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Reading any material about Chinese consumers, it is hard to miss references to demographics such as Gen-Z or millennials. They are important segments to target, but their needs, behaviours and emotional drivers can be as varied as China itself.

Sometimes, it can be more valuable to focus marketing not just on a demographic, but also the specific city those consumers live in. Youth in Chengdu are fiercely independent, with an underground music scene unrivalled in China, whereas young Shanghainese are much more likely to roll out a yoga mat and sip an Americano than anywhere else in the country. Identifying and tailoring marketing strategies around the target audience in specific cities can be a much more effective way to connect with consumers, than a generic China-wide ‘Gen-Z strategy.’

Some cities or regions in China are much more likely to possess the optimism, or the necessary affluence to purchase premium foreign products above cheaper alternatives. As the recent Economist Intelligence Unit study found, all of the top-10 cities with the greatest economic growth potential are in eastern and southern China, with the exception of Beijing. With many target cities grouped together in relatively small clusters – tastes, climates, lifestyles and cultures related to marketing are usually comparatively alike. Similarly, coverage of regional distributors, retail chains and other sales channels are likely to be more consistent.

Chinese cities warrant some individualised attention in their own right. These cities have the personal wealth, GDP and populations comparable to countries that businesses typically build individual strategies for. Shanghai has more people than Australia, a GDP greater than the UAE and Qatar combined, and millions of people with a net worth higher than $1 USD million. China’s mega city clusters Jing-Jin-Ji, Yangzte River Delta, Pearl River Delta Greater Bay Area average populations of over 100 million affluent residents each, although consumer profiles between the cities in each cluster can vary a lot.

We’ve aimed to help you make sense of the cities in China with our free-to-use City Tier Calculator and City-Nator tools, which have been updated with the latest numbers and classifications. Take a look, you may find them a helpful resource – we use them all the time ourselves!

Most readers will know that ‘localising’ for China isn’t a one-size fits all approach. But brands should also pay attention to what they are actually localising. In many cases, localising a foreign product for China can backfire, particularly if it is the foreignness than is appealing to Chinese consumers. Localisation is often more effective when done for the marketing proposition, sales structure and even the speed of decision making.

In short, when developing marketing strategies for China in segments such as Gen-Z or millennials, it pays not to look at the groups one-dimensionally. At a high level, creating a matrix between the segment and the city/region will build a solid foundation, to then factor in the many tribes who fall under them. Get in touch with us here at China Skinny to learn how we can assist in defining your target audience and ensuring that your marketing strategy will be relevant to and resonant with them.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

Refreshed and Updated City Tier Calculator and City-Nator: Compare Chinese cities by tiers, check out their populations, GDPs, rankings and even number of Starbucks cafes with the City Tier Calculator using the most recent data and classifications. The City-Nator provides an interesting perspective into the scale of Chinese cities relative to your own hometown or other big cities around the world.

Tech-Oriented Cities in Southeast China Lead the country in growth potential: Hangzhou topped the Economist Intelligence Unit ranking of Chinese cities with the greatest economic growth potential in the next few years. All of the cities in the top 10 are in eastern and southern China, except for sixth-ranking Beijing, coming in after Hangzhou, Shenzhen, Guangzhou, Shanghai and Zhuhai. Suzhou, Hefei, Nanjing and Ningbo rounded out the top-10. Shanghai remains China’s top-ranked consumer market, owing to its large retail sector and high concentration of wealth. Chongqing also ranks highly due to strong retail sales and tourism revenue growth, and a high ratio of young consumers.

Should You Localise Your Product for the Chinese Market?: Many brands’ main selling point in the Chinese market is their sense of foreignness, and so product strategies in which foreign elements are replaced with more familiar features often end up eliminating the very thing that customers appreciated about the product. While a localisation strategy can be effective in some cases, it’s critical to carefully consider which components of the business will benefit most from localisation — whether that’s a specific product feature, a customer service policy, or even a sales structure — and which would be more marketable and/or cost-effective to leave as a global standard.

Most Chinese College Graduates Expect to Earn USD155,000 a Year Within 10 Years, Survey Shows: As the first batch of Generation Z-ers, or those born after the year 2000, start to enter the job market in China, 67% are optimistic that they will be able to command a yearly salary of ¥1 million ($155,000) within a decade of graduating according to a recent survey. Tech firms ByteDance, Alibaba Holdings and JD.com are the three most sought-after companies to work for, with 64% wanting to work in the tech sector. 42% want to work in the recreation sector and 40% in education.

JD.com’s First Brick-and-Mortar Mall Set to Open in Xi’an: 200,000 items across an area of over 40,000 sq. metres opens in Xi’an on 30 September. Tenants range from electronics companies like Huawei Technologies and Haier to restaurants and home goods stores. The mall will include beauty and health shops with interactive components as well as virtual reality experiences. By offering an immersive experience, JD.com hopes to promote products in a way that is difficult to convey through a screen and woo customers to its online platform as well.

Online: Digital China

Chinese Podcaster Ximalaya Files for Hong Kong IPO After Ditching US Listing Plan: Ximalaya, China’s biggest podcasting platform, plans to file for an initial public offering (IPO) in Hong Kong. Founded in 2012, Ximalaya had 262 million active monthly users in the first half of this year. The average number of monthly active paying users on mobile terminals reached 14.2 million in the period, up 66% from a year ago.

Apple’s Initial iPhone 13 Pre-Orders in China Surpass Last Year’s as Market Offers Fewer Premium Handsets Amid Huawei’s Decline: More than two million preorders for the new iPhone 13 had been placed on Apple’s official store on JD.com as of last Thursday, surpassing the 1.5 million iPhone 12 pre-orders on the same platform in 2020. The enthusiasm saw Apple’s official website crash.

Overall Beauty

Antiracism Push Prompts Rethink of Asia’s ‘Beautiful White’ Creams: Unilever to relabel skin-care products to avoid implying fairer is better, but J&J and L’Oréal are keeping references to ‘white’ in Asia. Japan’s Kosé, with brands like Jill Stuart and high-end Decorté, replaced the word “whitening” with “brightening” on products sold in the US and Europe, but not in Asia.  Shiseido similarly said it plans to stop using “white” in the West but not in Asia.

Investors Bet China’s Cosmetic Surgery Industry is Next on Regulators’ Hit List: China’s aesthetic medicine market could suffer a heavy blow if Beijing concludes that the sector’s negative social influence is on a par with private tutoring and online gaming. State media have stepped up criticism of the industry for promoting the idolisation of physical appearances and piling further misery on young people already self-conscious about their looks. In related news, more men are going under the knife to boost their chances in life, with 17% of white-collar workers having had cosmetic treatments.

Overseas Chinese Tourists

Chinese Travellers Still See US as Most Unsafe for Travel: Chinese travellers back in March showed pent up desire to get back to exploring the US in spite of strained relations between the two countries and a perception of America as unsafe from a pandemic perspective. Six months later, 87% of Chinese consumers still rank the US as the most unsafe country to visit among a list of top 13 destinations. Japan, UK and Canada dropped in ranking for safety. Singapore and Hong Kong are seen as among the safest.

Chinese sport Sport

China’s Elite Snowboarders Herald New Wave of Olympians: As elite snowboarder Liu Jiayu trains for the 2022 Winter Olympics, it’s not just her platinum blond-streaked ponytail that stands out – she also has a colourful, personal and public social media presence, a relative rarity for Chinese athletes.

China’s COVID-19 Driven Surfing Boom: Chinese young people are discovering surfing in increasing numbers, thanks in part to restrictions on foreign travel in the wake of the pandemic.

