If you’re already exporting to China, we’re guessing you’re probably also selling to a host of other countries – markets like Dubai and the other six emirates could be on the list. In the UAE, there’s a good chance you’ve engaged some localisation for the country – culturally sensitive and resonant branding & communications, legal & regulatory allowances, logistics & distribution, and possibly even some new product development and packaging. In China, it’s probable that you’ve also localised the mix. But how local is your localisation?
Few people come to China without hearing that the country is like Europe; made up of varied and diverse regions. Yet in the same moment of acknowledgement, many will turn around and ‘localise for China’ with a homogenous strategy that they hope will win the hearts of consumers spanning the country.
China Skinny does a lot of research across different cities and provinces in China, and we usually find notable variances between the regions. There are the obvious differences in food tastes, climates, lifestyles, pollution and even body size, but it is the emotional cues that are often the most pronounced. We only need to look at one of the most common themes in Chinese advertising – families. Even in Guangzhou and Shenzhen – two tier 1 cities just 30 minutes apart on the fast train, the reality for families can be quite different: a large share of millennials in Guangzhou live with their parents and see them most days. In Shenzhen – a city built by domestic migrants – many millennials may only see their parents every few months, or just once a year during the Spring Festival.
Whilst some overarching localisation should be implemented across China, there is often a case to get city-specific with marketing and other initiatives. Take Shanghai, it has population greater than Australia, and a 13% larger GDP than the UAE, yet unlike the UAE-specific localisation, many brands will roll out the same strategy for Beijing, Guangzhou, Shenzhen and many other cities across China.
China’s metropolises are of a scale and affluence that they justify an element of localisation. The hyper-competitive nature of marketing in Chinese cities is finding it increasingly harder to connect with consumers without it. That means localising messaging, and even sometimes the digital platforms you use to share it. In certain demographics in some cities, digital channels aren’t always the best option to reach Chinese consumers, highlighting the need to have regionally-specific plans.
Over the past few years, brands have become increasingly focused on cities beyond tier 1, and even tier 2, with good reason. These ‘smaller’ cities are often much less contested and less apathetic to interesting, new foreign products. Half of the 50 million Chinese households entering the middle to affluent classes between 2016-2020 are expected to reign from cities outside of the top-100 cities according to BCG. They’re buying more imported products, and travelling abroad more which influences more purchases. The number of direct flights between cities in China and Thailand grew from 69 to 148 over the past three years for example. Yet with such variances between lower tier cities, brands would be wise to do their due diligence before entering and localising for them.
On the subject of cities, China Skinny has launched a new tool on our site to help you make sense of it all. We’re often getting questions about which cities fall into which tier, so we have created out City Tier Calculator which provides detailed information about which tier Chinese cities are, some of the key indicators, their rankings in that tier, and even how many Starbucks they have. Use the tool here. The tool is part of an overall redesign of chinaskinny.com, which is long overdue – we’d suggest you take a look. Go to Page 2 to see this week’s China news and highlights.
Back in 2012 scouring content for the Skinny, it seemed almost every week there was another article praising KFC’s success in China. It was the Western pin-up brand; finding the much sought-after balance that tempted the masses with its alluring foreignness, but localised its offerings just enough to appeal to Chinese tastes – with the menu sporting old favourites like congee.
For every 10 bucks spent on fast food in China, KFC accounted for 4. It had almost 4,000 restaurants, with another 16,000 planned. There were movie placements, celebs munching on drumsticks, lovebirds courting one another over buckets … then Bird Flu and a series of scandals happened.
KFC has never really recovered from the dark days of ’13. In 2014 the menu was ‘overhauled’ for the first time in 27 years, there’s been a refresh of some decor, but if you were to go into most KFC restaurants in China they still bear a stark resemblance to the golden years pre-2013. China, Chinese consumers, and their tastes on the other hand have changed – dramatically. A simple scan of restaurants on Dianping or a stroll through a city mall or restaurant street and it becomes clear that there has been an evolution in China’s hospitality sector. La Liste’s annual ranking of the world’s restaurants noted the big trend is the rise of restaurants in China who are meticulously preparing and presenting food, and charging real money for it.
Contrast KFC with another mega-chain from America – Starbucks. Over recent years, the coffeehouse chain has constantly adapted to Chinese consumers and their ever-shifting expectations for newer, shinier offerings. They have played well to Chinese consumers’ inherent need for status from what they purchase, opening cafes in highly visible spots in city streets and premium office building foyers where they will be seen sipping on their Green Tea Crème Frappuccinos. The look and feel of cafes have also evolved to keep up with changing tastes, with some of the latest cafes having fit outs that wouldn’t look out of place against some of the fine dining establishments on Shanghai’s Bund.
Starbucks has always played to Chinese love of all things digital and typically been an early adopter and innovative user of technology. In the early days of WeChat, it cleverly used the limited functions by encouraging fans to send emoticons reflecting their mood, receiving a short music clip related to that mood. A little later in the game they accepted WeChat Pay with some alluring features such as the ability to gift friends and family a drink or two.
Last week’s launch of Starbuck’s mega reserve roastery in Shanghai is one of its most exciting initiatives yet. In addition to a beautiful fitout, complete with contemporary Chinese elements, the venue plays true to the ‘New Retail’ movement that is fast making its way into the bricks & mortar landscape. Integrating the Taobao app, augmented reality brings Starbuck’s story to life in a format that China’s millennials love. The app also allows them to skip the queue and buy merchandise, which improves both customer experience and the likelihood of increased sales and advocacy purchases.
Much like KFC was before 2013, Starbucks has become a much-cited case study – with good reason. It illustrates how brands can successfully keep up and stay relevant to the ever-changing needs of Chinese consumers through offline and online initiatives and product offerings. Their lessons don’t just apply in the hospitality trade, but are applicable for any foreign or local brand trading in China. Go to Page 2 to see this week’s China news and highlights.
