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It’s been three weeks since Singles’ Day smashed records with sales topping $116 billion just from Alibaba and JD. At China Skinny, we’ve been busy analysing the results and trends – many of which apply to year-round marketing strategies to reach and connect with Chinese consumers.

For a start, the customer profile of this year’s Singles’ Day was different from previous festivals. The shifts that we saw in online shopper demographics during the lockdown in late-January to March have remain largely unchanged, even with the worst of Covid now behind China. This has resulted in consumers from tier 3 and below cities and the silver surfers accounting for a larger share of shoppers.

With many ‘small-town’ and older consumers reluctant to shop online pre-Covid, they were hard for brands to reach through the fragmented networks of stores and markets. In many cases, shopping was a key social event, but they appear to have been charmed by the convenience, deals, entertainment and range of online shopping, and are now finding social connections through other activities.

Whilst these demographics are becoming more confident when shopping online, they are still a long way behind the experienced and sophisticated Millennials and Gen-Zs in big cities who have used ecommerce for years. Brands should take note of these two-speeds of customers and adapt to them accordingly. For example, older consumers will typically respond better to simpler messaging and offer structures, will need reassurance of delivery and other policies, and be reinforced by functions and benefits that meet their age-specific needs and concerns.

Another outtake from Singles’ Day was reinforcing how much of a drawcard entertainment is for shoppers. Tmall saw more than 500 million players – yes, you read right – to their cat game, helped by the lure of small prizes. Similarly livestreaming, which is as much about entertainment as shopping drew in the masses. Austin Li sold ¥3.4 billion ($520 million) worth of goods and Viya ¥2.9 billion ($440 million) just on the opening of 11.11 pre-sales on 20 October. The takeaway from that is whether selling online or in traditional retail, Chinese consumers respond well to being entertained.

Possibly be the biggest surprise about Singles’ Day is that discounts weren’t as big as you may think, with many consumers drawn in by new product launches or special edition goods than buying cheap. For example, taking data from our Dairy Tracker, the average discount for the Double-11 festival period for liquid milk on Tmall was 34% – lower than the average discount of 38% from January to October. Even more interesting, was that consumers weren’t actually drawn to brands with the biggest discounts; milk with less discounting sold better. The average discount based on the value sold was just 16.1%, meaning that many brands over-discounted. The results were similar in our Beauty Tracker and other categories that we analysed.

One of the positive findings from our Trackers was that foreign brands were particularly popular on Singles’ Day, despite all the talk of nationalism. Foreign-branded dairy products accounted for 42.2% of sales, versus the 26.4% sales average in January to October. Similarly in beauty, the top-8 brands were all foreign.

Many of the lessons don’t only apply to the Singles’ Day festival but to overarching China marketing strategies. Get in touch with China Skinny to learn more about optimising sub-strategies for different demographics, how to bring your shopping experience to life through entertainment, help to determine the optimal discounts, or explore our ever-evolving Trackers together with all the other facets of a successful marketing strategy in China.

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

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Comparing China’s Elderly to its Millennials & Gen-Z: China’s Millennials & Gen-Z and silver consumer segments are among the most important in the world. Here’s how they differ.

Chinese Consumers Move Towards Forefront of Economic Recovery: Chinese consumers savings in the first three quarters of this year reached 37% of disposable income, versus 32% in 2019. Morgan Stanley expects this excess saving to be partly released in 2021, with early signs happening already such as October’s retail sales growth climbing to 4.3% in October. Goldman Sachs believes consumption will be the main driver of China’s economic growth next year forecasting that household consumption will increase 13%. Unemployment in urban areas was 5.3% in October, just a whisker up on the 5.2% at the end of last year, pre-Covid.

The Export Recovery Opportunity: Results from a survey of 1,000 British small and medium businesses by Alibaba to understand their attitudes towards export, perceived barriers to doing business internationally, and how overcoming these will be key to boosting growth and resilience in the wake of the Covid-19 pandemic. Just 7% of British companies looking to export are currently considering China, lower than Africa (23%) and Australia (10%). Some of those British brands who’ve entered the market are finding great success: “It’s sometimes easier to sell our products in China than it is in the UK,” says Stephen Shortt, Founder of Hawkins & Brimble.

Shanghai Wins Smart City 2020 Award: Shanghai was named the world’s “smartest city” at the Smart City Expo World Congress, the first Chinese city to win the award. The city’s People-Oriented Smart City digital infrastructure project saw it become a “Dual Gigabit” city – achieving full 5G coverage in the downtown area and fibre coverage across 99% of the city. Its e-government initiative, an interactive tool for citizens that has over 14.5 million users, also received special commendation from the judges.

Beijing Reins in the Social Credit System to Prevent Official Abuse, Avoid Collateral Damage: Most Western commentary on the China social credit system is inaccurate. New directives for the system from the State Council aim to raise the bar of applying restrictions and slash the severity of such restrictions.

Senior Xiaomi Exec Resigns After Calling Customers Losers: Be careful what you say at large HR conferences about your Chinese customers.

Online: Digital China

China Rises as World’s Data Superpower as Internet Fractures: China has had more cross-border data flows than the US since 2014 and now accounts for 23% of flows, with the US ranking a distant second at 12%. The source of Beijing’s power lies in its connections with the rest of Asia. While the US accounted for 45% of data flows in and out of China in 2001, that figure dropped to just 25% last year. Asian countries now make up more than half the total, particularly Vietnam at 17% and Singapore at 15%. As China becomes a global data superpower, it will control huge quantities of a resource that will be invaluable to its future economic competitiveness such as developing artificial intelligence and information technologies. China has surpassed the US for the number of AI patents for the first time.

The Rise of Facial Recognition in China’s Real Estate Market: Some homebuyers are countering the rise of facial recognition technology in real estate offices by wearing helmets during their visit.

Premium Food & Beverage

Australian Wine Exporters Face Fresh Blow After Beijing Imposes Tariffs: Australian wine, the global success story of wine exports to China has been hit with ‘anti-dumping’ duties ranging from 107.1% to 212.1%. Top-selling Penfolds faces a 169.3% tariff. In its provisional findings, the Chinese ministry of commerce cited “various financial programmes and grants” offered by the Australian government. A Nanjing importer said he was looking to redirect his uncleared Australian wine imports into a bonded warehouse with plans to sell the wine, bottle by bottle, on ecommerce websites, to get around the high anti-dumping import duties. At least 75 containers of Australian wine that have been stuck at Chinese ports since early November face the new tariffs. “The whole industry is devastated. Business and ordinary people suffer from politicians’ failure in handling diplomacy,” says a South Australian wine exporter.

Sales of Ready-to-Eat Chinese Kiwifruit Overtaking Foreign Brands: Imported kiwifruit which costs 4-5 times the local variety, now have a domestic competitor that isn’t too tart and firm when bought. Many Hema stores have seen sales exceed foreign brands, with the repurchase rate ranking highest in the category. In related news, Zespri recently signed a memorandum of intent for a trial project with Sichuan State-owned Assets Operation and Investment Management, in hope of advancing the development of the Chinese kiwifruit industry through cooperation throughout the supply chain.

MSC Launches New App for Chinese Consumers Tying Seafood to Health: The non-profit Marine Stewardship Council is seeking to expand its recognition among Chinese consumers by launching a new app that helps customers find out more about products bearing the MSC eco-label in China’s retail outlets. In launching the app, MSC pointed to the Chinese government’s Healthy China 2030 strategy and noted personal health and environmental health are intertwined.

Overall Beauty

China’s Rapidly Changing Beauty Market: China beauty market is rapidly changing – not just in terms of size, but also in terms of consumers and how it works. Although China has traditionally followed Japan and South Korea for beauty standards, it is starting to branch out on its own with subtle changes in what is considered attractive, such as eyebrows that are shaped differently. In 2019, 70% of cosmetics revenue came through ecommerce, and that portion has grown since the pandemic.

Overseas Chinese Tourists

Chinese Traveller Trends and Travel Retail: 15 min vid: China Skinny’s Mark Tanner joins Beam Suntory for their Spirited Speaker Series talking about current trends within the Chinese travel market, how it is starting to bounce back and ways we can enrich the customer journey across multiple touch points, including some insights into the Chinese consumer’s digital behaviour.

Pollution and Environment

Why Brand Sustainability Is Critical in China: Packaging made up 0.85% of China’s total household waste in 2018, which has driven Alibaba’s smart logistics arm, Cainiao, to launch the “National Cardboard Box Recycling Day” on November 20, following the onslaught of Singles’ Day. The company also transformed its 75,000 delivery outlets into recycling stations last year and has developed ‘ABOS’ which includes an AI-powered tool which can scan rubbish and identify plastic. Research released last year found 380 million consumers acquired eco-friendly products on Taobao and Tmall, with 41.8% of those customers born in the 90s and 32.9% in the 80s. According to a post-COVID-19 McKinsey & Company survey on consumer attitudes in China, 64% agree or strongly agree that they would consider products that are more environmentally friendly.

Autos and Cars

Global Carmakers Team Up with Chinese Internet Firms: International carmakers are partnering with Chinese internet companies to offer in-car applications familiar to Chinese consumers. Maserati made QQ Music available in its Chinese models earlier this month. Audi is working with Alibaba to improve in-car applications like navigation and digital assistant services. Last year Ford launched its China-specific infotainment system that leveraged Baidu’s artificial intelligence for improved connectivity.