Premium and Luxury

What China’s Changing ‘996’ Culture Means For Luxury: In response to high living costs and lack of upward mobility, Chinese youth have become increasingly vocal about rejecting societal pressures to work hard and compete, choosing to “lie flat” instead. Brands shouldn’t directly reference the “lying flat” movement, especially as state media outlets regard it as “shameful,” and the term is banned on some digital platforms.

Autos and Cars

Surging EV Sales Put China Ahead of Government Targets: Chinese consumers bought 1.79 million electric vehicles over the first eight months of 2021, up 194% from the same period last year. This expansion compares with 14% growth for overall auto sales. Last month, electrics made up 14.4% of sales. China officially has 479 EV companies. Of those, 70 were established over the past two years. Elon Musk has praised the growth potential of the Chinese market and emphasized the innovation of Chinese EV manufacturers.

The drivers that determine what Chinese consumers buy and where they buy it have shifted. Shoppers are placing much more emphasis on the experience, the convenience, the service and increasingly being part of a community.

The Harvard Business Review recently wrote a long article highlighting how Chinese retailers are reinventing the customer journey to reflect these new drivers. Many of the article’s themes will be familiar to Skinny readers, such as the importance of treating the customer like royalty.

Part of this customer-focus is ensuring that brands are where consumers want to be, when they want to be there. Consumers don’t distinguish between online and offline channels, which many Chinese retailers have picked up upon evolving into omni-channel businesses. As a result, Chinese sales, marketing and CRM systems don’t differentiate between the online and offline world. This provides a seamless, consistent experience for consumers, and also allows an easy pivot with an event like Covid which has pushed many shoppers online.

Ensuring that the customer is king or queen, means waiting upon them and responding to their needs. Anyone who has shopped online in China will appreciate the importance of quickly answering queries. Yet with China’s bursts in demand from massive festivals like Singles’ Day, Chinese retailers have found smart tech solutions to keep up with these peaks. AI-powered chatbots such as Dianxiaomi, can now understand more than 90% of customers’ queries. 94% of online service at Alibaba is AI-enabled, and it earns customer satisfaction ratings 3% higher than service delivered by staffers.

Chinese retailers don’t treat sales as isolated events. With the lines blurring between marketing and sales channels like we’ve seen on social media, any stage of the marketing journey, any scan of a QR code, or connection with a brand ambassador can be a sales interaction. Similarly, well-considered loyalty and advocacy programs can ensure an individual sale can morph into an avalanche of sales. The mobile-centric Chinese consumer provides numerous touch points to collect data and understand customers more, to better cater to their needs and even adapt strategies at a macro level.

Even brands who revolutionised retail in China still need to continue adapting to the ever-evolving Chinese marketing models. Walmart is a classic example, opening its first store in China 25 years ago and redefining the way consumers bought groceries. A decade ago, it was the number-2 hypermarket player in the country, but has since dropped to number-4, with its share oscillating at around 10%. Tencent and JD-backed Yonghui, on the other hand, has grown from around 2% to 12% since 2011. Whilst its integration of tech and logistics from its tech backers is relatively well known, a big part of its success can be put down to its targeted sales structure and incentives which keep small sales teams hungry for wins – something many brands overlook when determining their China strategy.

Walmart has been caught off-guard by its more agile local competitors and is rethinking its China strategy amid a shift to ecommerce. It is growing its focus on its Sam’s Club stores as more consumers demand premium groceries.

Walmart is like many brands in China who haven’t evolved fast enough to meet shifting consumer expectations. Areas that needed particular change are having an omni-channel approach, adapting quickly through data-led insights and ensuring sales structures incentivise sales teams on the right things. Get in touch with China Skinny to learn how we can guide you though many of these things.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

How Chinese Retailers Are Reinventing the Customer Journey: Western retailers lag their Chinese counterparts in leveraging customer data to make better business decisions, increase operational efficiency, and reduce costs. They need to integrate that data with off-line businesses so that customers are visible, identifiable, and traceable both online and off-line. Retailers need to establish contact with customers online through multiple touch points, including social media ecosystems, to increase their stickiness, loyalty, and activity.

China’s Hottest New Rental Service: Men Who Actually Listen: Chinese women are fed up with dating self-absorbed men. Now, “butler cafés” are offering them more attentive male company — for a fee.

China Doubles Reward for Consumer Fraud Whistleblowers To Up To $155,000: The Chinese government will offer rewards of up to 1 million yuan ($155,000) for reports of safety problems or misconduct involving consumer products, double the current ceiling, to encourage employees and the public to blow the whistle on corporate wrongdoing. The China Consumers Association reports that related organisations received more than 980,000 claims last year – up by half from five years earlier – with appliances, daily necessities and food among the leading categories.

Online: Digital China

How Chinese Consumers Shop Online – Cross-Border Commerce: A high level explanation of how cross border ecommerce works in China, including how bonded warehouses make delivery speedy and shoppers can ask livestream hosts to show items of interest live from the country of origin. There are 29,000 foreign brands on Tmall Global alone, with mum & baby and beauty products the most popular.

Premium Food & Beverage

Walmart Rethinks Its China ‘Hypermarket’ Strategy Amid Alibaba Gains: Sales in China’s supermarket and hypermarket sector fell more than 7% in the second quarter of 2021 compared to a year ago, as more Chinese shoppers shift online. In contrast, the membership-based sector is rapidly growing in popularity as consumers seek out imported goods such as Australian steaks and Belgian chocolates at lower prices. Sam’s Club’s strong growth has seen it plan to have 100 stores in China by 2028 from its current 33.

Dairy Deep Dive: Yili talks About Rankings and Plans: Yili uses tech and tools to listen to customer needs and develop products like its carrot-flavoured NOC (Nature of Cheerfulness) ice cream, which included a marketing strategy for ‘soft crust.’ Cheese and low-temperature milk have been among Yili’s fastest growing categories.

Surging Chinese Fish Prices Stir Up Food Supplies: Chinese consumers are having a hard time stomaching a nearly 50% jump in fish prices from a year ago, which mark the latest shake-up to the country’s vast food sector following a deadly hog disease outbreak that saw pork prices triple in 2019. Fish had previously been among the cheapest sources of protein in China, but is now more expensive than chicken and recently also higher than the staple pork. A widespread environmental clean-up drive has led China to restrict fish farming along major waterways in recent years, leading to a drop in the number of fish farms.

Why Mid-Autumn Festival Is China’s Fashion-Food Moment: Collaborations like Supreme x Skittles, Fila x Starbucks, Innisfree x Glico, or Dove x McCafé have diversified fashion and beauty players’ product portfolios and driven social media buzz. With brands increasingly tying in Chinese cultural elements, mooncakes for next week’s Mid-Autumn Festival are the next big collab theme.

Overseas Chinese Tourists

China’s Covid-Hit Travel Market Shows Signs of Recovery as Mid-Autumn Festival Bookings Surge: Interprovincial tour bookings made on Ctrip increased by 365%, while more niche private group tours grew by 550% between Aug 23 – Sep 6. But most travellers will be shunning long-distance trips for holidays closer to home, as the threat of Covid-related cancellations still lingers. Online travel agency LY.com estimates 800 million domestic travellers will hit the road during the Mid-Autumn Festival holiday.

China’s First Universal Studios Theme Park Opens this Month in Beijing. Here’s a Sneak Peek: The ¥50 billion ($7.7 billion) Universal Studios Beijing Resort will bring a little more of Hollywood to the mainland when it officially opens next week, following several pandemic-related delays. It has many of the popular attractions found at its counterparts in Singapore, Osaka, Los Angeles and Orlando. But there are some Universal firsts as well, including the Kung Fu Panda Land of Awesomeness. In the pre-opening trial, among the most popular attractions were the scream-inducing Decepticoaster inside the Transformers area, and all the Harry Potter rides.

