There’s nothing quite like a global pandemic to test the value of a brand. Some brands have increased in value by virtue of their category; others have become more valuable by adapting swiftly to changing consumption priorities, differing usage occasions, and shifting customer journeys. Yet in this untravelled COVID-19-influenced world, the underlying trust and connection that consumers have in brands has never been more important.
That is why this year’s BrandZ 100 index of the world’s most valuable brands is even more interesting than usual. Much of the research and analysis was undertaken at the crux of the outbreak, when the depth and strength of brands were really being stress-tested.
This year, Chinese brands accounted for 17 of the world’s most valuable brands, two more than last year. Of the five new brands entering the global list, two were Chinese. China also accounted for a quarter of the top-20 fastest rising brands. This reflects the importance of the China market globally in rankings, the rising calibre of Chinese brands, and how Chinese brands have embraced digital across their business structure – a common trait in many of the top-ranking brands. More than half of China’s top brands were tech companies and many of the others have a digitally-focused constitution.
Brand values that come out of China are likely to change faster over the next 12-months than they ever have. The extra time at home has given many consumers a chance to reflect on what is important to them. At China Skinny, we have seen consumers increasingly considering their own purpose, and the purpose of the brands they engage with. Many of these drivers are unique to China. One beneficiary will be principled beauty brands who are expected to have an avenue for general trade in China by January 2021 that does not involve testing on animals.
Across the BrandZ index, brands with a high reputation for sustainability grew their brand value faster than those without. Although sustainability branding is less developed in China than Western markets, it has also advanced as a result of COVID-19. Whilst the sustainability movement globally has recently had less airtime due to the immediate coronavirus crisis, we’ve seen many Chinese consumers increasingly embrace it. This has been a result of the personal reflection above, but also due to the associations between environmentally-friendly and healthy products – which have been a key focus since Covid. Some consumers even consider the outbreak to be Mother Nature fighting back, which is swaying some opinions.
Brand values globally have been impacted by the shift to buying local. This was already trending over the past six-or-so years in China, but has hastened as a result of the pandemic and the resulting geopolitical challenges. BrandZ found that 87% of Chinese interviewed were slightly/far more in favour of buying goods and services from their own country – higher than any other country in the study. Some categories are impacted more than others, but it is worth every marketer taking note.
Few brands illustrate the polarising home-grown preference better than Huawei. Chinese consumers trust in Huawei smartphones overtook Apple in 2017 and is now at 138 for Huawei versus 112 for Apple (average=100). Whereas outside of China, Poland and Norway’s trust of Huawei is the highest at just 105, whereas in Australia and Japan it is 93, South Korea is 90 and the US is 89.
With 17 Chinese brands now in the top-100, and more Greater China companies making the Fortune Global 500 list than the US, global expansion is on the cards for China’s increasingly confident and assertive brands. Yet as Huawei has found, negative Chinese sentiment from both Governments and consumers overseas is hurting sales. More recently, the ban of nearly 60 Chinese apps including TikTok and WeChat in India, add to the challenge for Chinese companies expanding abroad. Playing fields in markets across the world are becoming more nuanced, which only reinforces the importance of a strong brand.
China Skinny can assist with ensuring your brand remains true to its roots but connects with contemporary Chinese consumers. Contact us to find out more. Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
BrandZ Top-100 Most Valuable Global Brands 2020: China now has 17 brands in the global 100-most valuable brands according to the BrandZ index, with Alibaba and Tencent ranking sixth and seventh. Two of the five new entrants to the list were Chinese: TikTok and Bank of China. The world’s most valuable liquor company, Kweichow Moutai, was the fastest growing brand globally at 58% versus the average of 6%. Here’s the infographic.
Shanghai Gets Back to Business With Resumption of Major Trade Shows: The Shanghai New International Expo Centre’s website shows it held four exhibitions at the end of June, all on June 27-29, including Semicon China, a major semiconductor event. The site lists 14 events scheduled for July, including the China Digital Entertainment Expo & Conference, or ChinaJoy — the nation’s largest gamer show. The 23rd Shanghai International Film Festival, will take place later this month on dates still to be announced.
Xinhua Commentary: At 99, CPC Governance Legitimacy Shines Brighter in Time of Global Uncertainty: A recent survey by the Pew Research Center finds China tops the 2019 global rankings in terms of the levels of satisfaction with government performance. Over 86% of Chinese surveyed express satisfaction, far above the global average of 47%.
How COVID-19 Reshaped This Part of China’s Influencer Economy: The number of multi-channel networks (MCN) – agencies which manage KOL relationships with brands – are expected to double to 28,000 this year. As MCNs become more and more ubiquitous, the price tags for KOL services go up due to brands also needing to cover an agency fee. MCNs and KOLs usually do a 70/30 percent split. In late 2018 and 2019, many MCNs shifted their focus from simply endorsing products and brands to promoting their own branded products.
Update on Changes for Mandatory Animal-Testing of Beauty Products: The latest update of China’s CSAR (Cosmetic Supervision and Administration Regulation) has confirmed that there will be an avenue to general trade that does not involve testing on animals by January 2021, however exact details are still to be clarified.
China to Implement First Rules on Livestream Ecommerce in July: Rules have been implemented for livestreaming which restricts false and misleading advertising on livestreams and requires real-name registration from both merchants and individual livestreamers. From July 1, ecommerce livestreams have to give “comprehensive, truthful, and accurate” descriptions of the product and services without misleading exaggeration to guarantee the consumers’ right to know and to choose.
Avenue51 Ecommerce Platform Sees 245% Increase in Orders from Chinese Consumers for British Goods: Cross border ecommerce platform Avenue51 saw a 245% surge in orders for British goods from Mainland Chinese consumers in June, with the most popular categories being maternity, accessories, premium grocery and beauty. The platform is on track to increase sales by 650% in 2020.
