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China briefly had a new richest person last week. He wasn’t at the helm of a tech giant, hadn’t developed a vaccine for Covid-19, and hadn’t saved the planet with an environmental innovation – quite the opposite, he founded a company most famous for selling hundreds of billions of plastic bottles of water.

Zhong Shanshan is the founder and majority-owner of Hangzhou-based Nongfu Spring, which had a sparkling IPO in Hong Kong on 9 September, seeing his net worth climb to almost $59 billion for a spell. Nongfu Spring is China’s largest bottled water producer and a top-3 producer of bottled tea and juice, with profit margins more than double China’s industry average at 21%.

In most cities in China, you would be hard pressed to walk into a supermarket, convenience store, mom & pop retailer or corporate office without seeing Nongfu’s red labels in the chiller or shelves. That can be attributable to much of the success of Nongfu – they have incredible distribution networks which provides consumers with assurance that they’ll be able find their beverages almost anywhere they are. For many Chinese, memories of contaminated and counterfeited bottled water in recent years means that they are more likely to take the safe bet with a brand they recognise. Although there are thousands of bottled water brands in China, only a small handful of those have national coverage – and as with many categories in China – consumers are more likely to trust the biggest brands for safety.

Some would argue that Nongfu doesn’t quite deserve its trusted reputation. Back in 2011, the toxic chemical phenol leaked into the Xin’an River in Zhejiang in what is considered one of the worst water pollution disasters in China over the last decade. Nongfu Spring’s unique selling proposition is that its water is ‘natural’ as opposed to filtered tap water, yet that natural source happened to be the Xin’an River. Then again in 2013, Nongfu’s quality was labelled “worse than tap water,” with looser criteria than the national tap water standards for a number of factors including arsenic and cadmium. Nevertheless, Nongfu Spring bottles continued to be sold everywhere, highlighting the value of effective crisis management and the often-short memories of China’s hardened consumers as we’ve seen with the many geopolitical spats.

In addition to its near-universal China presence and ‘natural’ source, Nongfu Spring’s success can be attributed to smart placement. Back in 2016, when many Chinese were basking in pride that a tier-2 city, Hangzhou, was hosting the G20 Leaders’ Communiqué, Nongfu Spring was the official water of the summit. For less than $0.30, consumers too could be sipping the water presumed to be consumed by President Xi, Obama, Abe, Merkel, Modi, May, Putin, Trudeau and Turnbull, among others. Nongfu also read China’s fledging hip hop culture trend, appealing to the lucrative youth segment, shelling out ¥120 million ($18 million) to be the title sponsor of the first season of Rap of China in 2017 while incorporating some clever integrated marketing. In addition, Nongfu jumped on China’s nascent corporate social responsibility early, giving a small portion from each sale to poor areas.

Nongfu has delivered on basic China trends that other FMCG brands have missed. It recognised that some Chinese consumers prefer products that meet their specific needs rather than generic, and branded water for segments such as toddlers and students. It has tapped into China’s premiumisation trend producing high-end glass bottles following 50 drafts and 300 designs, and is controversially building its first factory outside of China in the tiny New Zealand settlement of Otakiri to export premium pure New Zealand water. As a beneficiary of China’s health trend, it has aligned its natural and healthy positioning by engaging a pricey documentary team to shoot a National Geographicesque ‘mini film’, generating much buzz in the market. Nongfu was also one of the early adopters of plant-based alternatives, launching China’s first mainstream plant-based yoghurt in March last year.

Like many brands in China, Nongfu Spring hasn’t always had a smooth run, but it has read the trends and ensured it did the basics well. You’d be surprised at how many brands don’t. Get in touch with China Skinny to ensure that you’re not one of them!

Click/tap here to see this week’s most important China market and marketing news.

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Consumption Move to Spur Spending: In another government-mandated consumption initiative, the Ministry of Commerce has teamed up with China Media Group to launch a month-long campaign to spur retail sales across 179 Chinese cities. There will be more than 2,800 key activities and events integrating online and offline. More than 100,000 companies are participating, promoting 2 million physical and online services and products. Retail sales rose 0.5% in August from a year ago – the first month of growth this year.

China Continues to Sweet-Talk Foreign Firms, but Business Groups ‘Need Something Solid’: Vice-Premier Hu Chunhua says preferential policies released by the government will apply equally to foreign companies, however market access remains the top concern among European businesses operating on the mainland. A recent American Chamber of Commerce in Shanghai survey found that despite a rise in US-China tensions and a slowing economy in 2019, American businesses in China remained profitable, with 78.2% of companies reporting profits last year, marginally ahead of recent years. 49.2% of American companies expect this year’s China revenues to be lower than 2019 revenues, although a surprising 32.5% expect them to increase. Long-term capital continues to flow into China, including $9 billion in July alone, up 12.2% from a year earlier.

Why Australian Companies in China Aren’t Running for the Door: Relations between Canberra and Beijing seem to be getting worse by the day: A TV anchor detained, journalists fleeing, key imports banned. But Australians doing business in China aren’t heading for the exit just yet.

Are Top Tier Chinese KOLs Refusing to Take on Foreign Brands Based on Country of Origin?: How foreign brands’ engagements with top KOLs are being impacted as a result of geopolitical tensions.

Online: Digital China

Infographic: China’s Lucrative Post-90s Segment – How, What, Where and Who Online: Post-90s are now the largest age group online in China, yet they are unlike any other demographic in the market. This infographic highlights their online preferences and behaviours to shed light into what pushes their buttons and where to push them.

Imported Goods to Steal Limelight in Tmall Gala: Tmall Global is hoping 2,000 cross-border brands will sell over ¥1 million ($146K) worth of products during its Double-11 (Singles’ Day) Festival this year, as cross-border ecommerce soars due to restricted international travel resulting from Covid-19. Alibaba hopes to attract 2,600 new brands to debut this November, centring around cosmetics, baby and maternal, health and fitness, food, and pet goods. Some 22,000 overseas brands from 78 markets attended the gala last year. More than 200,000 products lunched on Tmall Global between January and March this year – and new brands on the platform grew 125% between April and August from a year ago, with gross merchandise value growing 113%. Tmall Global has also announced it would upgrade its overseas warehouse business and officially released the cross-border direct delivery service “Overseas Direct Procurement,” focusing on importing overseas niche products.

Oracle Wins Bid to Become TikTok’s ‘Trusted Technology Provider’ in US: Oracle confirmed on Monday it had struck a deal with ByteDance to be its “trusted technology provider” in the US. The deal, designed to allow TikTok to stay in the country, has been submitted to the US government for approval and commits to locating Tiktok’s global HQ in the US, creating 20,000 new jobs. Microsoft, with Walmart, had been the frontrunner to acquire TikTok’s assets in the US, New Zealand, Canada, and Australia. Walmart continues to have an interest in TikTok and continues discussions.

Premium Food & Beverage

Bricklayer To Billionaire: China’s Second-Richest Man Rose From Rags To Extreme Riches—But Will It Last?: A big IPO in HK for the $50+ billion Nongfu saw founder Zhong Shanshan’s net worth sale past Jack Ma last week to become China’s second-richest man (pre-Jack Ma’s Ant Financial IPO). Nongfu’s margins of 20.6% are more than double the water and soft beverage industry average in the mainland however its stock price to earnings ratios are three times higher than other listed food and beverage peers.

China Becoming Battleground for Plant-Based Meat Makers: Beyond Meat has announced it’s building up its presence in mainland China with two new manufacturing facilities. The company’s R&D team in Shanghai is hard at work tweaking its products to suit the tastes of Chinese consumers. Both Beyond and Impossible Foods have targeted China as a top market for growth, despite Impossible still waiting for regulatory approval to sell in the market. Nestle is expanding its plant-based products factory in Tianjin. Local Chinese companies such as Zhenmeat and Starfield also are expanding their businesses, partnering with restaurants across the country and even offering vegan-based seafood.

Tear down your barriers, EU says after summit with China’s Xi: The EU and China have signed a deal to protect each other’s exported food and drinks items from feta cheese to Pixian bean paste meaning US, Australian or New Zealand producers will no longer be able to use the protected names on their exports to China. Meanwhile, China has banned imports of German pork imports after it confirmed its first case of the African Swine Flu.

‘Different Gender, Different Snack’ Food Promotion Slammed as Sexist: Bai Cao Wei, a well-known snack company has been slammed online for promoting gender-specific snacks in China. While the “girl version” included mostly vegetarian items such as cream-flavoured macadamia, mango chips, and canned peaches, the “boy version” had mostly meat, including beef and pork jerky, as well as a flavoured milk product. Earlier last week steak company Ding Nuo was belittled for its “dad steak” and “mum steak” products.