Health has been one of the core themes in China’s consumer landscape over the past few years. Anyone who understands Chinese consumers’ approach to health will appreciate the unity based on the opposing and complementary relations of the yin and yang. A pillar of Traditional Chinese Medicine (TCM) beliefs, the yin and yang need to be in harmony – when one aspect is deficient, the other is in excess.
Many consumers’ health, food and lifestyle decisions are based on maintaining this balance – this ensures a normal flow of qi so their body functions well and they can recover from illness more easily. Whilst people are increasingly living longer in China, partially due to advancements in modern medicine, the ancient TCM beliefs still hold significant importance for consumers. Many factors disrupting that harmony have only become an issue over the past generation.
We only need to look at the scary growth in breast cancer rates in Chinese women to understand how the yin and yang have been knocked off balance. Breast cancer has become the most common cancer among women in China with rates climbing 3.5% annually between 2000 and 2013, versus a 0.4% annual drop in the US. Much of the growth can be attributed to a generation of changes in Chinese lifestyles, such as urbanisation and an increase in professional work. This has led to lower childbearing rates and older mothers at birth, with a subsequent aversion to breastfeeding. Higher stress, less exercise, more unhealthy diets and increased alcohol consumption are also contributing. Each of these factors are common in many countries, but the rate and extremity of change has been much more dramatic in China.
Common household salt has been another factor disrupting the qi flow. On average Chinese eat more than double the recommended intake of salt. This is also a problem in many countries, the difference is 80% of consumption is attributable to Chinese consumers’ own cooking, whereas in the West it mainly comes from processed foods. The list of contributors goes on, as do their differences from other countries.
To help find balance, Chinese are increasingly making conscious decisions to consume healthy food and vitamins, in addition to doing more activities based on healthiness. The most popular of those is jogging. Interestingly, numerous studies have found the negative effects of exercising in pollution outweigh the benefits. This has done little to temper the enthusiasm of joggers in Chinese cities and their paraphernalia.
Many of the factors affecting consumers’ yin and yang balance are attributable to their lifestyle and dietary choices, however a number remain out of control of the average urban dweller. Air pollution may be the most visible, yet the water and soil pollution are often much more damaging to the balance and harder to restore. According to a national soil survey, one-fifth of farmland in China is contaminated by organic and inorganic chemical pollutants and by metals such as lead, cadmium and arsenic, with the most polluted areas concentrated around the wealthy cities where a large share of their food is grown. Unfortunately a paddock growing rice in soil oozing with cadmium seepage and irrigated with toxic water still often looks like a normal green rice paddy, making it harder to manage and resolve. Even the remarkable rise of meal delivery in China is contributing to waste that is affecting the food supply chain and consequent balance.
These influences have been a boon for foreign brands who are often perceived as healthier. Yet every brand trading on health and purity would be wise to understand how the yin and yang, and hot and cold fit into many consumers’ consideration set. Agencies such as China Skinny can assist with your new product development, your brand and positioning to ensure this is considered and relevant to Chinese consumers. Go to Page 2 to see this week’s China news and highlights.
When a Chinese consumer makes a decision – from picking a bottle of water, to choosing which country will best educate their child – the influence of KOLs (Key Opinion Leaders) can be dramatic. A feature of Chinese thought since the days of Chairman Mao, the KOL economy is set to boom; 2016’s value of ¥53 billion ($7.8 billion) is estimated to near double to ¥102 billion ($15.1 billion) next year. To bring some perspective, that is three times the forecasted value of China’s newspaper and magazine advertising in 2018.
Chinese consumers are well aware that influencers are rewarded for endorsing brands (in addition to ‘tips’ from fans). Despite this, their social media broadcasts have become some of the most authoritative and trusted sources for information.
One of the reasons for this can be traced back to 2011 when two of China’s new fast trains crashed, killing 40 people. While state media attempted to cover it up, consumers posted about it as it happened on Weibo, which was the primary social channel at the time. This had two notable consequences: 1. Chinese began to trust what they read from reliable sources on social media much more than traditional state-run media channels like TV, radio and print; and 2. Beijing, having already lost a lot of face from the Weibo reports of the train crash and subsequent citizen exposés and protests, saw the need to wrestle back influence from the people.
In 2013 legislation was passed threatening jail to those who created viral social posts that weren’t aligned with the Government mandate. This fundamentally altered the way influential Chinese posted on social media. With several celebrity social media accounts shut down in recent weeks, Beijing continues to tighten control on what KOLs actually say. In short, any KOL who doesn’t toe the party line will be shut down and in most cases, lose their livelihood.
The reality of operating in China on any scale, whether you are a celebrity, brand, or any type of business, you need to play by Beijing’s rules. Notwithstanding, although some would say KOLs are increasingly becoming state cheerleaders, their attraction certainly isn’t waning.
40% of food & beverage advertising in China is fronted by a KOL, versus around 10% in the US and UK. Luxury brands are among the most prevalent users of KOLs with watchmaker Jaeger-LeCoultre paying Papi Jiang over ¥5 million ($740K) for a campaign which saw their awareness more than double. Michael Kors threw a birthday party for actress Yang Mi. Brands are also using lesser known individuals, but who are well respected in their fields to appeal to an increasingly discerning Chinese consumer who are looking deeper into KOL endorsements. An example of this is Giorgio Armani supporting Chinese designer Xuzhi Chen.
KOLs can help break through the extraordinary clutter in China and amplify messages at a time when just 28% of 12-14 million official WeChat accounts saw an increase in content readership last year. But much like WeChat, a relevant and smart KOL strategy is imperative to ensure brands aren’t throwing good money after bad. Agencies such as China Skinny can help devising such a strategy.