Food & Beverage
Beyond Meat Makes Grocery Debut in China With Hema: Beyond Meat started stocking its flagship plant-based Beyond Burger in 50 Hema stores in Shanghai last weekend, following launches in Starbucks and Yum China (KFC, Pizza Hut and Taco Bell) in April. The brand will later roll out the product more broadly, starting with select locations in Beijing and Hangzhou in September. Hema now has 207 stores in over 20 Chinese cities, and is experimenting with new store formats including farmers’ markets, breakfast take-out stands and even a shopping mall. About 40% of Hema’s products are imported from overseas.
Budweiser Slams Urine-Tainted Beer Rumour on Chinese Social Media: The American brewer has reported a rumour that one of its employees had been adding a special ingredient to its beer for years. Such material often comes from the country’s notorious yingxiaohao, or “marketing accounts” — content mills that generate income by using outlandish, shocking, or salacious headlines to attract traffic.
Chinese Designers: Beware of “Guochao Fatigue”: Chinese netizens coined the term “Guochao” to describe a rising group of local designers who were making Chinese nationalism trendy. Since then, almost every millennial-savvy brand has rushed to launch Guochao-inspired collabs in support of Chinese culture. But as China-proud narratives continue to flood the market, consumer fatigue has followed with more discerning millennials calling out brands that utilise it superficially, demanding action rather than empty patriotism. Across social media, videos mocking Guochao have been trending. Guochao has also been called out for its constant plagiarism, and some of the most renowned local brands like Warrior have repeatedly been accused of copying international designers.
More Chinese Students Want to Study in UK than US: Survey: 42% of Chinese students would choose the UK as the first country in which to study abroad, with 37% of students choosing the US. It is the first time the UK has overtaken the US as the top destination for Chinese students in the New Oriental Education survey. The recent tension between China and the US has affected the choices of Chinese students, while the UK reformed its visa policy and allowed overseas students to stay in the UK for two years after graduation. Just 3% of Chinese students currently enrolled at UK universities have cancelled their study plans according to a British Council survey in June. However, UK institutions are forecast to have nearly 14,000 less enrolments from East Asia in 2020-21 as a result of COVID-19.
Australia to Open Borders for One Group: International Students: Australia has confirmed it will allow international students back to study in Canberra from this month. Under a trial program that could be rolled out nationally, the universities and territory government will foot the bill for their two-week mandatory quarantine in hotels. Overseas students make up roughly a quarter of all enrolments in Australia – the second-highest ratio in the world after Luxembourg, yet Australia faces stiff competition from other destinations. The US, Canada and the UK have been proactive in rolling out their curricula in international schools in countries such as China – where such schools have ballooned to 500 from 150 six years ago – only 39 teach an Australian final year matriculation certificate. In a Global Times survey, more than 80% of respondents said they would “definitely or somewhat consider” bilateral relations when choosing their study and travel destinations. Nevertheless, Australia has a compelling advantage over global competitors: its success to date in containing the coronavirus.
Even at China’s Elite Colleges, Rural Kids Feel Like ‘Losers’: Around two-thirds of high school students from urban areas born in the ’90s went on to attend university, compared with just one-third of rural students, according to a study published in April. Yet urban privilege extends far beyond the discrepancy in gaokao scores. Even when rural students manage to gain access to top colleges, they often run into new, invisible barriers to success. According to a 2018 survey, fresh graduates from rural families earn ¥4,469 ($675) per month on average — ¥287 ($41) less than graduates from urban backgrounds.
Chinese TV cartoon characters censored for ‘dyed’ hair: Shining Star, the Chinese version of a South Korean cartoon series about three girls who form a pop band has been taken off air. The ban is reportedly due to “problematic” values, and because the main characters set a bad example for kids because they “dyed their hair bright colours,” “wore loud clothes,” and “did costume changes onstage.”
The telltale sign that China had contained the coronavirus was when children were allowed back to school. It began out west as early as mid-March as schools in Xinjiang started opening their doors again. It was a little longer before schools in China’s wealthy coastal cities were operating again – in April, one Beijing mother whose child had been at home for almost three months noted a popular sentiment in her WeChat mums group was “if the scientists don’t hurry up and develop a vaccine, the mothers will!” Thankfully, by May, most schools across China had welcomed students back, albeit with reduced class sizes, shortened lessons, staggered arrival times and the looming presence of thermal scanners.
Although parents are clearly relieved that kids are mostly back in schools, education in China is unlikely to ever be the same again. This is evident with the closure of the once-promising Disney English, the 12-year-old chain with 25 language schools in China. “Over the past few years, we have noticed a shift in consumer preferences toward online learning experiences,” says Disney, “and this trend has been accelerated by the global pandemic as families are hesitant to resume in-person supplemental learning classes.”
The news comes as Chinese edtech giant Zuoyebang raised another $750 million at a valuation of $7.8 billion. The company has seen strong growth in its livestreaming business with full-price subscriptions rocketing more than 10-fold over the past two years. Of its 800 million registered users, 170 million are active monthly and 50 million daily. 90% of China’s nearly-200 million kindergarten-to-year-12 students have access to broadband, and with Chinese among the most digitally-smitten consumers on the planet, COVID-19 has just accelerated the inevitable adoption of online learning.
Alibaba has, of course, jumped on the bandwagon, launching a new section on Taobao called Taobao Education last week. Over the next three years, it aims to connect more than 1,000 online education providers with 100 million new students through pre-recorded and livestreamed videos, and mini programs.
Education providers in China and abroad should be paying attention to China’s shifting education market, but seemingly unrelated brands and industries should also be taking note.