If you’re not living in China, you probably haven’t heard of the sugar-free beverage brand Genki Forest. It’s unlikely that you’ve come across women’s underwear brand Ubras, or had a cup of Saturnbird instant coffee as you munched through a bowl of Wangbaobao cereal. Like in many markets, they are part of an increasingly-common genre of new brands who have quickly eroded market share from the big, established brands in their category. These disrupters should provide both inspiration and lessons for small-medium enterprises already selling or planning to launch in China.

In China where consumers are less trusting than in other markets, heritage and size helps reinforce doubts. The disrupters have countered this disadvantage by being much nimbler and more adaptive to China’s constantly changing consumer preferences and market structures. Whilst most incumbent brands are hindered with established processes to protect brand heritage, the new-to-market brands can take more risks and capitalise on trends as they happen.

Arguably the most famous disrupting consumer goods brand in China is the 5-year-old beauty darling Perfect Diary, which trails only L’Oreal and LVMH in China’s enormous colour cosmetics market. It was one of the start performers on Singles’ Day, shifting ¥500 million ($76 million) of products within 31 seconds. The brand’s parent company Yatsen, was yet another Chinese company to IPO on the NYSE last week, surging 75% on its first day. As of this morning, it had a market cap of $11.4 billion.

When Perfect Diary launched in 2015, few Chinese consumers purchased domestic cosmetic brands. PD has been a big contributor to local brands becoming a legitimate alternative to imports. Its contemporary packaging is up there with the sexiest international brands, but its cosmetics focus on value and are proudly designed for Chinese consumers. Nevertheless, Perfect Diary retains an international flavour, using many international OEMs to manufacture its products. It also partners with foreign institutions such as the Discovery Channel, the British Museum and the New York Metropolitan Museum of Art. Its recent collaboration with National Geographic, promoted by KOL Austin Li’s puppy, captured Chinese consumers increasing love of pets trends, particularly during Covid.

Another contributor to Perfect Diary’s success has been its tiered-approach to celebrities and influencers. It has used many of the big names and has heavily engaged with livestreaming to build awareness, preference and encourage trial. It has also connected at a deeper level and sought hard-to-reach tribes and communities as one of the early-adopters to engage with key opinion consumers, or grassroots influencers.

What has helped make Perfect Diary’s model more sustainable is that they have truly engaged the direct-to-consumer (DTC) model, and not just by cutting out distributors and other middlemen. They use clever tactics to attract and retain customers to the sales touch points that they own, such as their WeChat store and private groups. This means that they aren’t fully-reliant on the Alibabas, JDs and KOLs to move goods. Such a strategy enables them to have a much more intimate relationship with customers, glean more data, increase loyalty and maintain higher-margins. By the end of September, along with sister brands Little Ondine and Abby’s Choice, Perfect Diary already had 23.5 million such customers.

Many of Perfect Diary’s lessons can apply outside of the beauty category and for international brands as well as domestic. Both established and new-to-market brands can take stock too. Contact China Skinny to learn how we can assist in drawing on many success stories in China and applying them to your brand’s unique attributes.

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

This week’s China market and marketing news:

Consumers,  Chinese Consumers

In 25 Years to 2025, China Will Have Overtaken 56 Nations in Per Capita Income: Between 2000 to 2025, China’s GDP per capita will have increased 8.8 times to rank it 70th in the world, putting it close to joining the richest one-third of nations. It is forecast to have per-capita GDP, adjusted for purchasing power, equal to $25,307 in 2025. That will take it past Argentina. BRIC countries (Brazil, Russia, India and China) could become collectively bigger than the G-7 countries in the 2030s, almost exclusively to China, and to a smaller degree India.

The 14 Sins of Australia: Beijing Expands List of Grievances and Digs in for Extended Diplomatic Dispute: The Chinese embassy in Australia shared a detailed list of 14 grievances that Beijing has against the country, extending far beyond China’s core interests and directly criticising internal Australian affairs. “Our actions are wrongly seen and interpreted by some only through the lens of the strategic competition between China and the United States,” says Australian PM Scott Morrison.

Ten Words that Defined 2020, According to Chinese Internet Users: As this tumultuous year draws to an end, magazine Youth Digest has released a list of words that dominated the Chinese internet. The translations are: 1. Working people; 2. Balance-owed people; 3. Double festival branches; 4. The coming wave; 5. Suster; 6. Professional team; 7. Errand boy/girl; 8. NetEase depression cloud; 9. Virtual construction monitoring; and 10. Going against the flow-sters.

Chinese War Drama Taken Offline Over Fancy Home, Fancy Hairstyles: Chinese television series “Leiting Zhanjiang” (Warrior of Thunder) has been pulled from the Hunan TV network and several video-streaming platforms after being criticised as a departure from historical reality by state media. The show relied on sensational, over-the-top tropes such as out-of-place hairstyles and mansion to appeal to young viewers.

Maximum Penalties to Skyrocket Under China’s New Copyright Law: China will increase the maximum penalty for copyright infringement by a factor of 10 in an effort to deter intellectual property violations. From 1 June 2021, the highest compensation payment for infringement will rise from ¥500K to 5 million ($762,114). At the copyright holder’s request, courts will be able to order the destruction of any “materials, tools or equipment” used for illegally duplicating protected work, and block their entry into “commercial channels.

Online: Digital China

China Bans Spending by Teens in New Curbs on Livestreaming: China’s media watchdog has ordered that hosts and gift givers on livestreaming platforms register their real names and banned teenagers from gifting altogether, limiting the main revenue source for the multibillion-dollar online industry. Livestreaming platforms now must limit the amount of money a user can give hosts as a tip.

Premium Food & Beverage

Chinese Premium Brewers and Distillers Toast Return of Nightlife: The July-September quarter has seen the big alcohol players’ growth bounce back after a tough first half with sales in tobacco and alcohol soaring by 17.6% year-on-year in September. Premium labels have been growing the fastest but still present plenty of opportunity for growth. Demand in traditional karaoke bars for Budweiser has not recovered, but sales at restaurants, bars, pubs and lounges are surging. Tmall reports that consumers between 18 and 29 are responsible for half of the spirit sales on its platform. A report by Tencent last year found that consumers aged between 18 and 24 increasingly prefer spirits and whisky.

China’s Top Hotpot Chain Haidilao Accelerates Expansion Even as COVID-19 Pandemic Bites: China’s biggest hotpot chain Haidilao will open more than 400 new restaurants in 2020, exceeding initial estimates by about a third, even as the coronavirus pandemic batters its and the sector’s profits. The company had initially planned to open around 300 restaurants in 2020, versus 308 new openings in 2019. Meanwhile, another hot pot restaurant is in hot water for refusing to serve male customers.

Here’s why China is going to boom: China produces domestic beef, but not of the same quality as foreign beef; and so China depends on imports to meet the ever-growing demand for premium beef protein. This year, China accounts for 36% of all world meat trade and the quantity is up 26% from last year – helped by the reduced supply of pork from the African Swine Flu. The pork crisis has contributed to Beyond Meat’s launching of Beyond Pork, developed specifically for Chinese consumers in mind.

McCafé Poised for Major Expansion in China: McDonald’s China will invest ¥2.5 billion yuan ($368 million) over the next three years to upgrade the McCafé sub-brand with 4,000 outlets in the domestic market. It will fully leverage existing McDonald’s dining outlets, delivery network, supply chain capabilities and digital channels to build a strong presence in the booming coffee market. China’s coffee market is forecast to grow 15% a year to ¥217 billion ($33 billion) by 2025.

Overall Beauty

L’Oreal China CEO on Innovating Consumer Experiences on 11.11: L’Oréal was the first cosmetics group to hit ¥1 billion ($151 million) sales on Alibaba’s platforms on Singles’ Day. The brand saw 11.11 as a way to connect and engage with millions of consumers coming online, preparing a lot of surprises and innovations. This included launching new, limited edition products. More than ever, during Covid, consumers have been questioning what and why they are buying, so L’Oreal has had to be even more educational when it comes to our products and innovations.

In Shenzhen, World’s Largest Electronics Market Receives a Cosmetics Makeover: Shenzhen’s Huaqiangbei is home to dozens of multi-storey malls housing about 38,000 businesses once famous for smartphone ripoffs, microchip reels and other components. With changing demographics, consumer preferences and regulations, some markets had 50% vacancy rates by 2016. The area has evolved to gentrified “experience centres” selling genuine 5G handsets, and a strong showing of cosmetics retailers servicing “great demand for beauty products, whether it’s teenagers, women or men in their 60s and 70s.” The beauty business took off this year when border closures halted the flow of traders going to Hong Kong and picking up tax-free goods for resale.

Overseas Chinese Tourists

China’s Xi Jinping is Pushing for a Global Covid QR Code. He May Struggle to Convince the World: Chinese President Xi Jinping is pushing for a global Covid-19 tracking system using QR codes. The program would track health certificates based on nucleic acid test results, to help fast-track international travel and business during the coronavirus pandemic. Speaking at the virtual G20 leaders’ meeting on Saturday, Xi said that to ensure the “smooth functioning” of the world economy during the pandemic, countries needed to coordinate a uniform set of policies and standards.

