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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.

trump_effect_infographic

Earlier this month, Marks & Spencer announced that they were closing their remaining ten stores in China. This follows a string of exits from other retailers such as Media Markt, Home Depot, Best Buy, ASOS and the Barbie store.  Tesco and B&Q also recently divested their China operations.   Similarly well known local retailers such as Semir, Meters/bonwe, Feel100%, Baleno, Giordano and even Wanda are closing stores. With each closure comes the predictable commentary about how difficult it is to compete against ecommerce in China.

Ecommerce is proving to be a formidable competitor for many traditional retailers, yet online competition is just one factor leading to the demise of Marks & Spencer and others in China.  A limited understanding of the Chinese market and not adapting quick enough are as much to blame.

M&S was structurally doomed to fail. It had huge stores in locations with sky high rents, but its stores failed to provide a special shopping experience to sway customers from cheaper online alternatives.  It did little to maximise opportunities to integrate with digital channels and consideration for the local market was lacking – even the fashion didn’t fit Chinese body shapes.

While we often hear about the failures of physical stores in China, ecommerce is not without its challenges. Numerous online storefronts in China get few to no sales, and many others are yet to break even. In most cases, it isn’t because ecommerce is a poor channel choice. Many brands don’t fully understand online channels, how Chinese consumers use them and how they fit together with everything else. Just last week, Jack Ma himself said ‘plain’ ecommerce would face huge challenges in China in the near future, and success will require a combination of online, offline, logistics, and data.  His company has been buying up a slew of physical assets for that reason.

The most effective brands in China are integrating bricks & mortar with ecommerce channels – complementing rather than competing with each other.  Many are busily opening stores to increase their physical presence. Sephora has just opened its 200th store in Shanghai, at a similar time Microsoft announced it would triple its retail presence to 400 stores. Xiaomi realised that its pure play ecommerce strategy is no longer enough and are opening 300 new stores in China. Apple is similarly expanding its physical appearance, opening 25 new stores over the past two years. Adidas plans 3,000 new stores by 2020.

As we have seen, just opening stores isn’t the answer. Well considered target cities, locations in those cities, formats, and integrating online experiences are important and are continually shifting. Carrefour recently changed its strategy from large retail stores to a network of smaller convenience stores in China.  Many malls and retailers are integrating more food and beverage and experiences to make themselves destinations.

Chinese consumers’ inherent lack of trust, among other things, means they do significantly more research than their peers overseas before buying. Chinese seek information and inspiration from 7-10 touch points before purchasing the average product.  Real life stores done well, with great service and online integration can provide inspiration like nothing else. Many brands actually treat prime bricks & mortar stores as marketing channels, appreciating that visitors may go on to buy online or when they travel overseas – but they still buy that brand.

Understanding Chinese consumers to determine the right retail experience mix is a good place to start.  Agencies such as China Skinny can assist with that.  Go to Page 2 to see this week’s China news and highlights.

Two or three years ago, it felt like we had at least one article in every weekly Skinny about another food or health disgrace in China. Although the scandals don’t reach the headlines as frequently these days, Chinese consumers are no less trusting of food & beverages and health products that touch the local supply chain.

Chinese consumers’ lack of faith wasn’t helped by a string of exposés in recent weeks including 17,000 tins of counterfeit baby milk formula, a popular herbal supplement maker banned for excessive levels of arsenic and the infamous vaccine scandal; all of which spread like wildfire on WeChat and Weibo and have consumers taking extreme measures to avoid local products, again.

The scandals will further reinforce the allure of safer foreign products – particularly those bought directly from an overseas source through channels such as cross border commerce.  This will help lessen the impact of last week’s new cross border taxes and other discouraging policy, although some pundits are predicting that the scandals could lead to further tightening of ecommerce and cross border regulations.

The uncovering of the poisonous herbal supplements, fake vaccines and infant formula come at a time when China needs all the genuine help it can get to be healthy.  Aside from the obvious air, water and soil pollution contributing to soaring cancer and obesity rates, many of China’s health issues are somewhat self-inflicted.  With 23.8% of Chinese adults physically inactive, coupled with unhealthy diets, Chinese diabetes rates grew almost ten-fold in a generation.  Amazingly, China now has a higher diabetes rate than the US – the land famous for fast food drive-thrus, corn syrup and bottomless buckets of Coke.

Although Chinese across all segments are increasingly turning to healthier foods and demand for healthy lifestyle products and services is soaring, the global fast food giants are still backing continued growth in their fare.  McDonalds is planning to add 1,300 new stores in China, and Yum! Brands’ Taco Bell will be bringing more cheap, processed TexMex to the Middle Kingdom.  With a market the size of China, there’s room for most things.

On a healthier note, China Skinny’s Mark Tanner will be in Melbourne on April 28 chairing the China Digital Conference. Mark will be joined by an excellent line up of speakers providing actionable take-aways about how to best utilise integrated digital channels to win in China.  More information here.  Go to Page 2 to see this week’s China news and highlights.

The impact of the spectacular rise and fall of China’s stocks is anyone’s guess.  It would appear that China is imploding if you read some news reports – stories of a weaking China attracts readers in some countries.  Discuss it with Chinese consumers buying food for their kids in high end supermarkets, and they will shrug it off, unphased; China has made it through bigger economic challenges.

Of course some consumers will be feeling less confident, but it is unlikely to have the same impact on consumer spending as a crash would in markets like America.  In January this year, following a 122% rise in the Shanghai Composite Index over 12-months, retail sales grew at their slowest rate in five years.  At the time, just 6% of Chinese households owned stocks versus 55% of Americans.  The latest spike would have drawn a few more in with Beijing’s encouragement, but as a whole, fewer Chinese consumers gamble on stocks – China’s reputation for being conservative with their high savings is well deserved.  Although consumer investors make up a large portion of the owners of China’s stocks, their share of the overall market value is estimated to be 5% or less.

China needs healthy capital markets to finance the ongoing development of its economy, and will need a different approach to what we have seen recently.  Nevertheless, the biggest impact on consumption growth in both the US and China is wage growth, which has been rising faster than GDP in China.  IMF is keeping its pre-crash China GDP forecasts from April, as it believes China’s stock exchanges are so disconnected to the wider economy, and are small relative to the overall economy

The rate of growth across many categories is slowing in China, but that was happening before the market meltdown.  We expect Chinese consumers, particularly those born post-80s and 90s, will carry on in the consumer groove.  Consumption will continue increasing in areas such as premium food and beverage, tourism and experiences, health and wellbeing, affordable and some niche fashion, overseas investments and anything to do with the precious only child – food, clothing and education – just look at the 50% growth that Lego has experienced in China over the past two years, despite counterfeits costing a quarter of the price.  