China’s online learners span beyond school-aged children, and are not just seeking education in the traditional academic sense. Large numbers are wanting to learn about exercise, cosmetics, cooking, fashion, lifestyle and decorating homes. Brands would be wise to explore creative ways to weave their products into relevant educational channels through product placement, partnerships, endorsements and other means. Brands could even look to produce their own education videos/livestreams and distribute them through the established education channels to connect with their target market who are increasingly seeking out this way of learning. There’s plenty of scope to get creative, something which China Skinny can help with.
Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
Defying Dire Predictions, China Is the Bubble That Never Pops: Western analysts have been predicting China’s imminent demise constantly over the past 30 years: the authoritarian political system was too constricting for the economy to truly thrive. Banks were stuffed with bad loans. The industrial landscape was littered with zombie companies, the urban landscape with ghost towns. At first, it appeared Covid-19 would confirm that narrative, yet a few months later, with China in recovery mode and the US reporting 2.2 million cases, China looks to be in better stead.
US Rated by Chinese People as Biggest Stumbling Block in China-Australia Relations: Survey: When asked “what is the most disturbing factor affecting China-Australia relations?” 49.5% of Chinese respondents cited the US. 32.5% chose “ideological differences” and 13.7% cited domestic political factors in Australia. The favourability rating of Australia averaged 65.3/100. On the other hand, Australians’ favourability rating of China in 2019 was 49 according to the Lowy Institute; the lowest since the surveys began in 2006.
Chinese Street Vendors in Shanghai and Qingdao: 3 min video: Chinese consumers have embraced the renaissance of street vendors as a way to increase employment, but authorities in tier 1 cities like Beijing and Shanghai haven’t been so enthusiastic. Nevertheless, the scene has become vibrant in Shanghai – and slicker than before, as this footage attests.
Disney Exits Language School Business in China, Citing Coronavirus: The Walt Disney Company has decided to close Disney English’s chain of 25 language schools in China. 12-year-old chain of 25 language schools in the country and has welcomed 100,000 learners.
Ecommerce Giant Taobao Steps Into China’s Online Education Market: Alibaba’s Taobao has opened a new section on its platform to compete in China’s crowded online tutoring market with a massive plan aimed at connecting more than 1,000 online education service providers with 100 million new students over the next three years. Educational resources ranging from language to exercise will be available in the form of pre-recorded and livestreamed videos. Searches for education-related products on Taobao almost doubled during the January-May period, when some 5,000 education-related organizations opened stores on the online shopping platform
China Spends Over ¥5 Trillion on Education in 2019: China spent about ¥5.01 trillion ($706.6 billion) on education nationwide in 2019, up 8.7% from the previous year. Over ¥2.2 trillion of spending went to compulsory education and over ¥1.3 trillion yuan to higher education in 2019, up 9.1% and 12% percent respectively.
Almost One Third of Online Ad Traffic in China is Fake or Invalid: 31.9% of all online traffic in China was fake in 2019, up 1.7% from 2018. In addition, 57.5% of Key Opinion Leaders’ fans were fake, including 65.1% in the mum & baby category. 48% of all social media traffic was invalid. 30.7% of the total spent on digital advertising in China is paying for a fake audience, versus the next highest market the US, where 3.4% of the total spend was estimated to be fraudulent.
Huawei Put a Car, a Kitchen and a Gym Inside a Huge New Flagship Store in Shanghai: Huawei has opened a 5,000 square metre flagship store on Shanghai’s Nanjing Road complete with designated areas for in-car entertainment, fitness wearables and smart home products.
Jack Ma’s New Chieftain Lays Out His Plan to Fend Off Tencent: Ant Group Chief Executive Simon Hu is accelerating Alipay’s evolution into an online mall for everything from loans and travel services to food delivery, in a bid to claw back shoppers lost to Tencent Holdings Ltd.
Food & Beverage
Innovation Spotlight: DIY Superfood-Based Drink in China: Nestlé China has unveiled nesQino, a digitally-connected Q-mug machine that enables consumers to prepare their own healthy drink with superfood ingredients. Users choose a base sachet and a superfood sachet, pour the contents in the Q-mug with water, and select the desired temperature. A mini-program allows consumers to customise the drink temperature, explore recipe combinations, and access nutritional information.
Consumption Upgrade, Variety Enrich Chinese Wanderlust: Chinese domestic travellers are increasingly avoiding traditional standard-fare hotels, opting for personalized and distinctive accommodation such as tree houses and boathouses. Summer camp demand has spiked with popular activities including going fishing and planting rice paddies for parents and their kids. Trending search terms on Airbnb include tours of neighbouring areas, countryside trips, cleanliness and high quality. Roughly 90% of domestic flights are back and about 70% of domestic passengers, led by visiting friends and relatives and some leisure travel. Hotels are 30% down in occupancy, but with greater drops in revenue per room due to promotions. 4% said they expected to travel more post-Covid than before, with 36% expecting to travel less. Travel over the Dragon Boat Festival was down 49% on last year, with spending 69% lower, not helped by the Beijing outbreak immediately beforehand. About 80% of the country’s scenic spots had reopened by June 22.
Investments & Property
Shenzhen Leads the Way as China Turns to Property Investment Frenzy to Boost Growth: Investment into real estate development in Shenzhen surged 17.0% from a year earlier in the first five months of 2020. Property investment in Shanghai also expanded 3.7% in the first five months of the year, reversing a fall of 2.9% in the January-April period. As many as 22 out of 31 provinces have reported property investment growth in the January-May period as China’s central bank has eased credit supply. Just nine provinces reported growth in the first four months of the year.