Staying Health

Chinese City Investigates Burning Tap Water: A viral video showing flammable water spurting from a sink has prompted the northeastern city of Panjin to inspect the cause. After a customer complained to their local water supplier in the summer, staff said it was likely because they had recently upgraded their water quality, and there was nothing they could do beyond offering a ¥100 ($15) discount to the family’s water bill.

It’s fair to say that Double-11 / Singles’ Day was a runaway success; sales topped $116 billion from China’s two biggest ecommerce players alone. Alibaba’s additional 11-11 sales window saw transaction value virtually double this year to ¥498.2 billion ($75.1 billion). JD’s shorter sales period was also epic, clocking in at ¥271.5 billion ($40.9 billion).

Recent third quarter results also gave the big tech companies a reason to smile. Although China hadn’t really been in lockdown over the quarter, the rise in habitual online usage doesn’t appear to have tempered. JD sales were up 35% from a year ago, helped by 32% more users taking the total to 441.6 million. Alibaba sales grew around 20%, with 9% more users, at 757 million users. Pinduoduo sales grew 73%, with users climbing 46% to 731.3 million – within nipping range of Alibaba. Tencent’s revenue was up 29% with 1.212 billion active WeChat users monthly.

Yet, ironically, many of tech’s senior execs won’t have been celebrating as November 11 came to a close. On the eve of Double-11, China released draft antitrust rules, aimed at rooting out monopolistic practices among Internet companies.

This is big news for China, much bigger than it would be in other markets. Until now, China’s tech giants have had an unbridled run to become the enormous, hugely profitable gorillas that we see today. On just its ecommerce platforms, Alibaba sells more than twice as much as China’s top-100 brick & mortar retailers combined. It also owns many of the large physical retailers and directs millions of others. In China’s effectively cash-free society, Alipay accounts for 54% of the value of payments. It hosts data for many businesses in China through its cloud services, tracks people in cities and taps into advertising screens all over China. There wouldn’t be many countries which would let a business become that large and powerful.

Much speculation has passed about how China’s tech companies have been allowed to become so large. Beijing is likely to find it easier to manage a few giants, rather than a gaggle of rogue tech companies – yet as Jack Ma’s recent Ant Group speech illustrated, even the giants can rebel against regulatory directives. The ability for tech giants to consolidate and standardise the data from its numerous sources also allows Beijing easier data analysis and population control as we saw with the Covid controls.

The new antitrust measures may change all that. They are China’s first attempt to legally define anti-competitive practices from internet companies. Coincidentally, a day after their release, the European Commission alleged that Amazon uses nonpublic data it gathers from third-party sellers to unfairly compete against them. Hopefully the world is recalibrating.

China’s drafted regulations are positive news for brands. It is likely that platforms will no longer be able to demand vendors to exclusively transact on their marketplace. Platforms may not be permitted to differentiate prices to customers based on their shopping history and profiles. Offering large discounts to eliminate competitors, colluding on sharing sensitive consumer data, and forming alliances to force out competitors is also likely to be considered monopolistic.

The new rules could conceivably put an end to tech companies subsidising loss-making divisions, such as Alibaba does with AliCloud, forcing the companies to raise prices and churn a profit, or even divest the business altogether.

Overall, the legislation represents a slow trend which is paring back tech companies’ unchecked growth strategies. This will provide brands and individuals more rights in China, such as those we saw with recent laws around facial recognition. There may not be a significant shift as soon as the law is passed, but over time the landscape will be riper for new, diverse and innovative competitors to provide more choices for brands to reach consumers. We can all hopefully look forward to fairer, more transparent dealings with the tech gorillas overall. Get in touch with China Skinny about how to optimise your strategies to align with this.

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

This week’s China market and marketing news:

Consumers,  Chinese Consumers

RCEP: Asia-Pacific Countries Form World’s Largest Trading Bloc: The Regional Comprehensive Economic Partnership (RCEP) is made up of 10 Southeast Asian countries, as well as South Korea, China, Japan, Australia and New Zealand. It covers 2.2 billion people and nearly a third of the global economy. The RCEP is expected to eliminate a range of tariffs on imports within 20 years. It also includes provisions on intellectual property, telecommunications, financial services, e-commerce and professional services. Many of the countries in the bloc already have equal or better deals with each other.

China’s Firms Sign $73 Billion Worth of Deals at Flagship Shanghai Import Expo: The global pandemic and 14-day quarantine for overseas visitors was always going to be a challenge, but the third annual China International Import Expo (CIIE) saw $72.62 billion worth of deals signed, up 2.1% from last year. Before the event, the Shanghai government said that 400,000 people had registered, although it did not provide a breakdown of foreign visitors. In 2019, more than 500,000 people registered for the trade fair with 6,000 from overseas. Lego’s 378 square metre booth was considered the most fun booth at the show, with the theme “Rebuild the World” including a 2.7 x 2 metre LEGO globe, where 100 Chinese children’s creations were added to it.

China’s Consumer Prices Head for Deflation as Pork Prices Slump: China’s consumer price index rose 0.5% in October from a year earlier, the slowest pace since late 2009 and the first time below 1% in more than three years. Inflation was dragged down by declining pork prices – which dropped 2.8%, the first fall since February 2019. Overall food inflation weakened considerably to 2.2% in October from 7.9% in the previous month. Retail sales grew 4.3% year-on-year in October, picking up the pace from September’s 3.3% growth.

Understanding Chinese Consumers: Growth Engine of the World: McKinsey’s 2021 China consumer report. Five accelerating trends in China since COVID-19 are: digitalization, declining global exposure, rising competitive intensity, private and social sectors stepping up, and consumers coming of age. The accelerating maturity of Chinese consumers can be seen in four key areas: Young consumers’ spending; Even more prudent personal financial management; Health conscious purchase decisions; and Purchasing trade-offs amid a flight to quality.

Leading Chinese Supermarket Chain Apologizes for ‘Fat-Shaming’ Size Chart: Fat shaming is all too common on the Chinese internet and in advertising, but this week, one of China’s biggest supermarket chains, RT-Mart, was forced to apologise for displaying a size chart for clothing that called plus-size women “rotten.” The guide states that women who wear size small or medium are “slim” and “beautiful.”

Online: Digital China

Chinese Shoppers Spend Over $100 Billion in Singles’ Day Frenzy: American brands topped the international table selling $5.4 billion worth of goods, followed by Japan, South Korea and Australia, which sold over a billion in goods.

China Drafts New Antitrust Guideline to Rein in Tech Giants, Wiping $102 Billion from Alibaba, Tencent and Meituan Stocks: All the things that allowed China’s internet innovators to become big, powerful and hugely profitable are under threat.

Tech Giants Quarterly Results: For the quarter ending in September, Alibaba sales grew around 20%, with 9% more users taking the total to 757 million. Sales on JD’s were up 35% from a year ago, helped by 32% more users – 441.6 million in total. Pinduoduo sales were up 73%, with users climbing 46% to 731.3 million. Tencent also saw strong growth, with revenue up 29%.

Video: IKEA’s 3D Shopping Feature Online: Ecommerce has been trying to bridge the experience gap between online and bricks & mortar shopping for years. While it still isn’t quite there, Tmall’s 3D shopping feature is a step on the way as illustrated by IKEA. More than 60 million consumers used the 3D shopping feature during the 2020 11.11 Global Shopping Festival.

TikTok-Owner ByteDance to Rake in $27 Billion Ad Revenue by Year-End: After overtaking Baidu to become China’s second largest digital ad player in the first half of 2019 with 23% ($7.6 billion) of China’s digital ad spend, the country is on track to generate at least $27.2 billion this year, closing in on Alibaba. Tiktok contributes a fraction of ByteDance’s revenue, with Douyin bringing in 60% of ad revenue, Toutiao 20%, and Xigua 3%. As ByteDance pursues its global ambitions, it is also looking to step up investment in three main areas at home next year – e-commerce, search and longer-form videos. Douyin’s ecommerce platform is projected to hit around ¥150 billion ($23 billion) in gross merchandise value this year.

Premium Food & Beverage

Wahaha Targets China’s Health Boom, Livestreaming and Gen Z’s ‘Tribes’: Chinese food and beverage giant Wahaha enjoyed brand recognition but not brand resonance in China. But the family-owned, formerly old-fashioned conglomerate is rejuvenating through a strategy of product personalization, a healthcare e-commerce venture, and multiple brand and IP partnerships with Chiccream, PopMart, and the League of Legends Professional League.

Q&A: Loren Zhao, Fresh Bridge Supply Chain: Most avocado promotions and education in China are based on Western-style consumption, so there is scope for more integration with localised cuisine and eating habits. Smaller avocados have been more popular with Chinese consumers in retail. More than half of the avocados in China were sold to hospitality channels pre-Covid, illustrating the significance of restaurants and cafes, alongside travel, to build preference.

Viral Video Exposes Wuhan Canteen Kitchen Food Malpractices: A video that exposes the poor food hygiene inside the kitchen of a Wuhan college canteen has been making its rounds on Chinese social media. The video shows how a kitchen staff member picks up meat from the floor to put back in the tray, and how another kitchen worker uses rain boots to ‘wash’ vegetables in a big bowl on the ground, while another person is smoking. “I’m afraid that this is just the tip of the iceberg,” one commentator said on Weibo, receiving over 25,000 likes.