China’s affluent and middle class base will continue to grow -an extra million USD millionaires came on board in China last year, despite the reports of doom and gloom.  One loser will be state media who have been cheerleading the stock market, further eroding trust in traditional media and driving even more consumers to objective digital channels.  We hope you enjoy this week’s Skinny.

Consumers,  Chinese Consumers


The Chinese Stock Market and the Chinese Economy Have Literally Nothing To Do With Each Other“We don’t see it as a major macroeconomic issue,” said IMF’s research chief Olivier Blanchard referring to China’s recent market meltdown, citing many examples of the disconnect between China’s stocks and its wider economy. Despite the recent drop, Shanghai stocks are still up more than 80% over the past year, and the Chinese stock market is small compared to the overall economy, the world’s second biggest.

Landmark Trademark Victory for Menswear Designer Michael Bastian in ChinaA trademark squatter has lost its ability to use the Michael Bastian brand that it registered in China.  It is the first time a trademark registration application has been rejected in China in favour of a non-Chinese individual or entity. Nice work Foley & Lardner!

Megalopolis: the Future of Urban Planning in ChinaA massive new economic area encompassing 100 million people living Beijing, Tianjin and the province of Hebei is likely to become a model for China’s future urbanisation. One joint plan will cover economic and social development; urban and rural planning; and land use for the area larger than Uruguay, with a population roughly the size of Japan.

Uber Said to Seek Up to $1 Billion Funds for China CarveoutUber has been claiming a $7 to $8 billion valuation for its Chinese unit, which has been marred by police shutdowns and volatile regulations. Investments from local, Beijing-connected firms such as Baidu will help their cause.

Foreign Brands Losing Lustre in ChinaLocal FMCG brands gained more ground than foreign brands last year, with local market share growth strongest in skincare, fabric softener, colour cosmetics and infant formula, juice and biscuits. Foreign brands increased their share in the toilet tissue, beer, chewing gum, hair conditioner and chocolate segments.

Precious Little Emperors


Lego Builds on Strong Success in China as Playful Children Discover Their Creative Side: Lego’s Mainland sales have surged more than 50% over the past two years as parents recognise that playing with interlocking plastic bricks boosts inventiveness.

Online: Internet, eCommerce & Mobile


A Significant Group of Consumers is Ditching Android for the iPhone53% of Chinese who own an iPhone switched from an Android according to a CLSA survey. 32% of Android users who plan to buy a new phone in the next 12 months will switch to the iPhone.  This is representative of Chinese consumers upgrading their products across a number of categories. It comes at a time when Android-based Samsung is facing more bad news in China, with lawsuits for loading its mobiles with unneeded and unwanted apps.

Chinese E-Commerce Loophole Set to CloseMany Western companies have been avoiding strict Chinese consumer laws, such as the requirements for animal testing, by selling to consumers for “personal use” directly via e-commerce. This loophole is likely to be closed by the Chinese Government.

Premium Food & Beverage


McDonald’s, KFC Go High-Tech In China With Customization, E-PaymentsKFC is hoping to resonate more with China’s lucrative youth segment by accepting Alipay, rolling out Wifi and launching a menu app. Likewise, McDonald’s is piloting its “Create Your Taste” burger customisation in three Shanghai stores.

Top Chinese Wines Have Gone From Bad to Good. Will They Become Great?China now has more acres of vineyards than France. Locally grown wines are getting more impressive too.

Xu Jinglei Being Sued for Making False Health Claims About CookiesActress and director Xu Jinglei is being sued for endorsing “river monkey mushroom stomach cookies,” claiming they are good for the stomach, when they are no different from other cookies.

JD.com’s Richard Liu Buys Into Australia’s Biggest Milk Processor Murray GoulburnJD.com snapped up 4.6% of Australia’s dairy cooperative trust for A$20 million, not long after launching an “Australian Mall” on the platform while CEO Richard Liu was in Australia.

Overseas Chinese Tourists


U.S. Tops Chinese Tourists’ Satisfaction List in Q2Chinese travellers are most satisfied in the United States – 3.1 points higher than the average rating of 77.86 for 24 countries, according to a China Tourism Academy survey. Singapore topped Asia, with Mongolia and India reaching record highs. Complaints mainly focused on public services and travel agency services, such as a lack of Chinese translations of public information and poor transportation.

Clothes and Fashion


Opportunities for Growth In Challenging China MarketChinese consumers expect to spend more on children’s clothing, women’s casual, shoes, men’s casual and health, beauty & accessories over the next 90 days according to analysis by Prosper China.

Beauty Health


Have Chinese Consumers Started to Look Beyond Beauty Products?By 2013, only 5 million Chinese women had some form of cosmetic surgery. By the end of this year, an estimated 7 million will have, and 11 million by 2018. 15% of Chinese women are considering using plastic surgery for anti-aging, with the highest rates in Tier 1 & 2 cities.

Premium &: Luxury


Eight Surprising Facts About The Chinese Luxury ConsumerEight characteristics about Chinese luxury consumers: 1. They’re younger than you think; 2. They’re not as well off as you’d expect; 3. Most are married and have children; 4. They’re mobile natives; 5. They all have WeChat; 6. They prefer Chinese brand names; 7. They like to shop at retail; and 8. Alipay is an important method of purchase.

That’s the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.

A Chinese consumer’s purchase journey is like no other.  It begins online for most, with 85% using search engines, brand websites, or social media as their first step for researching a new product or purchase, according to a PWC survey.

Whilst online research is not unique to Chinese consumers, the way they do it is. For a start, they are less trusting of products and services, and investigate more, across a wider range of online channels before making a decision.

Globally, 56% use a search engine as their first port of call for doing research, whereas just 33% do in China. When Chinese search, it isn’t just on Baidu as it is on Google elsewhere.  Consumers are more likely to research products on ecommerce platforms like Taobao, particularly when they are getting closer to making a purchase decision.

Food and beverage is one illustration of Chinese search habits.  For example, consumers do twice as many searches for wine on Taobao/Tmall than on Baidu.  And wine is a product most consumers still require further education about.  Products such as packaged snack food – which consumers are more familiar with – often account for ten times more searches on Taobao/Tmall than on Baidu.