Luxury Institute: The Wide Divide Between US And Chinese Affluent Consumers On Privacy Concerns And Data Sharing: 8% of affluent US consumers are inclined to share medical and health information, versus 27% in China. 11% in the US are likely to share location data, versus 21% in China. For sharing lifestyle/interests US:38% versus China: 50%, Fitness and wellness 15% vs 50%, business travel: 14% vs 37% and browsing history: 14% vs 40%. 42% of affluent US consumers say that they would provide data to brands in exchange for more personalised service versus 85% of Chinese consumers.
Watchdog Planned High Marks for SUV Despite Failed Crash Test, Leak Shows: A leaked video and test results showing a GAC Honda vehicle failing a crash test but still being awarded the second-highest automotive safety rating and highest overall rating from the China Insurance Automotive Safety Index is likely to erode trust in cars reliant on Chinese standards and measures. The news comes at a time when Chinese footwear brands are being scrutinised over toxic chemicals.
In the midst of the biggest economic crisis that the world has faced since the Great Depression, Chinese consumers have again demonstrated how much they love to spend when there is a deal to be had. During the 18-days of the 618 shopping festival, consumers spent over a trillion RMB in gross merchandise value (GMV) across China’s ecommerce platforms. JD clocked 34% growth on last year’s event at ¥269.2 billion ($38 billion). Alibaba – who didn’t publish their sales in 2019 – had nothing to hide this year with a healthy ¥698.2 billion ($98.7 billion) – two and a half times what they shifted in the 11 days of their Singles’ Day record last November.
The sales data provides some interesting observations for anyone who was wondering how lockdown trends would evolve as everything returns to normal. The habit of buying groceries online looks like it will be a long-lasting shift with the fastest growing category on JD being fresh food, reinforced by the 500% growth for JD Super.
Similarly, consumers appear to be continuing to spend more time at home. This is evident based on their investments into making their homes a nicer place, with kitchenware the third-fastest growing category. To complement their shiny new utensils, appliances and dishes, they’re also enjoying the finer things in life at home, seen by the 250% growth in imported wine sales, pulled up by the top end of the market, with Penfolds, Moutai and Dassai sake up five-fold from last year.
While many food and beverage exporters are likely to be revelling in the growth, a good few meat and seafood exporters have less reason to rejoice in the short term. As a sign of how hysteria and ill-logic around COVID-19 can reappear any time, we only need to look at what happened last weekend when the Beijing outbreak was linked to Norwegian salmon. The World Health Organisation and the UN’s Food and Agricultural Organisation have both stated that there is no evidence of food or food packaging being association with the transmission of COVID-19. As salmon have gills and not lungs, the respiratory disease cannot infect the fish.
Yet even after official Chinese officials and media absolved the fish of blame, salmon remained absent from supermarkets and restaurants across China. If that wasn’t bad enough, the distress expanded beyond the pinky-orange fish to imported meat in general. It wasn’t just from concerned consumers, but Chinese customs too. Some ports began requiring coronavirus tests for all imported meat and seafood containers to prevent contamination, causing clearance delays. To add to the paranoia, Tyson chicken imports have been suspended following an outbreak among workers in their Arkansas factory.
Although the paranoia around imported meat is likely to only be a short-term blip for most consumers, Beijing plant-based meat startup Zhenmeat executed a well-timed launch of their faux ‘fried pork tenderloin’ and ‘crayfish meat’. Plant-based meat has been generating a lot of buzz of late in China, but there are mixed views about their popularity with consumers, with KFC’s Beyond Meat’s limited edition vege burgers receiving a lukewarm response at best. On the other hand, sales of plant-based milk on Alibaba platforms grew 320% during the 618 festival.
On the whole, retail sales China’s food and beverage category looks as robust as ever, particularly online. Foreign acquisitions of Chinese brands in the category are one of the drivers for foreign investments into China surpassing China’s outbound investments this year – the first time in a decade. In addition to these positive signals, we are anticipating more unexpected blips and further shifts in behaviour while the shadow of COVID-19 looms – be prepared to adapt! China Skinny can help you identify where, why and how. Contact us to find out more.
Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
Break the China Habit? Lobsters, Lights and Toilets Show How Hard It Is: The risks of relying economically on the Asian superpower have never seemed clearer. As the world tries to get moving again, it needs China more than ever. The International Monetary Fund has reported that China will be one of the few countries to see economic growth in 2020, while the US economy is expected to contract by about 6% and the eurozone by 7.5%.
Who’s Buying Whom? COVID-19 and China Cross-Border M&A Trends: COVID-19 depressed company values around the globe, triggering fears across the United States, Europe and Asia of a distressed asset buying spree by Chinese companies. These concerns drove many governments to enact policies – some temporary, some permanent – to shield their companies from Chinese takeovers. Several months into the pandemic, the data tells a different story – there are no signs of a Chinese outbound investment boom – instead, takeovers are headed in the other direction: into China. Flows into China have picked up every month since January, driven by consumer-focused investments, policy liberalisation and maturing Chinese company targets. This has seen investments in China surpass outbound for the first time in a decade.
Chinese Shoppers Break Sales Records During 618 Online Festival: If the official numbers are true, Chinese consumers are back spending in a big way – when there’s a deal to be had. JD saw its 618 shopping festival sales growth 33.6% from 2019 to ¥269.2 billion ($38 billion) in gross merchandise value, Tmall hit ¥698.2 billion ($98.7 billion). With Pinduoduo and other platform’s sales added, the total was well over a trillion RMB. Categories such as pet snacks, beauty tools and health check devices were showing “high triple-digit growth this year” according to Alibaba.
