenty of opportunities to grow brand awareness and engagement with Chinese consumers. What type of account is most suitable for your objectives?
China’s Internet Population Hits 649 Million, 86% on Phones: 557 of China’s 649 million Internet users accessed from a mobile phone in 2014, 57 million more than in 2013 according to the China Internet Network Information Center (CNNIC). Online shoppers increased by 20%, and users of messaging tools’ such as WeChat grew 10%. Online travel and group buying both grew 22.7%, whereas online video users grew just 1.1% and microblog users were down 11%, following a 9% decline in 2013.
Online Retail Spending in China to Exceed $1 Trillion By 2019: Forrester forecasts that online shopping will grow from $307 billion in 2013 to over a trillion by 2019. Mobile sales average growth will be 44.2% a year – more than double the overall growth rate of 19.9%. More categories traditionally sold offline, such as pharmaceuticals and furniture, are moving online, with a wide variety of high-end products, such as fresh food, imported goods, and automobiles increasing in popularity.
The One Barrier China’s Smartphone Companies Can’t Seem to Break: Although Chinese smartphone shoppers are falling over themselves to drop at least ¥5,288 ($847) on an iPhone 6, Chinese brands just can’t break the ¥3,000 ($480) mark.
Apple Commemorates New Year in Its First TV Spot Created Specifically for China: Apple is further reinforcing its increasing focus on the China market by launching its first TV ad specifically for the market, with some nice subtle references to Chinese culture.
Food & Beverage
Bend Baijiu Like Beckham: Diageo Talks Up Chinese Turnaround But Sales Keep Falling: Diageo’s super premium baijiu brand sales growth of 25% were driven by the launch of the lower-priced premium option – Master Distiller’s No.8. The austerity campaign is still hurting Diageo’s scotch sales, dropping 22% last year.
Haagen-Dazs Eyes China’s Coffee Market: Haagen-Daz is hoping to tap into China’s growing taste for coffee by launching its “Rainbow Latte” made with its ice cream and Illy coffee. It plans to open coffee shops to expand beyond its staple of ice cream.
Sentiment Bullish on China’s Hotel Sector: Long held concerns about a glut of China’s hotels are being allayed by the rise in occupancy rates last year, on the back of the rising purchase power of China’s middle class. Beijing’s hotels were 63.6% full in 2014, up from 59.5% in 2012. Shanghai’s 2014 occupancy rate grew to 71% from 66.2% in 2012.
Consumers May Mistake Daffodils for Chinese Vegetable, UK Stores Warned: Another example of how Chinese can view food differently, with a number of Chinese poisoned in the UK from eating daffodils.
China Digital Football Index 2015: Chinese football fans tend to follow a team due to their star players, with Lionel Messi having more online fans than the combined Weibo followers of Spain’s six teams. Manchester United’s Weibo account attracted 11 million new followers over the past 12 months.
76% of China’s Luxury Consumption Happens Overseas: Chinese consumers’ consumption of luxury goods worldwide was $106 billion last year, 4% higher than 2013. Goods bought in Mainland China totalled $25 billion, down 11%, whereas goods bought overseas – 76% of consumption – were up more than 9% to $81 billion.
New-Car Smell? No Thanks, Say Chinese Car Buyers: That sweet scent of new cars – the off-the-factory-floor plastics, glues and leathers – that appeal to many in the West does not have the same attraction for Chinese buyers, and so brands like Lincoln are doing what they can to deodorize them.
Last week in Beijing, free Wifi was rolled out across 12,000 of the city’s buses. It’s great news for the millions of Internet-obsessed commuters in the capital, but also relevant for tourism operators in the West.
Imagine you were a tourist arriving at a hotel in say, Boston or Brisbane, having just come from China where free Wifi is the standard in hotels and even free on bus rides which cost less than 50c. The smiling clerk at the check-in desk tells you that Wifi costs $15 for one hour to $30 for 24 hours. As a value-focused Chinese tourist, your first impression of the hotel may not be great. And once you’ve cooled down, even if you did like the view from your room or the food at the restaurant, you’d be much less likely to share it with your friends given the extortionate cost of doing so. That’s a big opportunity missed.
One of the most powerful way hotels and tourist attractions can promote their services to Chinese is through user advocacy on WeChat and Weibo. 84% of Chinese travelling internationally share the good and bad experiences from their trip on social media. For the under-35s, who account for two-thirds of outbound tourists, 42% consult social media when planning a trip away.
Hotels around the world are upping their game to woo the lucrative Chinese traveller. Slippers and kettles, Chinese TV beamed in, Mandarin speakers and Chinese porridge are important to offer, but that’s where most stop.