32% of Chinese will go directly to a brand’s website – much higher than the 19% globally, and almost as many as those who will use a search engine initially.

When we talk about online research in China, it’s a good idea to be thinking about mobiles.  Wherever Chinese are thinking about making a purchase – in a store or online – they will always have their smartphones with them, so it is important to factor this in to customer touchpoints.

PWC’s findings are polarising: 85% are online for their first step of research, whereas just 11% of retail sales happen over the Internet.  This signals a disconnect in the customer journey and represents an opportunity to further integrate online and offline channels to better tailor to consumer preferences.  China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.

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.

Consumers,: Chinese Consumers


How David Beckham Plans to Become an Even Bigger Star in ChinaBeckham-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 StoreChinese 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.

Online: Internet, Social Media & Mobile


Marketers in China Lag Behind Consumer Mobile AdoptionMobile 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 ViewReaders 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.

Premium Food & Beverage


COFCO Adjusts Fine Wine Message to Target ‘Mass Consumers’ at China Food and Drinks FairState-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 RiceChinese 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 FirstDisney 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.

Overseas Chinese Tourists


Chinese Tourists Shun Package Trips in Favour of Independent Travel71% 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 OpportunityIHG 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, ServicesFive 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.

Beauty Health


Alibaba, Other e-Retailers May Foray into Rx Drugs in ChinaThe 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.

Schooling and Education


Xbox Boasts its Education FunctionXbox 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.

Banking and Investments


Alibaba-Affiliated Money Market Fund Yu’ebao Users Hit 185 Million For 2014185 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 BuyersTo 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%.

Cars &: Auto


Tesla to Localize Production in China in 3 YearsTesla 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.

That’s the Skinny for the week! See previous newsletters hereContact China Skinny for marketing, research and digital advice and implementation.

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.

Consumers,: Chinese Consumers


The Three Elements of a Good Brand Story in Asia or AnywhereStory 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 AdvertThe 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 CommunityMainland 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 DRAGA 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. 

Online: Internet, Social Media & Ecommerce


China Backs Ecommerce Expansion in Win for Alibaba, JD.comThe 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 AreasAlibaba 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 ResultsWeibo’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 ServicesWeChat’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.

Premium Food & Beverage


Guide to Geographic Indications in ChinaProtecting 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.

Overseas Chinese Tourists


Chinese Tourists Are Headed Your Way With $264 Billion174 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.

Cars &: Auto


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 BrandsWhile 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.

Premium &: Luxury


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.

That’s the Skinny for the week! See previous newsletters hereContact China Skinny for marketing, research and digital advice and implementation.

China Skinny wishes you a happy 2015; we hope you saw it in with a bang!  The beginning of the year is often a time to plan ahead for the following 12-months. Whether you are already in China, or entering this year, here are a few points to keep in mind:

1. Strive to Understand Chinese Consumers

Understand who your consumers are. Where do they shop? What will catch their attention? How have businesses been successful with similar products and target markets? In addition to the answers to these questions, understand that Chinese consumers are becoming more sophisticated and diverse each day. Just because a foreign business is present in China does not mean they will succeed, especially with the growing competition – not only from foreign brands but also from homegrown brands

2. Be Bold

Entering China with an online-only strategy has worked nicely for some but it is not going to work for everyone, especially those with low to moderate brand recognition. How are you going to make a splash and get noticed? Chinese consumers are not limited in their options as more imported goods and services attempt to attract their wallets. How will you stand out? Not every organisation or company may have the means to open a store, but how about a pop-up store? Or can you join a road show to exhibit your goods? Combining offline efforts with digital efforts is one way to smartly and efficiently capitalise on opportunities in China. There are ways to make a buzz beyond store openings, one just has to be smart about it.

3. Venture Out

First and second tier cities are fun and exciting, with their bright lights and big malls, but they’re becoming very crowded. Is there a place for your goods or services outside of the major cities – the most landlocked province in China was the number one seller of bikinis online per capita!  Provinces in China differ enormously so trying to tackle a population as large as China’s with a single countrywide strategy can be difficult, if not impossible. Geographical differentiation needs to be taken into account and regional strategies should to be considered to maximise available opportunities and provide consumers with relevant products, services and messaging.

4. Be Committed and Flexible

China changes fast. Entering China and getting setting up is only the first step to tackling China. To succeed in China you must not only be committed but also informed on the constant changes that happen in China. A long-term strategy that is flexible is fundamental when entering China. 

5. Keep it Real!

Stay true to your brand. In a low-trust society such as China it is vital to stick to your foundation. Attempting to change your brand to satisfy someone’s notion of what appeals to Chinese shoppers often backfires in the medium term. Understand your market, the available opportunities, and how your products or services best fit into that market. There are ways to localise and appeal to Chinese consumers while still remaining true to your brand. Presenting your brand as authentic and retaining your roots while taking a China-fied approach has a more sustainable chance of success than changing your brand’s identity.

 

China isn’t easy by any measure, but keeping these five points in mind will ensure your business is well placed to maximise the opportunities that China presents. All the best for 2015 in China!

 

Last December many applauded the Chinese Government’s liberalisation of its one-child policy, which allowed most families in China to have two children for the first time in 35 years. As a result, we have seen many businesses ramp up their forecasts and investments to cater for the anticipated boom – Shanghai’s Disneyland development, which added $800 million to its budget, was one of them.

China’s 1.04 birth rate in 2011 was less than half of the 2.10 rate needed to maintain the country’s population. Conservative analysts predicted the new policy would raise the birth rates to 1.8 per mother, or 19 million births every 12-months, with one of the more bullish commentators predicting a rabbit-style explosion of 48 million babies a year.

It’s been eight months since the changes were announced, and Chinese parents don’t appear to be rushing to their bedrooms.  Although some research suggests 60% of Chinese parents would like to have a second child, a Weibo survey last November found that 52% of parents said the “economic pressure” of a second child would be too much.

The limited extra breeding is no surprise. Chinese parents invest heavily in their treasured offspring, with some spending as much as 30% of their annual incomes to educate their child.  Add another to the mix, and there’s not a lot of money left to pay for the cars, home appliances, designer clothing and overseas holidays that urban Chinese are increasingly aspiring to. There is also much less societal pressure to have more than one child than in other countries.

Milk powder and educational toy companies shouldn’t write off big expansion plans though. The rising affluence of urban Chinese is driving soaring demand for premium goods and services for young ones, whether there are one or two.