Thanks to Live-Streaming Craze, China’s Midyear Shopping Festival has Moved Beyond Ecommerce: JD.com hosted more than 300,000 live streaming sessions during the gala. More than 300 celebrities and 600 brand executives joined live-streaming sessions on Alibaba’s Taobao Live, while over 10,000 physical retail stores live-streamed to promote their products. Transactions generated through Taobao Live reached 5.1 billion yuan on the first day of the 618 shopping event on June 1, with reportedly more than 1,000 brands, merchants and livestreamers generating at least ¥10 million ($1.41 million) each. The “official” value of goods purchased via livestreaming grew 250% year-over-year for this year’s 618.
How to Get Set Up on Pinduoduo as Foreign Merchants?: 18 minute video: PDD focuses on providing customers value for money and greater social interaction – aiming to be “a combination of Costco and Disney.” In the year-ended 31 March 2020, 628 million active users shopped on the platform spending ¥1,842 ($407), 47% more than last year. 45% of revenue came from tier 1 & 2 cities. Mother and infant care, skincare and cosmetics are fast growing categories for foreign brands. To list on PDD Global, brands pay a deposit of $1,000 and a transaction service fee of 0.6% with no commission. There is no minimum number of SKUs and no Chinese entity is necessary for cross border sales. It takes 3 days to get a store set up. Sign up pages are currently only available in Chinese. PDD has seen its market cap increase from $37 billion in March to break $100 billion this month, after launching less than five years ago. Its founder Colin Huang has just surpassed Jack Ma to become China’s second wealthiest person. More about PDD in this infographic.
Douyin/TikTok Owner ByteDance Expands into Ecommerce: ByteDance has established an ecommerce unit with a gross merchandise volume (GMV) target of ¥200 billion ($28.3 billion) for 2020.
This is How Blockchain Can Be Used in Supply Chains to Shape a Post-COVID-19 Economic Recovery: The COVID-19 crisis has rattled supply chains and some believe blockchain can help rebuild disrupted networks by providing trading partners and consumers with transparent, trusted and secured data on goods and transactions.
Food & Beverage
China’s Meat Importers Fret About Delays as Port Runs Virus Tests: Following Beijing’s virus outbreak and the notion that imported salmon was the source, China’s meat importers saw clearing delays and a hit to demand after Tianjin, one of the country’s major ports, began requiring coronavirus tests for all meat and seafood containers to prevent contamination.
Zhenmeat Launches Plant-Based ‘Pork’ and ‘Crayfish’ to Cater to Chinese Tastes: Beijing-based startup Zhenmeat has launched ‘fried pork tenderloin’ made of pea and soy protein with the outside layer being made of sweet potato starch to make it taste crispy after being fried. The other is plant-based ‘crayfish meat’ made with seaweed and konjac extracts. The ‘pork tenderloin’ will be supplied to selected Sichuan hotpot chains in China, while the ‘crayfish meat’ will be available in both Chinese and Western restaurants across the country. Anecdotally, Beyond Meat’s limited edition burgers in KFC China saw a lukewarm response. Whether or not they receive a wider roll out will provide some clues into their success.
Farmers Become Social Media Stars on Chinese TikTok: A farmer who goes by the name Northern Big Sis sits in her greenhouse taking giant bites of the raw vegetables she grows such as onions and garlic. A large number of farmers like Big Sis have all of a sudden become minicelebrities.
Lay’s China Ups its Snack Game With a New Range of Unique Localised Chip Flavours: Lay’s has further localised its snacks with a new range of creative, and slightly bizarre, Chinese chip flavours including salted duck egg, roast pork zongzi, White Rabbit candy and Beijing duck with the Beijing tourism administration among many of its collaborations.
China Protein Milk Powder Imports from Australia, New Zealand Jump But Questions Over Use as a Supplement For Infants: Chinese demand for lactoferrin and whey products has increased dramatically since the coronavirus outbreak due to their immunity boosting qualities, but there remains no evidence the products can prevent coronavirus infections. Exports of Australian whey protein milk powder to China tripled in March from February to more than 1,000 tonnes. One New Zealand milk powder manufacturer reportedly received three times as many orders in the first two months of the year than it did for the whole of 2019. A 60g tub of lactoferrin powder costs just under ¥30 ($4.20) to make and send to China, but is being sold for between ¥400 ($56.40) to ¥600 ($84.70).
Chinese Airline Offers ‘Flight Pass’ Promotion for Unlimited Travel: Six months of unlimited domestic travel on China Eastern Airlines can be yours for just ¥3,322 ($470), valid until the end of 2020. The initiative is hoped to generate cashflow and optimise flight occupancy for the airline. Despite recent signs of a COVID-19 rebound in Beijing, sales for the flight pass have taken off, even causing China Eastern’s mobile app to crash repeatedly on the first day that the promotional package was available.
Colgate Considers Rebranding its ‘Black People Toothpaste’ and Chinese Consumers are Confused: Colgate has announced a review of popular toothpaste brand Darlie’s Chinese name, hēirén yágāo, which literally means “Black People Toothpaste,” causing an interesting response online in China. Many Weibo users say that the decision was another example of “excessive political correctness” in the US and that “Black people are so sensitive and dramatic.” Johnson & Johnson received similar feedback after halting sales of skin whitening products in parts of Asia and the Middle East.
Oral Contraceptive Brand Slammed Over ‘Sexist’ China Market Ad: Bayer’s leading birth control product Yasmin has been accused of promoting a misogynistic narrative in its latest advertisement, which depicts a woman trying to attract a man by offering him unprotected sex. Bayer has responded saying it “respects a woman’s right to autonomous contraception” and has “resolved” the ad. China’s low rate of oral contraceptive use is partly due to misunderstandings about the product, research suggests. According to studies, nearly 20% of unmarried women do not know the purpose of contraceptive pills, while over 94% are unaware of its effects on the body, and think taking such pills will make them fat and ugly.