On the subject of marketing strategies for China, our US-based readers in the Bay Area should consider attending the Export 101 Series on Thursday July 20 in San Jose. China Skinny’s Ann Bierbower will be sharing wisdom, joining the US Department of Commerce, DHL Express and the CalAsian Chamber at the event. Register here. Go to Page 2 to see this week’s China news and highlights.
Last week Alibaba hosted their first conference outside of China – Gateway 17 in Detroit. China Skinny was there.
Jack Ma has long had a personal dream of cracking the US and with plenty of cash in the coffers, Alibaba was out to dazzle the audience. Jack Ma was joined by Martha Stewart, Lisa Ling, Charlie Rose and robots, backed up with an arsenal of big statistics and some sage advice to entice more American businesses to export to China.
The focus of Gateway 17 was to sell the Alibaba dream, yet exporters would be wise to consider the multitude of other options when planning a market entry into China. For big brands, a presence on Alibaba is an essential hygiene factor for both sales and marketing. Marketing on Alibaba’s platforms is becoming more powerful with new tools such as the Uni Marketing system offering features such as personalised and targeted communications.
Whilst there are great success stories on Tmall and Tmall Global, the platforms aren’t right for every brand. It is not cheap to set up and operate, and new stores are competing with over 10 million other vendors who are often well established. Smaller brands may also have difficulty being accepted by Alibaba.
Alibaba has a finely tuned sales machine attracting foreign brands to its platforms. It has set up offices across North America, Europe and Australasia, has shiny campus tours for visiting delegations and now hosts overseas events to woo Western brands to its cross border channels. Yet with all the good news stories, there are some cautionary factors. For example, Tmall Global’s sales drive saw the number of brands selling on the platform grow 169% last year, with sales growing just 30% – a similar rate to ecommerce overall. In short, there are many more foreign brands competing for a smaller piece of pie.
Cross border commerce is also much more fragmented than Mainland based commerce. Alibaba commands around 80% of overall ecommerce sales in China and 57% of B2C commerce. Whereas Tmall Global accounts for just 18.9% of the cross border market and Taobao Global 15.4%.
There are a host of smaller cross border platforms that are often more targeted to specific segments such as food, wine, cosmetics, mum & baby, health and fashion. They may only have 10 or 20 million shoppers, but they are generally qualified for your segment, often more affluent, and the competition is less fierce.
Alibaba is China’s most popular ecommerce platform and a great option for many brands, however China is a large market with a number of online and offline sales channels, so take some time to consider them. Agencies like China Skinny can help you work through your options. Go to Page 2 to see this week’s China news and highlights.
If you’re looking for trends in the Chinese consumer market, the tourism industry should be your first stop. Whether it’s trading-up in food & beverage or the health & fitness craze seizing the domestic market, China Skinny sees China’s affluent international travellers particularly influential in shaping these trends back home. A quick glance at five trends stemming from tourism:
1: Make it special. Wealthy travellers have been ditching the standard travel packages in favour of finely-tuned and customizable ones for a while now. Across virtually every category brands are looking to create more personalized offerings to meet the increasingly specific wants and needs of Chinese consumers.
2: Get adventurous. Affluent travellers are also getting more adventurous on their holidays, seeking a more authentic experience – a theme replicated in individual tastes across other categories. Based on the number of tents and outdoor equipment sold on Alibaba platforms last year, adventure of a less comfortable nature also looks to be trending in China.
3: It’s the little things. Little comforts like bottled water, kettles and slippers have long been an important feature in hotel rooms and are key to keeping an ever-more discerning Chinese traveller happy. Similar hygiene factors and little surprises will go a long way for any brand in ensuring Chinese consumers are happy and potentially prompting all-important advocacy for your brand.
4: Convenience is king. Tourism operators have been quick to identify the short attention spans of Chinese tourists, with some notably shortening the duration of the activities they offer to Chinese tourists. This trait is mirrored by the general consumer who is seeking convenience and instant gratification from what they buy.
5: Domestic brands know best. Domestic players are upping their game in every category. From the National Tourism Administration’s “Toilet Revolution” which has seen over 50,000 of China’s toilets upgraded since 2015, to intricately restored (and sometimes rebuilt) historic wonders, to epic theme parks, to deep-pocketed online travel apps. Across all categories it pays to research and learn from domestic counterparts when delivering products are services that are tailored for the Chinese market.
An example of domestic learnings is the point of difference Tujia holds over Airbnb as it tries to establish a foothold in China. Beijing has a jumble of business districts often defined by a certain specialty. If you want to stay in a commerce, tech or arts area Tujia gives you the ability to narrow your search accordingly. With Beijing’s hospitals driving a huge amount of short-term accommodation, users can look for areas around certain medical facilities. Beijing’s traffic is a known hassle, so sorting by proximity to subway lines and specific attractions is a much appreciated feature. Not only do Chinese consumers have unique needs, but they are often specific to different locations in China.
Improving domestic competition is mostly a good thing for tourism. Like with many categories, from wine to furniture, a good local experience will whet travellers’ appetites for more and often lead to farther-flung holidays, particularly to destinations catering to Chinese needs.
One of the most powerful channels to reach not just Chinese tourists but all consumers is digital. For our Shanghai-based readers, China Skinny’s Nadja Rauscher will be on stage at Austcham’s Clicks to Commerce event next Tuesday 27 June providing some great tips and tricks to best stand out in China’s crowded digital market. More info here. Go to Page 2 to see this week’s China news and highlights.
Any news covering Intellectual Property and China is typically fraught with stories about IP-theft and trademark violations. It can cover anything from fake milk powder, to Alibaba being ousted from the prestigious International AntiCounterfeiting Coalition (IACC), to a man named Wang who bought 1 million RMB worth of fakes on Singles’ Day.
