History was made earlier this month in China when homegrown animated movie Ne Zha became just the sixth film to break $700 million at the box office in a single territory. It also became the second-highest grossing film ever in China behind the nationalistic Rambo-esque Wolf Warrior II.
Whilst there is no disputing that Chinese consumers love cartoons, animated films make up just 6-10% of the box office, versus around 40% in Japan and 10-15% in the US. In addition, the hero isn’t exactly your typical cutesy cartoon that resonates in China, rather a demon with a disturbingly-close resemblance to Chucky the killer doll. The success behind the movie is much deeper than the spectacular animation, and provides insight into what is connecting with Chinese consumers right now.
For a start, the plot is loosely based on Ming Dynasty-era legends and lore, playing to Chinese consumers’ increasing embrace of their heritage and culture, particularly when it is expressed creatively. Yet it is the overarching message that hits a home run with modern Chinese consumers.
Ne Zha is born with the unfortunate destiny that he will wreak destruction on humanity. His father, a lord, refuses to have him killed at birth, and in the end Ne Zha manages to train his inner-demon and saves the very village that despises him. Many parents connect with the theme of providing unconditional support and love to their child, even if they are a little demon. And almost every Chinese person will relate to Ne Zha’s situation: if fate isn’t fear, fight it till the end.
This underlying theme couldn’t be more timely, as China is in the throes of some of its biggest challenges in a generation due to geopolitical issues, the trade war and a slowing economy. Modern China was built on the premise of ‘fighting for the dream’, reflected in milestones such as The Long March. In recent months, there has been a rise in subtle language about the fight China must take on, with increasing usage of the word dòuzhēng (struggle) by Xi Jinping and official state dialogue.
The stoic nature of China’s people fighting their destiny is reflected in some of its most revered heroes. Jack Ma, who officially retired from Alibaba last week on the 20th anniversary of the company, is admired not just for his success, but for making it without inherited wealth, good looks or a high education – fates that many Chinese believe are crucial to succeeding. Similarly, Naomi Wang, a freckled, tanned and “chunky” pop star challenged traditional Chinese beauty standards and is now Fendy Cosmetics KOL. More recently, Zhang Weili, once earning a meagre wage as a cleaner became the first Chinese/Asian champion in UFC history, winning the admiration of large swathes of the Chinese public.
Brands that effectively tap into this theme of challenging your destiny are likely to connect with Chinese consumers at a deep and emotional level. Nike is a textbook example, with their “Don’t look down upon women, women can do as well as men” campaign, showing the attitude of five outstanding female athletes to encourage brave women not to care what others say, and not to pay attention to the judgment from a society, but to pursue their own goals or dreams. Large consumer segments are increasingly challenging expectations of China’s traditional society, and brands who thoughtfully and sensitively play to this are likely to have an edge.
As China’s market becomes ever-more crowded, nimble competitors are increasingly becoming fast and efficient at mimicking your products and services. The brands that hit a nerve with Chinese consumers and connect at an emotional level are most likely to succeed. Talk to China Skinny about how your brand can be best placed to strike that chord.
On a related note for our readers in Shanghai this week, we’d suggest signing up for the CHina CHat conference September 19-20. China Skinny’s Mark Tanner joins the esteemed lineup on Friday to discuss what brands need to do to win in China. If you’re at the conference, please come and say hello. More information here. Go to Page 2 to see this week’s China news and highlights.
Britain’s lively capital, London: Arguably the world’s most international city, its cultural capital, the city with the second-highest private wealth after New York, home to four Unesco World Heritage Sites, more five-star hotels than any other city, and based on measurable and objective data, simply ‘the capital of the world’. It also has similar house prices to China’s tier-3 city of Xiamen.
Half the world away, straddling the beautiful Puget Sound and Lake Washington, is Seattle. Workers in the HQs of Amazon, Microsoft and other large tech firms have been blamed for driving city’s house prices to ‘dysfunctional’ levels, with real estate costing so much Microsoft has pledged $500 million to help alleviate the crisis. Seattle has similar house prices to China’s second-tier city of Hangzhou.
Whilst incomes are a factor in Chinese consumers’ spending behaviour, it would be amiss not to understand the impact house prices have on how wealthy Chinese consumers’ feel. As we’ve noted before, an estimated 90% of Chinese families are believed to own a home, 80% without a ‘mortgage’. Whereas share prices can soar and dive without impacting consumer sentiment, a rise or fall of house prices directly correlates to Chinese consumer behaviour.
Many economists in the west look to Chinese incomes as the key metric for comparing Chinese consumers with those in other markets, without factoring in the rise in wealth from soaring property appreciation over the past generation. Most of us have heard the stories about consumers “spending a month’s salary on an iPhone” or “three month’s salary on a handbag,” but the decision to spend is often less related to incomes than the consumer’s – or their parent’s – property wealth.
Beijing has the difficult balancing act of keeping house prices ‘affordable’ while continuing to have the consumption-driven economy ticking along by supporting house price growth. Facing the challenge of a slowing economy, the government has been pulling levers to keep house prices buoyant. Beijing is also allocating ¥30 billion ($4.2 billion) to make the move to the city from the countryside more attractive to help drive the economic growth they are seeking.
Economies in lower tier cities, and subsequent housing prices, have been beneficiaries of Beijing’s focus on driving growth in China’s lower tier cities and narrowing the gap between them and China’s big cities. This has seen categories from cars to FMCG grow much faster in smaller cities, often with less competitors scooping up the share. Yet an announcement two weeks ago to focus domestic economic activities in central cities and central clusters may see some of the fastest growth returning to cities in Beijing-Tianjin-Hebei region, the Yangtze Economic Belt and the Guangdong-Hong Kong-Macao Greater Bay Area.
These clusters aren’t to be sneezed at. For example, the Jiangsu province in the Yangtze Economic Belt now has a GDP similar to Australia, becoming the first province to have a GDP greater than ¥9 trillion ($1.26 trillion). Guangdong’s GDP will be even greater when it is announced this month. Similarly, China now has 17 cities with GDP higher than ¥1 trillion ($140 billion). These cities are markets comparable to countries in some cases and should be treated like that, rather than trying to use the same generic strategy across diverse consumers in these geographies. Messaging, channels and even product formats should be localised due to differing emotional and functional preferences and behaviour between cities.
China Skinny has developed free tools to help you understand and compare China’s different tiered cities. Click/tap here for more information. We can also provide localised city-specific strategies and quick wins to ensure your brand is maximising the opportunity. Please be in touch to find out more. Go to Page 2 to see this week’s China news and highlights.