China’s digital channels have been the talk of the town since COVID-19 burst onto the scene. Online platforms’ already-healthy growth rates have switched up a gear, with livestreaming and its big brother, ecommerce, hogging much of the spotlight. Yet behind the big numbers, all isn’t what it seems. In 2018, at least a third of internet traffic in China could be considered “abnormal”, and still today, few online touch points escape the bot-bombardment, brushing and other fake numbers.
Anyone familiar with China’s biggest KOLs being caught engaging millions of fake followers or even Luckin Coffee’s fraud will know that there is little chance of the red-hot livestreaming channel being squeaky clean. As Elijah Whaley from Parklu eloquently puts it, the presence of bot accounts routinely inflates livestream viewer numbers. This means that the baseline awareness that brands are expecting to generate among target consumers is fake. That’s the good part. The thousands, or even millions of kuai worth of sales that makes marketeers giddy are, sadly, often fake as well.
How does something as measurable as sales get fabricated? Well, the typical livestreaming terms involve a flat fee + commission on heavily-discounted products, on the promise of minimum sales volumes. There is also an agreed maximum return rate, usually as high as 40-50%. Then your show slot comes. While everyone is watching in awe as sales numbers make their steep accent to the promised volume, behind the scenes the livestreamer’s representative is often figuratively clicking the buy button like a possessed woodpecker. And when it is all over, the livestreamer will return the maximum agreed amount and used a share of their flat fee to pay for the remaining fake sales (while still pocketing a handsome payment). To recoup much of that cost, they’ll flog anything left to the promiscuous and price-sensitive consumers on group buying platforms.
Livestreaming scams are a likely contributor to companies such as British skincare brand Saville & Quinn, seeing “less than 10% of livestream buyers becoming repeat purchasers” versus 40% of their Tmall customers. Yes, livestreaming can rocket-charge awareness and, done well, can retain customers as loyal advocates, but brands should be aware of the variety of underhand practices out there.
On a brighter note, the long-practiced art of ‘brushing’ on ecommerce may finally start to be put in check. The algorithm’s for platforms such as Taobao, Tmall or JD favour listings that are selling a lot of product and getting rave reviews, among other things. The more sales you have, the more reviews you can get, and the more sales you’ll get as a result. In short, the rich get richer. So to help bolster sales, brands will often inflate sales and positive reviews through ‘brushing’, or fake sales.
When competitors are faking their sales, it makes it even harder for brands trying to sell online the honest way. But things are looking up as China’s tax authorities increasingly use big data to identify sales volumes, and late last month started sending alerts to merchants warning about the risks of unpaid taxes on sales between 2017 to 2019. A seller who has inflated ¥10 million ($1.4m) in sales would have to pay more than ¥1 million (around $140K) in taxes. Hopefully it will start to change behaviour – we may even see the soaring COVID-driven growth of ecommerce, tempered somewhat as fake sales start to fall off the official GMV (gross merchandise value) numbers.
As the old adage goes, ‘perception is reality’, and faked and fudged numbers are likely to carry weight with Chinese consumers for some time yet. Many brands will see it necessary to raise their perceived popularity against their competitors to tap into the herd mentality and generate online buzz. Yet initiatives such as taxing brushing is a step into creating more transparency in the market, and provide a more level playing field for all brands. Fake data aside, ecommerce and livestreaming continue to present great opportunities in China when done well. China Skinny can assist you 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:
Off the Shelves in Beijing, is Salmon Guilty of Spreading Coronavirus?: Beijing’s largest vegetable wholesale market, Xinfadi market, was shut down after another burst of COVID infections over the weekend. According to local health officials, the virus was found on a chopping board used by a seller of imported salmon, sparking speculations on whether the fish can spread the virus. No evidence has shown that the novel coronavirus can be transmitted directly through food and drink to humans, yet salmon is no longer for sale across Beijing and in other places, and many consumers are talking about the risks of contracting the virus from imported food.
6 Ways to Boost Your Next Brand Collaboration in China: Few people would have picked these unexpected big-name collaborations, but they getting consumers attention in China, and also providing foreign brands as a great way to appeal and connect with patriotism.
Scott Morrison Allows International Students Back From July, Says Australia-China Relationship ‘Not Injured’: Australia’s Federal Government will allow international students back into the country in a “pilot basis” from next month, as the country’s higher education industry looks to recover from a double hit of travel restrictions and accusations of racism. The diplomatic storm with China continues, with the country’s Education Bureau last week taking the rare step of warning Chinese students about studying in Australia because of “racist incidents” during the coronavirus pandemic. In related news, a survey including Chinese students who had secured an offer to study in the UK, found 75% would go if it opened its doors, 20% would probably put off enrolment until next academic year, and just 3-4% would give up their UK studies all together as a result of the pandemic.
Is Targeting Vouchers A Successful Strategy For Brands?: To date, over 190 cities in China have issued vouchers to their citizens. Although the value of vouchers versus actual consumption varies from single to double-digits, the cities that have achieved remarkable results are mainly economically developed regions with relatively strong spending power. Shanghai’s shopping festival generated ¥100 billion ($14 billion) in sales from online channels and ¥144.36 billion ($20.4 billion) in May.
The Ups and Downs of ‘Intensive Motherhood’ in Shanghai: Extreme parenting is increasingly the norm for the city’s anxious, status-conscious middle class.