It’s probably the Chinese Government who is most concerned, who need more income earners to support the ballooning pensioner population – 484 million in 2012, up 50.9% from 2007, and rising.  But it’s early days and they still have plenty of tools in their belt, from legislation and incentives, to their far-reaching media channels to sway parents.

On the subject of baby and maternity consumer trends, China Skinny’s Sophie Lees will be presenting about China’s Little Treasures on 23 July in Shanghai. For Austcham members in the industry, it will be well worth attending.  More info here.  We hope you enjoy this week’s Skinny.

Precious Little Emperors

Hard Choices for Family Planners and ParentsWith the loosening of China’s one-child policy, unexpected challenges are emerging. Eligible parents haven’t jumped into bed and bred at the rate expected and slow implementation of the law by some local governments has caused issues for parents who had a second child after the national-level decision. Former university lecturer, Cai Zhiqi, who was fired from the South China University of Technology for having too many children, predicts 48 million babies will be born every year.

Consumers,: Chinese Consumers

Here’s What Investors Get Wrong About Chinese ConsumersMany businesses investing in China have a distorted view, thinking of Chinese consumers as one big market and over-relying on retail sales as a measure of consumption. It is also difficult to define China’s middle class.

Dos & Don’ts for Courting Chinese ConsumersWhile big data will provide some assistance, brands that connect emotionally with Chinese consumers will stand out. The key is to understand the landscape, not to innovate by sitting in an office, don’t export your brand – reinvent it, and become an educator.

A U.K. e-Retailer Gets an Education in Selling Online in ChinaUK retailer Asos only launched online in China. The social media campaigns had a 300:1 sales to marketing expenditure return. The company has found that Chinese consumers are much more likely to buy different clothes for different seasons that Europeans, but most Chinese choose one style for all occasions.

Hot Pot to Herbal Tea: Report Names China’s 10 Most Eye-Catching CompaniesBoston Consulting Group has named Chinese companies finding success on their own and becoming formidable challengers to global companies, competing on innovation rather than lower cost.

Online: Internet, eCommerce, Mobile & Social Media

Can WeChat Become A Major Advertising Platform?WeChat is now allowing official verified accounts to place ads at the bottom of corporate pages with more than 100,000 followers. Advertisers can target viewers based on gender, age, location and personal interests.

Overseas Online Shopping: China’s Next ‘Blue Sea’Online shopping from overseas sources through domestic platforms is estimated to top ¥70 billion (US$11.3 billion) this year. In 2012, overseas shopping via Alipay grew 117% versus 64.7% growth for domestic online shopping.

Chinese Consumers Warming Up to Xiaomi, Surpassing Apple on EngagementXiaomi users are 7% more engaged with apps on their smartphones than Apple users. They are also particularly popular with young urban professionals. Even 18 months ago, a lot of Chinese wouldn’t have thought a Chinese brand would rise to that.

Premium Food & Beverage

Quality Still Our Ace in the HoleAlthough Mainland consumer perceptions of Chinese brands on the whole are rising, it will be a long time until premium food and beverage produced in China can match the quality and safety standards of food produced in some Western countries.

Wine Becoming ‘Part of the Lifestyle’ for Chinese Urban WealthyThe number of urban upper middle class consumers drinking imported wine hit 38m in 2014, double that of 2011 according to Wine Intelligence. Those surveyed drank imported wines almost 3 times more often in informal settings, such as at home, than formal occasions such as business dinners. 65% of consumers bought wine at hypermarkets, 62% at wine shops, 52% at department stores and 47% online.  Imports have risen to 30% of the market, from 10% a decade ago, but eCommerce is driving some stiff price competition.

Overall Health

Alibaba Group Fights Fake Drugs with Scannable CodesAlibaba has added the ability check the authenticity of drugs as part of their 2D code strategy. Using the Mobile Taobao or Alipay Wallet app, users can scan a bar code to check the authenticity, origin, usage instructions, ingredients and reasons not to take the drug. WHO estimated the global pharmaceutical counterfeiting industry was worth $75 billion in 2010, of which China was the biggest contributor.

Banking, Property

Real Estate Pros Rank China’s Top Cities for Investment and DevelopmentTier-1 cities came out as the best Chinese cities to invest in property, with Shanghai, Shenzhen, Beijing and Guangzhou taking out the top spots and Nanjing rounding out the top five. Tier-2 cities are being treated with caution.

Premium and Luxury

2 Percent Growth Forecast For China’s Luxury Industry Through 2015Luxury products related to gifting have been hit the hardest following the Government’s clamp down on corruption. Men’s luxury watches, accounting for more than a fifth of the country’s total luxury consumption, saw sales plummet 11% in 2013. There is a shift in focus towards the female categories and fashion.

Kooky, Weird & Wonderful

Shanghai to Look More Like LondonThe Chinese owners of London’s distinctive black cabs have signed a deal to supply 200 cabs for Shanghai streets, with the roll out starting in September. 1,000 cars have already been sold throughout China.

Well, that’s another week!  One of the most productive things you could do this week is contact China Skinny to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

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

For some, Batman is a selfless hero fighting to keep evil from Gotham City.  Yet, according to China’s Communist Party mouthpiece the Global Times, the Caped Crusader is a vehicle for American skulldugery, grouped in with the CIA, an American think tank and pro-democracy NGO, and said to be responsible for the current troubles in Hong Kong.

What really rattled the Global Times’ reporter was the way America “packages its ideology into its cultural products”, which Chinese “unconsciously consume”. This isn’t well aligned to Beijing’s “Chinese Dream” for the development of “comprehensive national power”. In saying that, there is an increasing trend of Hollywood China-fying its blockbusters to further appeal to the world’s second largest movie market.

China restricts the number of foreign movies shown at the cinema to 34 a year.  Those few titles still accounted for 41% of total box office takings in the Mainland last year, down from 52% in 2012.

Yet with foreign restrictions to be lifted in 2017, the powerful China Film Bureau has “declared war” on Hollywood, with strategies such as urging cinemas to lessen screen times of the new Transformers movie.  Even so, the movie opened with a record $90 million on its first weekend in China, and is expected to help push the share of foreign films back over 50% this year.

China’s box office has grown 35% annually since 2003 to ¥21.7 billion ($3.48 billion) in 2013.  Hollywood’s share is nothing to sneeze at, but the real benefit to America, and other Western countries to a degree, is the corresponding soft power which drives sales in China of everything from wine and coffee, to Nike shoes, to overseas vacations.  How the movie industry pans out has a bearing on many of us, so it is something we at China Skinny will be watching with interest.