If you think your workload is a bit rough, spare a thought for the 3-15 year-old kids in China. If school wasn’t tough enough already, they spend an average of one-and-a-half hours a day doing homework. On top of that, they spend almost 3.5 hours daily in extracurricular classes. Around six in every ten Chinese parents sign their children up for extracurricular classes, spending almost 13% of their household income on after-school education on average.
Whilst parents in the West may be enrolling their kids into swimming, soccer or gym class; sports rank behind tutorial classes and art in China, highlighting the emphasis parents place on their kids academic success in China’s fiercely-competitive schooling system and the growing desire for kids to excel in their creative endeavours. Although close to half of courses are motivated by improving grades, there is also a growing array of niche subject interests covering areas often underserved by the public school system such as sexual education.
These courses provide further views into priorities that the rising segment of liberally-spending millennial parents place on their kids, which has seen child-related categories among the fastest growing in China’s retail sector. They also give some clues into possible interests these kids may have when they grow up, such as art.
Between the homework and after-school courses, Chinese kids are still managing to find time for other activities: spending 50 minutes on entertaining themselves, 49 minutes in public venues, 38 minutes on electronic devices and 37 minutes reading. Some of these activities are driven by a sense of escapism from the stresses of studying, with school-aged kids contributing a sizeable share of the astonishing 630 million Chinese who play video games.
The importance of education in the Chinese psyche has implications for many categories beyond learning. Toys, vitamins, food and beverage, and even other products that are beneficial to a child’s brain development will connect with consumers if marketed correctly. Pampers are a good example: they sold poorly at first as Chinese parents didn’t see any real benefits over kaidangku (split pants). P&G re-launched them with their “Golden Sleep” campaign, which claimed babies in diapers sleep better, helping them develop faster and achieve more at school. The rest is history.
Given 58% of children registered for extracurricular classes during the summer holidays, and over a third during October’s National Day Holiday, even tourism operators could be wise to consider exploring child development add-ons to appeal to the lucrative family traveller.
Toys, nappies, nutrition, trips away and other categories: China Skinny can investigate and qualify the education and child development opportunities to incorporate into your China proposition. Go to Page 2 to see this week’s China news and highlights.
Arriving in China in 2030 may look quite different to how it does today, particularly if the last decade is anything to go by. For a start, expect to see less smokers, more walkers and less oily, salty and sugary food options, if Beijing has its way.
Whilst these things will hopefully happen in most places, they are likely to come about much quicker in China – particularly as a result of the Government’s Healthy China Action Plan for 2019-2030 released last month. The plan detailed 15 campaigns to promote healthy lifestyles and health at various stages of life, and to control major diseases. This included building health knowledge, balanced diets, national fitness, tobacco control, mental health and a healthy environment.
Most of us understand the impact that Government directives have on influencing behaviour and trends in China. They are enacted through Beijing’s powerful levers such as regulations, funding, support and its vast state media networks. They may even impact social credit scores positively or negatively. Private business investments tend to shadow government policies, and in most cases, consumers will inevitably follow.
It would be wise for brands to review the Action Plan’s objectives. The plan provides an indication of some of the issues Beijing will be focusing on over the next decade. One of the wide-reaching initiatives is educating the masses to improve their awareness of healthy living, with health literacy targeted to increase from 22% in 2022 to 30% in 2030. This aims to amend relatively poor health knowledge and unhealthy lifestyles, which include smoking, alcohol abuse, lack of exercise and an unbalanced diet. That is likely to impact the way consumers view products and services, and the marketing around them.
Many of the plan’s goals are on already on-trend, such as healthier eating and increased fitness, however it is likely that these will further accelerate now a strong plan is behind them. For example, the target is for consumers to eat 17% less sugar, 30-40% less oil and 50% less salt in 2030, using 2002 as a base. Whilst there is no new regulation around food processing yet, food and beverage brands should plan for this to be a possibility, and ideally incorporate it into new product development and messaging. The plan also aims to have each consumer eating at least 500 grams of vegetables and fruit daily, something which could be considered when determining ingredients for products.
Another core focus on the health plan is physical activity. The goal is for 40% of people to exercise regularly by 2030, up from 37% in 2022 – a mere 40 million extra people. That’s suggested to be 6,000-10,000 steps a day, 150 minutes of moderately intense exercise and 75 minutes of high intensity a week. 60% of students should score “good” physical health, up from 50% in 2022. The plan also aims to have the exercising adult populace supported by 7-8 hours sleep. Ultimately as a result, men should have a sub-85cm waistline, and women sub-80cm.
Brands as broad as tourism, fashion, vitamins and health providers should account for an increasingly healthy and health-conscience Chinese consumer. For example, hotel restaurants are likely to be more scrupulously evaluated for healthy food, and tourism operators can count on fitter visitors who are more open to physical activity. Like most things in China, political direction should be considered for any China-related planning, no matter how irrelevant it may seem in your home market. Go to Page 2 to see this week’s China news and highlights.
What’s Driving Coca-Cola’s Growth in China?: Coca Cola came from nowhere to take out the fastest growing FMCG brand in China in Consumer Reach Points this year according to Kantar. Coca Cola picked up significantly more consumers who were allured by sugar-free cokes and newly launched Coke Fibre Plus products. Smaller packages of conventional Coke generated enough growth to offset the decline of bigger packages.
In Depth: The Fake Engagement Powering China’s Internet: Nearly a third of China’s internet traffic in 2018 was rated “abnormal,” resulting in losses to advertisers of more than ¥26 billion ($3.75 billion).
Why was Little Red Book Pulled from China’s App Stores?: Popular app Little Red Book (Xiaohongshu) was pulled from Android app stores due to Government intervention resulting from complaints about the platform facilitating the sale of restricted, forbidden, and fake products. These products include tobacco, e-cigarette products, and medicinal products such as skin-injection kits from third-party sellers on the platform. Little Red Book has struggled to monitor its three billion pieces of content, 70% of which is user-generated.
China’s Top Live Streamer Viya Sells NZ$30 Million ($19 Million) Worth of New Zealand Product in Hours: KOL Viya livestreamed from Auckland to almost 10 million Chinese viewers on Taobao, who collectively spent ¥134 million ($19 million) in four and a half hours. The livestream featured an alpaca, haka and more than 40 New Zealand and Australian honey, dairy, skin care, duvets and cereal brands. Last year Viya generated sales of $2.7 billion from her live streams on Taobao.
Is WeChat’s Growth Over?: Although Tencent’s WeChat users grew 3.2% between December 2018 to June 2019, it wasn’t enough to compensate for the 8.4% drop in usage over the six months – from 35.4 to 32.4 hours/month. The bright spot was time spent on WeChat Mini Programs, which grew 23.3% to 64 minutes a month. Mini Programs had 746 million monthly active users. Tencent still dominates time spend online in China, however it total share of time spent dropped 3.6 percentage points to 42.3% for the year ending June 2019, mainly due to competition from ByteDance’s Douyin and Toutiao which grew from 10.3% to 11.7% and the rise of diverse apps, which grew from 26.3% to 29.7%. Baidu dropped from 7.5% to 6.3% and Alibaba held firm on 10.1%.