Big Data Allows Tax Authorities to Collect on ‘Brushed’ Ecommerce Sales: Chinese ecommerce shop owners reliant on “order brushing,” a practice of falsifying sales numbers, may now be required to pay taxes based on the inflated figures with the implementation of a new tax law. Chinese taxation authorities began sending alerts in late May to merchants on ecommerce platforms like Tmall and JD.com, warning about risks of unpaid taxes from 2017 to 2019. The first group of nearly 2,000 merchants in Beijing were warned of such irregularities and were required to make a supplementary payment based on the inflated numbers by early June. In an attempt to better regulate the industry, China’s Ecommerce Law in 2019 made order “brushing” illegal, along with a number of other unscrupulous practices like rewarding positive consumer reviews with money.
Live-Streaming Scams & Struggles in China: The scam many live-streamers are running is getting paid to simultaneously buy and sell collaborating brands’ products. Livestreamers don’t even need to front the cash to buy the products in streams, they use brands’ upfront flat fee instalments for that, return what they can, and resell the everything else they’ve bought on group buyings sites. Coupled with a majority bot-controlled audience, it’s the perfect hustle.
Flight Attendants and Tour Guides Promote Cross-Border Shopping: As part of 6.18, Tmall Global has partnered with several leading airlines and travel agencies in China for a livestream series that promotes cross-border products. Hosted by flight attendants and tour guides, the broadcasts are designed to encourage Chinese consumers to continue exploring and shopping from international brands even as overseas travel remains stymied.
Food & Beverage
Chinese Market Undergoing Drastic Change Through Coronavirus Crisis: The pandemic has seen strong growth from China’s leading players in the frozen and processed seafood space. The frozen ready-to-eat-meals market and the chilled ready-meals market are expected to grow 9.9% and 14.6% annually between 2018-2023, although frozen remains dominated by meat products such as pork dumplings. Frozen foods, chilled beers and ice cream were given a boost during Alibaba’s 6.6 campaign. For consumers seeking better quality and healthier food options, the virus has forced purchasing trade-offs. More than 70% of respondents in McKinsey’s COVID-19 consumer survey said they will continue to spend more time and money purchasing safe and eco-friendly products, while three-quarters want to eat healthier after the crisis, which may subdue frozen and processed sales in the medium term.
Tmall Spotlights Fruit: More than 25,000 brands, nearly twice as many as 2019, from 92 countries and regions are participating in this year’s 6.18 festival on Tmall. Imported fresh food from Thailand, Malaysia, Singapore, Chile and Russia will be offered for the first time via their country flagship stores on Tmall. Meanwhile, the Netherlands and Hokkaido, Japan are scheduled to open their respective flagship stores in June.
How China’s Expansion of Ecommerce Zones Could Benefit Overseas Food Companies: China has expanded its cross border ecommerce zone scheme to help bounce back post-COVID. The country has approved 46 new pilot cross border ecommerce zones to join the existing 59 zones. Many of the newly-added locations are also in smaller ‘second-‘ and ‘third-tier’ cities, where food imports are less readily available.
Chinese Domestic Air Travel Recovery Continues: Domestic air travel has just now topped 60% of its 2019 level. As an indicator of improving consumer confidence – and a lack of alternatives – hotel occupancy on Hainan Island has now exceeded 2019’s rates year-on-year. Tax-free shopping on the island has increased to ¥100K ($14K), which is also helping to bump up numbers. Increased demand for travel to Hainan has seen the launch of a new airline, Sanya International Airlines.
China Home Prices Up Most in Seven Months as Economy Reopens: China’s house prices rose at the fastest pace in seven months in May, as the property market continues its rapid recovery from the coronavirus shutdowns. New-home prices in 70 major cities, excluding state-subsidized housing, increased 0.49% last month, up from a 0.42% gain in April. Values in the secondary market, which is largely free from government intervention, gained 0.24%, also the most in seven months.
Luxury Brands Look to Online Sales in China in Aftermath of Pandemic: April sales were basically equal to last year according Adriel Chan, CEO of Hang Lung Properties who owns 11 mostly high-end shopping centres in China. Chan noted “the luxury brands’ CEOs that we talked to just a year ago were saying that online sales were accounting for 5 to 7 percent, and they saw it going up to maybe 15 percent when we most recently spoke to them.” There are two particularities of Chinese consumers that are different to other markets — they are the youngest luxury consumers with a sweet spot between 25 and 35 years of age, and they are the most digital.
Back in 2016, long before people’s hands were dried-out from sanitiser and faces indented from masks, there was a popular WeChat account that launched an initiative called the “4-hour escape from Bejing, Shanghai, Guangzhou and Shenzhen.” Consumers had to get to the airport asap, where they’d receive a ticket to an unknown destination and a ¥300 ($42) hotel subsidy, and start travelling. The initiative was a runaway success, which saw many copycats follow such as travel platform Mafengwo which created the similar “unknown travel destination lab.”
Domestic travel is currently running at about half the rate that it was a year ago. Although travel is trending up, the unpredictability of mystery weekends to unknown hotels doesn’t hold a lot of allure to Covid-shy consumers. Nevertheless, the ‘mystery’ concept has resurfaced in new manifestations. While global uncertainty from the pandemic is impacting everyone, the mystery and surprise of purchasing the unknown is presently generating a lot of buzz from Chinese consumers.
If suitcases are your thing, you’ll probably get a kick out of Xiaomi’s intelligent travel cases. Yet with less travelling happening, suitcase stock is gathering dust. Enter the trending ‘blind box’ tactic, where consumers purchase an unknown product from a brand for a set price. Xiaomi’s version involves a take on the classic lucky dip, where suitcase purchasers open their luggage to find a potentially-valuable product inside ranging from feature-packed smartphones to cute collectables.
The fast moving consumer goods category has been quick to jump on the blind box trend. In April, Pringles launched a line of “mystery flavour” crisps where consumers can either search for the hidden flavour on the outside or just bite in to discover the flavour. Similarly, last month WAHAHA brand Dimoo launched “blind water” where consumers buy a box of drinks and don’t find out the flavours – or the accompanying figurine – until its opened. Yes, you may not get your favourite flavour, but the thrill of the surprise more that compensates for many consumers.