But behind the easy clickbait headlines about Chinese fakes, there is a growing trend that is likely to improve IP protection and enforcement in China. Chinese are filing for their own patents at a rate never seen before, anywhere. Last year, China became the first country to ever file more than a million patents over a 12 month period – close to double that of the US.
With China getting more of their own IP to protect, and Beijing doing what it can to encourage innovation to transition to a higher value economy, it has much more incentive to police counterfeits and copycats. As much as two thirds of the world’s fakes have been estimated to originate from China, so there is some work to do.
Growing IP protection in China is good news for foreign brands, although it’s further evidence that Chinese businesses are increasingly aiming to compete on more than just price.
At this stage, virtually all competition from Chinese brands will come in their home market. While we hear a lot about companies like Huawei, Haier and Ctrip aggressively expanding abroad, it would appear that most Chinese players only have China in their sights. China organisations filed just 42,154 overseas applications, less than a fifth of the 237,961 from the US, and a small part of Japan’s 195,446 and Germany’s 101,892.
Increasing patent filings are a key ingredient to build China into a true global player, but another contributing factor, entrepreneurialism, still appears to be lacking. It is moving in the right direction nevertheless.
One category that Chinese innovation is unlikely to challenge is outbound tourism. For our Shanghai-based readers, China Skinny’s Andrew Atkinson will be speaking tomorrow morning (Thursday) about the changing face of the Chinese tourist, and what you need to know to reach them. More info here. Go to Page 2 to see this week’s China news and highlights.
With an estimated 500 new products launching every day in a market that is already fiercely competitive, brands vying for earshot can easily go unnoticed in China.
A popular way to break through the clutter and amplify your message is to use Key Opinion Leaders (KOLs). Chinese people have a history of taking cues from a small group of people – we only need to look back to the days of Chairman Mao. Yet in today’s market there is more noise and less trust than ever, and Chinese consumers often seek direction and affirmation from someone they trust and admire in making purchase decisions. With the growth of WeChat and Weibo, China’s influencers are becoming more prolific and diverse than ever.
Some of the most popular KOLs on WeChat and Weibo are now so valuable they are courting investment, such as video blogger Papi Jiang who received funding of $1.8 million and was paid $3.4 million for a single ad earlier this year.
There’s a good chance you’ve heard stories of soaring sales of lavender bears, fish & chips and craft beer after well known figures tried them; KOLs can be immensely powerful in China, but they can also be costly with little impact on sales.
Due to the popularity of KOLs, many charge sky high fees for endorsements. That’s regardless of whether their fan base and areas of influence are relevant to your brand and target market. Similarly, some trade on huge follower numbers. However the ease of cheaply purchasing fake followers, likes, and even comments on Taobao can render these numbers irrelevant. Deep analysis into KOLs’ true reach is invaluable. You’d probably also want to do a background check, as a number of China’s nouveau celebs have been getting up to mischief lately, which doesn’t help your brand’s image in the eyes of the average consumer.
Most importantly, your target market needs to consider your KOL authentic and relevant to them. Often the micro or grass-roots influencers can have more sway with consumer groups in their fields than the A-listers, and will be a fraction of the cost.
In addition to getting to know the KOLs, it’s also valuable to understand the fans who follow them. Weibo recently released findings of an interesting study shedding light on China’s online influencers. 36,410 of the most prominent online celebrities each received an average of 25,130 reposts, 11,151 comments and 45,317 likes over five months this year. Whilst most followers are males, 74% of online celebs are female. Of those celebrities, 88% are 17-33 years old and 89% have a tertiary education. The majority live in Shanghai, Beijing, Guangdong, Jiangsu and Zhejiang provinces.
Done well, KOLs can be very effective to build awareness and trust. Yet on their own, they are rarely enough to convert to sales. Chinese consumers often see the same KOLs endorsing countless other products. KOLs may spark an interest and prompt them to seek more information, which is why it is best to optimise and integrate other touch points too. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
Every day this year, an average of more than 120,000 new Chinese consumers signed up to the Internet. Most of them on their smartphones, and many of them using it to run a big part of their lives.
Growth in internet users coupled with an evermore online savvy population has contributed to an impressive rise of Chinese who are active online. In the past year, 18% more consumers shopped on Alibaba platforms, 65% more bought on JD and Weibo’s active social media users surged by 36%. Yet the most interesting growth story is the convergence of commerce and social media on WeChat.
Although WeChat sales are small relative to traditional ecommerce channels, its growth potential is enormous. Every official and personal account has the ability to sell to their followers and friends. This has prompted tens of millions of enterprising WeChat users to try and pry a few bucks out of their WeChat networks – a subtle version of Amway if you like.
There are now more than five times more stores on WeChat than there are on Taobao, Tmall and JD combined. Although individuals make up the majority of stores, brands such as Dior – who don’t even have their own ecommerce store yet – are dipping their toes into social commerce. WeChat’s all-in-one nature is creating a whole new level of commerce-related sharing opportunities that is unrivalled globally.
On top of trading products on WeChat, app usage rates for services such as ride sharing, food delivery, cinema, massage booking and health, to name a few, are among the highest globally.
The phenomenal uptake and usage rates of smartphone commerce has been driven by massive sweeteners – for example Meituan Dianping was estimated to have provided ¥58 billion ($9 billion) worth of discounts and subsidies for restaurants and movies in 2015. Such incentives have been enabled by countless sums of investment cash utilised to grow users, often with little regard for profits. Last year over $20 billion dollars was invested in Chinese internet businesses – quadruple that of 2012.