Schooling and Education

Chinese Parents Fear Children’s English Skills Will Suffer as Schools Cut Back on Language Classes and Tutors Face Crackdown: Reforms designed to reduce the burden on pupils have worried parents who fear they will reduce their ability to communicate with the outside world. The reforms were intended to lighten students’ workloads and allow them to develop their sporting and artistic skills and, although they did not explicitly target English, the subject seems to be hit the hardest.

Designers and Fashion

China Accuses Canada Goose of ‘Misleading’ Consumers in Ads: Canada Goose has been fined ¥450,000 ($71,000) for deceiving customers with claims of “the warmest material from Hutterite [communities],” as most of its products are actually made with other material.

Overall Beauty

A Cut Above: In Conversation With Hawkins & Brimble’s CEO on the Male Grooming Brand’s China Strategy: Brimble launched in China a year ago, and the country already accounts for 25% of sales as Chinese men strive for “British gentlemen associations.” The company once had to fly a jumbo jet full of product to China on short notice to ensure products stayed on shelves.

Premium and Luxury

Hong Kong’s Global Watch Dominance Comes to an End: Hong Kong was once considered “El Dorado,” for Swiss watch exports. It was the top destination for over a decade, however industry experts doubt the city will ever regain the No. 1 spot. Much of the growth has come from Mainland China where many watch makers are seeing triple-digit growth over pre-pandemic levels, with Hainan’s duty free status helping drive sales.

What do the NBA, L’Oreal, Prada, Samsung and Nike have in common? They are a handful of the many brands whose endorsements by boy band idols have been a key pillar in their Chinese marketing strategies. These young celebs with immaculate hair and makeup have been among the most expensive, and most effective, brand ambassadors in the market.

Yet those endorsements may start to get a lot cheaper, and their reach a lot smaller, following Beijing’s recent banning of ‘sissy boys’ from TV, and last month’s wholesale removal of their idol fan clubs from the Internet.

Similarly, numerous brands who are doing collaborations with computer games such as Uniqlo’s League of Legends collection and Hershey’s King of Glory chocolates may see their returns diminish as the government has banned gaming for under-18s except for three one-hour windows on Friday-Sunday evenings.

The writing has been on the wall for some time. In 2017, over half of youngsters in some cities flunked their physical exams when trying to join the army. Officials lamented kids for playing too many computer games as one of the main reasons for the high failure rates. In 2018, referring to boy band idols, state media declared “these sissies promote an unhealthy and unnatural culture which has a not-to-underestimate negative impact on the youth. The sissy culture, driven by consumption, challenges the public order and worships a decadent lifestyle.” As we’ve seen recently, those in Beijing are men of action, acting upon many of their grumbles from previous years. The initial crackdown on tech giants has shown that they really mean business this time.

It’s best not to look at this suppression of China’s celebrities and gaming in isolation. It is part of a broader purge of influences  shaping popular culture that don’t align with national strategic goals and public interests. There will be a lot of areas that are impacted as a result.

Are young Chinese men all going to ditch their gaming devices, skincare regimes and platform shoes to watch patriotic war films and play tackle sports? Probably not, but removing their presence from popular channels will reduce awareness among the mainstream and decrease devotion in time. Nevertheless, the new rules may also create an air of underground exclusiveness with younger tribes who are almost inspired when BJ bans something on mainstream media. This has happened with ‘vices’ like tattoos. Boy bands may not have the same aura of underground cool, but some fans will remain committed for the meantime.

Regardless of how devoted boy-band fans are, many of the tried and true strategies for brands in China will change as a result of the new initiatives. Successful brands do well in China because they have constantly adapted to ever-changing consumer preferences and regulations.

With the closing of one door, new opportunities for marketers will open with others. This includes new tribes moulded from the outcome of the regulations. It means improved links between China’s digital platforms as part of the antitrust initiatives. Since 2013, WeChat accounts and Tmall stores have been unable to be linked, but this type of connection is opening up again presenting new, interesting opportunities. As ever, contact China Skinny to learn how we can assist your brand to best adapt to China’s ever changing rules and trends.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

Chinese Regulators Ban ‘Effeminate’ Men From TV as Part of Sweeping Entertainment Reforms: Beijing has told broadcasters in China that they must “resolutely put an end to sissy men and other abnormal aesthetics.” They should avoid promoting “vulgar internet celebrities” and admiration of wealth and celebrity.

Zhao Wei is a Huge Star, But There’s Barely a Trace of Her Online. Here’s Why: China is carrying out a sweeping crackdown on a number of industries, including the entertainment business.

Just 15% of China’s 2020 Small Town Undergrads Chose to Work in First-Tier Cities: Just 15% of Chinese college students from ‘small towns’ who graduated last year were working in first-tier cities six months after graduation. That compared with 18% in 2019 and 21% in 2016. The decline was attributed to high living costs in first-tier cities, and lower requirements for hukous (local residency permits) in other cities, coupled with their increased attractiveness.

Video & Entertainment

China’s Latest Crackdown Targets Its Entertainment Industry. What Investors Need to Know: Weibo has said publicly some fan groups had become “irrational” and “unhealthy” and that it would devise a “new scoring mechanism to curb fan fundraising, encourage fans to chase stars rationally, and encourage stars to interact with fans through charity.” Leading video-streaming platform iQiyi will cease airing its super popular idol talent shows, which often require viewers to purchase products in order to vote for their contestants of choice.

Online: Digital China

China Internet Report 2021: Following a period of rapid growth and innovation, the Chinese internet sector has entered a new phase of development with both push and pull factors driving internet companies to evolve, including tightening regulations, an increasingly saturated domestic market with changing demographics, and geopolitical tensions. Learn how these factors are influencing companies to look outside their established markets, pivot business models, focus on new customer segments, and adapt to shifting dynamics to remain competitive.

China Threatens to Ban E-Commerce Companies That Flout IP Laws: Ecommerce platforms will be restricted from online business operations or even have their licenses revoked if they fail to deal with serious violations of IP rights by vendors on their platforms, according to a draft revision of China’s ecommerce law.

ByteDance Takes First Step into Virtual Reality with Latest Acquisition: Douyin and Tiktok parent ByteDance has acquired China’s Pico, the third-largest virtual reality headset maker globally in the first quarter of 2021. The acquisition signifies further diversification of its business and potential integration of VR with its existing services.

Why Meituan Remains Wedded to Community Group Buying Despite Mounting Losses and Rising Regulatory Heat: Tech giant Meituan clearly believes in the community group buying trend, throwing billions of dollars at the category.

Tencent’s Messaging Platform Blocks LGBTQ Search Terms: Messaging platform QQ, home to over half a billion users, now blocks search terms like “gay” or “LGBTQ.” Search attempts come back with a notice: “Use the Internet in a civil manner. Say no to harmful information,” the same notice users get when searching for pornographic content.

Overall Beauty

‘Very Optimistic’: Estée Lauder CEO Expecting Double-Digit Growth for China in 2022: Estée Lauder’s Shanghai innovation centre is expected to open in the second half of the year, focusing on product design, formulation, consumer insight and trend analytics for Chinese and Asian consumers. These are all services offered by China Skinny’s Skincare and Beauty Trackers, at a fraction of the cost.