Alibaba to Buy Kaola Unit From NetEase for $2 Billion: Widespread reports claim Alibaba is paying $2 billion for NetEase’s cross border ecommerce platform Kaola to merge with the Tmall Global platform, although a Tencent news article (in Chinese) yesterday afternoon claimed NetEase CEO Ding Lei vetoed the transaction. In 2018, Kaola accounted for 27.5% of China’s cross border market, ahead of Tmall Global on 25%. The comes off the back of Alibaba’s 42% increase in revenue for Q2 suggesting Chinese consumers are still spending. 674 million annual active customers now use its retail marketplaces, 20 million more than a year ago. JD also had a strong quarter with revenue up 22% and annual active customers growing almost 11 million to 321.3 million.
Marketers, sales managers, product developers and strategists the world over are increasingly using data to help form decisions. Fortunately in China, we have a greater depth and breadth of data than anywhere else. Not only do Chinese use their smartphones (and faces) more frequently, across a broader array of online and offline occasions, they are also among the least concerned about data privacy globally. China Skinny uses our own in-house tools to tap into China’s vast banks of data to provide macro and granular views of consumers’ preferences and trends. These can impact everything from communications, branding and product development, to the channels and influencers you use.
However, just blindly using data to drive decisions can be reckless and is often misleading. For a start, data can miss the emotional drivers that influence decisions – these are becoming increasingly relevant as branding and premiumisation gains importance. More importantly, data can be misleading due to the likelihood of your data being skewed by fakes.
Nearly a third of China’s internet traffic last year was rated “abnormal” according to a report by third-party advertising data monitor Miaozhen Systems. The resulting loss to advertisers alone reached more than ¥26 billion ($3.75 billion). Virtually every corner of China’s internet that boasts massive user numbers has developed a shadow ecosystem of fake engagement. They are trading money for clicks, followers, commenters and buyers. Late last year Alibaba estimated there were at least 2,800 organizations in China specialising in faking ecommerce activity alone.
Zombie Weibo followers usually go for ¥10 ($1.44) per 10,000 followers, although for a higher fee, brands can engage “advanced zombies” with avatars and content expressing fake opinions. Of real concern is that it isn’t just your fly-by-night operations buying fake engagement in China; many of the best-known brands have engaged with fake social media likes, forwards and comments to bolster their impression of popularity. This taps into the tribalistic follower tendencies of consumers.
Arguably China’s most in-demand KOL, pop star Cai Xukun, clearly creates millions of fake engagements to fuel his popularity. He isn’t alone. Around 70% online celebrity peers are estimated to forge their fanbase. Last year, Chinese state media CCTV reported that 90% of views generated by many popular shows on video sites are fake. On ecommerce, the long-used method of “brushing” remains common where brands ship empty parcels to bolster their sales numbers and positive reviews on ecommerce platforms.
In addition to the ill-gotten gains for brands and KOLs, China’s big tech platforms themselves often see opportunities in the fake economy. It is well known that ecommerce platforms engage fake sales – or do little to stop them – to artificially inflate sales numbers, drive buzz and attract investment. In the build-up to its IPO, popular ‘user-generated’ travel site Mafengwo has been tacitly allowing registered merchants to place fake orders in order to beef up their onsite rankings and attract more views. 30% of all orders on Mafengwo are estimated to be fake.
Data is a powerful tool to provide clues and clarity into China’s complex marketplace, yet brands should caution from using that data as gospel. In most projects we do, China Skinny cross references data with other sources of insights to ensure its robust and reliable. We’d suggest you do the same.
On a more wholesome note, if you’re in the food and beverage space, book yourself a flight to Melbourne on September 3-6 for the prestigious Global Table event, focusing on solving our biggest food challenges and creating tomorrow’s breakthroughs. China Skinny’s Mark Tanner will be giving the opening presentation for the China section, discussing China beyond 2020. More information here. Please let us know if you’ll be there, it would be great to have a chat. Go to Page 2 to see this week’s China news and highlights.
As protests in Hong Kong enter their 10th week, the violence continues to intensify, leading to Monday’s closure and yesterday’s mass cancellations at the eighth busiest airport in the world. Many miles away, some of the world’s most aspirational brands are having their own set of issues recognising the Special Administrative Region.
On Sunday, following an uproar on Chinese social media, Italian luxury brand Versace officially apologised on Chinese and Western social media for selling a Versace t-shirt that suggested Hong Kong and Macau were independent countries. The following morning, images of a 2018 t-shirt from the Coach and Disney collection labelling Hong Kong, Macau and Taiwan as independent countries was circulated on Weibo, with similar designations on Coach’s website. Coach was forced to apologise. Next came Givenchy, Calvin Klein, Fresh skincare and Japanese sportswear brand Asics, who all apologised after being embroiled in similar gaffes.
An online poll by fashion blogger Zoe which asked peoples’ attitudes towards brands that “insulted China”, swiftly attracted more than a million respondents, with 70% claiming they’d “never buy their products even if I have nothing to wear.” Actress Yang Mi ended her endorsement of Versace, “very indignant that Versace’s mistake blatantly defies the sovereignty and territorial integrality of China.” Coach’s brand’s ambassador in China, model Liu Wen, apologised on Monday for not being rigorous in her selection of brands to represent, ending her collaboration with Coach since its behaviour had “hurt the national feelings of the Chinese people” and must be “condemned seriously”. KOLs for the other brands were quick to follow suit.
Although China is becoming increasingly more powerful and confident, it remains sensitive to any brands that disrespect Beijing’s mandate, right through to Chinese individuals. Although this has increased in intensity with the trade war and the latest round of geopolitical challenges, it is nothing new. Many of us are likely to recall the firestorm when United Airlines unfairly treated a ‘Chinese looking’ passenger in the US in April 2017.
The implications of wrongly classifying Hong Kong as a country have been known for some time. Marriott Hotels discovered this with its PR-disaster in January 2018 following an online questionnaire which listed Hong Kong as a country (as well as Tibet, Taiwan and Macau). Zara and others made similarly high profile slip ups. Luxury brands such as Versace, Coach and Givenchy should be wiser as a result. Chinese consumers account for a third of all luxury purchases worldwide, and are expected to buy half by 2025. With so much at stake, it is surprising that these brands don’t have a better understanding of the basic cultural and politically-sensitive issues that have been rattling China for some years. Just having a Mainland Chinese exec, or someone who deeply understands China at the senior table would be a good place to start.