Go to Page 2 to see this week’s China news and highlights.

China has long been known as the land of fakes. The country was the source of two thirds of fake goods seized globally between 2008 and 2010.  Street-side stalls, shops and entire shopping malls are dedicated to counterfeit bags, garb and DVDs.  Staff in a fake Apple store were fooled into believing that their employer was the real thing.  Rat meat has been sold as beef and lamb.  Even the kids aren’t sacred, with a local zoo in Henan duping visitors with a fake lion.  From the minute Chinese are old enough to consume, they are exposed to a myriad of phoneys.

Having your brand and products ripped off in China is an unfortunate reality of doing business in China.  Even though the China Government is focused on addressing the issue to meet the World Trade Organization mandate, and to protect its own growing innovate and creative companies, China’s vast and disparate supply chains mean it’s a difficult puzzle to solve.

However, not everything is looking grim.  Online shopping, once a breeding grounds for peddlers of fakes, is one of the beacons of hope for fighting the fraudsters.   China’s B2C platforms such as Tmall, JD.com and Yihaodian are the fastest growing eCommerce channels in China, and are close to accounting for half of all online sales.  Much of their growth can be attributed to consumers trusting the platforms to sell genuine and safe products.

Sites such as Tmall only allow registered trademark holders or associated parties to list on their platform.  Vendors pay a sizable deposit which can be used as refunds if goods aren’t what they’re meant to be.  And customer reviews, which are a large factor for consumer perceptions and search results, soon weed out the fraudsters.

Buying goods online is often more reliable than elsewhere in China.  We only need to look to wine as an example; even at a swanky bar in Shanghai, you could drop $100 on a bottle of wine, which could turn out to be fake plonk in a real bottle. On Tmall or Yihaodian, you can be pretty sure it’s the real thing, which has why 47% of wine consumers are expected to buy online by 2020.

Alibaba’s imminent IPO in the USA will bring even more focus to cleaning its platforms of fakes.  Expect to see smaller players like Amazon and Dangdang clamping down on third parties selling fake cosmetics and other wares following CCTV accusations.  Online platforms are working with the authorities to help the cause.  ¥172.9 billion ($27.8 billion) worth of fakes have been seized and 59,000 people have been arrested. The war hasn’t been won yet, but the good guys are winning a lot of battles.

For our readers in Hong Kong and Southern China, China Skinny’s founder Mark Tanner will be sharing valuable insights at the Fashion Access Conference in Hong Kong on 1 April.  It would be great to see you there.  In the meantime, we hope you enjoy this week’s Skinny.

Consumers, Chinese Consumers

Alibaba Shakes Off Counterfeit Label Smoothing Path to U.S. IPO: 18 months after Alibaba was under US scrutiny for supporting counterfeiters, it may now be the biggest IPO in America since 2008. Alibaba has removed 114 million allegedly intellectual-property infringing listings and has teamed up with brand owners and law enforcement to arrest suspects from 51 counterfeit rings. Tmall is now more trusted than some physical retail outlets.

How China (and the Rest of the Emerging Markets) Spend Today: Unlike in Western countries where older people make more, young and educated Chinese have higher incomes and spend more of it. Consumers aged 18-29 earn the most, more than those aged 30-45, and significantly higher than older age groups.

In China, the Customer Experience Is Better Online: Chinese consumers rate online retailers easier, more enjoyable and having better customer service than physical retailers. Four of the top five ranked retailers only sell online.

Chinese Consumers Fastest to Adopt Ultra-High Definition TV: Of the 1.6 million ultra-HD TVs shipped in 2013, China accounted for 84% of them.

Online: Internet, eCommerce, Mobile & Social Media

China Mobile Search Development in 2013: Reading is the most searched category on Baidu mobile, accounting for almost one in five searches. Life service, tool & inquiries, health and education searches rose in 2013, however Chinese sites were of poor quality in these areas.

WeChat Sees Resurgent Growth, Now Has 355 Million Active Users: In December 2013, 355 million WeChat users sent out one or more messages via WeChat or used other features such as logging into Game Centre or updating Moments. Weibo has 129 million active monthly users, although it is hard to compare like with like as it is often used for different purposes.

Premium Food & Beverage

Weetabix Explores ‘Savoury’ Flavours as it Sets Sights on Chinese Consumers: Weetabix is incorporating ingredients such as green tea and sesame seeds, to align with Chinese breakfast habits. Chinese also prefer hot and fast breakfasts.

‘Hedonic Expectations’: How to drive healthy drinks sales in China: The Chinese place more trust in the bigger beverage brands to deliver safe products.  They also link ‘naturalness’ to single-flavour varieties and are increasingly willing to pay more for quality, safety and nutrition.

Why Chinese brands stumble in the West: Some Chinese brands are focusing on data and customer experience in the domestic market which will help them expand globally. Hot pot chain Hai Di Lao ‘delivers happiness’ by creating a fun-loving employee culture and share that enthusiasm with customers.

Milk Flies Off e-Commerce Shelves as Site Sets a New Guiness World Record: 30 container-loads, or 600,000 packets of half-price milk imports sold in less than an hour on Yihaodian to set a new world record. The online grocery store expected it to take a day to break the record. Yihaodian sells 40% of China’s imported milk. In an average week, 5,000 litres of fresh Australian milk is flown from Melbourne to Shanghai and sold at $8/litre. Interestingly, OzDairy was singled out for dodgy use-by date labelling on CCTVs 315 Gala consumer protection show.

Chinese Pay Double for Organic Kale After Food Scandals: An online poll of 3.26 million people by People’s Daily found food and drug safety was the third-biggest concern for ordinary Chinese this year, up from seventh place in 2013. The number of certifications issued to ‘organic products’ more than doubled between 2009 and 2013 in China. Sales of those items reached ¥‎80 billion ($13 billion) at the end of 2012. Sales of packaged organic foods such as honey and cereals jumped 46% in China last year to ¥‎5.94 billion ($1 billion).

Overseas Chinese Tourists

Chinese Travel Willingness Report in 2014: A Ctrip survey found 51% of Chinese want to travel three or more times in 2014. 56% plan to increase travel spending this year. 81% wanted a self guided tour, with a little under half not booking those through travel agencies.

High-End Malls in Southern California Court Shoppers in China: 40 of the wealthiest 100 individuals made their millions in Tier 2 & 3 cities, and shopping malls in popular tourist destinations like LA are increasingly catering for them.