Overseas Chinese Tourists

Why China is Expanding Access to Duty-Free Shopping: Sanya’s Haitang Bay Duty Free Shop, operated by state-owned China Duty Free Group, served 740,000 customers between 1 July – 18 August, 70% more than in the same period a year ago. They purchased 4.58 million items — from fragrances to cosmetics to luxury watches and bags – 150% more than a year ago. The store set a global industry record with ¥5 billion ($730 million) of sales in 49 days. The industry expects China’s duty-free retail market to expand to ¥200 billion ($29 billion) in three years – four times the current ¥50 billion. Hainan currently contributes 26% of total duty-free sales in China.

Chinese sport Sport

World’s Largest NBA Store Opens in Guangzhou: Shrugging off last year’s tensions, NBA China has opened a two-storey 2,680 square metre store in Guangzhou – its largest globally. The store aims to provide a “cutting-edge, immersive social experience” will sell authentic NBA products, including jerseys, footwear, trading cards, NBA Style apparel, headwear and kidswear. The store is operated by sportswear retailer Topsports and includes a Nike Hoops space.

Autos and Cars

China Car Sales Rebound Accelerated in August as Coronavirus Pressures Eased: Sales of sedans, SUVs, minivans and multipurpose vehicles increased 8.8% last month from a year earlier to 1.73 million units. That followed a 7.9% increase in July. Sales of electric cars increased 45%, with Tesla and GM-SAIC dominating sales despite trade tensions.

Many execs from the world’s luxury brands are likely to be toasting the resilient Chinese consumers who are the bright spot in otherwise abysmal sales. As LMVH’s global sales contracted 38% between April to June, consumers in China shelled out 65% more on their fashion and leather goods than a year earlier. Similarly, Kering’s worldwide revenue declined 29%, whereas sales in China grew 40%. Tiffany’s China sales were up 90% in May from 2019 while they fell 45% in the US in the first half of the year. The list goes on…

On the surface it may seem that Chinese consumers are out storming luxury stores, yet the reality looks a little different. Whilst the pandemic has seen Chinese consumers spending more on many products from milk to motorcars, they’re actually spending less on luxury than pre-Covid. In 2018, just 27% of Chinese luxury purchases took place in Mainland China according to Bain. Although the portion of luxury sales in China was increasing, domestic turnover still accounted for less than a third when the pandemic hit. So luxury sales in China would need to grow well over 200% just to match 2019 sales, particularly given the daigou luxury sales have slowed to a trickle. Many daigou have been unable to travel, international shipping is slower and less certain, and consumers can be worried about overseas packages being infected, on top of higher import taxes and more customs inspections than ever.

Back before the pandemic, when Chinese travellers could still go abroad, shopping was becoming a less dominant pastime on trips, yet many would still bring home suitcases stuffed full of handbags and watches from Paris, London, New York, Tokyo and Hong Kong. Prices of luxury goods overseas were as much as 30-50% lower, there were more ‘unique’ products to choose from, and you’d get solid street-cred taking selfies with purchases in the world’s fashion capitals.

We should be commending luxury brands that consumers are spending more in their stores and online in China than ever before, but we should also take stock that, overall, Chinese are buying less luxury goods than they have for a long time. That isn’t just because they can’t jump on the next Airbus to France or buy from their daigou agent on WeChat. There is an element of global uncertainty influencing purchase decisions, but above all, the shock of the pandemic has seen many consumers recalibrate their spending.

China Skinny has spoken to thousands of consumers since the outbreak, in addition to tracking online conversations and trending preferences and behaviour. During the lockdown consumers had a chance to reflect on what is important to them, their purpose and, subsequently, what they buy. From our analysis, things such as the value of family and self improvement have dialled up much more than rushing out to buy beautifully-made bags or shoes.

With that aside, there is no disputing the good work that luxury brands have done in the Mainland. There are many best practice examples that marketers in most industries could learn from including their digital and o2o initiatives, pop-up stores and their overall adaptiveness, which has helped drive their strong domestic sales during these challenging Covid-era times.

The future for luxury brands in China is bright. Chinese consumers continue to define themselves by consumption more than consumers in most other countries and many are driven by the status that accompanies luxury purchases. Luxury brands – and any brand for that matter – could further dial into the shifted sense of purpose and priorities of Chinese consumers to grow even more. Get in touch with China Skinny to discuss how we could help you do just that.

Click/tap here to see this week’s most important China market and marketing news.

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Chinese Shoppers Splash on Luxury Goods, but Still Won’t Eat Out: Bored after months of strict social distancing measures and unable to vacation overseas, wealthy Chinese consumers are seeking comfort in retail therapy. They are back to binging on luxury handbags, cosmetics and cars. But this shopping enthusiasm is not extending to mass consumption in sporting goods, beer and restaurants. Higher-end brands have rebounded faster. Companies promoting healthy living – dairy firms in particular – have been another big beneficiary as consumers strive to take better care of themselves. Mengniu reported 19% revenue growth in the June quarter and Yili was up 23%.

Xi Jinping Calls for Freer Service Trade as China Tries to Counter Decoupling: The China International Fair for Trade in Services (CIFTIS) – the first big trade fair since Covid-19 struck – kicked off last Friday in Beijing with President Xi Jinping saying that China will open up its market further to the services trade and calling upon other countries to help forge an “open and inclusive” environment, promoting China as the leader to restore global trade and growth after the coronavirus outbreak.

Shanghai to Stage Four More Shopping Galas This Year to Boost Spending: The Shanghai municipal government hopes to further stimulate consumption in areas such as automobiles, home decoration, home appliances and gold and jewellery. The rest of the year will be filled with the Golden Autumn Shopping and Tourism Festival from September to October, a gala in honour of the China International Import Expo from mid-October to early November, an online shopping carnival from November to December and a New Year’s Eve bonanza from mid-December to the Chinese Lunar New Year next year. The last two-month-long Double Five Shopping Festival from May to July grossed over ¥500 billion ($71 billion). Shanghai was the only Chinese city with retail sales more than ¥600 billion ($88 billion) in the first half of 2020.

Marrying a Top Chinese Trend and Subculture: The Pet x Hanfu Collaboration: Entrepreneur Wu Qiuqiao has combined China’s fast-growing pet trend with its Hanfu subculture, creating a super-cute product and successful business venture.

Mental Health

In China, Therapy is Going Mobile: A wave of therapy apps is shaping how the country’s rising middle class sees itself and the world. Self-help titles make up an estimated third of China’s book market, and a therapist can be summoned with a few taps on a smartphone screen. While 173 million people live with a mental health disorder in China, the lingering stigma of treatment means that only one in 10 of them end up seeking it.

Online: Digital China

Infographic: China Online User Trends & Profiles: Chinese online usage has skyrocketed since the pandemic. We take a look at how that usage has changed.

China Awakens to Digital Privacy Concerns: Although China’s tech giants have access to, and use significantly more data than their Western counterparts, Chinese consumers are standing up to internet giants for their digital privacy in an unprecedented way. In 2018, Baidu was sued by a consumer rights protection group for collecting user data without consent. The lawsuit was later withdrawn after Baidu removed the function to monitor users’ contacts and activities. China is in the early stages of setting up a data protection regulatory system. The Cyber Security Law, effective 1 June 2017, included a set of data protection provisions in the form of national-level legislation for the first time. The 2018 e-commerce Law incorporated data privacy protections for consumers such as the ‘right to be forgotten’, similar to the EU’s General Data Protection Regulation. China passed a new Civil Code in May 2020 to take effect in January 2021. It marks a key step in developing a legal framework governing individual data privacy, defining as a personality right for the first time in the statute [paywall].

The Next Target for TikTok’s Parent Company: Payments: ByteDance, owner of Douyin, Toutiao, and other popular apps in China, has acquired a payment service called UIPay, which is attractive due to its highly sought-after payments licence. ByteDance is commanding an increasing share of screen-time in China, and has made clear its objectives for ecommerce. With its algorithms and startup energy, it is likely to be one to watch.

Kaola Announces Strategic Upgrade to Help Overseas Brands and Domestic Companies Reach China’s Middle Class: Cross border offerings on Tmall Global differ slightly from Kaola’s. Tmall Global has a wider product selection targeted at general consumers, while Kaola’s focus is on higher-end and niche items, often from boutique international brands. Kaola is the first membership-based ecommerce platform in Alibaba’s digital ecosystem. Membership to Kaola Global’s VIP program costs ¥279 ($40) a year and provides more personalised shopping experiences, and a dedicated customer service rep, among other benefits. 81% of VIP members say they prefer imported food.