The good news is, as long as they aren’t as reckless as Dolce & Gabbana, Versace, Coach, Givenchy, Calvin Klein, Fresh and Asics’ fortunes in China aren’t lost forever. Although Chinese consumers can come across as virulent on social media, they typically move on relatively quickly from blunders such as Hong Kong territorial mis-classifications. The brands may see a dip in sales and some issues finding new KOLs in the short term, but as long they have a smart and sensitive strategy going forward, China should continue to be a strong market for them. We only need to look at Zara who have seen growth since their similar slamming in 2018; and Marriott Hotels who continue to be a strong brand in China and remain a core pillar in Alibaba’s 88 loyalty scheme, with barely a whisper of their misstep 18 months ago.
On a brighter note, if you’re in Shanghai next Wednesday evening, August 21, China Skinny’s Andrew Atkinson will join the Directors of Strategy for Treasury Wine Estates and eCargo on a panel organised by the Australia-China Young Professionals Initiative to discuss how to drive growth outside of the familiar Tier 1 cities. You can find more information and RSVP here. Go to Page 2 to see this week’s China news and highlights.
In 2012 in the city of Wuhu, Anhui, a former street vendor and motorcycle taxi operator named Liaoyuan Zhang, left his job selling nuts to start his own nut company. In just 65 days, the company – Three Squirrels – became the top selling nuts brand on Tmall and within a couple of years, was said to be the top-selling food brand online. On Singles’ Day last year, it took less than 10 minutes to sell ¥100 million ($14.2 million) worth of snacks. The recently-listed company now has a market cap of close to $3 billion.
Many brands can learn from Zhang’s success and his trio of squirrels. For a start, its DNA is imbedded with three super-cute mascots, tapping into Chinese consumers’ adoration of Japanese-inspired Meng culture, and its cute cartoons such as Pokemon. Their appeal stretches beyond just kids with many urban professionals hooked on all that is cute. This can be observed in some of China’s most aspirational mainstream brands such as Tmall’s cat and JD’s dog.
Yet while many Chinese brands plaster cute mascots over their packaging and promotions, Three Squirrels has always gone deeper incorporating the personalities into everything they do. Videos, stories, games and prizes showcase each squirrel’s personality, providing consumers the experience they so-often seek, and weaving them into a longer narrative. Thoughtful extras that add to the experience include a wet wipe, a bag for shells and often nut crackers with purchases. On its customer service line, consumers are addressed as pet ‘owners’ and purchases are called ‘adoptions. Everything Zhang does keeps his customers at the heart of his business, so much so, that he considers “fans” to be as much a part of Three Squirrels as his employees.
Three Squirrels’ D2C (Direct to Consumer) model bypasses retailers but still manages a notable premium over the sea of competitors that make up China’s massive snacking category. It also taps in to other digital channels such as asking and listening to its social media fanbase about the type of products they want, which has shortened its new product development cycles to a few months.
While the Three Squirrels brand was built on the back of Tmall sales, like many online retailers, lowering ecommerce margins and high customer acquisition costs have led it to focus on channel diversification. Whereas Tmall once accounted for 80% of its sales, now just half of its billion dollar-plus revenue comes from the platform. A nice chunk of this growth has come from the drive for offline ‘experience’ stores, where gross margins exceed 40%, versus sub-30% online.
Unlike it was in 2012, selling online is no longer novel in China. Whilst it remains a vitally important sales and marketing channel, one of the advantages of brick and mortar stores is that it is harder to compare products than simple searches online. In online stores, brands tend to use their best-selling products for promotional purposes and so must discount, resulting in even lower margins. Customers can see how many ratings, and often the number of purchases, which is likely to further distort sales as consumers regularly just go for the bestselling or most reviewed items. In an offline store, hero products are not nearly as obvious and so the distribution of sales is less likely to be skewed towards just a few popular items. This plays better to Three Squirrel’s strategy of product diversification which has seen cakes account for over 20% of its sales, and nuts just over half.
Brick and mortar stores also allow consumers to buy very little at a time, at a much higher frequency, and without added delivery costs. The fixed delivery costs online means each order needs to reach a certain dollar amount in order for it to be financially viable. Offline purchases have no such threshold.
Whereas no one should underestimate the importance of ecommerce in China, China Skinny is increasingly seeing brands focus more on traditional retail as the golden years of high growth and high margin sales through platforms like Tmall and JD appear to be over. Experience-focused physical stores such as New Retail has also given the channel a second wind. Brands are becoming increasingly concerned about being over-reliant on platforms such as Tmall for sales and are also cognisant of ecommerce platforms launching more private label brands, which are somewhat of a conflict of interest. Like many things in China, it is important to understand and assess sales and marketing channels beyond the hype and develop strategies that balance risk with opportunity, such as China Skinny does. Go to Page 2 to see this week’s China news and highlights.
In July 2017, Beijing set the target to make China “the world’s primary AI (Artificial Intelligence) innovation centre” by 2030. Whilst a detailed plan didn’t accompany the goal, it sent a message reinforcing how serious China is about AI. Such a signal is almost always accompanied by investment, policy and supporting regulations (or lack thereof) from Central Government. In early 2018, eagle-eyed Chinese spotted AI-related books on Xi Jinping’s bookshelf, highlighting that the mandate is being supported from the very top.
The vital ingredient for AI is the data that fuels the machines that learn from it. Unlike in the West where data is becoming more difficult to access as a result of heightened privacy legislation, China has very liberal rules. Chinese consumers are also among the least concerned about privacy and rate convenience as more important. On top of that, between some of the highest ecommerce, mobile payments, general smartphone and o2o (Online to Offline) usage rates in the world, coupled with the “datatization” of public spaces through facial recognition, the breadth of data-sourcing opportunities are second to none. China has so much data, it needs AI to make sense of it all.
There has been no shortage of news about how AI will touch most things we do including our education, whether or not we’re offered a job, romantic matches, bank loans, how we are entertained, self-driving cars, and even the scarier things such as military drones. In China, ‘keeping the population safe’ has become one of most commonly cited applications. Yet possibly the most underreported driver for why China needs AI is to address the lack of youngsters being born to fill the gap in the workforce, as the ballooning elderly population retires.
While AI has some way to go to being able to match humans for feelings and emotional intelligence, improvements are happening. This is where things are getting interesting.
The global race for AI supremacy has illustrated just how far values differ between China and the West, resulting in different prioritisation in AI algorithms. This was evident during an AI ethics seminar in London earlier this month which highlighted that there is no global ethical standard for this very important technology which will impact us all. Codes of principles written in the west tend to focus on fairness, transparency, individual rights, privacy and accountability. Chinese AI ethicists prioritise values that are open, inclusive and adaptive, adding up to “great compassion and deep harmony” – collective good rather than individual rights.