A result of the investments are some significant mergers and consolidations, including ride hailing apps Didi-Kuaidi-Uber, group buying and food apps Meituan-Dianping, classified ads Ganji-58.com and online travel Ctrip-Qunar. The mergers have created virtual monopolies and, by proxy, less incentives to subsidise and discount. The most recent example is the Didi-Uber merger which has seen a typical ride that cost ¥8 in May, now costing ¥13.
Fewer subsidies may slightly slow down the adoption rate of many apps, but Chinese consumers will continue their deeply-embedded habits of using smartphone apps in most facets of life. Brands should factor this into their marketing strategies and creative tactics as a powerful way to engage Chinese consumers. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
Many have pondered what would happen if everyone in China jumped at the same time. There’s been talk of the earth being thrown from its axis, mass earthquakes, volcanic eruptions and other catastrophic events.
Although China’s 1.4 billion people are unlikely to ever synchronise the world’s greatest leap, many of them are stamping their feet and making businesses take notice.
Until recently, Chinese consumers had very few channels of recourse. Then the Internet became mainstream. Chinese consumers finally had a channel to make a public stand when things weren’t up to scratch. In 2011, after Weibo had reached a critical mass, a businessman in Qingdao was so disappointed with the service he received with his Lamborghini, he hired nine men wearing blue suits and hard hats to destroy the $650,000 supercar with sledgehammers. He captured the spectacle on film and it went viral. The stunt spurned countless copycats in China, who resorted to equally dramatic social media posts to share their poor experiences – to the horror of many poorly-prepared brands.
Another high profile example of Chinese consumers’ displeasure has arisen again, this time with Ikea, writing off much of the goodwill that the furniture giant had earned by providing public sleeping, dating and dining facilities. Following Ikea’s decision not to recall furniture in China as it did in the US and Canada following the death of at least six children in North America, the predictable PR-nightmare ensued. Consumers in Ikea’s fastest growing market expressed their anger on WeChat, Weibo and other online forums about China’s exclusion from recall. 69% of respondents accused Ikea of prejudice against Chinese consumers according to one survey. After the damage was done, Ikea backpedalled, offering refunds or assistance to anchor the deadly dressers and chests.
Where practical, keeping Chinese consumers happy is vital to success in the market. They are the world’s most avid social media contributors and a poor product experience, particularly from a foreign brand, will often spread like wildfire. They write more online reviews than any other country in the world – just look at the average ecommerce storefront. Chinese tourists write 42% of luxury travel reviews globally. China’s inherent lack of trust and research habits means other consumers read and take notice of those reviews more than their peers in any other country.
Providing effective customer service, and relevant responses to crises are often overlooked when developing marketing strategies for China, but one misstep can undo all of the other good work a brand has done. Understanding the Chinese consumer and how they respond to such events should be an important part of planning. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.
Although there is a lot of hype about soaring demand for premium imported food and beverage from Chinese consumers, many brands are yet to see a profit in the market. Some of this comes down to the hyper-competitive nature of China’s marketplace, but it often stems from limited due diligence and poor delivery.
It’s not uncommon for exporters to get the obligatory China Food & Drug Administration (CFDA) approvals, find an importer/distributor who seems professional and speaks English, and expect to see profits rolling in after that. Unfortunately, these are usually just two small steps in the long journey to success in China.
Trademarking should be one of the first steps you take for your brand, even if you aren’t sure if and when you’ll enter China. Although foreign businesses are increasingly aware of the importance of trademarking their brand, some overlook creating and protecting a Chinese brand name. And even those who follow the right steps should be aware of phony firms who provide a fake registration certification, meaning that their brand isn’t protected at all.
Another important step is understanding your target market and their unique needs. Chinese consumers can vary immensely by demographic and the region they live in. Even the biggest brands are unable to reach China’s 1.35 billion people, and most only target a portion of the 150 million-odd urban middle and affluence class. So it’s best to understand which consumers are most likely to want and be able to afford your products, and localise and position your brand and products to best appeal to them. Note that perceptions of your products and their origins can often be quite different than you imagine, as this interesting analysis of European countries by Baidu autocomplete results illustrates.
Understanding your target market is also understanding the channels to best market and sell to them. That may include digital and traditional channels, and even touchpoints outside of Mainland China, which brands as varied as Hersheys and Yashili are using.
Once you have determined your target market, regions, marketing mix and sales channels, you’re much better placed to find a distributor who will best meet your needs. Although many distributors claim that they have nationwide coverage and are experts in online and offline channels, almost all distributors are only strong in one or two regions, and very few have any marketing nous, particularly in the digital space. Understanding your needs first will ensure that you ask the right questions and increase the likelihood of finding a distributor who covers the regions and channels that you’re targeting. China Skinny can assist with that.
For our readers in Australia’s Northern Territory, China Skinny’s Nadja Rauscher will be the keynote speaker and workshop chair at the Deliver to China Ecommerce Conference in Alice Springs on 10 May and Darwin on 11 May. Learn from on-the-ground experience about how to use digital channels to grow sales in China. For more info about the Alice Springs event click here and Darwin event click here. Go to Page 2 to see this week’s China news and highlights.
After last year’s high profile gaffe by Burberry, when their special edition Chinese New Year scarf was mocked on social media, you’d think foreign brands would take extra care to ensure that their Lunar New Year-themed promotions were checked by Chinese experts before launching them. Think again.
Leading up to this year’s Spring Festival, there’s been the usual line-up of monkey and New Year-themed paraphernalia hoping to tap into China’s busiest shopping season. This year has seen its share of foreign brands miss the mark, mostly with monkeys that don’t appeal to Chinese, an unfortunate choice of font or even poorly considered characters. Here are a few that have been laughing stock on WeChat, Weibo and other media, circulated by accounts such as 齐鲁晚报.