Overall Beauty

Budget Beauty Specialist Spruces Up for $600 Million US IPO: Yatsen, the owner of local cosmetics darling Perfect Diary plans to raise money for investments and acquisitions, to develop new products and data analytics technology, and to open new physical stores. The company has over 200 physical “experience” stores across more than 90 Chinese cities and directly sells its products to 23.5 million consumers. Last month it acquired skincare brand Galenic in an attempt to strengthen R&D capabilities and bolster product innovation.

Schooling and Education

How Chinese University Admissions Became a No-Holds-Barred Arms Race: Looking to boost their minimum admissions scores — and their reputations — universities are waging a cut-throat battle for top students. Now that students can test first and choose afterward, schools have more room to jostle, and they’re making full use of it. But who’s really benefitting?

Monday night saw many of Shanghai’s wine connoisseurs converge on Wine Australia’s eighth annual China Wine Awards. China Skinny’s founder Mark Tanner was honoured to be a judge.

Few exporters have had as much to celebrate as Australia’s collective wine exporters. In 2014, Australian wine sold to China was just 40% of the value of French wine. In the space of five years, Australian wine exports have flown past the French to become the top selling wine in the world’s largest red wine market. For every dollar that Chinese drop on imported wine, they spend 35 cents on Australian wine versus 29 cents on French wine. Australian wine also commands the highest price per bottle among the top-10 wine exporters to China.

Those successes in China are unlikely to smell so sweet after last week, when Australian-China relations reached their ‘lowest ebb’ following verbal instructions by Chinese authorities to effectively impose a trade ban on wine, copper, barley, coal, sugar, timber and lobster. This has re-energised talk in Australia about diversifying exports, the big challenge is to where?

The recalibration of international relations as a result of the new US President (congratulations Joe!) and Covid-related travel difficulties impeding much-needed face to face meetings between China and Australia mean that the challenges are unlikely to be sorted soon. For categories such as wine, there is a good stockpile of Australian product in China, which will ensure a limited impact if things can be resolved before the Year of the Ox. If it drags out it will be tough for many, but we know from other geopolitical spats with countries such as Japan, Korea and even Norway, that favour bounces back relatively quickly for consumer goods.

Australia has a strong brand in China. This will be bolstered when tourism and education return and visitors increase their exposure and affinities with Australian products. Australia was rated ‘the most welcoming country‘ to Chinese tourists for many years running, so let’s hope that there isn’t too much love lost and that Australians will again have a chance to show off their hospitality and rebuild consumer aspiration in China. In the meantime, we know many consumers are miffed and aggrieved that they may not be able to get some of their favourite Australian brands for a while.

With the exception of the Covid-related sales dip and present geopolitical challenges, the trajectory of Australian wine in China deserves to be applauded – it provides lessons for many countries and industries exporting to China. A strong governing and promotional body in Wine Australia, has supported innovative and hard working brands and support channels (there are 2,900 Australian wine distributors in China supporting 2,700 wineries) to endear Chinese consumers to drink and gift their fine vino above all others. A favourable free trade agreement helped too.

Wine Australia has delivered the basics well, such as providing tasting roadshows, award recognition, and partnerships with key opinion leaders and other platforms for brands to educate and promote their wines. The wine body has also understood and addressed Chinese consumer pain points with initiatives like the ‘tasting wheel’ back in 2015, which identified appropriate Chinese terms and flavours that fit in with wine descriptions which may be unfamiliar to Chinese drinkers. Many individual brands have also contributed to the rise of Australian wines.

In Australia, initiatives such as ‘China ready’ cellar doors with China-friendly purchasing methods, shipments, memberships, digital marketing and language have helped grow popularity. But it is the thoughtful and innovative initiatives in China by Australian brands, partners and individuals which were celebrated in Monday night’s awards.

Our hat goes off to Telford who scooped up two of the five awards for online promotion and advocacy. What we appreciated was how they utilised research to identify consumers born in the 90s as a segment who would enjoy their wines. To reach them they collaborated with hot pot chain Dalongyi to create a positive association between one of the post-90s favourite pastimes and their well-matched yellow tail Moscato wine. The initiative was supported by integrated on-premise and off-premise promotions, digital marketing with a strong focus on Douyin and private groups, a pop-up-store and online gift boxes, resulting in a material jump in sales and awareness.

Shanghai Fortune PinU scooped up the offline award, capitalising on the popularity of TV and video to showcase of TarraWara Estate and the Yarra Valley. Through a variety show on video platform iQIYI and Jiangsu Satellite TV, and tie-in with Ctrip, they built preference for the region’s wine and tours. Travel+Leisure won the outstanding feature story category with a colourful write up about a South Australian winery tour. Australian Wine Communicator of the Year went to Ian Dai for podcast shows covering resonant topics such as the evolution of Australian wine, boutique wines and the drinking culture of Australians.

Brands beyond the wine category can take inspiration from the innovative initiatives and relevant communications from both the winners and other worthy finalists. Here’s to the winners, to us all learning from them, and more stable geopolitical times ahead.

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

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Has Consumer Behaviour Changed in China?: You bet it has!

Chinese State Media Reacts to Biden Victory With Cautious Optimism: Propaganda outlets said a Biden presidency would most likely restore stability to frayed US-China relations, but warned that tensions would continue. The immediate reaction to Mr. Biden’s victory on Sunday was measured, indicating that China was willing to attempt, and indeed was eager for, a thaw. But even as Chinese propaganda signalled a new phase in US-China relations, it also continued to push a narrative of American’s decline. When Biden’s presidency was confirmed, a CCTV anchor declared that there had been “not only verbal attacks but also even physical clashes” between Trump and Biden supporters – in reality, there were few reports of violent confrontations. While most leaders rushed to congratulate Joe Biden on his election, Xi Jinping and Putin remained silent.

US Firms Get Another Boost From China: July to September “was another extraordinary quarter for Chinese consumer consumption,” says Estee Lauder whose China sales increased 28-30% against a fall of 9% globally. L’Oreal’s China sales rose 28% versus a global fall of 2%. Coca-Cola reported case volume of carbonated soft drinks rose by a ‘mid single-digit percentage’ in China, whereas they fell 6% in the US and 4% globally. Mercedes had record unit sales in China, Daimler was up 24% and GM reported a 12% increase, against a 10% decline in the US. Ford grew 22% in China, but declined 5% globally. Chines car sales in October grew 8% overall year-on-year.

How One Obscure Word Captures Urban China’s Unhappiness: Over the past few months, Chinese people from all walks of life, be they software developers, stay-at-home moms, or elite university students, have all discovered their daily lives can be accurately described by the same once-arcane academic term: involution. Involution has become a shorthand used by Chinese urbanites to describe the ills of their modern lives. Involution relates to Confucianism, how China’s narrow definition of social success means people end up competing with each other, and how there doesn’t seem to be an exit ramp from this “endless cycle of self-flagellation.”

Imports: CIIE

Keynote speech by President Xi Jinping at opening ceremony of 3rd China International Import Expo: Unlike the last two years when he opened CIIE in person, Chinese president Xi Jinping opened the expo via a video link. Notable quotes from his speech included: “The vastly huge China market is the most promising in the world. Total import into China is estimated to top 22 trillion U.S. dollars in the coming decade.” And “We will introduce a negative list for cross-border services trade and open still wider in areas like the digital economy and the internet.” And “China stands ready to conclude high-standard free trade agreements with more countries in the world. We will work for the early signing of the Regional Comprehensive Economic Partnership (RCEP) and speed up negotiations on a China-EU investment treaty and a China-Japan-ROK free trade agreement.”

Eye-Catching Exhibits at 3rd CIIE: New, innovative health tech wowed China Daily reporters at the CIIE including a ventilator with non-invasive modes, a waterproof electronic thermometer which could be full submerged in disinfectant, a handheld blood analyser, virtual clinical command centre and a new all therapy drug from Pfizer. A light-weight supercar, the world’s first hydrogen-fuelled heavy-duty truck, a tent which can be opened in 2 seconds, red hot instant noodles and jet black chewing gum were also highlights.

Online: Digital China

Highlights of 2020 11.11’s First Shopping Window: The first of two sales windows for this year’s Singles Day / Double-11 ran from 1-3 November. 100 brands topped gross merchandise volume of ¥100 million ($15.1 million) in 111 minutes after sales officially began. They included Nike, Adidas, Apple, L’Oréal, Estée Lauder, Xiaomi and Haier. AliExpress will use the world’s first real-time livestreaming translation on an e-commerce platform, also tapping into DAMO Academy’s technology to provide live captions to shoppers outside China. Just 40 minutes into 1 November sales, beauty products generated over ¥10 billion ($1.5 billion) in GMV. Estée Lauder was the first Tmall flagship store to surpass ¥1 billion ($151 million) in sales among American and European brands during 11.11; and in a little over nine hours, the brand broke its 11.11 record from last year. This year, almost 100% of the packaging shipped from Cainiao warehouses is biodegradable, and nearly 50% of the paper packaging in its warehouses is tape-free. With the second sales window underway, by 12:30am this morning, Alibaba’s 11.11 sales since 1 November had reached ¥372.3 billion ($56.3 billion) gross merchandise value.