Designers and Fashion

The Four Fashion Personas of China’s Gen Z: Gen Z believes that to qualify as true luxury, a brand needs more than high price points, heritage and craftsmanship. It must also convey an elevated sense of aesthetics, with unique qualities and character. Male Gen Z shoppers are outspending women by 20% on fashion and luxury goods. Many Gen Z are critical of celebrities and influencers and the culture that surrounds them.

H&M Fined for Misleading Chinese Consumers: Still hurting from the Xinjiang cotton incident, H&M has been fined ¥260,000 ($40K) for “misleading consumers” in its advertising. The firm reportedly duped its customers with advertising that claimed that the featured products were only available in China. Authorities have confiscated “illicit earnings from selling substandard products” worth ¥30,000 ($4.6K).

Chinese sport Sport

Prada Takes the Lead on China’s Explosive Winter Sports Market: Prada has launched their “Prada On Ice” collection in response to the upcoming 2022 Beijing Winter Olympics. In addition to a range of sports gear from skis to snowboards to snowshoes, the collection also features high-performance accessories, all with Prada’s distinctive style, including ski goggles, ski boot bags, and sleeping bags.

Premium and Luxury

How Luxury Brands’ Customer Services are Going ‘Phygital’ in China: Taobao Life is an immersive 3D world where users can explore with their own unique avatars. Eight brands including Ralph Lauren, Valentino and Versace created 3D models of their garments and accessories for avatars to wear in Taobao Life. Participating brands, on average, each reached over 5 million new users on Alibaba’s ecommerce platforms during the four-day campaign. Jewellery & accessories was the fastest-growing category on Tmall Luxury Pavilion during Qixi. Luxury brands also used livestreaming for invite-only, private showcases for prospective customers. The online streams were designed to replicate the same exclusive, tailored shopping experience in a brick-and-mortar store.

Tech firms’ actions in China have long been a bellwether for trends in the market. Their vast data mines have enabled them to adapt to changes, however their latest undertakings have been less about distilling consumer data and more about interpreting messages from Beijing.

Having already taken a hammering from Beijing’s antitrust initiatives in the tech industry, tech firms have become a lot quicker in reading the tea leaves and acting upon them. Beijing’s increasing use of its “common prosperity” catchphrase has seen a rush of China’s tech giants pledging money to social responsibility programmes in recent months. $77m (¥500m) has come from the ByteDance founder’s personal wealth, Xiaomi is donating $2.2bn in shares, Meituan is gifting $2.3bn in shares, and Tencent has promised two massive pledges totalling $15bn.

Last week, Pinduoduo (PDD) announced that it is giving ¥10 billion ($1.5 billion) to support the country’s farmers and agricultural areas. This is arguably the smartest pledge yet as it ticks many of the boxes on Beijing’s scorecard. Firstly, it supports rural residents, who have benefitted less from China’s rise than city-dwellers and are an important piece of the “common prosperity” puzzle. It also involves investment in smart technology to bolster China’s standing, which remains key to Beijing’s aspirations, regardless of the crackdown on tech giants. No less important, is that it aids Beijing’s aspiration for greater food security, safety and efficiencies, and reduced exposure to natural disasters. The plan also aligns perfectly with PDD’s claim as the world’s largest agri-tech platform, with 12 million farmers in China already using its platform.

PDD are likely to be feeling flush with cash, having just announced their June quarter results which saw sales jump 89% and monthly active users increase 30% from a year ago, contributing to a net profit of $374 million. The company claims that the initiative will “not be driven by profit or commercial goals“, but strive to facilitate the advancement of agritech, promote digital inclusion, and provide agritech talents and workers with greater motivation and a sense of achievement.

The plan also aims to improve downstream market access for farmers to help them build their brands, training younger talent to set up agri-businesses, and revamping midstream logistics infrastructure to reduce waste, lower costs and speed up the delivery of agricultural food products.

Although $1.5 billion is just a blip in China’s enormous agricultural market, it is representative of the measured move away from peasantry farming on postage stamp-size plots and dangerously fragmented supply chains. China is investing large sums to modernise and industrialise its agricultural sector. Last year, while venture capital funding fell by more than half in China, agri-food tech funding increased 66% up to $6 billion. From monitoring chickens through blockchain and facial recognition to agricultural drones that increase crop yields to highrise hotels for pigs to 2-metre-high ‘giant rice’, large tracts of China’s food production is moving from the primitive to the futuristic, which will have an impact on food producers globally.

Beyond providing another bump for China’s domestic food production, distribution and sales, PDD’s and the other tech giant’s pledge, illustrate that we have reached a new phase of corporate social responsibility in China. There will be more initiatives, larger initiatives, and they will need to be supported by more thoughtful campaigns than ever to be noticed.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

China’s Celebrity Culture Is Raucous. The Authorities Want to Change That: The Communist Party has declared war on idol worship, part of a broader crackdown on what it sees as toxic celebrity culture that is poisoning the minds of the country’s youth. The ranking of celebrities by popularity was banned last Friday. One of China’s biggest film stars, Fendi’s brand ambassador Zhao Wei (Vicki Zhao) has disappeared from the Internet for unknown reasons, among a series of celebrity crackdowns sweeping China’s entertainment industry.

Jackson Yee Repeats Atop 2021 Forbes China Celebrity List: Jackson Yee, the 20-year old Chinese singer and actor again topped the latest Forbes China Celebrity List. Yee ended his brand ambassadorship with Givenchy in 2019 after their T-shirts listed HK, Macau and Taiwan as separate countries. He distanced himself from Adidas in March this year following the Xinjiang cotton incident, but in April signed on with Armani and Tiffany & Co. The Forbes top-10 celebs were: 1. Jackson Yee, Actor and Singer; 2. Yibo Wang, Actor; 3. Jia Ling, Actress and Director; 4. Yang Mi, Actress; 5. Jay Chou, Singer; 6. Lay Zhang; 7. Zhao Liying; 8. Yang Zi; 9. Karry Wang; and 10. Jackson Wang.

China: Politics are Important but it’s the Regulations that Matter for Multinationals: Looking at the new Data Security law, there certainly are aspects that are worrying for business – particularly the possibility of data localisation – but is it all concerning?

Online: Digital China

Apple Exemplified an Era of Global Capitalism that has Passed: Apple’s annual sales from China have roughly quintupled from a decade ago to $60 billion, more than any other Western firm. Unlike the other tech giants, Apple mainly sells hardware, and has a higher share of sales outside its home market than Alphabet (Google), Amazon, Facebook, Microsoft, Alibaba or Tencent. In the 10-years since Tim Cook took the helm, he has grown the company’s value more than five-fold to $2.5 trillion, but he now has to adapt to a new age of tech and globalisation.

Alibaba Says Delivery Robots are the Future. Here are Four Charts that Explain Why: Alibaba is deploying 1,000 autonomous delivery robots across China this year. The “Xiaomanlv” or “small donkey” robots can deliver about 50 packages at a time and as many as 500 boxes in one day, covering 100 kilometres on a single charge. Alibaba claims its robots will overcome the “problem” of last-mile shipping – the part where a parcel actually arrives at your door – which it says is plagued by the issue of delivery people getting lost or stuck in traffic. Between 2013 to 2020, the number of parcels delivered in China grew from 9.2 billion 83.4 billion.

Premium Food & Beverage

Why China’s E-Grocery Giant Is Pouring $1.5B Into Sustainable Ag-Tech: Pinduoduo’s ¥10 billion ($1.5 billion) fund hopes to support the digitalisation of agriculture and advance sustainability in rural Chinese farms.