These values don’t just provide an interesting perspective on the cultural differences between the West and China, but how AI’s execution may differ in China and how it will shape marketing here. Most of China’s tech giants are already using AI to offer adaptive and personalised offerings that make life easier and more convenient for consumers. This is already impacting marketing and will increasingly do so beyond the smartphone, such as future evolutions of New Retail and when personalised Out of Home advertising comes to the fore.
Foreign brands don’t just need to understand how this is impacting their marketplace, channels and competitors, but also how differing principles will shape its development. China Skinny would be happy to assist. Go to Page 2 to see this week’s China news and highlights.
To mark seven years of writing the Skinny Newsletter, we’ve put together seven key trends which we believe are important to consider when marketing to Chinese consumers. These are trends that we have seen forming through researching for and writing the newsletter every week since 2012, in addition to the projects that we’ve worked on with almost 200 brands.
Some of these trends may be relatively well known, but are often still overlooked. When we do brand and product audits, and competitive analysis, we find successful brands have incorporated most, if not all these factors into their marketing strategies. Nevertheless, we’ve found the majority of brands don’t appear to have considered these components. We hope you find the recommendations below helpful in keeping Chinese consumers at the heart of decisions you make in the China market:
1. Play to my Tribe
At first glance, Little Zhouzhou may look like an attractive young lady. Yet the livestreaming star who sells countless tubes and tubs of beauty and skincare products to women around China is a male. Many of his livestream audience are also males who have contributed to the male beauty market growing at over 50% a year since 2016, with mens’ eyebrow pencils up 214% , men’s lipstick soaring 278%, and men’s BB cream growing 145% on Tmall. They have also driven sales of lacy, transparent garb for men to grow faster than any other male fashion category on ecommerce.
Little Zhouzhou and other effeminate Chinese males are part of a large and lucrative consumer sector who are shaking off traditional conforming ways, and unashamedly buying products and services that reflect their personalities, their interests and their tribes. This is far from the homogenous segmentation of China that many brands employ.
We estimate that there are around 500 new products launching every day in China. To cut through in the ever-more cluttered marketplace, brands should understand and connect with their target market’s emotional and functional interests with laser focus. It may not always be as extreme as targeting Gen-Zs wearing mascara, but should hone in on specific consumer and geographic profiles ensuring than positioning, messaging, products, packaging, formats, promotions, partnerships and pricing is relevant and meaningful. Here’s an infographic we created highlighting an example of how foreign brands are off the mark with segmentation and formats.
2. Do it For Me
Chinese consumers are bombarded with new products, apps and advertising every day. For many, all of the choices can be overwhelming. One of the biggest complaints we observed around Singles’ Day last year was how unmanageable the deluge of promotions had become. A cottage industry evolved where enterprising folk made sense of it all for overwhelmed consumers. The most common initiative was to create lists to make it easier for consumers to find what they want, cutting through the ocean of offers and just finding the best deals or brands for requested categories.
Evolutions by China’s tech giants and AI are taking the guess work out consuming goods and information for Chinese consumers. In many cases, they are making the decisions for consumers. In 2015, searching was the main method consumers would find products on the Taobao app. Nowadays, the majority of products are found through proactive recommendations from Alibaba, as illustrated in the chart above. The attraction of recommendation algorithms are even more evident in the runaway success of the Douyin and Toutiao apps, where users are directed to videos and news based on AI, while searching is mostly irrelevant.
Making decisions for consumers doesn’t have to utilise AI. This could be as simple as selling Ready-to-Cook meals, rather than consumers having to figure it out the ingredients. It can making fashion and accessory recommendations for occasions, or choosing travel itineraries based on interests and demographics. Understanding consumer needs and executing them well can be profitable, particularly for less-familiar foreign categories which require an element of education.
3. Make it Convenient
Luckin Coffee already has 3,000 stores in 40 cities and is fast catching Starbuck’s 3,500 stores. Luckin set a record by IPOing on Nasdaq just 17 months after opening its first coffee shop. Although lower prices than Starbucks has helped Luckin’s sales, the convenience of coffee delivery has been a big contributor to its popularity. Even Starbucks has followed with coffee delivery.
Even if a coffee shop is close to the office, Chinese consumers have no qualms about having one cup delivered. Similarly, more than 10 billion+ meals were delivered last year even though they are laden with unsustainable plastic packaging. 30-minute grocery delivery from New Retail purchases is turning brick & mortar retail on its head in China, and is said to have been a significant driver for Carrefour’s recent retreat from China. The enormous uptake of delivery services is attributable to one factor: convenience.
For foreigners studying Chinese, one of the first words they learn is fāngbiàn, meaning convenience, representative of how important the word is. It wasn’t long ago when China used to have archaic systems that saw even a basic trip to the bank as difficult. But well-resourced tech companies have addressed many of these pain points with convenient alternatives, and have been rewarded handsomely as a result. Through tech innovations such as mobile/facial payments, delivery and ecommerce, China has become one of the most convenient countries on planet in many ways. Whenever Chinese travel abroad, the most common complaint they have is that it isn’t as convenient as China.
When devising a marketing strategy, the customer journey should be as convenient as possible. This should factor in where consumers find information, seek customer support, to the channels they purchase, repurchase and even return. Products should factor in convenient formats and packaging.
4. Give me an Experience
China is the most contested market on the planet, and to stand out, brands need to do more than just sell something. They need to make the whole experience better. In many cases, this involves combining products, services and marketing with interactive tech and creating meaningful experiences.
We only need to look at good old fashioned malls and how they have evolved over the past few years from just having shops, to ‘experience centres‘. Up to 50% of the area of China’s most successful malls are now made up of food and beverage, cinemas, ice skating rinks, spas, gyms, children’s play places, language schools, bowling alleys, horse riding centres, indoor beaches, amphitheatres, etc. New Retail destinations also highlight the need for experience where customers can have their food cooked and then eaten on site. There are countless places to interact with their smartphones to try on lipstick, clothes and other gear on magic mirrors. In the tourism category, shopping used to account for lion’s share of budget, now most spending goes to experiences.
The increased desire for experiences is representative of a maturing consumer, many who are seeking a form of escapism from sometimes busy and stressful life in the city. In 2018, 52% of Chinese consumers spent more on experiences, such as travel, dining out and activities, compared with just 26% in the United States according to PWC. Marketing, product and channel strategies should always consider Chinese consumers expectations for an interesting, energising experience encompassing anything from gamification to physical retail experience.