Chinese Consumers Turn Focus to Home Comforts and Self-Care: During the first three days of this year’s Singles Day Grand Promotion on JD, shoppers flocked to buy products across home and lifestyle categories including kitchen, living room, children’s room, home spa items and more. 6.43 million kitchen shelving units sold, with Gen-Z making up nearly half of buyers. Parents born between the years of 1985-1990 bought about 10,000 units of a product designed to correct kids’ sitting posture. Sales of table and chair sets designed to facilitate learning for kids increased by four times; and sales of a children’s bed and mattress set designed to promote better sleep and spinal health more than doubled. JD says that the fastest-growing consumers of imported goods are from forth- and fifth-tier cities.

NetEase Yanxuan Bows Out of Double 11 Shopping Gala as It Eschews ‘Excessive Consumption’: The Double-11 Shopping Festival advocates excessive consumption, whereas NetEase Yanxuan is in favour of more moderate consumption, the e-marketplace posted on its Weibo yesterday. The firm, which mainly sells NetEase’s own brands, will not get involved in complicated promotional activities but will still offer big subsidies, it said.

Premium Food & Beverage

Wine Australia 2020 China Awards Winners: Winners, details and photos of the five categories from this year’s prestigious awards.

China Requires Disinfection of Imported Cold Chain Food: China is now requiring imported cold chain food to be thoroughly disinfected before going to market, after live coronavirus was detected on the outer packaging of imported cold chain food in three cities in two days. Loading and transporting carriers, and the inner and outer packaging of the cold chain food must be fully sterilized. In September, China suspended imports from 56 cold-chain food companies in 19 countries and regions where workers had been infected with COVID-19.

$400 Hairy Crabs Are Selling Out in China as Consumers Splurge: “Almost all the hairy crabs in our pools have been reserved, much faster than last year,” says a crab farmer. “To offset the frustration of travel restrictions, many customers are buying bigger crabs to share with their families.” Chinese are spending 10% more on in home dining than this time a year ago. The hairy crabs can cost ¥2,700 yuan ($400) for a box of eight and can only be purchased for a few weeks in autumn. The bestseller this year costs ¥1,600 ($242) per box, up from ¥800 ($121) in 2019. Demand for hairy crabs in China was about ¥120 billion ($18.2 billion) last year and is expected to reach ¥150 billion ($22.7 billion) this year.

JD and Diageo Partner on Responsible Drinking Efforts in China: JD and Diageo signed an agreement at CIIE to jointly promote responsible drinking and moderate consumption of alcohol in the China market. The companies will work together with industry partners in China to advance the development of a code of conduct for responsible sales of alcohol online in China under the principle of self-governance, and promote the responsible drinking platform DRINKiQ as well as other initiatives.

Premium and Luxury

Alibaba, Richemont to Invest $1.1 Billion in Farfetch with Focus on China: Alibaba said on Thursday it would launch Farfetch shopping channels on its e-commerce sites Tmall Luxury Pavilion and Luxury Soho, while also investing in newly formed Farfetch China along with Richemont. Meanwhile, Farfetch will cease operations with JD.com, who invested $397 million in the company in 2017 which merged its China sales platform with JD. Separately, Artemis, the controlling shareholder of Gucci-owner Kering, also plans to increase its stake in Farfetch.

Declutter: China’s Luxury Shoppers Call in the Tidy Teams: There are now thousands of graduates from a home-organising school called Liucundao, which teaches the art of bringing order to the chaos of China’s wealthy shoppers. More than 3,000 professionals work in the emerging industry, which CCTV projected could reach ¥100 billion ($14.9 billion) this year in turnover. During the pandemic, business surged by hundreds of percent for some professionals.

 

Throughout the ages people have engaged in commerce to exchange goods and services for payment. Yet it wasn’t until around 1,100 BC when China introduced the first standardised currency. The money was miniature replicas of tools cast in bronze, before being replaced by more-practical, rounded metal pieces. This was followed by other iterations including leather, such as white deerskin bills a foot in length. Then around a thousand years ago, during the Song Dynasty, China introduced the world’s first paper money.

Although China pioneered many of the money concepts and forms that we use today in modern commerce, the country failed to modernise as the world adopted plastic cards and electronic transactions. Less than ten years ago, most Chinese would still carry wads of notes, taken from the stash under their mattress. Then something remarkable happened. Over the past decade, helped by the rise of ecommerce, smartphones and clever marketing strategies, mobile payments hit the mainstream to again leapfrog China to the forefront of payments technology.

China had 805 million people making payments on their mobile at the end of 30 June 2020, accounting for 86% of internet users. In 2017, Americans collectively spent $50 billion on mobile payments, while Chinese consumers spent $12 trillion. Chinese transactions have grown hundreds of percent since, with $9 trillion spent just in Q2 this year.

China’s mobile payments leadership is symbolic of China’s aspiration to be a global leader in innovation within 15 years, as it outlined in its 14th all-important Five Year Plan. Ant Group and its hero service Alipay is one of the prodigal sons of this tech strategy. In addition to driving the adoption of mobile payments in China, Ant has capitalised on China’s liberal attitude towards privacy issues to use its realm of big data to drive other services. It now makes more revenue from lending, than payments, however that lending may be impacted under new regulations around funding loans.

It’s those fundamentals and national pride that saw ‘mom-and-pop investors’ stump up $3 trillion to oversubscribe to Ant Group’s scheduled IPO on the Shanghai and HK stock exchanges. From retail investors alone, it attracted a bid value equivalent to Britain’s gross domestic product. The company was looking to raise almost $37 billion in the largest IPO the world has ever seen, valuing the company at $313 billion, larger than some of America’s biggest banks including Goldman Sachs and Wells Fargo. As Jack Ma noted, this is “the first time that such a big IPO was priced outside of New York City, which we wouldn’t have dared to think about five, or even three years ago.”

That was before the bombshell news broke late yesterday that Thursday’s IPO was suspended by Beijing. There is speculation that it is the result of Jack Ma’s public speech last week which criticised China’s financial system; and acts as a reminder of how things can work in the market. On top of this, the suspension signals that Beijing remains wary of large tech companies encroaching on its financial sector and that innovation leadership goals will not progress unabated.

Although the rise of Ant and Alipay seemed unstoppable before the IPO suspension, not everything it touched had turned to gold. The next targeted evolution in its payment system – the futuristic facial payments – hasn’t been as popular as the company had hoped, particularly given the widespread adoption of the technology in China. Facial scanning is another technology that the country leads in, with almost one camera for every two people expected to be operating in China by the end of this year. Facial recognition has helped contain spread of Covid-19, identifying people wearing masks, and even monitoring individuals’ temperatures. It has been incorporated into security and policing, public transport and caught jaywalkers. In the marketing and retail sphere, facial recognition provides some very exciting possibilities for personalisation and upselling relevant services based purely on expressions.

Chinese have historically embraced technology and have been relatively unfazed by privacy issues, allowing big data and Artificial Intelligence (AI)-fuelled applications to flourish in China. Yet, recently there has been genuine push back about facial recognition going a step too far in the road to Orwellian. Amid mounting public concerns over biometric data safety, Hangzhou – ironically Jack Ma’s hometown and his companies’ headquarters – has become China’s first city to prohibit the compulsory use of facial recognition in residential communities. A 2020 report on facial-recognition applications suggests that over 60% of people in China think the technology is overused, while over 30% said their facial information had been leaked or exploited.

Platforms and brands in China will continue to push limits around big data, AI and facial recognition, supported by pro-tech government policy. But it is likely that consumers will increasingly push back about privacy concerns and policy makers will progressively need to balance these concerns. Brands should take note!

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

This week’s China market and marketing news:

Consumers,  Chinese Consumers

China’s Fifth Plenum: What You Need to Know: The Fifth Plenum and the finalising of China’s draft 14th Five-Year Plan wrapped up last week. There were no real surprises in the new plan which elevated China’s self-reliance in technology into a national strategic pillar, aiming to become a global leader in innovation within 15 years. Other goals also reaching to 2035 included a pledge to see the nation’s carbon emissions peaking and starting to decline in the period, while raising per capita GDP to the status of a moderately developed country. Quality, rather than the pace of growth was emphasised, with no specific GDP targets mentioned, however these may come next year with Beijing ambitious in its growth outlook. China’s military will modernize and grow. Above all, China says that it is sticking to its strategy of boosting domestic demand and opening up the economy over the next five years.

China’s Export-Import Bank Sets Up $52.2 Billion Credit Line to Support CIIE: China’s Export-Import Bank will raise a credit line supporting imports to ¥350 billion ($52.2 billion) for CIIE deals, up from last year’s ¥300 billion. ¥180 billion of this year’s quota will be allocated to imports from countries that are part of the Belt and Road Initiative. $71.13 billion worth of tentative deals were reached for one-year purchases were signed at CIIE last year. CIIE starts tomorrow, 5 November, and will run until 10 November.

Don’t Be Blind to China’s Rise in a Changing World: The world order is changing, yet many are missing this because of a persistent anti-China bias. China’s extraordinary performance isn’t new. In fact, apart from the 1839-1949 “Century of Humiliation”, it has historically been one of the world’s most powerful countries and cultures. This year nearly half the world’s initial public offerings will be in China, including Ant Financial’s $37 billion listing, the world’s biggest ever. It has a growing population of well-educated people, with around a third of the world’s science and technology university majors, three times that of the US [FT paywall]. For UK relations with China, it is not Cold War, but a Values War; not decoupling, but some divergence.