As a tourism business, by understanding a Chinese visitor’s journey – from planning to reminiscing, the role online channels play – and how best to utilise them, you can win the hearts and wallets of Chinese tourists, and create an army of authentic marketers for your services. We hope you enjoy this week’s Skinny.
Transparent Brands, Demanding Consumers: 22 min vid: 79% of Chinese consumers view transparency and honesty as important, versus 65% who think price is key, according to Cohn and Wolfe. Chinese consumers are more likely to follow brand issues and news than their Western equivalents, and are much less cynical of those brands. Chinese rate Western brands highly, whereas consumers in other developing markets typically trust local brands more.
Australia and China’s FTA: The Long Game: There has been much celebration in the media about the Australia-China Free Trade Agreement, but it is no panacea. What does it mean for you?
China Just Knocked Off The Range Rover Evoque: Chinese auto maker Land Wind revealed its X7 at the Guangzhou Auto Show – a spitting image off the popular Range Rover Evoque. The X7 is expected to retail for ¥135,000 ($22,000) versus $80-109,000 for the original in China. In other fake news, the Chinese Government is lending its hand to certify authentic Buddhist and Taoist temples due to the proliferation of fake temples and monks trying to pry cash out of tourists.
UK Rolls Out Red Carpet for China’s Tourists: The UK’s Great China Welcome initiative has attracted almost 200 hotels, restaurants, attractions and other hospitality businesses to become “China-ready” since launching this year – we’re surprised more haven’t signed up given it is free. Tourism Great Britain has also just launched a $2.5 million campaign asking Chinese to name 101 British landmarks. Similarly, the USA is wooing Chinese tourists with social media, fried dough fritters and a quiz.
Tourism Australia’s Plan to Whet China’s Appetite: Australia is spending $10 million on a marketing campaign to woo Chinese tourists. Food and beverage is central to the campaign, projected on big screens in subways and shopping malls, with 86 food bloggers, writers and critics coming to Australia. 28% of Chinese consumers who have not visited the country think Australia offers good food, wine, local cuisine and produce, whereas 76% who have visited the country think it has great food and wine, ranking Australia top for culinary experience.
China Online Travel Market Grows to ¥72 Billion in Q3: Between July and September, Chinese travellers spent ¥72.6 billion ($11.8 billion) online buying products such as air tickets, hotels and vacation tours – 20% more than in Q3 2013. Ctrip accounted for 55.9% of the OTA market, followed by eLong at 9.7% and TongCheng 6.3%. Ctrip’s mobile app downloads grew 75% in the last quarter to 350 million.
Internet, eCommerce & Mobile
Four Reasons Why Chinese Consumers Go Online: 98% of Chinese use the Internet to explore new subjects such as brands, products and services. 88% use it to connect with family and friends and 89% to express opinions and be heard (versus 38% in the USA).
How Companies Use Wechat Official Accounts: There are now 5.8 million official WeChat accounts, with ecommerce, catering, finance, auto, real estate and hotels being the top industries.
Consumers Find Delayed Gratification Of Ecommerce More Rewarding: 82% of Chinese consumers are more excited about online purchases than in-store buys.
Food & Beverage
Sprouts and More – China’s Food Unsafety: The latest food scandal to hit China – 20 tonnes of toxic bean sprouts uncovered in Beijing containing poisons that can cause premature puberty, disrupted menstrual cycles and osteoporosis. Similarly, more than three quarters of the rice fields in central Hunan province have been contaminated with excessive levels of heavy metals or chemical waste.
Heinz Opens State-of-the-Art Infant Cereal Factory in China: To coincide with its 30th anniversary of having a presence in China, Heinz is opening its largest infant cereal production plant in the world in Guangdong.
Chinese Demand for Dairy Products Spurs U.S. Exports: U.S. milk exports to China were up 35% in January from a year earlier. Tetra Pak’s analysis found China to be the world’s largest flavoured milk market. UHT makes up 76% of milk sales, with lactose-free products filling an important need given such high levels of lactose intolerance. Most milk in China is sold in single serve packs.
Companies Take Note: Consumers Trust Climate Change Warnings : 82% of Chinese believe that the world’s climate is changing due to human activities – the highest rate of 18 countries surveyed by National Geographic. 53% of Americans agree – the lowest rate in the world.
China’s Rich Want to Send Children Abroad for Education: 80% of China’s wealthy plan to send their children abroad for education according to Hurun. Just 1% of Japanese do. The U.S. and UK are the top spots, with Australia, Canada, Switzerland, New Zealand, Singapore, France and Germany attracting most of the rest.
China Motorists Exceed 300 Million as Cities Struggle: China now has as many drivers as there are people in the U.S. It took just four years to add 100 million new drivers in China, and 35 of its cities now have more than 1 million vehicles.