Yili and Westland ‘Cream Team’ Create New Product for Chinese Consumers: A cross-cultural research and development project has delivered a new whipping cream. Overcoming variabilities of NZ’s grass-fed dairy, the partnership has created something suitable for the demands of Chinese bakers. The cream factors different needs of bakers in China from NZ, with whipping cream suitable for a number of applications such as milk foam, cake decorating and mousse. New product sales accounted for 16% of Yili’s total revenue in 2020 with Yili now ranked the fifth largest dairy producer globally.

US Frozen Beef Exports to China Surge, Adding to Canberra-Beijing Tensions but Boosting Trade Deal: US exported $107 million worth of frozen beef to China in July, compared to just $35 million from traditional export destination Australia. Australia still dominates exports of chilled beef, but the gap is also closing, although chilled beef from the US remains more expensive than imports from Australia and New Zealand. In news that may increase beef imports, African swine fever is spreading rapidly in China, again.

Chinese Staycationers Hunt for New Drinks and Cognacs: 33% of duty free shoppers in Hainan purchased alcohol, most notably Cognac. Despite being second in terms of footfall, alcohol had the strongest sales conversion at 93%, with shoppers spending around ¥3,000 ($465) on average. 68% of Chinese tourists visiting Hainan’s duty free shops said they were open to buying a brand or product they had never before purchased, showing that there is a big opportunity for new or rare drinks otherwise unavailable in mainland China.

Overseas Chinese Tourists

Trip.com Sees the Light of Recovery: Compared with January-June volumes, Ctrip searches for European flights grew by over 150% in July and continued to rise in August, peaking on 12 August at over 320% higher than the pre-summer volume. Searches for European hotels rose by 80% in August.

Video & Entertainment

China’s Tightened Limits for Kids’ Gaming Time Raise Questions About Tolerance for Foreign Platforms, VPNs: On Monday, China issued a new rule limiting gaming time for players aged under 18 to between 8pm and 9pm only on Fridays, Saturdays, Sundays and statutory holidays to tackle video gaming addiction among young people. The new rule, however, is expected to steer young people to find alternative platforms on which to play without such restriction.

China’s Newest Boy Band Called ‘Absurd’ for Being Too Young: The seven-member idol group Panda Boys, whose members are aged between 7 and 11, has courted controversy after debuting in the southwestern city of Chengdu last week. On Monday, CCTV said involving children in showbiz is “absurd,” adding that the country’s idol industry must not profit at the expense of the healthy upbringing of minors. The boy band has since disbanded following the outrage on social media.

Autos and Cars

Tesla Brakes Became Trending Topic on Weibo 130 Times in First Half of 2021: In the first half of the year, only four topics got more airtime on Weibo than #TeslaBrakes, trending 130 separate times during the period, becoming the only business enterprise in the list of top trending terms.

Premium and Luxury

Dragons Fly as Chinese Millennials Take a Shine to Gold: Sales of gold bracelets, pendants, earrings and necklaces that draw on dragons, phoenixes, peonies and other traditional Chinese patterns and symbols are flying in popularity, especially for consumers in their 20s and 30s. They are helping drive a rebound in gold demand in the country after a pandemic-induced slump. Heritage gold jewellery can command premiums of 20% or more over conventional gold jewellery.

How the Daigou Can Help New Brands: BCG estimates that of the ¥230 billion ($35 billion) spent by Chinese consumers in the overseas luxury market in 2020, as much as 70 to 80% was spent through daigou shoppers. The role of the daigou, or Chinese personal shopper, is expanding to reflect the changing priorities of Gen Z consumers in China, working closer to home, and mixing emerging Chinese designers with foreign brands.

As much of China swelters in the summer heat, staff at companies selling chocolate-laden ice cream on a stick or tub should be skipping around the office. But even with the AC blasting, the folk in Unilever’s ice cream division are likely to be sweating more than usual.

China is the largest market for Unilever’s Magnum ice creams. The rising appetite for ice cream in China, coupled with Magnum’s clever marketing, collaborations and promotions had seen sales growing at around 20% annually for some time.

Over the years Magnum has engaged a host of popular brand ambassadors such as Li Bingbing, Gao Yuanyuan and Ayanga. It’s collaborated with strategic partners such as the Family Mart convenience store chain, having Family Mart-specific QR codes on ice cream sticks directing consumers to the retailer’s WeChat account for discounts on more Magnums. Quirky, timely collabs have included popular milk tea brand Lelecha, to launch a limited menu of ice cream beverages and bread for summer.

Magnum was an early adopter of pop-up stores, theming them with summer campaigns every year since 2013. In 2019, its Magnum Beauty Store pop-up partnered with cosmetics brand Benefit, aiming to fuse ice cream with alluring beauty services. It’s campaigns have incorporated many on-trend themes and technologies from Augmented Reality to personalisation through DIY ice creams and segment-targeted flavours.

Over time, Magnum managed to hike prices for a simple ice cream on a stick from a mere ¥5 (77c) at the Family Mart in 2011 to as much as ¥12 ($1.85) today. For a while there, it felt like they were nudging the price up ¥1 every summer, symbolic of their clever marketing and the premiumisation trend that has happened across almost every category in China over the past decade.

Yet much of this good work in building brand equity is likely to take a back seat for a while as the freezer burn sets in, following the exposé into Magnum’s ingredients list in China. Whilst Magnum claims 100% imported Belgian Chocolate in China, it turns out that they contain milk powder and a higher proportion of vegetable oil than European Magnums which are made with concentrated milk. This clearly hasn’t gone down well in China, with the topic attracting over 400 million views on Weibo within hours last Friday, tagged with topics like “double standards for ingredients.” This year’s brand ambassador Jing Boran has terminated his relationship with the brand.

Unilever’s response highlighted the difficulty of transporting fresh milk from Europe to China, also noting domestically-produced milk would cause a “supply problem.” It didn’t elaborate as to whether this was due to the quality of local milk but should be something brands consider when evaluating on-shoring their production to China.

Although many products in China use powder such as the popular milk teas, the issue for Chinese consumers are the double standards from overseas brands. We’ve seen it come up with brands like Starbucks, which charges more for a cuppa in Shanghai than Seattle, which turned out to be one of the drivers for Luckin Coffee’s push … before its fall from grace.

Chinese are already vigilant with ingredient lists. This scandal will only further motivate consumers to study the labels, rewarding those products that have quality inputs. As the runaway success of Chicecream and its $10+ ice creams attests, consumers are prepared to pay for what they believe is good quality. It is yet another area to watch for with sensitive Chinese shoppers, and another area where China Skinny can assist – drop us a line to learn more.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

Brands Must Rethink Their Approach to Chinese Festivals: Luxury brands on Tmall introduced more than 500 styles of limited edition products for Qixi. In the week prior to Qixi on JD, sales of cosmetic products surged 600% over 2020. Yet many are saying that the over-commercialisation of festivals is causing shopper fatigue with less consumer buzz with this year’s Qixi. Many brands are simply doing routine work for festivals, losing focus on what Chinese consumers care about in the real world, and failing to stand out as a result.

The Biggest Losers From China’s Aging Crisis? Millennials: Under the one-child policy, Chinese millennials were “little emperors” pampered by an entourage of older relatives. Now, their former caregivers have reached old age — and the one-child generation is struggling to cope. In Shanghai, local authorities have vowed to provide 175,000 extra nursing home beds by 2022. Yet the city is already home to a staggering 5.8 million senior citizens, and supply remains woefully short of demand.

China’s New Gen Z Jobs Reflect Changing Views on Life and Society, from Pet Morticians to Ancient Chinese Stylists: Pet dietitians, wardrobe organisers and esports players are appealing new jobs that China’s youngest adults are embracing. A growing reluctance to have children, coupled with a rapidly ageing society, is making pets more popular among young and old people alike, and the related job sector is growing fast.