Samsonite Takes the Pulse of Chinese Consumers: Samsonite’s China sales grew from $92 million in 2010 to $192 million in 2013. Although sales increased just 5.3% last year, Samsonite are expecting sales to grow more than 10% this year due to rising wages and soaring tourism numbers. Some Samsonite retailers around the world are offering scales in stores as Chinese consumers like to double check the advertised weight of cases.

Accessories Jewellery

China’s Secret Vaults: Where Is All The Missing Gold?: Chinese consumers bough a record 1,066 tons of gold in 2013, 32% more than a year earlier. The value and status of gold remain high in China, where it represents financial security. Tight government control over gold in the past has contributed to this.

Pollution and Environment

Beijing’s Smog Ain’t Going Nowhere: In the Beijing and its surrounds, 58% of PM2.5 pollution comes from coal combustion in the power, steel, cement and brick industries, with an as little as 4% coming from cars according to one study. Even with all the attention on pollution in China in 2013, coal consumption still rose 2.5%.

Cars and Auto

Chinese Consumers Prefer Not to Buy Chinese-Built EVs – In Steps US-Made Tesla: “Modern electric vehicles are a new mass market technology, which adds to the apprehensions of the typical Chinese car buyer…Consumers must not only overcome this range anxiety but also Chinese-car anxiety.” Beijing, Tianjin and Shanghai are all subsidising electric, hybrid and fuel cell cars.

Premium and Luxury

Luxury Brands Look to South Korea for China Sales Boost: Brands such as Chanel, Gucci and Louis Vuitton have used product placement in Korean TV dramas to broaden their appeal to young Chinese consumers.

Kooky, Weird & Wonderful

Farmer Rides His Pig to Market After Illness Left Him Too Sick to Walk: A pig farmer in Chongqing who became too sick to walk after a bout of bronchitis, has started riding a 250kg hog to get around. Pigs may be the answer for China’s aging population.

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

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

Smartphones were always destined to take off in China.  On a surface level, there’s an inherent love of gadgets, the shiny and new.  More importantly, it’s China’s leisure activities that really lend themselves to surfing on the Samsung.  Playing sports and going to the pub aren’t as common as in most Western countries, however popular activities such visiting shopping malls have seen the smartphone become the must-have accessory. China’s consumers spend a lot of time at home in the evenings and weekends, but it’s generally not out in the garden and increasingly not watching TV – China’s middle class are online 34% more than in front of a TV

Chinese spend more time on their smartphones than consumers in any Western country.  The high usage rates have been self-fulfilling, incentivising more content and services to be created, which in turn, encourages more consumers to use them.  With highly-specced smartphones selling for under $150, and 72.4 million 4G mobiles set to sell in China this year, China’s smartphone user experience will only keep improving.

The mobile space is a source of much nationalistic pride in China.  Home-grown devices such as Xiaomi are marketing with the best of them, and apps such WeChat and Alibaba’s mobile shopping, are setting international standards for innovation.  While online shopping is currently more popular on PCs than mobile, commerce will follow general online usage trends in China and soon be dominated by mobiles.

All of this is contributing to smartphones becoming a bigger part of Chinese consumer’s lives, touching more points in the consumer journey, right through to purchasing and after sales loyalty.  There’s plenty more on that below. 

For our Australian and New Zealand readers, China Skinny’s founder Mark Tanner will be in Melbourne on 27 March presenting at the Australia China Business Week, sharing insights, advice and best practice for succeeding in China’s dynamic market.  More information here

In the meantime, we hope you enjoy this week’s Skinny.

Consumers, Chinese Consumers

Smog Pushes Emigration: More than 80% of Chinese who want to emigrate cite pollution as the main reason. 70% of those who’ve already gone were the same. Recent bad smog has seen some emigration and overseas property consultancies have a 300% rise in inquiries.

2014 Forbes Billionaires List: Growing China’s 10 Richest: China’s middle classes aren’t the only ones getting richer.  China’s billionaires were up 25% in 2013 to 152.

Why Western Companies Like LinkedIn Need Chinese Brand Names: Chinese brand names often take on more meaning than the original Western brand names, and brands are more likely to go viral if they have a Chinese name.

Online: Internet, eCommerce, Mobile & Social Media

Vulnerability of China’s Online Shoppers: Mobile channels such as WeChat are allowing businesses to communicate on an intimate and individual level with consumers. With mobile shopping becoming simpler and more familiar, the point of purchase is directly where a relationship has been nurtured. But recent QR code fraud highlights that mobile shopping still has some vulnerabilities.

Chinese Consumers Will Now be Able to Buy Almost Anything Inside WeChat: WeChat users can buy a product online or in store payments through scanning a QR code. Companies with a Service Account can offer products and services which can be used to assist with loyalty, customer service and online selling campaigns.

Online and Mobile Luxury Spending on the Rise in China, Lower Prices a Key Driver: The gap between official offline prices and online parallel imports for high end brands can reach 30-100% in China, driving online and mobile purchases.

Nearly $1.6 Trillion in Mobile Payment Transactions Were Made in 2013: Last year, China’s central bank handled 1.67 billion mobile payment transactions, 213% more than 2012. Transactions were up 317% to ¥9.64 trillion ($1.6 trillion). 25,000 mobile Alipay transactions take place every minute. PC transactions still dwarf mobile at ¥1,075 trillion ($177 trillion), up 29.5% for the year.

The Future of the Mobile Internet is in Asia: If you wanted some perspective of the rate of growth of the Mobile Internet in Asia, check out this animated chart – Asia was already the biggest market in 2010, but its lead has runaway since. Last year, 351 million smartphones sold in China, 80% of all mobile sales.

MasterCard Survey Finds That Nearly 60% of Chinese Online Shoppers Made Purchases via Smartphones: 59.4% of Chinese online shoppers used their smartphone to make purchases, the highest in the Asia Pacific region. Security remains the top concern for 91.8% of Chinese.

Go Long-Tail for Your SEO Strategy in China: Hosting in China improves pages included in Chinese search engines and if paid ads take over brand engagement, then long-tail should be a key SEO strategy.

Premium Food & Beverage

Costa Coffee to Make China its ‘Second Home’: Costa Coffee plans to more than double its stores to number 700 in China by 2017. The number of coffee shops overall in China grew from 15,898 to 31,283 between 2007-2012, with Shanghai having the highest consumption per capita. At this stage, many consumers place more value on the experience and environment than the coffee itself.