5. Stroke my Nationalistic Pride
The Trade War has been doing interesting things to Chinese consumer behaviour. There has been a 30% spike in Chinese students to the UK at expense of US. Chinese travellers to the US are expected to drop 5% as a result and demand for US products from almonds to wine have dipped as a result of tariffs. Yet one of the biggest results from increasingly abrasive geopolitics such as Huawei issues is the acceleration of the rise of nationalism.
We’ve being seeing Chinese consumers become more proud of their country and politics over the past half-dozen years. Back in 2011 any self-respecting Chinese consumer who could afford it wouldn’t be seen dead with a Chinese product. Yet the combination of improving domestic products, quality control and branding, coupled with a greater sense of national pride about where China has come from and what it has become is seeing a rise in preference for Chinese culture and products.
Foreign brands can tap into this increasing nationalism through culturally sensitive and smart marketing initiatives. Collaborations and partnerships with Chinese brands, designers and KOLs can help build a Chinese connection with brands. An example is the US cookie brand Oreo who partnered with Forbidden City to develop packaging, marketing and products that had a proudly Chinese feel to them such Green Tea Cake, Red Bean Cake, Hawthorn Berries or Lychee-Rose Cake – said to be a favourite of the Qing emperor Kangxi. More than 760,000 boxes sold online on its first day of sales. Cultural sensitivity needs to be considered well beyond China’s borders as brands like United Airlines, Marriott Hotels and even Nike has discovered.
While it is important to be culturally sensitive and relevant in China, foreign brands shouldn’t lose their core DNA and what makes them special and unique – which is often their origin. It is becoming increasingly hard to compete with domestic brands without it.
6. Sell me Better Things
In June this year, sales of luxury cars in China grew 25% from a year earlier, despite the overall auto market slowing down. Super-premium products are the fastest growing, and often the largest segment, of almost every FMCG category. This is representative of the general trend of trading up. 26% of Chinese consumers traded up their purchases in 2018, versus 17% in the other top-10 other economies according to McKinsey.
This premiumisation is the result of a maturing Chinese consumer who increasingly has the means and will to purchase better quality products, and pay a premium for them. In many cases, domestic brands have been quicker to realise the shift to premium. This is particularly obvious in the FMCG category where brands will often repurpose products with a few new ingredients, slicker packaging and marketing and charge a significant premium for them. A good example is the Mengnui Delux premium milk with slightly more protein sells at twice the cost of Mengniu’s normal milk, and sells 50% more volume online.
While Chinese consumers are demanding premium products, they are ever-more discerning. Brands need to increasingly justify why they are more expensive. If relevant, the reasons don’t need to be expensive such as more protein with Mengniu Delux, but the rationale needs to connect with what Chinese consumers find important.
7. Help Me Improve
With more experience and discretionary income, Chinese consumers’ desire for richer and more fulfilling lives is ever increasing. This is alongside China’s hyper-competitive environment which is driving consumers to improve their skills proactively to stand out from the masses both professionally and socially.
The ability to improve and have more fulfilling lives is driving everything from education to fitness. Adult classes are one of the fastest growing categories online. In the 2017, 1,102 running events took place in China attracting five million athletes. This was a 20-fold increase on the number of events in 2014. This has helped Nike’s Greater China revenue grow 24% in Q1 of this year, but has also driven sales for brands spanning sports nutrition, joint pain supplements and sports tourism.
One of the biggest beneficiaries of China’s self-improvement trend is proactive health, a large driver behind the rise of fitness, but also significantly influencing food and beverage preferences and travel.
The pursuit of betterment focuses on health, professional, practical skills, sports and fitness in addition to a suite of niche desires. Any products and marketing that give consumers the impression that they will learn, get healthier, become more attractive, etc are likely resonate well.
8. The Bonus: Ensure it’s Sustainable
It is still early days, but we’re hopeful that the recent recycling rules in Shanghai and rollout to 25 mainland cities by the end of 2020 will make consumers more aware and conscious about responsible and sustainable consumerism. It still has a long way to go, but we’ve found Government-led initiatives are among some of the most persuasive drivers and shapers of behaviour.
Brands should aim to be ahead of the curve, introducing sustainable initiatives into their marketing strategies. Initiatives that personally impact consumers are most likely to connect with the target market. Hundreds of millions of Chinese consuming more sustainably will be a boon for everyone.
Ensuring that the trends above are incorporating into your marketing plan, will mean that you are well on the way to really connecting with Chinese consumers and maximising your chance of success in the lucrative Chinese market. China Skinny would welcome the opportunity to assist with defining and shaping that strategy to do so!
A little over seven years ago, our fledging little marketing agency wrote its first Weekly Skinny. The topics of the day were common myths about Chinese consumers, the importance of female consumers, food scandals, fakes and 300 million+ users on Weibo. On the surface, the subject matters weren’t too different from those today. Yet open the hood and you see a Chinese consumer, national swagger and marketing landscape that is almost unrecognisable from 2012.
The level of consumer sophistication has changed dramatically. In those days, you could just put a foreign product on the shelf and many shoppers would think it was incredible. No self-respecting consumer would be seen dead with a Chinese smartphone (they now account for almost 90% of smartphones sold) or Chinese brands across a slew of categories. KFC was the pin up kid for foreign brands, managing to balance its ‘aspirational’ foreignness with thoughtful localisation. If Chinese wanted to do the pilgrimage to the source in Kentucky, getting a visa for travel to Western countries was very difficult for travellers outside of tier 1 cities, and many within. Over the seven years, the number of outbound trips has almost doubled.
Over seven years, 130 million people – more than Japan’s total population – have moved from the countryside to cities, although a third of cities are shrinking. The average wage has grown almost 75%, and with it, a willingness to make discretionary purchases. There are around 150 million new passenger cars on the road and 125% more kilometres (29,000km in total) of fast train tracks. The Beijing-Shanghai connection has carried over 100 million passengers/year on average over that time.
One of the most obvious changes on the street is the ever-present smartphone. In 2012, just 288 million Chinese sported a smartphone. By the end of 2018, it was around 785 million. Online shoppers have increased from 242 million to 610 million last year, with their share of total retail growing from 5.3% to 25%. Gone are the wads of 100 kuai notes stuffed under the mattress, with mobile payments, and increasingly facial payments seeing the endangerment of legal tender. Mobile payments in China are now estimated to be over 100 times the size of the US.
That’s China speed for you. They say China years are like dog years – what happens in seven years in some countries, takes a year in China. Based on that, we should be celebrating 50 years of the Skinny sometime in September.