Trending in China: Are China’s Blue-Collar Wages Really Higher Than Graduate Salaries?: #BlueCollarSalariesBeatCollegeGrads? has been viewed by 39 million social media users and garnered around 2,000 comments. As factories face staff shortages, many workers now earn more than ¥10,000 ($1,500) a month, whereas the typical starting salary for a college grad is ¥4,000 ($600). Commentators spoke of Huawei offering PhD grads ¥2 million ($300,000) salaries and reminded people not to compare the end point of one group of workers with the starting point of others.

China’s Stance on Homosexuality Has Changed. Its Textbooks Haven’t: A lawsuit brought by a student is part of an effort to get schools, editors and publishers to recognize that being gay is not a mental disorder. In 2015, a student sued the Ministry of Education over textbooks that describe homosexuality as an affliction, arguing that the government was responsible for ensuring the books’ quality and should disclose its approval process; she lost two years later. In 2014, a Chinese court ordered a clinic to compensate a man who underwent electroshock therapy designed to “cure” homosexuality, saying the clinic had committed consumer fraud.

Online: Digital China

Hangzhou Bans Mandatory Facial Recognition in Residential Communities: Amid mounting public concerns over biometric data safety, the eastern Chinese city of Hangzhou has become the first in the country to prohibit the compulsory use of such technology in residential communities. Community managers are also forbidden from selling residents’ information to third parties.

Singles Day: The West Wants In: According to Edited, products first discounted during Singles Day week increased 9% in the US and 86% in the UK in 2019, including from brands and retailers as diverse as Macy’s, Asos, Furla, Uniqlo, The Modist and Opening Ceremony.

Premium Food & Beverage

Tapping into New Growth Opportunities in China’s F&B Market: In 2019, China’s food imports reached $90.8 billion, 23.4% up on 2018. In 2018 aquatic products was the category was the highest value import category at $12.2b, and also the fastest growing at 42.9% year-on-year. Meat products were the next biggest at $11.1b, dairy products at $10.6b and fruit products at $8.0 billion. New Zealand, Australia and US were China’s three biggest sources of imported food. 71.7% of snacks bought online in 2019 were imported, 31.9% of beverages, 30.4% of cereals, 22.5% of instant food, 21.0% of canned food, 14.5% of healthcare food and 10.1% of fresh food.

China’s Dairy Boom: Yili Pegs Post-COVID-19 Health Demands and Tech as Key to Consumption Boost – Exclusive Interview: 51% of Chinese respondents say they are buying more white (regular) milk than before, 34% are buying the same as before according to GlobalData. Apart from regular milk, Chinese consumers are also showing a preference for dairy products that have immune-boosting properties or reduced sugar content post-Covid.

China’s New Cheese Rules Could Cultivate Market of Fromage Connoisseurs: The likely new national standard will mean that products that are made up of less than 50% of natural cheese can only be called ‘cheese-based products’, not cheese products. Previously food items that contained as little as 15% of cheese could be called cheese products. Few related products available in stores reveal their actual cheese content. Chinese people consume 100 grams of cheese per capita a year.

150-Year-Old Peking Duck Brand Bleeds Cash as Trends Pass It By: Quanjude’s loss came as the 156-year-old company, which operates a chain of restaurants nationwide besides selling precooked ducks, struggled to meet the needs of a new generation of eaters. Despite its history, it is not popular with old or young consumers. The lagging development of its brand, menu and services have put it in a weak position in a competitive market.

Overseas Chinese Tourists

China’s Top Airline Returns to Profit as Domestic Routes Bloom: China’s largest carrier, China Southern Airlines, reported a net profit of ¥711 million ($106 million) for Q3. Revenue dropped by 40%, but cost savings that include lower fuel consumption and cheaper oil prices helped lift the bottom line. Domestic air traffic in the mainland was only 2% lower year-on-year in September, with all major state-owned airlines recording gains in domestic passengers.

Video & Entertainment

Tencent-backed Esport Star Honour of Kings DAU Reaches 100 million: 100 million people a day are actively playing mobile game Honour of Kings, becoming the world’s first esport product to reach such a volume of users. The game, where an estimated 50% of players are female, has also been a merchandising success with an array of branded toy models, clothing, school stationery, FMCG and beauty products. It has also partnered with luxury brand Burberry and created a Bruce Lee-themed game skin.

Premium and Luxury

Louis Vuitton Picks Wuhan in China for Global Exhibition Launch – a Sign of Confidence in World’s Biggest Luxury Market: Wuhan, where the Covid-19 coronavirus was first identified, is the first place in the world to host a new exhibition “See LV” by the world’s No.1 luxury brand. After a strict lockdown to stop the spread of the virus, Wuhan is nearly back to normal, and Chinese luxury consumers have been spending with a vengeance.

This week’s China market and marketing news:

Online: Digital China

First Day of Double 11 Shopping Festival Sets New Records, Livestreams Drive Sales Spike: Alibaba’s Double 11 (Singles’ Day) shopping festival kicked off on 21 October, with livestreaming sales on Taobao Live surpassing last year’s first day sales in the first 10-minutes. 12 cosmetic products each recorded more than ¥100 million ($15 million) sales in the first hour.

China’s Cross-Border Ecommerce, or Haitao, Grows on Search for Exclusivity and Thrift: Sales of imported beauty, fashion and health products grew more than 100% year on year on JD Global during June’s 618 promotion.

ByteDance Tests the Waters of Cross-Border Ecommerce: ByteDance is reportedly testing a cross-border ecommerce service, Fuxiang Haigou, accessible through mini-programs on Douyin and the news aggregator Toutiao. Livestreaming through Alibaba’s cross-border platform, Tmall Global, reached ¥470 million ($70.2 million) in Q3 last year, up from ¥62 million ($9.3 million) in 2018. It is likely to be much higher again this year.

ByteDance Apps Toutiao, Douyin Engage Chinese Consumers Longer than Tencent’s WeChat, Survey Says: Users of news aggregator Toutiao spent an average of 73.4 minutes on the app every day, while those on Douyin spent a daily average of 72.9 minutes. WeChat engaged its users by a daily average of 60.6 minutes. Users of Kuaishou and Xiaohongshu (Little Red Book) spent close to an hour on each app. 26.4% of China’s 904 million Internet users spend more than three hours on these platforms every day.

Consumers,  Chinese Consumers

China set to keep up 5% growth through 2035, Xi adviser says: The Chinese economy will probably continue expanding at a roughly 5% annual clip over the next 15 years, an adviser to President Xi Jinping told Nikkei, citing a rapidly developing technology sector. China’s high-tech capabilities are advancing swiftly, seeing the country become “the world’s largest exporter of high-tech products”, according to Tsinghua University professor Hu Angang. “China’s high-tech exports have increased by an average of 7.1% a year from 2007 to 2018.” The domestic market also presents enormous opportunity for growth, in line with Xi Jinping’s “dual circulation” economic model.

China’s Billionaires See Biggest Gains Ever, Adding More than $1.5 Trillion to their Fortunes: China minted 257 billionaires over the past year – five new billionaires a week, bringing the total to 878, according to the Hurun Rich List 2020. The billionaires added $1.5 trillion to their wealth this year – more wealth than the last five years combined – bringing the total worth of China’s billionaires to $4 trillion. China’s soaring stock markets, a flood of initial public offerings and surging growth in the tech sector have all helped to fuel the country’s latest wealth boom. Jack Ma topped China’s billionaire ranking for the third year in a row, with $59 billion.

Chinese Personal Shoppers and Australian Brands Devastated by the Impact of Coronavirus: Before Covid-19, there were an estimated 150,000 daigou in Australia. The decline in overseas arrivals, particularly international students has hurt, as has a preference for products produced or stored in China due to concerns around parcels ‘contracting’ Covid during delivery. Around 1,000 specialty daigou brick and mortar stores are dotted across Australia, but an estimated 30% are now closed temporary or permanently. One of the biggest logistic providers for daigou shoppers — Blue Sky International Express — went bankrupt in May.

Young Chinese Bemoan Rat Race With Tongue-in-Cheek Memes: China’s pandemic-addled workforce is finding solace in self-deprecating humour, which have created buzzwords on social media such as dagong zai (“migrant worker”), ban zhuan (“brick movers”), shechu (“corporate cattle”), and jiaban gou (“overtime dog”).

Premium Food & Beverage

Dairy Company Fined $45,000 Over ‘Incorrect’ Map of China: Chinese brand Bright Dairy has been fined ¥300,000 ($45,000) for a video advertisement published on the company’s website. A map in the video had failed to show China’s “complete and correct territory.” China enforces strict regulations for maps published within its borders, requiring them to be submitted for review by the relevant authorities. In August last year, 29 Fortune 500 companies had taken down maps it had called out as “problematic.”

Impossible Foods Launches in Asian Grocery Stores as it Aims to Move into China: Impossible says it launched in about 200 grocery stores in Hong Kong and Singapore last week as it vies to bolster its presence in Asia and before entering the potentially lucrative mainland China market. Impossible is still awaiting regulator approval for its key ingredient, heme, made from genetically modified yeast.

Alibaba Shops for Hypermarket Chain Sun Art in $3.6 billion Deal: Alibaba will invest $3.6 billion to acquire a controlling stake in hypermarket operator Sun Art Retail, hoping to further leverage its digital presence to support Sun Art’s 481 RT-Mart and Auchan hypermarkets in China.