Monkeys that Are Just All Wrong in China
Luis Vuitton’s wealth of experience in China didn’t seem to factor in when they designed the Monkey Crew Necklace to see in the New Year. Based on the unanimous mocking on Chinese social media, it may not be a top seller this Spring Festival. Some of the more humorous quotes included “Does this monkey come from other planet?” and “Even though I can’t afford this, I must say it’s ugly.”
Similarly, the choice of monkey on the ornamental Breguet Queen of Naples and the Piaget Altiplano’s watches have scared a good few online Chinese, claiming they looked too real, like they’d jump out at any second.
The Correct Chinese Typeface
Even Giorgio Armani has had its share of critics for their Chinese New Year highlighting palette. The red and black colours were popular and considered high quality, and some liked the monkey imprint, but no one liked the 福 (“fu” meaning fortune) character on the cover. To a Westerner it may look nice, but many Chinese claim it has no sense of design at all – looking to be taken straight out of a Word document. Chinese place great emphasis on the brush strokes of the “fu” in reference to the New Year, and this example clearly hasn’t.
The Fa Fu Faux Pas
The award for the biggest bungle of them all goes to our friends at Nike. In December, the brand launched a new pair of customized shoes, with a traditional Chinese character 發 (“Fa” meaning getting richer) on one shoe, and 福 (“Fu” meaning fortune arrives) on the other. The characters are perfect for Chinese New Year, but combining them together to make “Fa Fu” means getting FAT in Chinese! Obviously China’s social media has been buzzing for the wrong reasons since.
The day before the Fa Fu launch, Nike had released another Chinese New Year edition called “Nian Hua”, which is a traditional painting that Chinese buy for the Lunar New Year to bring good luck.
The consensus on Chinese social media was why would they put them on the white shoes, they are so ugly? A few of the better quotes included:
“OMG, why they are such ugly shoes?”
“Finally there is something equal to the GA Highlighting palette”
“Maybe the Westerners who can’t read Chinese would wear them pretending to be cool!”
Many others commented on the Chinese characters gave the impression that the shoes were fake.
Double Check it with an Expert
Even the big foreign brands make mistakes localising for Chinese culture, but there really is no excuse. Things that we assume in the West are often completely different in China. If you are localising for China from another country, or without a trained Mainland branding expert, ensure that you always run localisation ideas past a company like China Skinny who can provide professional advice to ensure you get it right. Happy New Year!
China’s online shoppers are showing the stamina of Ironmen. Less than three weeks after the Single’s Day frenzy, they were tapping and clicking up a storm for America’s Black Friday. Shopper’s Fatigue? Not the Chinese.
A recent Nielsen survey found 38% of shoppers in Tier 1 cities, and 27% in Tier 2 currently make cross border purchases online. This was confirmed on Single’s Day, when a third of all shoppers bought goods from an international brand or merchant. 88% of respondents are interested in buying from overseas next year according to Nielsen.
It’s hard for Chinese shoppers to miss America’s version for Single’s Day. Black Friday ads have been sprouting up across the major online platforms including QQ, Baidu, Taobao, Alipay and even Ctrip.
The #2015BlackFriday# hashtag on Weibo inspired 150,000 discussions and 450 million views by yesterday. Over 50,000 articles bombarded WeChat users covering deals and purchasing guides. In the week leading up to Black Friday, there were around 90,000 searches a day on Taobao for Black Friday, many looking for dàigòu – shopping agents, who could buy the discounted goods in the U.S.
Yet just having discounted goods is no sure way to attract Chinese shoppers. For a start, they need to be able to pay using the systems they like, such as Alipay. By far the fastest-growing Black Friday related search terms on Baidu were ‘Alipay Black Friday’ which grew 41,400% in the week and ‘Black Friday Alipay’ which grew 6,700%. Transactions through Alipay grew 700% on last year.
Cross border commerce is a great way to test if Chinese consumers want your goods before investing in a market entry. For example, boutique NY fashion house Otte opened a store in Shanghai after discovering China’s hearty appetite for their clothes, with over 50% of their export sales going to the Mainland. It’s a low-risk approach to test the market. As a starting point, contact China Skinny for a site audit to ensure your store and site are optimised to reach Chinese. Go to Page 2 to see this week’s China news and highlights.
If you were selling iron ore or aluminium to China right now, or hoping to flog Swiss watches, Prada bags or Audis, you probably wouldn’t be overly optimistic about Chinese growth prospects in the short term. Anyone viewing this year’s slowing 7% GDP growth in the first half of this year could be subdued as well. Yet taking a broad-brush approach to the current market conditions in China doesn’t quite tell the full story.
For most brands selling to consumers, the growth in retail spending is a strong gauge of how things are tracking in the market. The last couple of months have been particularly interesting in light of plummeting stock prices, with retail sales growing faster than expected at 10.8% year-on-year in August, following 10.5% growth in July.
There’s no debating that many things in China aren’t climbing at the mouth-watering rates from a couple of years ago, but the overall trend for consumer spending is far from grim. Consumption accounted for 50.2% of growth to China’s GDP in 2014. In the first half of this year, it contributed to 60.0% growth. If GDP grows at 7% this year, and consumption continues to track at 60% of that growth, Chinese consumers will spend $433 billion more this year than in 2014.
So if China is buying less aluminium, fewer Prada bags and less fried chicken from Kentucky, what are they buying? They’re buying many things related to experiences and entertainment. China’s box office revenue grew 48.5% in the first half of this year, with cinema goers having already spent more this year than all of 2014. Consumers are expected to shell out 66% more on mobile games this year than last. And spending on tourism continues to look good, up 28% in 2014.
Heath-related products are retaining strong growth, whether it be the booming multivitamin category or healthy and trusted imported food, which grew 25% year-on-year in August. Sales of those segments continue to soar online, on trend with overall ecommerce sales, which grew almost 50% in the first half of this year.