Writing the Skinny every week has forced us to keep up with the macro and micro trends in China. It’s enabled us to see through the hype and often-dubious data and understand the constant changes in this market, something which is incorporated into every project we do. To mark seven years of the Skinny, we thought it would be fitting to share 7 Trends that are impacting Chinese Consumers today. Here they are.
One last note, any recent history of marketing in China would be amiss without including WeChat, which had around 150 million users when the Weekly Skinny was first published. It has now become a big part Chinese consumers’ lives. There’s no better way to learn about marketing on the super app than the China Chat conference in Shanghai this September. China Skinny’s Mark Tanner will be joining the esteemed lineup of speakers. More information here. Go to Page 2 to see this week’s China news and highlights.
Sleep deprivation, oh how horrible. It’s the giveaway sign of new parents or someone trying to juggle a demanding job with study or other extracurriculars. It’s also increasingly likely to affect Chinese consumers.
On the surface, many Chinese appear to be among the most capable sleepers on the planet – where else do people manage to nap while standing on the subway, or within seconds on a seat anywhere, even with the lights and noise of Chinese cities around them. Yet for 300 million Chinese people – almost a quarter of the population – sleep disorders are a genuine issue according to a recent study from the Chinese Sleep Research Society. Overall, the sleep quality of 94.1% of the Chinese public does not meet the recommended healthy standard.
It’s little surprise that many Chinese don’t get enough sleep: Chinese are working longer hours than before, and there are ever-more distractions in and out of the home. A recent Accenture study found 43% of Chinese spend less time at home than they did five years ago, versus just 15% on average from the 13 countries studied. Even at home, the smartphone screen and its alluring ecommerce deals, short videos, WeChat feeds and gaming are keeping Chinese consumers from the land of nod.
China’s lack of sleep has supported the rise of related industries. Sleep-aid supplements on Tmall increased by 300% last year, for example. However, like most things in China it is far from a one-size-fits-all, with data giving us an insight into how segments approach their issues overall. Consumers aged over 40 are more likely to favour treatment-based remedies such as natural foods and supplements, while those born in the 80s aim to optimise their sleeping environment, spending large on high-end mattresses, bedding and pillows. Folk from the 90s tend to buy products such as eye masks and sprays.
The steep growth in sleep-related products and services indicates that Chinese consumers are increasingly recognising their sleep issues, which has translated to an increase in resonant sleep-assisted marketing claims. Nevertheless, many consumers are unaware of the far-reaching downstream effects of a lack of sleep such as weight gain, heart disease, diabetes, strokes, cognitive function, lack of sex drive and even family harmony – all directly and indirectly related to family, success and health which are among the most important for goals for many Chinese consumers.
Brands should consider related sleep-related components when determining their product development, positioning and messaging hierarchy. Even categories that seem a little disconnected would be wise to consider it. We only need to look at Chinese tourists who claim the top reason for travelling overseas is to relax. As a hotel or airline, sleep-assisting pillows, seats or other features may increase your allure. China Skinny can assist to ensure you make the most of the opportunities. Go to Page 2 to see this week’s China news and highlights.
Last week, a man surnamed Cheng burst onto the stage at Baidu’s AI conference and upended a bottle of water over Baidu’s CEO Robin Li. Cheng’s bold act was applauded by many online patrons and was representative of how many Chinese consumers have become frustrated with the performance, ethics and privacy from China’s leading search engine; particularly as the Googles of the world are shut out.
In 2016, Baidu was slammed by consumers and the authorities after a university student died of cancer following subpar treatment from a hospital that had paid for an elevated listing in the search engine’s results. Just last month, Baidu was again censured for promoting fraudulent college application services. A state education department warned students to avoid using search engines when seeking the official university application website as they may be misdirected to an unofficial website which leaks personal information, while not even providing valid applications.
Yet it isn’t just Baidu who is untrusted. Highly trafficked search engine 360 Search was also summoned by China’s Ministry of Education and Ministry of Public Security for linking to the dodgy application services from paid advertising. Just last month, popular search engine Sogou was fined $4.37 Million for ‘unfair competition’ after directing users to its own site using suggested search pop-ups on its keyboard, even when users were trying to input keywords into rival search engines.
These are just a few misdemeanours contributing to why search engines are not nearly as relevant in China as they are in other countries. Last year Google topped the BrandZ Most Valuable Global Brands and YouGov Global Brand Health Rankings, among many others. On the other hand, Baidu’s market has dropped from 86% in August 2015 to 64% in May this year. Baidu reported its first net loss in Q1: nearly ¥330 million ($48 million). Following its worst performance since listing in 2005, Baidu’s CEO Robin Li began restructuring its management team. At least seven top executives have left Baidu this year including president of new business Zhang Yaqin and senior vice president of the search business Xiang Hailong.
At China Skinny, we still hear from numerous brands seeking a plan for Baidu as the key pillar of their China marketing strategy. Whilst Baidu can be an important touchpoint in the customer journey for many categories, in most cases, it is secondary to other digital channels such as WeChat, ecommerce and even relative newcomers such as Douyin.
Digital ad spending is forecast to grow 22% in 2019. While Baidu’s share is shrinking, Alibaba’s ad revenue is forecast to be $27.3 billion – 63% greater than total ad spending on TV. According to emarketer, digital ad spending is expected to account for 69.5% of total media ad spend this year, and Alibaba’s digital advertising revenue will be more than double that of Baidu’s.
Why is Alibaba’s ad revenue more than twice the value of China’s biggest search engine? One reason is context. When you are searching on an ecommerce platform, your target market is typically much closer to the point of purchase, so your ad spend is more likely to result in a sale. Secondly, as well as purchases, Chinese consumers use ecommerce platforms for research – often instead of search engines. This is because Chinese ecommerce pages contain so much valuable information, results contain user generated reviews, and are more organic than the paid placements on Baidu. In short, they are more trusted. In China’s inherently untrusting society, whether it be ecommerce search results or KOL endorsements (even though most are dishonest), Chinese consumers are more likely to respond to sources that they can trust. Brands should aim to understand those trusted touch points and have a strong presence across them – something China Skinny can assist with.
On the subject of untrusted online sources, we have heard from a few people who have registered for the 2019 China Digital Conference advertised in Melbourne on 31 July. The site claims that China Skinny’s Mark Tanner is the conference chair and the esteemed Matt McKenzie and Benjamin Sun will also be speaking. We can confirm that Matt, Ben or Mark were unaware of the conference and the advertised venue does not have a booking on the said date. We’re sorry for those who purchased tickets, and hope there is a path of recourse to get your money back. China Skinny is lined up to be back speaking in Melbourne in September, so hopefully we can share some of our insights and views on the China market then. Go to Page 2 to see this week’s China news and highlights.