Chinese Food Manufacturers Face Pressure: 87% of consumers in China are more concerned about food safety than they were just a year ago. Food hygiene was the biggest food priority among 82% of the respondents, followed by nutrition with 73%. When asked about their chief concerns, 56% said it was finding foreign objects, such as metal or plastic, in their food. 92% admitted that they thought food waste is a problem. Just 18% were ‘very confident’ that food labelled as organic is truly grown or reared in such conditions.

Overall Beauty

Nutrition and Beauty in China: Formulas and Active Ingredients the Key Purchasing Factors – Swisse Research: Chinese consumers are most concerned with dark facial spots when buying beauty products. The key determining factor for buying a product lies in the formula and active ingredients used. Other concerns include skin dullness, dry skin, wrinkles, sagging skin, enlarged pores, pimples, oily skin, and skin redness and sensitivity.

Overseas Chinese Tourists

39 Chinese are Thailand’s 1st Foreign Tourists in 7 Months: 39 Chinese tourists flying to Bangkok from Shanghai on the “Special Tourist Visa” have committed to a staying at least 30 days. They were issued 90-day visas that can be renewed twice. After arriving, they must stay in government-approved quarantine at a hotel or hospital for 14 days and prove they have long-term accommodation. They must have special insurance policies, undergo pre-departure testing for the virus and download an official coronavirus-tracking application for use during their stay. At least two other flights from China are expected later this month.

 

For a culmination of most of the big digital trends in China, look no further than Double-11 or Singles’ Day. Nothing quite illustrates China’s infatuation with all things online and the might of its consumer classes quite like the world’s biggest dedicated shopping festival. But much like with Christmas Day, where the festivities begin weeks ahead of December 25, consumers are bombarded with Singles’ Day promotions before November 11 – more so every year.

This year’s Singles’ Day – which could be better described as Singles’ Three-Weeks – now has two sales windows – November 1-3 and November 11, supported by weeks of pre-sales. The festivities kicked off last Wednesday with a livestreaming extravaganza that provides hints into how big this year’s event is likely to be.

When the team at China Skinny checked the livestream at 1.17am, there were 160 million people tuned into Austin Li’s live-streaming room and the 126 products he promoted that morning. Across in Viya’s livestream, 130 million were watching and buying the 149 products on offer. Livestreaming sales on Taobao Live surpassed last year’s first day sales in the first 10-minutes. Much like when die-hard sports fans peal themselves out of bed to watch their national team compete in a disparate time zone, crowds of die-hard Chinese shoppers are foregoing their slumber to clinch a deal weeks before Singles’ Day itself.

As we saw with JD.com’s 33.6% growth for its 6.18 festival in June this year, the 12th annual Singles’ Day is likely to smash records again as Chinese consumers continue to show the world that it will take a lot more than a global pandemic to dampen their enthusiasm for shopping. The longer format will help bolster numbers too. Here are the big areas to watch at this year’s festival:

New Releases
Singles’ Day has evolved from just finding a cheap deal, to becoming a popular time to discover new products. More than 250,000 brands will be taking advantage of the 800 million+ audience to launch 2 million new products – double last year’s number of product debuts. The diversity of products is also increasing including less traditional categories such as automobiles, apartments and home decoration plans. Sneaker fans will be eagerly waiting for Air Jordan’s new kicks. Nearly 200 luxury brands will be peddling their wares, including Dior, which is releasing a capsule collection exclusively for the shopping festival, much like it has for Qixi – Chinese Valentine’s Day.

Cross Border
One of this year’s rising stars has been cross border ecommerce. Chinese consumers have gone online for their fix of foreign goods as they have been unable to buy them while travelling or through the slowing daigou trade. To cater for this growth, Tmall Global will debut over 2,600 new brands from overseas. JD is introducing more than 500,000 imported goods from more than 100 countries and regions across the globe. Behind the scenes, Alibaba’s logistics arm, Cainiao, will operate 3,000 chartered flights and long-haul cargo ships to meet the rising demand for imported goods.

Livestreaming
Although China’s livestreaming users grew just 0.4% last quarter, there is still plenty of wind in its sails, as we saw in the wee-hours last Wednesday. Livestreaming will be a pivotal channel for this years Double-11 Festival, riding on its enormous popularity since the outbreak. 400 company executives and 300 celebrities will step in front of the camera on Alibaba platforms, and not to be outdone, JD has promised livestreams from 300 celebrities and 500 company execs. DAMO Academy will use artificial intelligence to create its first virtual livestreaming host, while Fliggy will host travel-related livestreams as we’ve seen with the popular Trip (Ctrip) livestreams.

o2o
Since 2015, we’ve seen Singles’ Day build a real presence in the physical world. With the tech giants increasingly investing in and integrating technology into physical retail chains, this trend will only grow. Through Alibaba’s companies and partnerships, it has more than 2 million brick-and-mortar businesses that it hopes will participate in one way or another. Alipay’s offline theme this Singles’ Day is ‘Hyper-local’, as it offers city-specific vouchers and special promotions to consumers in over 100 Chinese cities. By searching for specific keywords on the Alipay app, consumers will be able to redeem local discounts from shops such as coffeehouses and neighbourhood grocery stores.

Thrifty
True to its Singles’ Day roots, and to cater for the price-sensitive older generations and consumers from lower tier cities who have come online since Covid – in addition to China’s affluent classes who still love a deal – there will be plenty of cheap goods to buy over the next couple of weeks. Taobao Deals, Alibaba’s platform for super-cheap goods which launched in March, is selling direct-from-factory items at surprisingly low prices in the app, some as low as ¥1 ($0.15), including shipping. There will also be 14 million ‘value-for-money products’ from more than 250,000 brands available on Tmall.

Over the past decade we have been watching Singles’ Day / Double-11 evolve and grow. This year is looking like it will be no different, even in light of Covid. Rather than just offering a lot of goods at heavily discounted prices, participating brands should look to smart and sustainable strategies to get a positive return from the event. Much like anything in China, it isn’t a case of just jumping on the wagon and hoping the shoppers will come to you. Five million sellers are expected to participate in the 21-day sale festival so brands need to be smart in their execution to stand out. Contact China Skinny to learn how we can assist.

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Beijing and Shanghai may be the first cities that most people associate with China, yet no city embodies the meteoric rise and confidence of modern China quite like Shenzhen in the south. Pre-China opening up, Shenzhen was described as a ‘backward fishing village,’ but after being designated as a Special Economic Zone (SEZ) in 1980, its proximity to Hong Kong’s entrepreneurs and capital, coupled with the ambition and scale of China’s migrant workforce have seen it transform into a dynamic metropolis at a scale that is unmatched in world history.

Over four decades, Shenzhen has steamed ahead to alpha city-status. It is now home to 12 million people, and a GDP that surpassed Hong Kong in 2018 and is now higher than Israel, Argentina and the United Arab Emirates. It hosts the headquarters of Tencent, Huawei and Ping An, three of China’s seven most valuable brands, in addition to other mega-companies such as ZTE, SF Best, Vanke and drone maker DJI, which has captured 70% of the global market for consumer drones. In 2016, more skyscrapers were completed in Shenzhen than the US and Australia combined, and the city now has more buildings over 200 metres high than any other city in the world – 82 as of July 2019 (there are 22 in the European Union).

Travelling through Shenzhen, it is hard to miss the propaganda banners with slogans saying ‘reform never halted and opening-up never stopped’. Further reform was confirmed during President Xi Jinping’s visit to the “miracle city” last week to celebrate the 40th anniversary of its designation as a special economic zone. Not long after the festivities, the central government announced new powers for Shenzhen to attract key foreign workers and finance to further build the city as China’s tech hub, which will further establish it as the hub of the Greater Bay Area initiative.

The continued rise of Shenzhen will increase its allure to brands and marketers hoping to tap into its large, affluent consumer base. Brands shouldn’t make the mistake of rolling out the same strategy as that of other tier-1 cities to the north. Disparate climate and ways of life have and formed quite different behaviour between consumers across China. When considering that the average age of the 12 million people in Shenzhen is under 30, different products, positioning and platforms are likely to appeal than in other cities.

As we’ve noted before, many brands lump Shenzhen and Guangzhou together in their marketing strategy as two tier-1 cities 30-minutes apart on the fast train. However, Guangzhou is an established city where many of the wealthy consumers are multi-generational local and living with their parents, versus Shenzhen’s affluent migrants who may only see their family once or twice a year, lifestyles can be quite different, and messaging around family and work can mean quite different things.

Consumer behaviour in Shenzhen has also been impacted by Covid differently than any other city in China. Although virtually all of the main consumer trends that have happened since the pandemic apply in Shenzhen, there is also the added element of easy travel between Hong Kong and Shenzhen ending. Whereas many Shenzhen consumers regularly bought cheaper and often more trust-worthy goods across the border, border controls have put a stop to much of this, creating some interesting shifts in local consumption which may have become habit by the time borders are flowing freely again.

Although Shenzhen is the most extreme example, there are literally hundreds of cities in China where the consumer class has risen from nothing over the past few decades. Each city presents opportunities, but they also require an element of city or regional localisation to connect with consumers in a meaningful way. Contact China Skinny to discuss how we can assist.