Premium Food & Beverage

With Rising Population and Declining Arable Land, China May Be Staring at a Major Food Crisis: China faces a daunting task to feed 22% of the world population with only 7% of the global arable land. The mismatch between agricultural (grain) supply and demand in China, is high. China has struggled to feed its 1.4 billion people, amidst recurrent natural calamities (floods, draughts), shrinking arable land, severe water shortages, depleting workforce, forcing food prices up 13.2% in July from a year earlier. The current anti-food waste campaign hopes to reduce the 93 grams of waste per person per meal – enough to feed 30-50 million individuals for a year.

Why China’s Food Delivery is Better Than Yours: In terms of scale, accessibility, and innovation, China’s food delivery is just plain better. As of 2020, China’s online food delivery market generated the equivalent of $45 billion annually — nearly double that of the US, driven by the 83% of white collar app users working ‘996’ schedules, extreme incentives and super-quick delivery. On average, delivery fees cost the equivalent of one dollar, but disappear entirely when you reach a minimum spend –  yet delivery people can earn well above the average salary.

Premium and Luxury

Increasing Prices in Covid-19? Chanel, Louis Vuitton Show It Works: A long list of luxury brands have raised prices this year, particularly on popular handbag lines, which have among the highest profit margins in the industry. More price increases could come this year, but the strategy is a temporary fix: there are limits to how many times prices can go up, and once international travel resumes, brands will have to readjust. Luxury brands have been normalising their regional pricing for the past several years, which had floated above 50%. In June that differential was at around 30%.

Are Luxury Brands Losing The Battle Against Alibaba’s Counterfeiters?: This year Taobao was put back on the United States’ Notorious Markets blacklist, which highlights marketplaces that facilitate “substantial copyright piracy and trademark counterfeiting. The rationale is evident as soon as one goes to the landing page of the Taobao section of the Alipay app, where there are cheap, knock-off products that mimic brands such as Apede Mod, Dior and Saint Laurent.

The Fashion World Looks to China: Paris men’s fashion week was entirely virtual this year, and Louis Vuitton didn’t show anything at all. Instead, the venerable French couture house put on a blockbuster show in Shanghai in August. The show attracted 84,000 views on Vuitton’s website – compared to its coverage in China where it received 68 million views on Weibo, 18 million on Douyin, 8 million on Tencent, and millions more on other platforms. Fashion industry association Altagamma now expects Chinese consumers to account for 50% of the global luxury market as soon as 2025.

Luxury Offline Activations Are Back in China: Luxury offline activations in China are back to pre-COVID-19 levels as consumers feel more comfortable shopping back in brick and mortar stores, driven by pop-ups and exhibitions. Online buzz from events and fashion shows are yet to recover, only receiving about half the mentions from a year ago, although this typically spikes around October and November.

China is notorious for its festivals, which are increasingly morphing into “themed shopping occasions.” When it comes to love, there are six official days on the calendar which fit the mould of the Western Valentine’s Day. Qixi, or the ‘Double Seven Festival’, on August 25 this year, is thought to be the most romantic and authentically Chinese. It celebrates a 2,000 year old love story with its roots in Chinese mythology; a mortal man, a goddess, forbidden love, talking oxen, astrological obstacles and bridges made up of magpies – all your ingredients for a powerful tale of romance.

What better way to demonstrate romance than through consumption. Qixi has turned into a major shopping holiday, with sales in some categories jumping by nearly 120% for the day alone in 2019 – from predictable categories like luxury, to home goods and outdoor. This year Alibaba’s Tmall and Taobao saw pre-sales of Qixi gifts peak a week prior to the festival date, an increase of 118% from 2019.

Domestic travel the weekend before also saw a boost as couples sought a romantic weekend away as China’s gruelling 996 work schedule has resumed for many office workers. Hotel reservations on travel platform Qunar were up 40% across the country compared with the prior week, while Alibaba’s Fliggy reported a 34% YoY increase. For those staying closer to home, young romantics finally filled the cinemas again, with patronage just 10% below last year’s pre-Covid Qixi.

We mentioned several weeks back an expectation of diversification in brands’ marketing this Qixi away from purely hetero couples and even away from love/couples. The festival formed an opportunity for brands to engage in  LGBTQ+ friendly marketing which has seen increased visibility since the start of 2020. Jewellery brand Cartier released a video campaign with the caption, “Trinity rings, witnessing all sorts of love and emotions in the world” with ambiguous imagery around same-sex couples.  Tmall caused confusion and debate in their advertising – one campaign showed two men riding bikes together and described them as being ‘father and son’ (“Father and son can be brothers, enjoying life’s journey”), and a female couple as friends. Dolce & Gabbana also showed two female virtual models in their Qixi ads, but insisted that they were not meant to be romantically linked and that Qixi can also be about spending time with “good friends”.

Let’s not forget about the single ladies (and men), with the rise of China’s single economy which ready-to-drink alcohol brand Rio tapped into with its campaign centering around famous actress Zhong Dong Yu. In the various clips we see her sipping Rio in a cosy apartment all while cooking herself a delicious meal as she muses over ex boyfriends, journaling about future career goals and even winning the lottery.

However, some singles are feeling sour about their relationship status. Tapping into ‘sang culture’ (a self-deprecating ‘doom and gloom’ type of humour popular with Gen Z) Tmall launched a #先酸为敬# (‘cheers to sourness’) campaign. The short video shows a single man at the bar tipping back a sour lemon drink who can’t help but shout 酸!(sour) each time he sees an in-love couple. The platform even rolled out a feature allowing users to virtually grow their own lemon trees, which will eventually result in real fruit being sent.

For those Gen Z consumers with a taste for the finer things, many luxury brands have been engaging in some daring, hit-or-miss Qixi campaigns. Balenciaga released limited-edition handbags on their Tmall flagship, with “他爱我” (“He Loves Me”) written in large, bold graffiti font, which netizens received to be ‘down market’ and even ‘trashy’. Gucci put out a limited edition range of products just for Qixi, with entirely new print featuring stylised apples (a play on ‘apple of my eye’), available on their WeChat store as well as boutiques. The hashtag “Gucci Qixi” on Little Red Book has reached 126,000 views.

Brands are now looking towards Golden Week (start of October) and Singles Day (11 November) as the next big campaign rollouts. Both festivals will incorporate the fast changing world of love and lust in modern China, so get in touch with China Skinny for insights and strategy if you need help in getting your message right.

Click/tap here to see this week’s most important China market and marketing news.

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Chinese Consumer Sentiment Perks Up, Bolsters Economic Recovery: China’s national Consumer Confidence Index led 24 countries surveyed including the United States, India and Brazil in August by rebounding to 72.9 points, becoming the only economy to show a gain from January, according to Ipsos. China’s retail sales of consumer goods rose by 0.85% month on month in July, a moderate increase from 0.83% in June, maintaining a six-month streak of expansion after a contraction in January. China’s services sector grew at the fastest pace in over two and a half years in August.

Chinese Social Media Users Stand up Against Body Shaming: Recent photos of famous actress Gong Li that showed her curvier figure have gone viral on Sina Weibo, receiving over 850 million clicks. The public’s focus on her appearance has sparked an online wave of body positivity posts, with web users rejecting the all-too-common phenomenon of body shaming on Chinese social media.

Online: Digital China

ByteDance Platform Douyin Tightens its Ecommerce Policies to Compete With Alibaba and JD.com Ahead of Singles’ Day Festival: Douyin is loosening ties with third-party e-commerce platforms to prepare for the Singles’ Day shopping festival on November 11. Merchants must also use Douyin’s own digital marketing matching service to find key opinion leaders (KOLs) and cannot promote products from third party ecommerce websites through its live streaming service.

Premium Food & Beverage

Consumers Work Up An Appetite for Meal Replacements: Amid rapid economic development and increased awareness of healthy eating, the meal replacement market in China has grown at an annual rate of more than 30% in recent years, despite making a late start. The market is expected to hit ¥120 billion ($17.5 billion) by 2022. 22% of consumers spent more than ¥1,000 ($146) a year on food replacements – more than 60% of them take meal replacements at least once a week, and some 20% do so once a day. Global brands have taken the lion’s share of the Chinese market. About 50% of consumers in China bought “healthy eating products” over the past year, with those born in the 1990s in particular showing increased awareness of this market.

Tianjin Restaurant Introduces “Meal Boxes for Women”: China’s anti food waste campaign launched last month, and is still in full swing and noticeable on China’s social media where new initiatives to curb the problem of food loss are discussed every single day. The special lunch boxes for women were introduced with 50g less rice after female customers had too much leftover.

China Doubles Down on Australia Trade Dispute With New Joint Probe into Wine Subsidies and Dumping Claims: China has further escalated its trade dispute with Australia by initiating a second investigation into Australian wines in a matter of weeks, this time focusing on subsidised products. The Australian government is alleged to have offered 40 wine subsidy programs that allow producers to offer cheap Australian wines that unfairly compete with Chinese products.