Online: Digital China

China Passes New Personal Data Privacy Law, to Take Effect Nov. 1: After many years of tech giants taking advantage of liberal rules around data collection and usage, China has passed one of world’s strictest data privacy laws. It lays out conditions for which companies can collect personal data, and algorithms for “personalized decision making” such as recommendations must first obtain user consent.

China Now Wants to Tell Influencers How to Speak and Dress When Livestreaming: China’s Ministry of Commerce has outlined proposals for an “industry standard” for livestreamers who market products on online shopping platforms. The rules include details about how hosts on such shows should dress or speak in front of the camera, as well as guidelines for how platforms should allow consumers to provide reviews for hosts or the products that they market.

Premium Food & Beverage

Differing Ingredients for Unilever Ice Cream in China and Europe Generate Controversy: According to the ingredients list of a China-made Magnum ice cream bar, water and vegetable oil are listed ahead of milk powder. However, milk remains the major ingredient of Magnum ice cream in Europe. The proportion of vegetable oil, or coconut oil in China-made Magnum ice cream, is also higher than its European counterpart.

The Five Major Trends Motivating the Ecommerce Snack Customer in China: Online snack sales grew 91% last year, with customers coming from all scenarios and regions. Their tastes differ greatly, ranging from everyday treats to the most eclectic like mango-flavoured chocolate and sauerkraut-flavoured potato chips. In 2020, puffed snacks, chocolates and biscuits were the three most popular categories in the early months of the pandemic, while wafers, bulk food and chocolates experienced the fastest growth.

Dole and Hema Fresh Organized Sweetio Super Sweet Banana Activity for Chinese Valentine’s Day: Many key opinion leaders (KOLs) weighed in on the new look of the Dole Sweetio banana brand during the promotional activity in Shanghai. The Hema Fresh store in Shanghai’s Baodi Plaza was fully kitted out with happy Sweetio super sweet banana images for Qixi.

Overall Beauty

How to Name a Lipstick for the China Market: The choice of name for a lipstick can have a powerful impact. In China, it pays to think like the Chinese. With the rise of idol culture and Chinese dramas, foreign brands have started marketing products as “same-colours” associated with specific celebs. Globally, female consumers often buy products named with reference to food or hints of sexuality, but in China, laws prohibit “the use of vulgar language or vocabulary unintelligible to consumers”. Nars Cosmetics lists its Orgasm Blush as Pleasure Pink on Tmall.

Overseas Chinese Tourists

Driving Licence Deal Makes it Easier for Chinese to Take to the Roads in France: Mutual recognition of Chinese and French driving licences have come into effect. One French politician backing the plan noted ‘if you can drive in China, you can cope with the roundabout at the Arc de Triomphe’. China has been pushing for similar moves around the world to help the large numbers of its citizens living overseas, however once travel opens up again, it will support rising self driving holidays as a way to reduce the risks of virus contraction.

Video & Entertainment

China’s Youth React to Gaming Curbs with Anguish and Cunning: China’s gaming youth are the latest targets of Beijing’s tighter tech regulation, but many are finding loopholes in the broader curbs, such as spreading time across different games or borrowing a parent’s account or smartphone.

China Considers Legal Changes to Curb Noise Pollution from the Country’s Notorious Dancing Grannies: Of all the regulations being introduced at present, this is the most heartbreaking. Dancing grannies could be fined ¥200 to ¥500 ($30 to $77) under the new rules.

Schooling and Education

US-Bound Chinese Students Face Costly Tickets and Crowded Airports: In 2020, 372,532 Chinese students enrolled at universities across the US. As America relaxes travel restrictions and universities start in-person classes, Chinese students are paying big bucks for air tickets and facing long lines at check-in counters pose as the last hurdle before they finally take off to study abroad.

Pollution and Environment

Chinese Consumers Embrace Low-Carbon Products Amid Green Drive: When buying furniture or appliances, Chinese consumers are increasingly thinking more about the eco-friendly goods as they are free from harmful chemicals or emissions.

 

 

The Mao Zedong badges worn by China’s cycling gold medalists on Tokyo’s Olympic podium were symbolic of idol culture that has long persisted in China. While idol worshipping continues in China, much has changed since the widespread pins, portraits and pilgrims to statues of the beloved Chairman. Like for many things in China, capitalism and technology have come together to supercharge consumers’ ability to pledge their support to their modern icons.

Fans will watch every film and stream every song with their idol in it. It is not unusual for them to purchase many – sometimes all – of the products they endorse. Loyal followers will spend hundreds of hours creating, commenting and liking posts and defending their actions on social media. Some make the commitment to organise digital fan clubs.

Fans can become more extreme in their admiration and have been known to rally other devotees to draw attention to their heroes, be it advertising on subway trains, renting large LED screens in urban spaces, performing aerial antics over a city using a helicopter or other aircraft, and organizing VIP luxury cruises. Back in November 2016, a keen group of fans celebrated the 16th birthday of TF Boys star Jackson Yee, purchasing a video advertisement in New York’s Times Square, and flying a cake-shaped hot air balloon in NY and another over the River Thames in London.

Although Chinese consumers are slower adopters of giving to charity and are more likely to go out of their way to get a deal than the average western consumer, their free-spending on idols is unrivalled. In what has become a mainstream mania, consumers shower their icons with tips to demonstrate their fidelity. Many livestreamers make more from tips than sales commissions.

This devotion is one of the drivers for why China’s celebrity and KOL culture remains such a powerful way to build awareness and credibility for brands and products – although many of the metrics shouldn’t be taken at face value. As more consumers have smaller family networks to seek advice and opinions from, the pulling power of influencers is likely to only increase … although the trajectory of China’s obsessive fan economy will take a hit due to it being Beijing’s next target for a crackdown.

Back in May, during a state-run campaign to eliminate food waste, young idol fans were admonished for dumping large volumes of milk into sewers, as the result of a Mengniu dairy marketing promotion that encouraged consumers to scan QR codes inside bottle caps to earn more votes for their idols on a reality TV show. The show was suspended. The following month, Beijing launched an operation targeting the country’s “chaotic” online celebrity fanclubs, accusing them of contributing to a culture of abuse and of manipulating public opinion. And this week’s formal rape charge for one of China’s most influential celebrities, Kris Wu, has provided further fuel to temper China’s fan economy.

The Cyberspace Administration of China has been working for months to weed out opinion manipulation caused by online fan circles. 150,000 pieces of harmful content online have been removed and more than 4,000 accounts related to fan clubs have been punished.

For many brands who have signed up Chinese celebrities as brand ambassadors, there could be a rude shock. Fan clubs are much less likely to cheat the rankings of their idols on charts, and spread rumours, meaning the true popularity of your ‘stars’ may be a lot less than what you thought you were paying for. The new regulations and disapproval from Beijing are also likely to soften the ‘buzz’ that has helped fuel even the most wholesome of endorsers. Something to keep in mind.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

From ‘Positive Energy’ to ‘Chaos’: How China’s Online Fan Clubs Became a Target of Beijing’s Crackdown: Online fan circles, or informal cult-like communities centred around an idol, are likely to see restrictions from China’s internet watchdog. The communities have been criticised for the pressure to stay in the fan clubs and continue to invest effort and money into them to build a sense of identity from other fans.

As Tattoo Art Flourishes, Will China’s Censors Tighten their Grip?: Tattoos are mainstream in urban China now, despite a government that views them as markers of undesirable subcultures and censors them on TV. What does the future of the Chinese tattoo industry hold?