Overseas Chinese Tourists

How Important is Getting on the Chinese Tourist’s ‘Shopping List’?: Chinese women travelling for the first time have 2-30 carefully researched items on their shopping list. Those who have travelled five or more times have 1-2 items, and plan to just choose a location and make impulse purchases, spending just as much.

Retail and Fashion

Defining Chinese Style: 22 min vid: The social capital gained from trendiness and an increasingly sophisticated sense of fashion is seeing Chinese consumers more willing to mix and match multiple brands, putting their own individual style at the centre, more so than the brand. Personal styles are expressing who they are, rather than having labels define them.

Gap Inc Seeks New Berth in China With Old Navy: Old Navy plans to overcome poor brand awareness in China, opening it’s first store in China and putting a lot of attention on online marketing and eCommerce. The fast fashion market is showing further potential, with Zara and H&M beating store opening targets, while two thirds of high end retailers missed theirs.

Fluffy little Pets

With Pet Ownership Set to Boom, Chinese Pet Product e-Store Nets $25 Million in Funding: 2% of Chinese households own a cat, 7% a dog – and just 10% of those are fed commercial dog food. Rising incomes in China are expected to drive pet ownership closer to the 40% of American households who own at least one pet. Pet-related goods sales growth rates at around 10% a year have contributed to online store Boqii receiving $25 million in funding.

Beauty and Health & Beauty

Male Vanity Helps Drive Cosmetics Sales in China: The average man in China’s top tier cities uses 2.5 facial products daily, whilst only 13% regularly use deodorant. Sales of personal grooming products aimed at men grew by 7% in 2013, higher than the overall 5% market growth, albeit from a smaller base. 73% of men believed looking good is essential for success with both women and work.

What Money Failed To Buy: The Limits Of China’s Healthcare Reform: Between 2003 and 2011 the number of Chinese with health insurance grew from 30% to 95%, with hospital bed utilisation up from 36% to 88%. Nevertheless, by late-2013 80% of Chinese still found it hard to see a doctor, with 95% believing it was expensive to seek care.

Premium and Luxury

Made-in-USA Luxury Brands Win Fans in China: American luxury brands such as Coach, Michael Kors and Kate Spade are appealing to Chinese consumers with lower price points and an affinity with the USA.

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

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

There are new stats and figures coming out about China every day.  They are often staggering, and regularly inconsistent.   China’s diversity and opaqueness means there’s often a few stray figures, but after studying enough China research and data, consistent trends and themes do come through.  Notwithstanding, sometimes even the most reputable of sources don’t align with these trends. 

Late last month, FT, backed by data from Credit Suisse released some stats and an opinion piece outlining China’s preference for foreign brands.  The article includes stats such as ‘91% of Chinese consumers intend to buy a foreign handset in 2013’, whereas in reality, just one of China’s top-six selling handsets isn’t Chinese.  The opinion piece alludes to Chinese consumers having an unwavering preference for foreign brands across many segments.  Whilst Chinese do hold many foreign brands in high esteem, the article could give foreign companies the impression that there is limited competition coming from Chinese brands.  We disagree. 

It is important for foreign brands to be aware that local companies are upping their game, and Chinese consumers no longer unconditionally put foreign brands on a pedestal – they need to earn that reputation.   Brands from Apple, to Nike, to KFC, once some of the most-trusted Western businesses in China, have seen their brand reputations slide and market share diminish recently.  Foreign films no longer dominate China’s box office.  The biggest foreign fast food chains aren’t keeping up with the segment’s growth.  And although domestic car maker’s share of the local market has actually dropped, local manufacturers are being recognised for improving their standards, and it’s likely they’ll start growing their share. The FT article made good points that local brands better understand how to appeal to traditional ideas, but they are also making inroads in classic Western-style marketing and messaging as well.  Many foreign brands remain aspirational and have an advantage of perceived higher standards, but marketing needs to be smarter than ever to convince Chinese consumers that its worth spending more on imports.  Hopefully this week’s Skinny will help you do just that.

For our Australasian readers, China Skinny’s founder Mark Tanner will be presenting at the China Digital Forum in Melbourne on 19 November and Sydney on 21 November. Mark will be joined by executives from Baidu, Alibaba (Taobao), Tencent (WeChat) and China Telecom in what is destined to be an excellent event.  China Skinny Weekly subscribers can receive special full and half day rates by entering the promo code ‘CS’. Find out more at the Australian Business Forum website.

We hope you enjoy this week’s Skinny!

Consumers, Chinese Consumers

China: Foreign values: According to FT, Chinese brands only really making headway at the commoditised end of consumer goods in China. Reading this, a foreign brand could be led to believe that Chinese brands aren’t too much of a challenge. Chinese products and services are upping their game across the board in the domestic market and are increasingly challenging established foreign brands, with a little help from the authorities.  In addition to that, Chinese consumers are much more discerning when choosing products and services and no longer just automatically assume foreign = better.

How Chinese Consumers Prioritize Spending: Watches, Handsets, Perfume and Autos top categories for purchasing foreign brands according to FT and Credit Suisse. Bottled water, cigarettes, dairy and tissues top domestic purchases. Some of these stats largely contradict countless other studies, including China Skinny’s own research and actual sales figures. Take mobile handsets for example, the research claims 91% of Chinese consumers intend on purchasing foreign brands in 2013 – Samsung is the only foreign brand in the top-six in China at present – just try buying a limited-offer Xiaomi online. And dairy at 92% of local brands?

Lane Crawford’s President, Andrew Keith, Talks About Why Selecting the Right Mix of Goods for Chinese Consumers is Like Conducting an Orchestra: “Our consumers are moving from buying products that reflect status toward really appreciating products and how it reflects their lifestyle. It’s not buying a statement piece to show off. It’s about feeling confident in purchasing to your lifestyle requirements,” says Andrew Keith, president of Lane Crawford.

Chinese Consumers See Their Rights Enshrined in Major Legal Review: China’s consumer protection law has had its first major overhaul in 20 years. Changes include online shopping and harsher penalties for businesses that mislead shoppers.

Wal-Mart to Accelerate China Expansion With 110 New Stores: While some foreign bulk retailers are struggling in China, Walmart is upping its expansion, especially in smaller cities. Net sales grew 6.3% in Q2, but shopper traffic declined 6.8%.

Consumers, Internet, eCommerce, Mobile & Social Media

Asia Messaging Apps Seek to Upend Rivals with Marketing Might: WeChat has big plans outside of China, budgeting up to $200 million on marketing this year alone. 150 million of WeChat’s 600 million users globally are now outside of China.