China is a complicated market, and while high level figures are important, there are likely to be many more micro figures to help you get a clearer picture of the current and future opportunities in your specific industry. China Skinny can help with that. We hope you enjoy this week’s Skinny.
China Released a Big Dump of Data, and Some of It Wasn’t That Bad: Year-on-year factory output growth in China was lower than forecast at 6.1% in August, but retail spending grew higher than expected at 10.8%, up from 10.5% in July.
What Chinese Consumers Want: In the early days of China opening up, guanxi or connections were key to succeeding in China; now those who understand the consumer culture and cultural traditions have a better chance of succeeding. For example, creating a potato chip that is perceived as healthier may not mean using less oil, but adding things such as cooling cucumber which can help balance the hot fried chip.
The Chinese City With the Best Economy Isn’t the One You Think: Chengdu is China’s most successful economy based on job growth, foreign investment and high-value-added industries according to U.S.-based Milken Institute. Shanghai, Tianjin, Dalian and Nanjing rounded out the top-5. Jiangsu province was home to seven of the top-10 tier-3 cities.
Shopping Centres Go Social to Attract Chinese Consumers: 73% of Chinese consumers regard shopping as a leisure activity, and roughly half think it is “among the best ways of spending time with the family.” To make shopping malls more of an overall experience, mall developers are increasing the mix of food and beverage, with the portion increasing to 30-40% of most malls versus 10-15% before 2007. Developers such as Wanda allocate 40-50%.
Uber to Enter 100 More Chinese Cities in Next 12 Months: CEO: Uber is expanding further into China as it solidifies its relationship with Baidu. The company says it welcomes new government regulations and is even adopting the language of Chinese officialdom, speaking on favoured Communist Party subjects such as harmony and stability. In related news, China’s biggest ride sharing app Didi Kuadi and biggest food delivery service Ele.me have partnered up, which could see them launch an UberEats type service in China.
Internet, Mobiles & Ecommerce
China’s Online Retail Rose 48.7% in H1 2015: China’s online retail sales grew 48.7% year-on-year to hit ¥1.6 trillion ($250 billion) in the first half of 2015. The number of shoppers grew 19.1% to 417 million according to CECRC. Tmall accounts for 57.7% of the B2C market with JD at number 2 on 25.1%. Suning is a distant third on 3.4%.
Social Media Playing Key Role In Chinese Ecommerce: After receiving rotten fruit purchased online in China, Chinese writer Liu Liu contacted the service centre multiple times over the next few days but received no reply. After posting on her Weibo account to her 10 million followers, she received an apology call within 5 minutes. Another call followed offering of a full refund and vouchers.
Here’s What the Future Will Look Like, According to Baidu and Microsoft: Baidu’s 3-min advertising video about how they see the world in the future including augmented reality, touchscreen surfaces everywhere, real-time speech and text translation, thin tablets and remote health monitoring.
Food & Beverage
Half of Chinese Consumers Use Internet to Order Groceries: 46% of connected Chinese consumers say they are already ordering food online for home delivery – almost double the global average of 25% according to Nielsen.
Visa Policy Spurs Growth in Trips to U.S.: More than 30,000 Chinese arranged independent U.S. tourism and business visas through Ctrip from January to August, a threefold increase from last year triggered by the 10-year visa. Chinese tourists to the U.S. have grown from 397,000 in 2007 to 2.19 million last year. Without the requirement to go through a group booker, fewer Chinese are opting for tour groups and choosing a combination of tours when they arrive in the U.S., such as adventure tours, museum tours or university ones.
‘Uncivilised’ Behaviour Gets Chinese Tourists Sent Home With 10-Year US Visas Revoked: Two Chinese travellers were repatriated upon arrival in the United States after immigration officers found they had “uncivilized [behaviour] records.” Privacy law means the reasons are not public, however likely acts include “damaging cultural relics, gambling, and participating in obscene activities.”
Chinese Sperm Banks Entice Donors with iPhone Cash: Following reports of Chinese consumers giving away kidneys in return for iPhones, sperm banks in China are offering men a less painless option.
Investments & Payments
Apple Pay Begins Entry Into Chinese Market: Apple has registered an entity in the Shanghai Free Trade Zone, with one of its operations described as ‘services and system integration in the field of payments’. It is up against some established and formidable mobile payment systems such as Alipay and TenPay, which accept payments in an expanding list of retailers abroad.
Do China’s Ghost Cities Offer a Solution to Europe’s Migrant Crisis?: There are estimated to be between 20 and 45 million unoccupied homes across China. 21% of urban households own more than one home.
Retail: What Differentiates Hong Kong & Chinese Luxury Shoppers?: Affluent Mainland Chinese are more likely to spend on luxury goods such as watches, bags, jewellery, fashion and accessories, whereas Hong Kongers have their biggest budgets assigned to travel categories according to Agility. Digital played a more significant role in the Mainland than HK. Their motivations for buying luxury were the same though, with the top-5 being 1) Design/styling, 2) After-sales service, 3) Exclusivity, 4) Craftsmanship, and 5) Country of origin.
The shift from luxury purchases can be partially blamed on the Government’s crackdown on gifting, but it also represents altering shopping preferences. Over the past few years, Chinese consumers have increasingly scrutinised over value when researching products and services, rather than assuming something is better because it is more expensive. A similar transition has happened in markets like the U.S. – it just took decades, unlike the few years it took in China. In many categories, Chinese consumers’ sophistication has become similar to Western markets, even surpassing them in areas such as mobile commerce and O2O.
Preferences for smartphones are a lucid representation of the change in spending habits: Between April and June the number of smartphones sold declined 10% year on year, however the value of phones sold actually increased 17%, with the number sales of high-end phones increasing 49%. Consumers are buying better quality phones and replacing them less frequently.