Overseas Chinese Tourists

China’s Air Travel Recovery Shows Power of Vast Home Market: Passenger numbers for China Eastern, China Southern and Air China in July rose about 25% from June as travel within China picked up, flying a total of 22 million passengers domestically. Ticket bookings in the second week of August reached 98% of last year’s levels – the first time a major section of the global aviation market has returned to normal levels since Covid. International passenger traffic was still down 96% or more from a year earlier for the big three airlines. China’s theme parks are riding a boom as tourists have nowhere to go.

FIT, Customised and Bleisure Travel: Trends Among Chinese Travellers in the New Normal: 90% of the travel agencies in an ITB survey said travellers want Covid prevention at destination. Over 70% stated sanitary measures in place will also become key concerns, as will stable flights schedules. Island holidays, family trips, outdoor/adventure and medical tours are among the most popular travel themes in the coming year.

Payments and Investments & Banking

Ant Group Cites US Risks in Filing for Hong Kong, Shanghai IPO: Geopolitical tensions have led to an IPO on Greater China exchanges for Ant Financial, which could mark one of the biggest debuts in years. Ant’s Alipay processed ¥118 trillion ($17.2 trillion) in transactions in the year ended June, yet the contribution from digital payments and merchants services accounted for just 35.9% of revenue. The firm is targeting a valuation of $225 billion, which would match Bank of America’s market capitalisation, and only be smaller than JPMorgan Chase & Co. among US banks.

Designers and Fashion

Can China Look Past Counterfeits and Superstition in its Burgeoning Second-Hand Fashion Market?: Superstitions around preowned clothes being seen as inauspicious in China and an additional taboo surrounding clothes worn by people who may have since died isn’t as important with Chinese consumers as it once was, with people now mostly worried about hygiene when considering second-hand clothes. BCG forecasts that preowned goods will account for 9% of all luxury sales globally by 2021, yet they make up just 2% of the country’s luxury goods transactions in China.

Overall Beauty

Has China had Enough of Celebrity Beauty?  Last month Victoria Beckham joined a growing list of western celebrities to debut her beauty line VB Beauty on Tmall which had netizens pondering whether China has become the pension fund for aging Western Divas. Her weak sales are comparable to Kim Kardashian’s 2018 China launch, proving it takes more than a celebrity name to appeal to China’s beauty consumer groups.

Video & Entertainment

Power of Love Pushes China Cinemas to Post-COVID-19 High: China’s box office raked in ¥508 million ($73.5 million) on 25 August for the Qiyi Festival – just 10% below last year’s box office for Qiyi Festival and the biggest single-day takings since cinemas were allowed to reopen in July [paywall].

A Change of Negative Stereotype, Beijing Looks to Boost Esports: A decade ago, Chinese state media bashed “gaming addiction” and lauded electrocution as the cure. Today, even People’s Daily has an esports channel, and Beijing is developing itself as the esports capital of China.  The Esports Beijing 2020 initiative appears to be part of China’s massive, multi-year, ¥10 trillion ($1.5 trillion) “New Infrastructure” plan. China’s esports users reached 480 million in the first half of 2020, up 9.94% year-over-year.

The coronavirus is likely to change the face of retail the world over. Brick & mortar retailers have taken the double-hit of falling consumer spending, and a pivot to ecommerce as consumers seek to minimise their risk of infection in public spaces.

The numbers in China highlight the shifting dynamics of retail in this market. Between April and June this year, retail sales of consumer goods were 3.9% below 2019, while ecommerce platforms had their biggest quarters yet: Tmall sold 27% more worth of goods than the same period last year. Its cross border platform Tmall Global was up 40%. JD’s sales increased 47.4% and Pinduoduo climbed 67%, with an extra 81.4 million monthly active users on its platform since March.

From what we’ve seen, many of China’s new online shoppers have overcome their initial barriers to ecommerce, and are likely to continue shopping on their phones even after the pandemic wanes. As a result, many brick & mortar retailers from before are unlikely to be sustainable.

Yet the outlook for physical retailers isn’t as grim as some may think. A study by Savills found that footfall at high-end shopping malls in three of China’s top five cities last month had returned to, or exceeded, pre-virus levels. This has been helped by the inability to travel causing many Chinese to buy their luxury wares in China, when they’d normally buy them overseas. But it is also driven by the simple fact that many Chinese still rate shopping as their favourite pastime and a genuine form of entertainment.

Whilst there are positive signs for brick & mortar retail in China, the new pain points from the pandemic means that retailers need to work harder than ever to attract shoppers.  Many retailers and caterers have used the Covid downtime to renovate their premises to create more interactive and entertaining in-store encounters. Some are incorporating art into their retail experience and others – particularly luxury retailers – have kept things new and fresh by rolling out pop-up stores aligned with festivals and trending themes.  On top of that, 188 new stores in Beijing (including 96 eateries/cafes), 173 in Shanghai (69 eateries), 192 in Shenzhen (60 eateries) and 128 in Guangzhou (84 eateries) have opened since June.

Even the ecommerce giants have continued their drive into the brick & mortar retail space. Late last month, JD announced it had completed a full buyout of China’s third-largest home-appliance chain 5STAR, and recently announced plans to roll out 20 modern E-Space stores in first tier cities and thousands of other stores beyond. In April, Pinduoduo invested $200 million into appliance retailer Gome. Alibaba has long been growing its physical footprint, particularly in the FMCG category, owning a share of many of China’s top supermarket chains. Their department store InTime, has used smart o2o integration to see their revenue recover despite footfall being just 70% of pre-Covid levels.

In short, physical retail in China remains vibrant for stores who connect with shoppers through interactive and engaging experiences. Get in touch with China Skinny to learn more about how we can assist with refining and integrating your retail experience.

Click/tap here to see this week’s most important China market and marketing news.

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Malls, Shopping Centres Change With Times: During the past several months, when fears of the virus kept shoppers at home, many retailers and caterers have used the downtime to renovate their brick-and-mortar stores to make them more appealing. More than 20 stores have been altered in Beijing’s Taikoo Li Sanlitun shopping destination. Apple opened an entirely novel store twice the size of its original, introducing several firsts for Apple. Shanghai Xintiandi has increased the ratio of the retailers of cosmetics, lifestyle products and fashionable brands in order to diversify shopping options.

How Mixing Art & Retail Can Work In China (And How It Can’t): In December 2019, one of China’s leading shopping malls had a flock of sheep in its lobby, causing debate over whether the sheep were real or simulated to go viral on social media and earning countrywide recognition for its innovative environment. The most successful examples of incorporating art into retail are those that contextualize artworks within retail space and engage customers. Chinese Gen-Zers tend to view consumption as a combination of expressions, belongings, and verifications of their personalities or interests.

Premium Retailers Ride China’s Recovery From Covid-19 Crisis: Like in many countries, the relative stability of upper middle-class incomes in China throughout the pandemic has enabled many white-collar workers to work and ride out the crisis from home. In contrast, up to 80 million Chinese people, mainly lower earners in services and manufacturing, have lost their jobs this year as a result of the pandemic, according to the state-backed Chinese Academy of Social Sciences. From cars to sportswear and liquor, foreign and Chinese companies who provide luxury items have seen sales growth return more quickly in the second quarter.

All Work and No Play – China Complains of Long Working Hours Culture: Chinese are lamenting their life as “corporate slaves” online after a report was released highlighting how the average Chinese employee only has 2.42 hours of time per day when they are not at work or asleep, down by 25 minutes from last year, with over half of the 100,000 respondents saying they have been sleeping less.

US Executives Who Left China Amid Pandemic Are Stuck Abroad—and May Never Return: An estimated 250,000 foreign executives can’t get back to China, hurting business operations. With tensions between the US and China at their worst in decades, the American business community—traditionally a buffer in conflict between the two sides—risks being hollowed out by the travel freeze [paywall].

Online: Digital China

Alibaba’s Daniel Zhang on Post-Covid Opportunities and Consumer Behaviour: Annual active consumers on Alibaba’s China retail marketplaces reached 742 million, up 16 million from April to June. JD’s annual active customers grew 30 million to 417 million and Pinduoduo’s climbed to 683 million- 200 million more than a year ago (although spending a lot less than Alibaba and JD). Hoping not to face the same fate in the US as WeChat and Tiktok, Alibaba has told Trump that the online retailer’s policies “support American brands, retailers, small businesses and farmers”. On the subject, Tmall Global has launched its first virtual pitch event aimed at helping US small and medium-sized businesses expand globally. In the last three months alone, Tmall Global said it has launched more than 100 US brands on the platform, more than double that of last year.