China Anti-Graft Watchdog Calls for Business Drinking Curbs: China should reduce business drinking and replace it with “correct values,” the Chinese Communist Party’s anti-corruption watchdog said in commentary on a sexual assault case involving employees with Alibaba Group. Alcohol-related stocks have dropped as a result.

Online: Digital China

Bilibili’s Daily Active Users Exceeds 65 Million, Surpassing Youku to Become the Third Largest Long Video Platform in China: Active monthly users on Bilibili have increased 30% over the past 12 months to 223 million. 60% of registered users from 2009 were still active ten years later. Users spend an average of more than 80 minutes per day on the platform.

How China’s Elderly Built an Internet of Their Own: According to data from last year’s census, China is home to 260 million people aged 60 and over. Of these, just 110 million described themselves as “online” and use apps differently than younger consumers.

Founder Lei Jun Says Xiaomi Wants to be the World’s Top Smartphone Maker in Three Years’ Time: A decade since launching its first smartphone, Xiaomi recently surpassed Apple to become the world’s No. 2 mobile brand behind Samsung Electronics. The company refocused from value-for-money to high-end smartphones three years ago, officially launching the Xiaomi 10 in February 2020. Xiaomi accounted for 17% of the global market in Q2, just behind Samsung at 19%.

Premium Food & Beverage

‘Blue is the New Green’ for Young Chinese Consumers: People have traditionally turned away from the blue as no natural food is coloured that way and it is often associated with poison or products that are harmful to health. But that may no longer be the case as blue-coloured food products are becoming increasingly popular with young Chinese consumers.

“Brand Formation is Key to the Rise of High-Quality Domestic Fruit in the Chinese Market”: Imported fruit supply chains are often interrupted with Covid, and consumers are less confident about their safety. As a result, some Chinese consumers are turning their attention to premium domestic fruit, with some premium Chinese fruit costing more than imported fruit.

‘Huge China Dairy Potential’: Yili Predicts Rising Demand for Value-Added and Sustainable Products: As consumers become increasingly health-conscious, they are expecting to see more value-added dairy products too. This isn’t limited to just nutritional value-adds, but also products that are technologically advanced and can provide cool stories to share in social discussions. Yili’s award-winning examples include Cute Star Rub Your Tummy Dietary Fibre Yoghurt Drink, TOORan Black Milk Powder and the SATINE x Palace Museum Product Special Edition.

Overall Beauty

Female Chinese Athletes Applauded for ‘Correcting’ Beauty Standards: Women from Team China were both winning medals and challenging the stereotypical appearance traditionally associated with their gender, supported by hundreds of millions on social media.

Regulatory Headwinds Take Luster Off Beauty Industry Stocks: China’s booming “medical beauty” industry faces twin regulatory headwinds – one focused on medical risks and the other financial practices, such as lending cash to people who undergo procedures, and bundling those loans into asset-backed securities traded on Chinese exchanges.

Schooling and Education

China Kills Almost 300 Partnerships with Elite Foreign Universities in Places like New York, London and Hong Kong, After Private Tutoring Ban: China routinely assesses and cancels foreign educational partnerships that fail to meet its regulatory standards. The latest round of cancellations comes less than a month after a crackdown on the country’s private tutoring industry to try and curb a culture of excessive studying among China’s youth.

Premium and Luxury

How Millionaires Define Luxury in 2021: 63% of Chinese millionaires are optimistic about their financial future, as they expect an increase in disposable income. 8% expect income to decrease. The Agility study concluded a “more complex and diverse definition of luxury among Chinese millionaires” – it has added new notions about what luxury means such as freedom, enjoyment and health. 88% care about brands being ethically responsible.

China Luxury Resale Report Shows Louis Vuitton, Gucci Lead Searches: Chinese consumers are most enthusiastic about mega brands such as Louis Vuitton, Gucci, Chanel, Christian Dior and Hermès for second hand purchases according to Plum. Users show a strong interest in second-hand luxury bags, jewellery, watches and clothing. In each category, classic styles and products with iconic signatures are preferred.

For anyone who is familiar with the approach successful Chinese brands take these days, this strategy would sound fairly normal: Constantly launch a slew of new products, and see what sticks. Heavily market these products through KOLs and social media, and continually analyse consumer data, swiftly adapting to the insights.

As these increasingly savvy Chinese brands spread their wings, we are starting to see this strategy effectively used in markets outside of China. Whereas many Chinese brands’ overseas ambitions have been focused on nearby markets in Asia, it’s likely that we’ll see more of them become legitimate competitors in our home markets in the West.

A good example is the mysterious online retailer Shein (pronounced She-in) – a brand that most over-30s have never heard of. Whilst China hasn’t traditionally been known as a fashion-powerhouse, it is making a massive impact with Gen-Z apparel buyers in markets such as the US. Shein counts 120 million as registered users of its app, of whom over 30 million are active daily. In May this year, it overtook Amazon as the most-downloaded shopping app in America. Most amazingly, it grew from 13% of the US fast fashion market in January to 28% by mid-June, flying past H&M (20%), Zara (11%) and Forever 21 (10%) to lead in sales.

Shein’s impact is representative of the structural differences that Chinese businesses have versus those from other countries. For a start, Chinese brands focus on growing revenue and customer acquisition – largely fuelled by venture capital – rather than the profit-based approach that most western brands take. As a result, they invest a much larger share of revenue in marketing, and focus on hot platforms and KOLs. Shein has engaged Instagram influencers and celebrities like Katy Perry and Lil Nas X.

As China has become the world’s factory, brands see what is being made early on and can quickly imitate and improve. The enormous amount of competition has driven factories to be leaner and faster to stay alive. As many of them grow, they are utilising China’s digital ecosystem to launch their own Consumer-to-Manufacture (C2M) model businesses.

Because most Chinese companies don’t have heritage brands to protect, they are much less risk averse than established western brands, and are prepared to try a lot more things. This lean startup, easy-come-easy-go approach has now become part of many Chinese brand’s DNA. Everyone who has grown up in China has only ever known constant change, which has made them very adaptable and quick thinking, particularly in the way they run their business.

These common characteristics of China have contributed to Chinese brands increasingly muscling their way onto international business tables. 11 more mainland Chinese and Hong Kong businesses joined the Global Fortune 500 list this year, taking the total to 135 – well ahead of the 122 US companies on the list. 18 Chinese brands rank on the Kantar BrandZ 100 Most Valuable Global Brands list. Chinese companies will become increasingly visible, as we saw with their four brands – Hisense, Alipay, Vivo and TikTok – among the 12 sponsors at this year’s postponed Euro Championship.

For brands in China, understanding the way Chinese competitors operate is vital to success. But with Chinese brands like Shein increasingly likely to contest western markets, understanding the way they do things is also important for marketeers and strategists focusing on other countries, even their own domestic markets. As a starting point, we’d suggest subscribing to our very own Weekly Skinny newsletter, but for a deep and tailored understanding of these strategies and how best to counter them, please get in touch to see how China Skinny can assist.

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

This week’s news and trends in China:

Consumers,  Chinese Consumers

Made in China But Not For China: How a Mysterious Fashion Retailer has Emerged to Take on the World: Shein adds nearly 5,000 new items to its website every day. It has topped Amazon.com as the most popular app in the shopping category of the Apple and Google app stores in May in the US.

China Tops Global Fortune 500 List: 135 Chinese companies (including mainland and Hong Kong firms) made the cut for this year’s Fortune Global 500 – an increase of 11 from last year and surpassing the 122 US companies on the list. 18 Chinese companies debuted on the list. Chinese enterprises in the group are less profitable than ones from the US.