Experiences and health are two segments Chinese are placing a lot of value on. Experiences can come from using a beautifully smooth and functional smartphone to support countless aspects of their lives, or a holiday away from the tour groups with authentic experiences – a trend that has been recognised by companies like AirBnB who are hiring a CEO locally in China. Health spans beyond pharmaceuticals and medical devices and includes things such as safe, healthy food and beverages. This has seen brands like Korea’s Genesis BBQ chain localise in China by cooking in premium olive oil, with sales increasing 300% last year.
In short, Chinese consumers are still prepared to pay a high price for goods and services, if they are getting more value than lower cost alternatives – particularly if is healthier or will give a better, more authentic experience.
For our Shanghai-based readers, China Skinny’s Mark Tanner will be presenting with the Nordic business councils next Wednesday 2 September at 11:30am, discussing tailoring products, services and marketing to Chinese consumers while retaining your country’s point of difference. More information here. We hope you enjoy this week’s Skinny.
Five Insights on Marketing to China’s Millennials: Unlike older generations, China’s 135 million post-90s consumers are focused on the now, instead of building for the future.
¥796 Million Retrieved For Disgruntled Consumers In China: Chinese authorities retrieved around ¥796 million ($130.07 million) in the first half of 2015, not far off the ¥920.02 million awarded for the full 2014. 290,000 individual consumer complaints were made, with household items and electrical appliances, clothing and shoes, communications equipment, home decor and food safety among the most common subjects of complaints about goods.
With New Shanghai Restaurant, Gucci Serves Up Taste Of Tuscany To Grow Sales: First it cut prices by up to half in China. Now Italian luxury fashion label Gucci is trying to sell the dream of the “old country” by launching the 1921Gucci restaurant in Shanghai’s iAPM mall, named after the year the brand was founded. The initiative was led by the change in consumer behaviour, from the pursuit of brands, to the product itself, and now to lifestyle.
Internet, Social Media, Mobiles & Ecommerce
China’s Smartphone Sales Slide 10% Year-On-Year (but not for the reason you think): Even as China becomes increasingly mobile, smartphone sales dropped to 88.7 million units in Q2 from 98.6 million units a year ago, however the value of sales rose 17% to $26.8 billion. Demand for high-end phones – those costing $500 or more – increased 49%, accounting for 17% of the market, versus 10% last year.
China’s Wanda, Baidu and Tencent Launch Ffan E-Commerce Site: FFan, the billion dollar ecommerce venture between Wanda, Tencent and Baidu launched earlier this month with the goal of encouraging online to offline, click and collect type offerings, tying in with Wanda’s physical malls, department stores and cinemas. Although the launch was limited, Wanda is aiming for 100 million loyalty scheme members by the end of the year.
Alibaba vs. JD.com: Executives Weigh In: While Alibaba’s Tmall controls 59% of China’s B2C ecommerce marketplace, JingDong still accounted for a respectable 23% in Q1 this year and is growing faster. Views from Alibaba Executive Vice Chairman Joseph Tsai and JD Mall Chief Executive Haoyu Shen about the challenges the companies face and what’s at stake [subscription required].
Weibo Hits 212M Monthly Active Users, Most Now On Mobile: Weibo’s active monthly users have hit 212 million – 36% up from a year ago, with 85% on mobile. 93 million users are active daily, 34% more than in 2014.
Food & Beverage
87% Of Consumers Globally Think Non-GMO Food is Healthier: 71% of Chinese consumers are concerned about GMO food according to Health Focus International – one of the highest rates in the world.
American Farmers Have To Stop Juicing Their Pigs To Meet China’s Food Safety Standards: America’s National Pork Board is quietly encouraging farmers to stop using Ractopamine due to the importance of exports to the Chinese market – one of 200 countries where it is banned. The drug changes animals’ metabolism so that they develop more muscle instead of fat.
A Parable Of Oreos And Ovens: Oreo has seen its market share drop from 9% to 6% since 2012 as Chinese get more aware about health. Although the ‘Oreo Thin’ sales are looking good, cookies are increasingly facing competition from home bakers, who can create snacks without preservatives and additives. Sales of benchtop ovens have reportedly more than quadrupled since 2008 in China.
Localization Strategy of Genesis BBQ in China: Korean BBQ chain Genesis has localised in China by offering premium cafes that use healthy ingredients such as 100% Extra Virgin Olive Oil. They have also improved the menu and concept to accommodate family dining and implemented extensive Weibo and WeChat marketing. Sales in the chain grew 300% last year.
35% Of The World’s Seafood Supply Consumed In China Every Year: China is expected to consume 50% of the world’s seafood by 2019. Let’s hope not too much of it is like the gelatin shrimp reported in Shanghai.
Airbnb’s Clever Strategy In China May Outshine Uber’s: AirBnB has started its search for a CEO for the Far East, as it focuses on outbound travel from China. The focus on Chinese travelling abroad means that it is likely to have an easier road than Uber in the market.
Buzzwords: China’s Tourism Trends: With China’s tourism market booming, here are a few mainstream and niche categories growing quickly.
The “YouTube Of China” Is Acting More And More Like YouTube: Youku Tudou is following Youtube, Alibaba and Tencent’s foray into content production, pledging ¥10 billon ($1.6 billion) towards producing “professional-generated content,” – high-quality videos made by semi-pros. China’s online video industry generated almost $4 billion in revenue last year, although Youku Tudou spent $80 million in licensing fees just in Q1 this year.
New Wave Of NYC Fashion Designers Launch On Taobao: Over the past week Alibaba worked with five recent design graduates from New York’s Fashion Institute of Technology and another 100 up and coming designers to display their fashion on a virtual Taobao catwalk. To provide extra support, a Taobao partner factory in China produced larger quantities of designers’ outfits that drew sufficient orders during the Aug. 20-23 presale period.