JD Outlines Aggressive Expansion Strategy for Mainland China: JD will open 20 E-Space stores in first tier cities, 300 home-appliance flagship stores in prefectural-level cities and 5000 stores in towns and villages by 2025. JD has also announced completion of the full acquisition of 5Star, to be renamed JD 5STAR – China’s third-largest home-appliance chain, with annual sales of more than $2.6 billion.

Trump Administration Signals US Firms Can Use WeChat in China: The Trump administration is privately seeking to reassure US companies including Apple that they can still do business with WeChat in China. A partial WeChat ban could mean that companies like Apple and Google could offer it in their China app stores and businesses like Starbucks could continue to sell coffee or accept payment via the app in China. The intention is to prohibit any downloads or updates of the WeChat app from US app stores, according to people familiar with the discussions.

Premium Food & Beverage

New Restrictions in China as Covid-19 is Found on Frozen Food Imports Again: Chinese officials have announced tightened controls and inspection requirements on meat and seafood imports after more traces of the virus were found on packages of imported frozen food from Latin America. Local companies must obtain certification that strict sanitary controls are in place for production, packaging and transport of the shrimp. At Chinese ports, the screening of all incoming refrigerated containers holding meat or seafood has caused bottlenecks and delays. Since the beginning of July, temporary bans have been imposed on frozen food from 23 companies from various countries, including the US, UK, Brazil and Germany. Meanwhile, pork imports hit a record 430,000 tonnes in July.

‘Australia Made’ Label No Longer Enough to Convince Chinese Consumers: Most Chinese respondents in a small tier-1 survey were not sure whether a steak labelled ‘Australian cut and packaged beef’ really came from Australia, reinforcing Chinese consumers’ limited trust in labels. Consumers preferred Australian beef which was portion cut and packed in Australia, citing concerns of counterfeiting, substitution and adulteration in Chinese processing plants. Backing-up origin claims with blockchain tech would boost trust and potentially value, according to the research.

Chinese Avocado Imports Plummet by 19%: Few avocados were consumed before 2013 in China, but then imports soared – until 2019 when the market started to flounder. Peru, Chile, and Mexico currently dominate the Chinese imported avocado market. In 2018, NZ avocados were allowed in, followed by Colombian and Filipino fruit late last year. Californian Hass avocados were also given access in April this year, in addition to growing domestic supply in Yunnan and Guangxi providing more competition for the market.

Pinduoduo’s Latest Aim: Sell $145 Billion of Farm Produce in 2025: Pinduoduo wants to lead the digitization of China’s agricultural sector, believing its “group-buying” approach can help standardize growing practices and bring economies of scale to small farms, coupled with affordable logistics. Consumer insights will also help farmers make more informed decisions across planting cycles, including what to plant and when to harvest. Just 2.5% of China’s agricultural goods were distributed online last year – around ¥400 billion ($58 billion), a 27% increase from the year before.

Designers and Fashion

Here’s Why ‘Princess Style’ is All the Rage With China’s Gen-Z: Young adults in China have become obsessed with Disney princess feminine archetypes thanks to a new online trend. Many are proclaiming themselves to be “escaped Disney princesses” and are showing off their princess-style fashions (oversized bubble sleeves, ruffle skirts, and princess-style makeup looks) on social media. As the concept of “womanhood” becomes an increasingly heated discussion topic in China, many Gen-Zers are reinterpreting what it means to be a powerful woman while embracing femininity through their fashion tastes.

Cute, Fluffy Pets

Best Paw Forward: The Skinny on the 2020 Pet Fair Asia in Shanghai – the World’s Largest Pet Supply Expo: China Skinny was at last week’s Pet Fair Asia in Shanghai, which saw record numbers – even without the foreign visitors. Interesting offerings included everything from pet dating apps to pet funeral services.

Premium and Luxury

The Luxury Industry Is Turning to Pop-up Stores to Win Over Chinese Millennials: Luxury brands in China are launching experiential, omnichannel pop-up stores to cater to tech-savvy Millennials. For Chinese Valentine’s Day (Qixi) on August 24, Fendi launched pop-up stores in Beijing and Chengdu to celebrate its newest capsule collection, in partnership with Mr. Doodle. Also celebrating the festival, Dior launched pop-up stores in Chengdu, Beijing and Shenzhen to celebrate its new love-themed Dioramour capsule collection. KOL Angelababy – Dior’s main brand spokesperson in China – along with brand ambassadors Liying Zhao and Jing Tian, attended the opening ceremony in early August. In June, Burberry set up Animal Kingdom-themed pop-up stores in Shanghai, Shenyang and Nanjing to show off its newest spring 2020 collection. Bottega Veneta unveiled its mirror-covered “Invisible Store” in Shanghai’s Plaza 66 mall to launch the brand’s pre-fall 2020 collection.

There are few industries which have taken a hit like tourism since COVID-19. Whilst the ramifications have been hardest on airlines, hotels and tourism operators, many other categories are likely to feel the impact. As we’ve noted before, international travel increases exposure to, and affinities with, foreign products and lifestyles, strengthening the likelihood of buying those products and services down the line.

With Chinese international travel grinding to a halt since the outbreak, brands selling everything from food to cosmetics to education may have to work a little harder until Chinese consumers are back jet-setting again. It could be years before travelling is back to the free-flow, virus-free ways of pre-COVID, but last week’s loosening of travel between China and 36 European countries point to a Beijing opening up to slightly-freer travel as it tries to get on with the new normal.

The good news is that Chinese travel is recovering and will continue to over a number of stages. The first stage happened around April, mainly driven by the Qing Ming (Tomb Sweeping) Festival long weekend, when many Chinese shook off the cabin fever to visit tourist sites – mainly in their home cities or cities close by.

The second stage is happening as you read, where travellers are zigging and zagging across China – but they are travelling differently from a year ago. Travel providers are increasingly promoting their clean environment and sanitation, alongside flexible cancellation policies. The top-2 destinations in Labour Day holiday in May 2019 were Sanya and Xiamen. But they both dropped off the 10-most visited list this year, with 9th-placed Zhuhai, as they are typically reached by plane. Whereas the top cities in 2020 were all easily got to by the ‘safer’ high speed rail or roads: Shanghai took the top-spot this year up from number 6 in 2019, and Shenzhen, Nanjing and Changsha, were new to the top-10.

On paper, it looks like domestic travel has bounced back to pre-COVID rates, with hotel vacancies similar to January levels and domestic air travel at 90%. Yet many of these travellers have been tempted by significant discounts meaning full hotels and planes aren’t realising the revenue that they were making a year ago. Airlines such as China Eastern have offered all-you-can-fly deals every weekend for the rest of the year for as little as ¥3,322 ($479). Budget airline Spring has gone one better selling all-you-can-eat flights every day for 2020 from ¥2,999 ($433), with an additional ¥50 ($7) per flight for airport tax. And while you’re away, with the Everywhere Journey offer, you can stay weekends and holidays in over 300 quality brand hotels in 100+ cities in China for the next two years for the absurd combined rate of ¥668 ($96) – although consumer comments hint that you may have to wait a couple of months for an available room.

China’s leading online travel agent Trip.com (Ctrip) is also stoking Chinese consumers’ travel bug by tapping into the livestream buzz. Chairman and co-founder Liang Jianzhang has done numerous regionally-themed livestreams (complete with costumes) offering cheap rates on domestic travel, but he is now moving into international destinations.

Short-haul and ‘safe’ destinations are likely to be the next stage of China’s post-covid travel evolution. Trip.com’s livestreams are showing some early promise that Chinese travellers are keen to fly abroad again. Although they still don’t know when they will be able to travel overseas, Chinese have been prepaying for travel deals overseas. Trip.com’s July livestreams saw 1,000 rooms at Singapore’s Marina Bay Sands hotel sell out in 7 seconds. Similarly, 9,000 rooms in Japanese hotels and 23,000 rooms in Thailand were sold, with flexible, no-risk booking conditions. Last week, over ¥1 billion worth of travel was booked in the Maldives, alongside some healthy reservations in Fiji and Mexico through the livestream.

Although there is likely to be latent demand for overseas travel when it is allowed, its fair to say that Chinese are currently doing limited research in far flung locales at this stage. As this destination exploration data on Trip.com illustrates, search volume for most long haul destinations is well under a tenth of what it was in December 2019, having plateaued since April. Interestingly, even though a Global Times poll found 90% Chinese netizens disfavour US amid tensions, and its likely tourists won’t be able use WeChat or WeChat Pay when they visit the country, the US has overtaken New Zealand and Australia to become the most-searched long haul destination on Trip.com since February.