On the surface, Chinese consumers appear to be some of the most environmentally-conscious consumers in the world. For years, high profile studies have praised Chinese consumer’s sustainability habits, such as the National Geographic’s 2014 Greendex which ranked China second globally for its consumers’ environmental behaviour, applauding their high public transport and scooter use, and consumption of locally grown food.
More recently, China’s Electric Vehicle (EV) adoption has been the envy of every environmentally-focused government, accounting for 49.5% of EV sales globally. Yet with annual EV sales growth plummeting from 126% to 2% over the past 12 months, largely due to the reduction of Government incentives, it is fair to say the purchases were more motivated by wallets and license plate quotas than sustainability concerns.
At China Skinny, we’ve been following consumer attitudes towards sustainability for many years now. Whilst there have been some hopeful green-shoots, overall behaviour is still at its nascent stage relative to most Western markets. This is reflected in the 10+ billion plastic-loaded meal deliveries a year, or the nearly three-quarters of residents in top-tier cities who couldn’t identify how to properly sort their rubbish for recycling.
Chai Jing’s raw 2015 documentary Under the Dome showed great hope for educating a population hungry for answers about China’s toxic environment, but its runaway popularity ironically saw every trace of it removed in China less than a week after airing. This stole the opportunity to corral the population into more sustainable behaviour.
On virtually every related research project China Skinny has done, we’ve found consumer responses are supportive of sustainable brands and products at a surface level, yet delving deeper into actual behavioural has found limited individual accountability for environmentally-friendly behaviour. Most consumers have expected Beijing to be the main driver for fixing the environment. As of Monday, we’ve seen the most significant step from Beijing to shift the onus onto consumers to act more sustainably.
From July 1, Shanghai residents must sort their garbage into four classifications – household food or kitchen waste, hazardous waste, recyclable waste and residual waste. Failure to do so will see individuals face fines of up to ¥200 ($29). Businesses face fines of up to ¥50,000 ($7,282). Shanghai has installed more than 13,000 waste stations, so far covering 75% of the city, and has replaced more than 40,000 streetside bins for different types of waste. The city currently generates more than 9 million metric tons of garbage every year – the equivalent of 1.5 million African bush elephants. In its quest to reduce this and make sense of the new recycling rules, it has used gags, memes and events with “performers striking forceful beats on tall garbage cans.”
Following Shanghai, another 45 mainland cities will introduce similar regulations, including Beijing, Shenzhen and Guangzhou. By the end of 2020, the 46 cities will invest ¥21.3 billion ($3.11 billion) to build waste sorting and recycling systems.
We only need to look across the Strait to Taiwan to see what an impact this could have. In the first 10 months of last year, nearly 60% of Taiwan’s waste was recycled. The daily amount of garbage during than period was 0.41kg, down from 1.14kg in 1997. When you’re looking at China’s scale, similar savings won’t just have a massive impact on its cities, but the world as a whole.
Like many things in China, Government-led initiatives are among some of the most persuasive drivers and shapers of behaviour. As consumers are forced to sort and recycle, sustainability will be brought to the forefront of consumers’ consciousness. Expect sustainability to be one of the most talked-about and thought-about factors of consumption in the foreseeable future – something worth factoring into your marketing strategy.
On the topic of trends shaping marketing in China, China Skinny’s Mark Tanner is joining CBBC for the webinar What’s Hot and What’s Not in a Slowing Chinese Economy on 17 July to share insights on trends and categories currently shaping consumer behaviour. Non-CBBC members are welcome to join. More information here. Go to Page 2 to see this week’s China news and highlights.
If you were peddling your products in Los Angeles and Chicago, there’s a good chance that you’d need to tweak the marketing strategy to account for differing lifestyles, varying tastes, disparate climates, different sales channels and varied cultural and emotional needs. In China, variations between cities are typically even greater. Many Chinese cities’ characteristics have been evolving since long before Columbus was leading expeditions to the Americas. These historic differences have helped shape regionalised consumer behaviour. More recent Beijing policies have further moulded differing consumer profiles. For example, residents in first tier cities have been able to travel abroad with more flexibility for longer than their lower tier peers, impacting their sophistication and maturity when travelling abroad, and their exposure to foreign lifestyles and products.
There’s no city that better illustrates the diversity of China’s megalopolis’ than the boomtown of Chengdu in China’s southwest. On the surface, it could be any Mainland city; thousands of grey apartment blocks sprawled across a flat grid of streets, dotted with adventurous modern commercial towers and restored ancient constructions, dissected by a winding river and heaving highways, obscured by a soupy smog more days that it isn’t. But filling those towers are a population arguably more independently-minded than consumers in other parts of China – with personalities as spirited as the peppers that are such as big part of the local Sichuan cuisine.
Chengdu is located some distance from Beijing’s policy makers. The mountains that encircle the city have provided a natural barrier for traders, invaders and legislators for centuries, isolating the city from the outside influences that have impacted other Chinese cities. Chengdu’s fertile soil and natural resources have seen it stay isolated for much of its history, allowing it to stay largely self-sufficient, with an attitude that’s both “mind your own business” and “anything goes.”
With the wealthy, sophisticated city of 16 million people increasingly on brand’s radars, China Skinny has delivered a number of research projects that include the Chengdu market. Their tastes and preferences are often the most disparate from other consumers in other cities we have investigated. One of our recent studies into the customer journeys of consumers in six mainland cities found the research and sales channels used in Chendgu were by far the most distinct.
Chengdu’s relatively lower rents have lured young, independently-minded migrants from across China, cultivating a hip, progressive culture that’s spawned San Francisco-style cafes filled with millennials. The many miles and mountains between Chengdu and Beijing has seen regressive policies about homosexuality hold less clout in the city, which has become a haven for the LGBT community, whose members are drawn to the relaxed, open vibe. Chengdu was voted the gay capital of China in a recent poll by gay dating app Blued.
Beyond sexual liberation, Chengdu also leads China for many genres of music, its underground scene and youth culture. Much of China’s Hiphop and Trap has spawned from the city, with many of China’s biggest hiphop hits dispersed with the Sichuan dialect.
For brands hoping to connect with independently-minded consumers in the city, you’d by wise to ensure that your product, messaging, channels, KOLs and most importantly, your brand’s purpose, are resonant with the target market in the city because just transposing a successful strategy from Shanghai or Beijing won’t always work.
For most brands in China, it can be impractical to have an independent marketing strategy for each target city, however there can be consistent elements by city tier and/or regional city clusters which can be incorporated to make marketing more targeted and resonant. We’ve found that understanding the consumers in a specific city usually highlights some quick wins that can make your brand and product connect with local consumers and break through the clutter. China Skinny has a lot of knowledge and experience to help you with that. Go to Page 2 to see this week’s China news and highlights.