Report: Only 13% of Chinese Consumers Will Buy Smartphones Priced Over $330: Chinese consumers have an overwhelming preference for a mid-ranged Chinese smartphones, with 57.8% wanting to pay $165 to $246. Just 13% are prepared to pay over $330, ensuring the Apples and Samsungs of the world still have the premium end covered.

Chinese Food and Beverage

China Pushes Genetically Modified Food: Beijing’s propaganda machine is talking up Genetically Modified foods, possibly laying the groundwork for a roll out of more GM stock in the Mainland. The social media sphere, bloggers who are already acutely aware of the toxic food scandals rarely respond positively online on the subject.

Yihaodian to Offer More Choices of Imported Food: Online food retailer Yihaodian is looking to develop partnerships with trade commissions and agricultural organizations in the United States, Australia, South Korea, the United Kingdom, Italy and Spain. Yhd.com sells more than 18,000 imported products on its site, of which 78% is imported food. ¥63 billion ($10.4 billion) worth of imported food came into China in 2012, with growth averaging 15% a year for the past 5 years.

Local Tastes Tempt China Diners Away from Golden Arches: McDonalds is looking to slow its expansion in China as local competitors eat into market share. Despite heavy investment, McDonald’s market share has been stagnant at 2.7% since 2007. Consumers eating cheaper alternatives or dining at home has seen their growth rate halve over the past 5 years to 8%.

China’s Dairy Market Policies Clear as Milk: Among high-end baby formula brands in China, foreign companies currently hold more than 75% of the market. The Chinese Government wants that portion to be 30% by 2015. In related news, Japanese dairy giant Meiji has quit China’s baby milk market, citing rising costs, however analysts believe it is more political and safety fears could be involved. The company remains optimistic about liquid milk in the Mainland.

Sweet-Toothed Chinese Consumers Turn to Chocolate: Chocolate in China is picked to grow 10.1% a year in value and 7.4% in volume until 2017.

Cooking Oil Blends Worry Chinese Consumers: Blended oils in China often only contain a tiny percentage of the promised oil – less than 5% peanut oil or a drop of pure olive oil, bulked up by often more than 50% palm oil.

You May Never Eat Street Food in China Again After Watching this Video: On the subject of cooking oil, if you’re a fan of the local hole in the wall, or street vendor, probably best to skip this 2 min vid. An estimated 10% of oil in China is the gutter stuff.

Tourism and Travel

How the Chinese Learned to Embrace Independent Travel: 90% of Chinese travellers are under 45.  They are focused on individuality and making their own choices, and finding it easier than ever to get visas. Bloggers such as Gu Yue (who backpacked from Beijing to Berlin to see his girlfriend) is creating a huge amount of romantic adulation for the idea of life out on the open road.

LVMH’s DFS Group Plans First Europe Shops as Chinese Travel More: Tax free shopping by overseas Chinese tourists grew 20% in the first quarter of 2013 and DFS is hoping to tap into it by opening its first store in Europe.

Recreation and Sport

Sina Expands NBA Partnership to Woo Advertisers: Sina and NBA enhance their partnership to focus on mobile broadcasting, community interaction and live video in a bid to sell more data-driven advertising.

Q & A: Tom Byer on Soccer in China: Tom Byer hired as head technical adviser for the Chinese School Football Program to teach football to tens of thousands of Chinese children.

Film and Entertainment

Co-Produced Movies Gain Popularity in China: 190 million Chinese went to the cinema last year, next year it’s expected to be 290 million.

Sculpture and Art

Forging an Art Market in China: After peaking in 2011, China’s art market dropped 24% in 2012, some say due to a lack of trust in authenticity. “Eagle Standing on a Pine Tree,” a 1946 ink painting by Qi Baishi, turned the art world upside down in 2011, selling for $65.4 million, but it still sits in a warehouse as the winning bidder still thinks it’s a fake.

Auto and Cars

Chinese Cars: More Reliable Than You Think: Four Chinese auto brands outperformed industry average for issues. Although it doesn’t appear to be helping with Chinese manufacturers having just 27% of the local market, down from 31% in 2010.

Understanding Chinese Consumers in 2013: Younger, More Savvy and Not Lacking Money: Chinese car buyers are getting younger, and females are increasingly playing their part, accounting for 31% of auto purchasers in China. More and more buyers are looking for individuality and branding.

Premium and Luxury Goods

Luxury Goods Sales Slowed as High-End Chinese Consumers Cut Purchases: Luxury sales in China are picked to grow just 2.5% this year.

Luxury Brands In China Face Four Major Challenges: The four biggest problems with luxury brands in China: 1) Intellectual property; 2) High costs; 3) Finding qualified staff; and 4) Protectionism.

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

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

Sina Weibo's 368 million registered users represent the most educated and highest earning portion of China's population, and the consumers who are most likely to buy western exports. Given 95% of Chinese consumers trust a brand more if they've seen it on Weibo, it's a good idea to understand Weibo user demographics when marketing to them. 

The infograph below should help you understand the profiles of the Weibo faithful.  Note that 60% of Weibo users live in 1st and 2nd Tier cities and almost two thirds have a University degree of higher…

China's Sina Weibo user demographics

Here's another of our infographics on how Weibo users compare to other social media in China.

 

Social media the world over is proving to be one of the most trusted places consumers source information about products and services, but nowhere more so than China.  As Chinese television, radio and newspapers have long been controlled by the Government, many Chinese consumers are somewhat skeptical of news and ‘advertorials’ from them. 

Although the Chinese Government does exercise some control over Weibo by scanning and screening certain content and in extreme cases, disabling commenting for short periods, Chinese users view this as a necessary evil.  The transparent nature of Weibo, which allows anyone to have a voice, makes it one of the most trustworthy and unbiased sources of information in China. 

A 2010 eMarketer global survey into trust of businesses using Microblogs, still just as relevant today, found that 95% of Chinese netizens trust a brand more if they have seen it on Weibo, with 46% trusting it a lot more.  Just 22% of US Internet users trust a brand more who tweets/blogs and 14% in the UK.

How Chinese consumers trust businesses with a microblog. Source: eMarketer.com

With 55% of Chinese netizens having contributed to a conversation about a brand on Weibo, having a brand on Weibo gives Chinese consumers the opportunity to share their thoughts on that brand, good or bad.  In the eyes of Chinese consumers, this gives a more balanced view, which all contributes to this trust.

The Weibo Facts