The final stage of the Chinese traveller return, will be longer-haul, more adventurous trips. The world is likely to be a different place by then and tourist behaviour will not be the same as before. We can look to domestic travel for some clues into what may be important for the future Chinese traveller abroad, and marry that up with lifestyle, food, entertainment, shopping and other wider consumer trends to ensure that we can connect with the travellers when they start considering their overseas trips. Get in touch with China Skinny to discuss how we can assist.

Click/tap here to see this week’s most important China market and marketing news.

This week’s China market and marketing news:

Consumers,  Chinese Consumers

How Is Chinese Consumers’ Interest in Other Countries Changing?: 5 charts: While travel searches to overseas countries have dropped more than 90%, it by no means point to a more insular Chinese public. Searches for other countries on other digital channels have trended up since COVID.

First Into the Virus Slump, China Is Proving the Fastest Out: Sales of goods in China turned positive for the first time this year in July, growing 0.2% from a year ago on the back of rising auto sales (up 7.9% in July), yet spending on restaurants and catering was down 11%. That’s even as hotel vacancies are back to January levels and domestic air travel is at 90% of where it was at the start of the year. Overall, retail sales fell 1.1% in July, lower than the projected 0.1% growth.

The Fortune Global 500 is Now More Chinese than American: Mainland China and Hong Kong now outnumber the US for Fortune 500 companies 124 to 121. When Taiwan is included, the Greater China total jumps to 133. Last year, Greater China was 129 and the US the same, at 121. Walmart tops the list again, followed by three Chinese companies – Sinopec, State Grid and China National Petroleum. There were no Chinese companies on the list when it was first released in 1990.

ShanghaiPRIDE Shutdown: Team Members Asked to ‘Have Tea’ with Police: After running for 12 consecutive years, ShanghaiPRIDE, an annual festival that celebrates China’s LGBTQ movement, announced abruptly last Thursday that it would cancel all upcoming activities.

Online: Digital China

Consumer-Oriented Lessons from Xiaomi CEO Jun Lei: Looking back on 10-years since Xiaomi launched, Simon Chen reflects about what has made CEO Jun Lei so successful and how he represents an increasingly savvy and assertive China company which is growing beyond the mainland.

95% of Chinese Consumers Would Rather Keep WeChat and Lose their iPhone: If President Trump’s executive order bans iPhones from listing WeChat on its App Store, 95% of Chinese iPhone users would switch brands.

Premium Food & Beverage

China Inflation Rose 2.7% in July, Driven by Higher Food Costs: China’s food prices rose 13.2% in the year to July, with pork up 87.5%, not helped by floods and disrupted agricultural production.

‘Clean Plate Club’ Stars Targeted by China’s Food Waste Campaign: Rising food prices have been a driver for China’s ‘Clean Plate Campaign’ which has seen Xi Jinping describing the country’s food waste as a “shocking and depressing” phenomenon. Fake eating, induced vomiting, promotional overeating, and other behaviours that involve waste have been banned online as livestreaming stars famous for eating absurd amounts of food in their shows got slammed by state media and netizens. A restaurant in Changsha trying to reduce food waste by weighing customers has been forced to apologise after public backlash.

China-Australia Trade Dispute Extends to Wine as Beijing Targets Cheap Imports in Anti-Dumping Probe: China’s Ministry of Commerce has confirmed the start of investigation following a complaint from the China Alcoholic Drinks Association on behalf of the domestic industry. Ironically, Australian wine has the highest average price of the top-10 wine exporting countries to China, although prices are dragged down by fakes in the country.

China’s Durian Imports Exceed $1.6 Billion in First Half of 2020: Durian imports in the first half of 2020 grew 73.5% from a year earlier, following a 47% increase in 2019. Durian have replaced cherries as the top-valued fruit imports, yet just 1% of Chinese consumers have tried them according to Fresh Plaza.

Overall Beauty

Shiseido Signs JV With Ya-Man to Create Anti-Aging Devices: Shiseido will bring its knowledge in skin care to the table while Ya-Man’s expertise in the beauty device business and high recognition among Chinese consumers will be invaluable as the new company develops and markets its Made in Japan anti-aging devices.

US Sunscreen Brand Supergood Makes a Splash in China Amid Covid-19: Sales of suncare products on Tmall Global grew 90% in 2019 from 2018. More than 20 international brands have joined the platform since the beginning of 2020.

Designers and Fashion

Uniqlo Opens 19 Chain Stores in China: Uniqlo has opened 19 new stores in China this month, entering six new cities as the chain explores more third-tier and lower cities, as well as launching more apparel suitable for Chinese consumers. The chain acknowledged an impact on customer flow in stores as a result of COVID-19, however since May, its China retail sales had recovered to the level of the same period last year, and it expected growth in July and August.

Video & Entertainment

‘Mulan’ Approved for China Theatrical Release: Disney has confirmed that its live-action Mulan has been approved to release in Chinese cinemas “soon,” whereas it will be going straight to streaming in most major territories including the US. The announcement on Disney’s official Weibo account, was written in a faux-poetic language that sought to mimic the original Mulan ballad’s traditional character. An official China poster for the film has been mocked online. China’s box office performance has been middling since cinemas reopened on July 20, with many viewers apparently preferring to stay home to wait for newer, more exciting titles.

‘Shared Sex Dolls’ Become a Popular Business Venture in China: Businesses providing customizable “shared sex dolls” have recently become popular in Chinese cities including Shanghai, Suzhou, Hefei, Shenzhen and Dongguan. Popping up in official buildings and residential communities with no conspicuous signs outside, they can be found through a life services app. The range of services can cost from around ¥180 ($26) to ¥500 ($72) per hour. The sanitation condition of the dolls and shops is reportedly far “from being qualified”. Paid sexual services are illegal in China, but it is still unclear as to whether such services by dolls will be considered illegal as well.

Premium and Luxury

What China’s Affluent Consumers Want Post-COVID-19: More than half of affluent consumers expect their income and wealth to increase over the next 12-months, yet the portion is lower than in January. Spending on travel is expected to take the biggest hit, with many consumers swapping it with shopping sprees – skincare, makeup and fashion are the biggest beneficiaries from the shift. Covid has created a need for new hobbies, including working out, running, yoga, and cooking.

Search data from Trip.com (Ctrip) indicates how little Chinese travellers are paying attention to overseas destinations at present. While domestic tourist is close to where it was by traveller numbers in both hotels and on airplanes, it is likely to be some time before international tourism returns back to where it was pre-covid.

Interestingly, the US has knocked New Zealand and Australia from the top-2 searched spots for travel research, in light of a Global Times poll found 90% Chinese netizens disfavour US amid tensions. Australia hasn’t fared so well during its geopolitical tensions, with Australia also dropping below the UK and France until April. The drops in searches of >90% are also reflected in shorter haul destination searches around Asia.

ctrip long haul searches covid

Note: This data is from a trusted third-party source but has not been verified by Trip.com.

 

The lower travel searches do not point to a more insular Chinese public. Searches for these countries on other digital channels have trended up since COVID hit – not always for the right reasons – but at least Chinese consumers are still paying attention.

baidu country searches covid

toutiao country searches covid

wechat country searches covid

weibo country searches covid

This week’s China market and marketing news:

Consumers,  Chinese Consumers

How Many Eggs, in How Many Baskets? An Update on NZ-China Trade Patterns: An interesting report commissioned by the NZ China Council exploring comparative data on New Zealand’s export and import exposure at a country level and by industry and product. China has accounted for over 60% of New Zealand’s goods’ export growth in the past decade, yet exports have diversified recently, largely due to rapid growth in a range of products over the past five years.

China’s Share of Australian Exports Hits 48.8%, an All-Time High: Australia’s exports to China in the June quarter reached a record high of A$14.6 billion ($10.5 billion) largely on the back of iron ore. Goods exports to China now account for around 8.5% of Australia’s GDP [paywall].

American Firms Take Refuge in China: In earnings calls for the quarter, senior executives from some of America’s best-known brands singled out China for salvaging what otherwise was a rough three months. Sketcher’s global income dropped 42% in the June quarter but grew 12% in China, with its COO noting “China offered a model of recovery, stabilization and then growth.” The gulf between China and the rest of the world was widest in the luxury sector, with LVMH global revenue falling 38% in Q2, but growing 65% in China; Kerring grew 40% in China against a 43% drop globally. Though consumption has rebounded, headwinds remain in China, with three categories still in decline: restaurants and cafes, autos, and clothing and footwear, down 15.2%, 8.2% and 0.1%, respectively. US businesses continue to bet on China, they are just localising more.

A Creative Way to Reach Consumers: How brands such as Alibaba and Mi’s Jun Lei are using auto-tune remix-themed content to connect with consumers.