Social Media Influencers Help Chinese Brands Outfox Foreign Rivals: Much of the recent success of local brands comes down to hefty investments in marketing, particularly on social media. Marketing has made Chinese products cool. They don’t have heritage brand equity that they’re trying to protect, which means they’re willing to take risks and move quickly.

12-Hour Days, Six Days a Week: Some companies have taken steps to improve work-life balance. Kuaishou, a short-video app, in July ended a policy requiring its staff to work on weekends twice a month. One division of Tencent began encouraging workers to go home at 6pm – though only on Wednesdays. Some Gen-Zers have turned to reading Mao Zedong’s writings on communism to rage against capitalist exploitation. An online craze this year called on young people to “lie flat” — essentially, to opt out.

Pandemic and Competition Reshuffle China’s Top 100 Brands: In one year, the brand landscape of China’s top-100 brands has changed profoundly, with 26 brands exiting/entering the list, and significant movements throughout the top 100 as measured by Campaign Asia. Panasonic and Starbucks have entered the top-10, whereas Nike fell from 8th to 11th and Nestle dropped from 3rd to 34th. Across the top 100, 11 Chinese brands moved down, 30 jumped up, and eight dropped out. At the same time, 17 overseas brands declined in the ranking, 29 moved up, and 18 dropped out.

Online: Digital China

China’s Live-Streaming Video Market May Face Tougher Regulation Amid Spread of ‘Vulgar Content’: China’s livestreaming market and its 130 million content creator accounts, has become “a game for traffic flows, as operators compete on who can be as vulgar as possible” according to state media.

Antitrust Crackdown on China’s Tech Sector Could Lead to Greater Competition, S&P Says: Competition is likely to intensify among Chinese internet companies like Alibaba, JD.com and Tencent, as Beijing places greater scrutiny on mergers, overseas listings and anticompetitive behaviour in the technology sector, according to S&P Global Ratings. Practices that are perceived to give companies unfair advantages or the ability to grow through acquisitions could be limited by regulators as they try to level the playing field and balance security and social stability considerations with growth and innovation.

Premium Food & Beverage

The China Challenge: Chinese Food and Beverage Brands Could Soon Muscle In on Premium Exports to Other Countries: Chinese brands’ ambition and structure have established them well to compete in the increasingly dynamic, digital and competitive world that we trade in. They are becoming more premium and are even rising in the food and beverage category.

China Food Safety Sweep: Government Launches Three-Month Crackdown on Online Counterfeits, Fake Certifications: The government is coming down on fakes, following an uproar on social media because safety and quality reports and certifications can be purchased online without the need to send samples for testing or taking any follow up actions. Regulators will also be placing extra onus on ecommerce platforms to ensure compliance. Australian wine brand Penfolds was the victim of a $20 million counterfeit scheme in China last year, even local candy-brand White Rabbit has seen the counterfeit ‘Little White Rabbit’ emerge.

China Dairy Labelling Findings: Consumers Most Concerned with Shelf Life than Nutrition Facts: Consumers in China are more concerned with the production date, shelf life and storage conditions on the labels of dairy products than other information such as nutrition facts, ingredients, certification, origin, and manufacturer according to research funded by China’s Ministry of Education.

Schooling and Education

Chinese Applicants Overtake EU as Brexit Raises UK Student Fees: EU applicants to study in the UK dropped by 43% to 28,400 this year, compared with 28,490 applications from China, a number that has more than doubled since 2017 including 17% in the last year.

Premium and Luxury

Chinese Shoppers Complain Bagging a Hermès Was Never Harder: Luxury brands’ sales tactics come under scrutiny as supplies appear to have tightened since the start of the COVID-19 pandemic.

Luxury Brands Embrace Chinese Valentine’s Day: Special-edition collections relating to Chinese Valentine’s Day of Qixi on August 14 launched to create ‘emotional connection’ with consumers were being launched a month ago – much earlier than usual.

Autos and Cars

Wolfsburg, We Have a Problem: How Volkswagen Stalled in China: A failed crash test fractured a key pillar in Volkswagen’s reputation in China, a market that is of utmost importance to the company’s financial health. Profit per vehicle in China has fallen from levels of €1,400-1,500 around 2015 to €800 in recent quarters.

The sports and fitness industry in China has had a golden run of late. China’s health kick has accelerated as a result of Covid, coupled with the increasing street cred that young consumers garner from having active interests. Throw in Beijing’s support, policies and facility building driven by the recently announced ¥5 trillion ($773 billion) 2025 National Fitness Plan, its Healthy China 2030 Plan, hosting the Winter Olympics next year, and the quest for soft power and national pride through sporting success, and you have fertile ground for the industry.

Clever, China-resonant marketing strategies have helped brands such as Nike and Adidas capitalise on this growth. However, some of the biggest beneficiaries recently have been local brands, helped by the H&M Xinjiang cotton scandal which impacted Nike and Adidas. Since February 2018, the capitalisation of local competitor Li-Ning has jumped almost 14 times to $29.2 billion and Anta Sports is tracking to overtake Adidas in market value soon.

One local sportswear brand who hadn’t been riding the wave was ERKE. The 21-year old brand was weathering tough times, suspended from trading for years on the Singapore Stock Exchange, before being delisted last year. After losing ¥220 million ($34 million) in 2020, the outlook for the company was grim.

But last week ERKE’s fortunes changed, drastically. The late-July “once in a thousand year” rainstorm in Henan Province saw a year’s worth of rain pummel the city of Zhengzhou in just 72 hours. The deluge led to over a million people displaced, 302 dead and 50 still missing.

From a precarious financial position, ERKE was quick to pledge ¥50 million ($7.7 million) worth of funds and goods to disaster relief efforts for Henan province. The donation was met with both admiration and surprise from Chinese consumers, with the comment “I thought you were going bankrupt, but you still donated so much,” receiving over 800K likes on Weibo.

Consumers acknowledged ERKE’s generosity by opening their wallets to say thank you and associate themselves with the brand.  ERKE’s Tmall livestream attracted 20 million viewers on July 24 – 2,000 times more than a week earlier forcing it to halt sales and postpone shipments until August 15. JD said sales increased 52-fold this month and Taobao sales ballooned by 50-times in a week. Brick and mortar stores were also heaving, seeing much of their inventory selling out. Tourism attractions across China were also offering free or discounted tickets to people wearing Erke gear and even the central government chimed in, noting that “one good deed deserves another.”

Corporate Social Responsibility (CSR) is not new in China, with the first wholesale movement happening after the Sichuan earthquake in 2008. Within a week of the quake, Chinese companies had donated more than $645 million in cash and goods, with many rewarded for their generosity. Other not-so-forthcoming brands were punished. Many consumers berated and even blockaded successful foreign brands such as KFC, McDonalds, Coca Cola and Samsung. They were accused of being misers and not chipping in commensurate to their presence and profitability in the market.

Brands’ responses from the 2008 quake have shaped consumer expectations for CSR in China, and we have since seen many brands quick to pledge during every challenging event. For foreign brands, it can help demonstrate to consumers that you are not just in the country to pillage profits, but also to give back too.

Nevertheless, like everything in China, even post-disaster pledges are a competitive business. Timing and execution is everything. It needs to appear authentic and genuinely heartfelt, but ideally it should garner some publicity without looking like a large scale commercial promotion. ERKE executed this brilliantly, announcing the pledge with a ‘low-key Weibo post’, which then went viral.

We are fortunate that there are hundreds of CSR case studies that we can learn from since 2008 in China. It’s unlikely that most campaigns will have the impact of ERKE’s, but they can still provide an authentic and powerful connection with target audiences and break through the clutter. Contact China Skinny to discuss how this can best be incorporated into your overall China strategy.

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