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

This week’s China market and marketing news:

Consumers,  Chinese Consumers

Shenzhen Given New Powers to Attract Key Foreign Workers and Develop New Financial Market Tools Under Plans to Develop Role as China’s Tech Hub: Shenzhen will be granted autonomy to make its own laws on artificial intelligence and big data, relax visa restrictions to attract foreign talent, and start a stock futures index under the latest plans to boost its role as tech and finance hub.

Shenzhen’s 40th Anniversary: What Those Early Years Were Like: China’s first, experimental SEZ could only be visited by obtaining a visa which would only allow access to the designated Shenzhen area. The city was effectively ring fenced off from the rest of mainland China in a 5 kilometre radius around the SEZ by a substantial, and well policed wall and manned by checkpoints. This rather exciting, yet somewhat Berlin-esque methodology was to protect the rest of the Motherland from capitalistic notions should the Shenzhen experiment not work.

China’s Inflation Hit 19-Month Low in September as Pork Prices Cool: China’s consumer price index (CPI) rose 1.7% in September from a year earlier, down from 2.4% in August. Prices of non-food items did not increase from a year ago. Food prices continue to rise, but at a slower rate than previous months as the pork supply is replenished, seeing pork prices rise 25.5% from a year ago – a notable slowdown from the 52.6% climb in August. During the height of the pandemic, CPI surged 5%, but the modest increases mean that the supply shocks caused by Covid are largely over. China’s Q3 GDP grew 4.9% with retail sales up 3.3% in September.

Australia Says it’s Ready to Talk to China About Their Trade Dispute: Australia wants dialogue with China to resolve their trade dispute and clear up any misunderstandings with its largest trading partner, Australian agriculture minister David Littleproud told CNBC Friday. In addition to import bans of barley and beef from five abattoirs, and investigations into Australian wine, China banned Australian coal imports last week, and has now started discouraging its spinning mills from using cotton imported from Australia.

China’s Most Valuable Brands Grow 12% in Value to $996 Billion: Despite the enormous pressures from Covid, China’s top-100 brands still grew $106.8 billion in value year-on-year according to BrandZ 2020 ranking. The 12% growth was double the global growth of 6%, with 14 out of 24 Chinese brand categories growing in value this year. Customer experience was a critical differentiator, now consumers can get what they want whenever they want it. The brands that score highest on ‘positive experience’ grew the brand value over three times faster year-on-year.

Former Pipe Factory Worker Becomes a Budget-Store Billionaire: Just a month after their carcinogenic lipstick was discovered to have 1,400 times the legal amount of chloroform, budget lifestyle chain Miniso has IPOed on the NYSE with a market cap of around $5 billion. The store which sells everything from $1.50 mascara to $6 headphones in colourful clean designs – often labelled a cheap version of Muji – has secured an almost 60% share of China’s general merchandise excluding grocery stores. 95% of its offerings are priced below $7.10 in China.

The ‘Fake Rich’ of Shanghai: Peeking Inside a Wannabe Socialite WeChat Group: A Shanghai Lady Socialite WeChat Group has become top trending on Chinese social media after a blogger exposed its workings. From splitting the costs for an afternoon high tea at The Ritz to sharing a Gucci pantyhose, these girls are taking the phrase ‘fake it ’til you make it’ a bit too literally. The group was like “a high-end version of Pinduoduo,” doing group buying like 60 of them chipping in ¥100 ($15) each to rent a white Ferrari for the day to get some selfies.

Finance and Banking

China’s Households Are Shouldering the Burden of Its Recovery: The scale of household borrowing marks a major difference between China and the West this year. Chinese consumers’ borrowing would indicate more confidence than their peers in the US and Europe, with Chinese borrowing growing around 14% in the first half of 2020, versus 1.5% in the US and 3% in the Eurozone. Unlike many countries where debt servicing costs are falling, China’s central bankers have been resistant to the idea of broad interest rate cuts this year [paywall].

Online: Digital China

Alibaba Spurs Competition With Pinduoduo by Offering 100 Million Products Almost Free: Pinduoduo’s annual active users in Q2 totalled 683 million, up 41% year-on-year, compared with Alibaba’s 742 million users built up over two decades in business. PDD’s growth was built partially on a ¥10 billion ($1.5 billion) subsidy program that has helped cement its place as the cheap ecommerce leader. But Alibaba isn’t lying down. On Taobao Deals, Alibaba’s bargain shopping platform, a campaign was launched this month selling items at just ¥1 ($0.15) with free shipping. 500,000 factories are participating in the promotion.

Apple’s 5G iPhone 12 May Have Drawn Derision on China’s Social Media but Millions are Still Signing Up For It: The lack of earphones and a charger, high price and relatively late adoption of 5G failed to impress, however some analysts see Apple re-taking ground lost to Huawei next year. At least 2.3 million Chinese consumers have registered for the free sign up for the new handset. Apple saw 225% quarterly growth in iPhone sales in the second quarter of 2020 in China thanks to price cuts.

Premium Food & Beverage

Covid-19 to Add Extra $1.6 Billion to Milk Sales in China in 2020: Sales of milk in China are predicted to stand at $26.9 billion in 2020, $1.6 billion greater than the previously projected amount before the coronavirus pandemic. Foreign brands are unlikely to benefit from the growth as much as they should.

JD.Com Affiliate to Set Up Showcase Digital Farm in China’s Hubei Province: A JD-affiliated company plans to build a farm to demonstrate the application of digital technologies in agriculture. The project aims to complete the digital operation of the entire crop supply chain from field to table, starting with soil, water and fertiliser management. JD will complement the venture with its strengths in platform, marketing, digital technology, finance and supply chains. This follows in the footsteps of fellow tech giant NetEase, which has been raising pigs since 2009. It is part of the trend which is seeing traditional small-scale farms replaced by vast, AI-assisted operations that feel more like smartphone factories than countryside havens. 98% of Chinese pork farms still have fewer than 50 animals, and account for about a third of the country’s pork production. Globally, more than 90% of farmed animals live on industrial farms.

Staying Health

Ads for New Sinopharm Covid-19 Vaccine on WeChat: An ad promoting appointments for a Covid-19 vaccination spread across WeChat Moments and state media last week. Students who plan to leave for study overseas between November 2020 and January 2021 were targeted for the free vaccination.

Durex Fined $120,000 for Inappropriate Advertisements on Chinese Social Media: Authorities in Shanghai imposed a ¥810,000 ($120,620) fine against Durex over an inappropriate ad in 2019. The joint campaign with Chinese brands HeyTea and Taopiaopiao, compared milk tea and sperm.

Video & Entertainment

Infographic: KTV in China – How Entertainment is Evolving in an O2O World: China’s ever-popular pastime Karaoke/KTV has evolved into a truly integrated online and offline pastime, where singers can make a buck. How does male and female behaviour compare?

Welcome back, we hope you had a great break if you’re based in China. As many of the 637 million trips were ending last week, so to was Jack Ma’s board position at Alibaba Group, as he took a further step back from the company he co-founded in 1999. Under Ma’s leadership, Alibaba became one of the world’s most dynamic companies and one of its most valuable – worth $826 billion as of yesterday, not to mention the $200 billion that Ant Group (of Alipay fame) could be worth after its imminent IPO.

In addition to building a giant ecommerce platform selling more than three times the value of goods as Amazon globally and a mobile payment system that is used by 81% of online Chinese, versus the 9% of Americans who use Apple Pay, Jack Ma also pioneered New Retail in China. This has become a blueprint for the future of retailing and established China as a testbed for retail innovation globally for companies such as Nike, Starbucks, Burberry and MAC.

Alibaba has also driven the uptake of in-video purchasing and livestreaming. Although livestream users appear to have peaked in China, it is starting to be adopted by US brands, and YouTube has just announced plans to create in-video shopping.

Beyond the digital world, Alibaba is also making in-roads in consumer goods categories in everything from food to fashion, utilising its enormous data pool to build and optimise its own products and brands. This will see it increasingly evolve from a partner to a competitor as well. Last month it gave small hints of where this is heading by unveiling its Xunxi Digital Factory in Hangzhou, a smart manufacturing facility which will support customised and demand-driven production. Creating competing brands and products is likely to be followed by China’s other data-rich, cashed-up tech giants, illustrated by ByteDance’s steps to start a coffee and cafe brand.

Few have contributed to China’s transition from a copycat to a global innovator more than Jack Ma (although many believe that his company has also supported IP-theft in China to flourish). Beyond Jack’s well-known uber-innovations, one of his most noticeable impacts has been contributing to the rise of China’s confidence and standing in global internet influence. This has seen China wielding more sway in setting international internet standards which, until recently, has been the preserve of a small group of industrialised democracies.

Alibaba has played a big part in China’s leadership in facial recognition, smart cities and some areas of AI, which are disciplines that are yet to be standardised. The global race for AI supremacy has illustrated just how far values differ between China and the West leading to different prioritises in AI algorithms. The disparity has seen increasing polarisation from standard setters and has contributed to the worsening ‘Tech Cold War‘ between China and the US.

Geopolitical issues aside, it is hard to not be impressed with Jack Ma’s achievements in just 21 years. It would be wise to keep an eye on him and the companies he founded as indicators of what is happening in China and what is likely to roll out in other markets of the world – both as enablers, but also as competitors. Contact China Skinny for help with that.

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