China’s New Hit Drama ‘Nothing But Thirty’ Thrives in the “She Era”: With over 20 billion views on its hashtag page, the 43-episode drama following the challenges of three different women who have reached the age of thirty is one of China’s most popular shows this season. Nothing But Thirty showcases the sheer diversity of experiences for women above thirty: you don’t have to be married, you don’t have to be super-capable, and you don’t have to be thinking about having children. By telling a story that is relatable and touches on relevant social issues, namely on expectations of women in society, the show was able to achieve widespread popularity and is adding another notch on the trend of China’s ta shidai (‘she’ era) dramas.

Citizens from These European Countries Can Now Return to China: Citizens from 36 European countries who hold relevant Chinese resident permits may apply for a visa to China for free. South Korea was given the green light last week as China looks to be slowly opening up again.

Online: Digital China

Importance of Offline and Online in a Post-COVID ‘New Normal’ as Reflected by Alibaba’s Taobao Maker Festival 2020: Intime department store is a testament to the rise of livestreaming. Although foot traffic is just 70% of pre-Covid levels, sales are almost back to what they were due to thousands of its mall staff who are now an army of livestreamers, and its app reinforcing the importance of o2o retailing in China.

TikTok, WeChat Targeted for US Ban With Trump’s Latest Executive Orders: The Trump administration announced executive orders late last week, banning “any transaction” with TikTok owner ByteDance, or WeChat, “by any person, or with respect to any property, subject to the jurisdiction of the United States.” Although the specifics are still murky, the ban may have an impact on anything from US brands promoting their wares to Chinese consumers on WeChat or Douyin, to Apple listing WeChat and Douyin on its app store in China. Chinese tourists and students in the US may even be impacted.

Douyin is Pushing Douyin Stores and Starts to Softly Break Ties with Taobao: Douyin is now a cornerstone marketing channel for many brands, but without a seamless ecommerce experience within the platform, its potential remains unfulfilled. Signals of an ecommerce overhaul and removal of external linking could cause significant shifts in certain consumers’ purchase journeys, and worth monitoring for all western brands.

Premium Food & Beverage

How Cute Rabbit Ears Are On the Frontline in Fight Between Delivery Firms: Delivery platforms have struggled during Covid-19, as takeaway services have been curtailed by lockdown restrictions. Meituan has bounced back by distributing floppy kangaroo ears which have gone viral. Ele.me has opted to give Doraemon-style propellers to takeaway riders. “Selling cuteness” doesn’t seem to get old in China with all ages and provides a way for big companies seeking to draw consumers closer in tough times.

China Expands Burger King Probe to Other US Chains: Following an exposé on CCTV’s consumer watchdog show 315, Chinese authorities investigating allegations of expired food sold at Burger King have broadened their probe nationwide and are looking into other US fast-food chains as diplomatic tensions rise.

Beijing Artisan Cheese Maker Finds New Growth on Taobao: After his business supplying local restaurants and hotels dried up, Beijing-based entrepreneur Liu Yang ramped up his online focus like many other businesses during the time. Informed by feedback on ecommerce that showed how new customers wanted to be able to try different products to begin with, Le Fromager de Pekin created a sample platter featuring five of his signature cheeses with different maturity levels and textures. The platter was an instant success, selling more than 300 on the first day of launching and now becoming a regular bestseller on the Taobao store. Other popular products include ones inspired by traditional Chinese ingredients, such as soybean juice and Chinese rice wine.

Video & Entertainment

Trending in China: Popcorn or Cheaper Tickets – What Would Make You Return to the Cinema?: Although most of China’s cinemas were allowed to reopen on July 24 after a six-month closure, they had to follow numerous restrictions due to public health concerns, such as operating at below 30% capacity, banning food or drinks, and showing movies that last no more than two hours. There hasn’t been a big return to the silver screen with some cinemas selling tickets as low as 1 yuan ($0.14) to attract patrons.

Schooling and Education

Nanjing’s Top High School Goes Back to Emphasis on Testing After Parents Protest About Low Exam Scores: Nanjing No. 1 high school is a prestigious institution that accepts only the highest-performing students in the city. About a decade ago, the school decided to gradually move away from the classic Chinese education model, which has long been criticized for putting too much emphasis on highly competitive and rigorous testing. In the years that followed, rather than assigning excessive homework and conducting endless exams, the school encouraged its students to participate in extracurricular activities and explore their interests. The school called off its all-rounded education this month following a demonstration by students’ parents who said that their children fell short in this year’s college entrance exam because of the school’s “ineffective” teaching methods.

Autos and Cars

Elon Musk Says ‘China Rocks’ While the US is Full of ‘Complacency and Entitlement’: Elon Musk lamented the “entitled” and “complacent” character of people in the United States, and lauded the “smart” and “hard working people” of China, in an Automotive News podcast. China now accounts for nearly one-quarter of Telsa revenue up from 11% a year ago, with June quarter earnings climbing 103% year-on-year to $1.4 billion.

The global pandemic has brought about much soul searching. Lockdowns and general uncertainty has given consumers around the world the impetus to reflect on what is important to them. This reflection has been echoed by businesses and we have even seen this at a government level in some countries.

When the coronavirus first hit China, concern grew from many businesses and governments about their exposure to the market while the country was in lock down. A number raised the need to diversify from their dependence on China. Although China has surfaced from pandemic as one of the few economies with positive economic growth; increasing geopolitical tensions and rising nationalism in many countries – including China – continues to fuel the diversification conversation.

There’s no shortage of countries and businesses that could be concerned about having an over-reliance on China. China became the world’s largest trading nation in 2013 when it was already the largest trading partner with 124 countries. With geopolitical challenges often intertwined with trade, many of those countries are feeling more vulnerable now than ever.

That’s why we paid close attention to a recent study by Sense Partners commissioned by the New Zealand China Council. The study analysed facts and figures to evaluate whether New Zealand is too economically dependent on China, and if so, what might be done about it. From a historical view, New Zealand is significantly less reliant on trade with China than it was with the UK until the late-1950s. Nevertheless, as a small island nation a long way from other markets, and one which produces a lot of goods which China likes to import – with favourable tariffs – New Zealand is more exposed to China than most countries.

To provide some context, New Zealand’s share of exports to China (a little under 25% in 2018) is lower than countries such as Australia – which last quarter sent 48.8% of its exports to China – Brazil, South Korea and Chile. Its export share isn’t dissimilar to many east and southeast Asian countries, and increasingly African and Central Asian countries helped by the Belt and Road Initiative.

The report is quite specific to New Zealand trade data, but provides interesting takeouts that apply to many countries, concerning their trade relationships beyond just China. The report highlights that there is no obvious right or wrong answer about the optimal level of trade exposure with any one country, but it does point out areas that are particularly precarious. Whereas a government can help smooth the wheels of trade through diplomatic relations, trade agreements and information, it is ultimately the exporting firms who take on the risk and reward and have a direct impact on the trade balance with a country.

For the time-being, the lack of alternative markets which are fast-growing, large and willing to provide ready access to many of New Zealand’s key exports means that NZ companies’ focus on China is unlikely to change any time soon. Similarly, many American and European companies from Sketchers to Louis Vuitton are singling out China for salvaging what otherwise was a tough quarter. Even Elon Musk is praising China and its people, as the country continues to account for a greater share of Tesla’s revenue.

There is no denying that China, like everywhere, faces a challenging time ahead. But the early signals indicate that the country is likely to again be the engine room of the global recovery as it was during the global financial crisis. The China market and its consumers are almost unrecognisable from 2007-2008: their increased affluence and sophistication present new, often-bigger opportunities and challenges for brands to navigate. Get in touch with China Skinny to learn how we can help.

Click/tap here to see this week’s most important China market and marketing news.

It wasn’t long after the establishment of the People’s Republic of China in 1949, when Chairman Mao started encouraging the population to procreate to create a strong China through “manpower”. Although there was no official policy supporting the fertility drive, government propaganda condemned contraceptives and even banned the import of some. Soon enough, woman were having average of six children each and China’s population had doubled.

After the introduction of the one-child policy in 1979, in the space of a generation, China’s households transformed from large to tiny in the most extreme family planning shift the world has ever known. Add rising life expectancy which has increased from 46.6 to 77.5 since 1950, and the result is top-heavy demographics that make most countries’ challenges with aging populations look like child’s play.

In 2017, 240 million people in China were aged over 60, accounting for 17% of the population. By 2050, 486 million over-60s are expected to call China home – a whopping third of the population. By comparison, the 60+ demographic in the US at this time is expected to number 108 million, 27.9% of the population.

With such enormous numbers, brands have been seeking to tap into China’s silver market for years – mostly with little success. The lucrative Baby Boomers in Western countries have spent up a storm on the back of decades of relative prosperity and accumulated wealth through numerous cycles of property appreciation. Yet China’s equivalents are not such liberal spenders. Yes, China’s elders have experienced enormous property appreciation, but most still remember the austere times of the Cultural Revolution between 1966 and 1976. These times have had long-lasting impacts on spending behaviour, much like the Great Depression did for many of our grandparents or great grandparents in the West. This, coupled with the age-old Chinese cultural trait of investing in the younger generation, hasn’t seen China’s elderly spending a lot on themselves historically.

However, the frugal habits of China’s mature consumers are slowly changing. Those now entering the silver demographic are born increasingly later, and have been more impacted by the growing influence of consumerism since China opened up. Pre-covid, travelling the world was becoming popular. They’ve been buying more appliances and smartphones, health products and better quality food. Yet even with increased purchase intent, reaching and educating the demographic has proved challenging for most Western brands.

Although young Chinese are among the world’s most savvy internet users, elderly Chinese are much less digitally literate than their Western counterparts. This makes digital channels quite ineffective to reach many of them. Most are disproportionately swayed by word of mouth, which is much tougher to influence than that of open-minded millennials.

Enter Coronavirus. For all the damage it has done, it is helping to finally unlock the enormous potential of China’s silver surfers. The lockdown and subsequent increased hours at home has seen China’s elderly spend more time with their younger, shopaholic relatives. This has both opened their eyes to more products and services, but also nudged more of them to get online where they can research and buy new things. As this infographic illustrates, not only are silver surfers the fastest-growing group online, but what they do is becoming more varied, providing more opportunities than ever for brands to reach them.

It seems the years of buzz around China’s ballooning elderly population may finally be coming home to roost. Brands should think about developing products, services and a whole customer experience that will best connect with this group. Get in touch with China Skinny to learn how we can help.

Click/tap here to see this week’s most important China market and marketing news.

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Infographic: How China’s Elderly Behave Online: What China’s elderly are doing online, how this is changing, and how it compares to other internet users.

3rd CIIE to Inject Impetus Into Global Economy: Despite uncertainty around the global pandemic, the third China International Import Expo (CIIE) is still scheduled to open in early November this year, with preparations in full swing. The total planned exhibition area is 360,000 square meters, 60,000 more than last year. The average exhibition area for the world’s top 500 companies and industry leaders is expected to increase by 14% from last year. Four new zones for public health and epidemic prevention, energy conservation and environment protection, smart transportation, as well as sports goods and competitions will be set up at the event. Some signing ceremonies and roadshows have been moved online to facilitate participation due to the novel coronavirus outbreak.

How to Earn Brand Loyalty From Chinese Gen Z: Dyson provides a unique QR code on each of its products, which customers scan to activate their warranty allowing personalised marketing, cross-selling and loyalty initiatives. Nike’s loyalty program gives members value beyond its core products, such as training programs, performance tracking, and online/offline events with professional trainers. Other benefits include early access to new products, birthday gifts, discounts, customized experiences, training and nutrition content, live streams from local professional coaches, fitness tracking, and personal workout consulting. The best loyalty programs in China offer a genuine sense of community, regular rewards and special offers.

Online: Digital China

Alibaba 2020 Taobao Maker Festival Explained In 5 Minutes: Video: Since 2016, the Taobao Maker Festival has showcased the latest and coolest trends in China, but this year the festival had to innovate as a result of Covid. China Skinny’s Sheryl Shen and Caroline Bridges went to the launch in Hangzhou, capturing the highlights on video and speaking to Alibaba CMO Chris Tung for his views on China trends. See the latest innovations from tiny vinyl to wacky beer flavours and labels.

Urged on by Central Bank, China Weighs Antitrust Probe into Alipay, WeChat Pay: China’s top antitrust agency is looking at whether to launch a probe into Alipay and WeChat Pay to investigate if the digital payment giants have used their dominant positions to quash competition. It’s not something you see often in China, where dominant players often have near-monopolies across numerous categories. China’s mobile banking market logged some ¥56.2 trillion ($8 trillion) worth of transactions in last three months of 2019, with Alipay’s share estimated to be 55% and WeChat Pay at 39%.

Huawei Overtakes Samsung to be No. 1 Smartphone Player in the World Thanks to China as Overseas Sales Drop: Despite geopolitical pressures challenging the brand, Huawei became the biggest smartphone player in the world in the second quarter, overtaking Samsung and Apple for the first time. Although Huawei’s sales dropped 5% year-on-year, it was a relatively strong result as global sales tanked. Samsung dropped 30%. Huawei was buoyed by its strong home market, with China accounting for 70% of its sales. Huawei’s growth was 8% in China, with 5G devices exceeding 60% of its shipments. Apple – the fifth most popular brand in China – also had a strong quarter in China growing 35%, helped by its more affordable iPhone SE, and promotions around instalment plans and trade-in offers.

Premium Food & Beverage

Chinese Liquor Industry Sees Brisk Sales as More People Buy Online to Drink at Home: In the first five months of this year, the country imported 478 billion litres of liquor, a year-on-year fall of about 30%. At business dinners, big brands are preferred, but when drinking at home, people opt for wine that is a good value. With the rise in online sales, COFCO is broadening its online platforms selling wine from just JD and Tmall to Suning, Pinduoduo and NetEase. Livestreaming on JD and Douyin is also popular with drinkers accepting of tasting classes with a wine master on a screen. According to Hema, sales of liquor priced at ¥200 ($29) to ¥400 ($57) a bottle have risen significantly since the outbreak started, in contrast to an overall market decline.

Legal Action Begins as Kiwifruit Plantings in China Soar: Illegal plantings of New Zealand’s high valued gold kiwifruit variety, Sun Gold, have almost doubled from 2,500 hectares to 4,000 in the past six months in China – over half of the total 7,500 hectares of Sun Gold planted in NZ. Eradicating the plantings is not possible but Zespri is about to start legal action against a nursery in China, using the PVR (Plant Variety Right) law to slow plantings down.

Staying Health

Wiped Out: The Young Chinese Men Trying to Quit Masturbation: TCM theory is providing another driver for Chinese males to end their masturbation. On the 6-million strong abstinence forum on Baidu, a well-known user claims masturbation-linked kidney depletion leads not just to physical maladies, but also to mental and psychological problems such as sluggishness, insomnia, introversion, negativity, cowardice, and social phobias. Then there’s the quasi-spiritual component grounded in Buddhism and centred on resisting masturbation, seen as the embodiment of lust.

Overall Beauty

As Cosmetics Sales Continue to Grow, China Revamps its 30-Year Old Regulations: China’s new cosmetics regulations take effect from 1 January 2021. The changes include shortened time to market for new ingredients, bringing opportunities for innovative cosmetic market players. The increased responsibilities of cosmetic license holders and severe consequences for non-compliance will likely force cosmetic companies to improve their quality management systems and perform their obligations more diligently through the product lifecycle.

Essential Protection: Anti-Pollution Cosmetics a ‘Must-Have’ for Chinese Consumers in All Segments: Anti-pollution products are becoming a must-have for Chinese consumers, with demand extending beyond skin-care into other personal care categories such as hair care. Even though pollution levels are improving, consumer awareness is increasing and they are linking pollution, outdoor and indoor, to their skin issues like skin sensitivity.

Schooling and Education

In 2020, China’s Top Study Abroad Destination Is: China: Popular foreign universities are dealing with travel bans and unwillingness to travel by providing local alternatives. NYU plans to host 3,100 students in temporary WeWork accomodation in Shanghai, although students are still paying between $50,000 and $100,000 a year in tuition fees. Duke will teach students at its Chinese partner university Duke Kunshan University and simultaneously online, Cornwell through elite domestic schools such as Peking and Tsinghua. Rutgers University, Syracuse University, Trinity College, Tulane University, University of Pittsburgh, and several other US colleges have also announced similar agreements with Chinese partners.

Premium and Luxury

Luxury Brands Get Hyperactive on Chinese Social Media: Fashion labels that depend on China’s overseas tourists for a huge chunk of sales must now follow them home. In the three months through June, average engagement on luxury Weibo account posts, a proxy for brands’ social media spending in China, increased 230% compared with the same period of 2019. This year, China’s luxury shoppers are expected to make 50% of all global luxury purchases, but they will mostly shop at home. Gucci and Bottega Veneta owner Kering saw China sales increase 40% in the second quarter compared with the same period of 2019. LVMH (Louis Vuitton Moët Hennessy) was up 65% [paywall].

Burberry Teams With Tencent to Launch World-First Social-Retail Store: The next advancement in experiential retailing? Burberry’s brand new 10-room Shenzhen store boasts interactive wall features, scannable clothing, gamification, social currency, avatars – and a cafe of course.