Where the blind box is proving most popular is for mystery toys and collectables – think McDonalds Happy Meals on steroids. Toy brand POP MART is among the best known, where rare mystery toys can sell for close to 40 times their retail price. The brand also partnered with WAHAHA to provide the figurines for their blind water. Research last year found that nearly 200,000 consumers spent an average of ¥20,000 ($2,800) collecting blind boxes, with the top bracket spending as much as ¥1 million ($143,000) to complete their sets. Tens of millions of others are tempted by collectables that come with purchases.
These are all tactics that have been around for generations globally, from collectable baseball cards to lucky dip bags of sweets, but they are very much on trend in China at present. Chinese consumers have come to expect an element of surprise and delight with many things they buy and the blind box is proving to be an effective way of meeting that.
Many online purchases already receive a thoughtful gift or accessory in hope of nudging shoppers to write a better review. But brands should aim to go over and above that, to wow even the most promotion-hardened of Chinese consumers with an experience that bends the usual consumption ritual. They will be rewarded with advocacy on China’s many social networks – particularly those experiences that come across well on a short video. We’ve seen this for a few years with Three Squirrels who turned the common act of eating nuts into an experience, and increasingly with brands playing the mystery angle, such as Xiaomi, Pringles, WAHAHA and POP MART.
Brands don’t necessary need a mystery with every purchase, but something above and beyond just a great product that makes them stand out and be memorable in the very crowded space in China. Chinese consumers love the novel factor and will share it, so why not give it to them? Contact China Skinny for ideas around this and how to best validate consumers’ experiences.
Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
China’s Blind Box Economy: From surprise flavours, to suitcases with surprise products, to rare collectables, Chinese are loving surprises at the moment and brands are all over it.
China Has Over 600 million Poor With $140 Monthly Income: Premier Li Keqiang: It might be the biggest luxury market in the world, topping global sales for everything from German cars to premium alcohol, yet China still has over 600 million people whose monthly income is barely ¥1,000 ($140).
JD.com: Home Appliances Sales Increase in China During Pandemic: As the 618 Grand Promotion kicked off on June, JD data has seen sales of purification and sterilisation air conditioners increasing 10-fold from last year as people spend more time at home. Refrigerators and washing machines increased by 550%. In Q1, online appliance sales accounted for 55.8% of total home appliance sales, surpassing the 50% benchmark for the first time.
“Oh, My God!” Li Jiaqi’s (Austin Li) Legal Battle to Trademark His Voice: 4 min video: The influential livestream “lipstick prince” wants to get his well-known phrase “Oh, my god! Buy it! Buy it!” trademarked. So-called audio logos have been eligible for registration as trademarks in China since May 2014, but their approval rate remains low with just 41 of 749 applications approved. Trademark law also does not allow a phrase that has religious or political expressions, so his chances may be slim.
China’s Digital Retail Shift Has Accelerated in the Past Few Months: Companies that have reacted quickly are much better prepared, especially for this new normal in China. They have more diversity in their sales and marketing channels, which gives them new ways to reach customers.
Food & Beverage
First 7-Eleven in Hunan Sets Global Record: The first 7-Eleven in Hunan has broken the global opening-day sales record for the convenience-store brand, reporting $70,310 of turnover. According to the Federation of Industry and Commerce of Hunan, the first 7-Eleven store attracted more than 5,000 customers on its opening day. The most popular products sold were more than 5,000 Japanese oden sticks, 3,000 sushi balls, 1,500 desserts and 600 loaves of bread.”
China Backpedals on Push to Revive Street-Selling Economy: Although it has been the talk of the town since last week, China appears to be backtracking on its recent efforts to promote street vending as a way to reboot the coronavirus-stricken economy. Beijing has labelled the “street stall economy” unsuitable for the capital due to many problems including food hygiene and product quality. Other high tier cities are expected to follow suit unfortunately. Premier Li had referenced an unnamed city in China’s western region that added 100,000 jobs “overnight” with 36,000 mobile stalls. In a recent trip to Shandong, Li praised the “street stall economy” as “the vitality of China.”
China’s Moutai Hits All-Time High on Promise to Sell Baijiu Online at AGM: Shares of Baijiu company Kweichow Moutai have risen more than 25% this year to ¥1.8 trillion ($254 billion) and briefly surpassed ICBC (Industrial and Commercial Bank of China) as the most valuable company listed in mainland China. The company posted Q1 revenue growth of 12.8% in Q1 despite the pandemic. The liquor firm will prepare 5,000 special boxes for its AGM, each containing eight bottles of baijiu. Shareholders can scan a QR code during the event to order the product with home delivery. The AGM box is priced at ¥5,666 ($796), which is slightly less than JD.Com’s price of ¥5,939 for a similarly sized product, although the e-commerce platform offers special discount vouchers.
Beijing’s Plan To Punish Skeptics Of Traditional Chinese Medicine: Beijing has unveiled a set of proposed regulations on traditional Chinese medicine. Included in the new rules is that those who “defame and slander” TCM are subject to punishment by public security departments or even face criminal responsibility for “picking quarrels, causing trouble, and disrupting public order.”
China’s Domestic Travel Breaks 50% Barrier: Analysis of flight ticketing data indicates that Chinese domestic travel is more than 50% of what is was at the same time in 2019. The increase in mid-late May was driven by an uptick of last-minute flight bookings. 72% of tickets were issued within four days of the travel date, compared with 51% for the same period last year. Similarly, hotel bookings have returned to around 50% of normal as Beijing waves value-added taxes for the tourism industry. Midmarket hotels are faring better than both high-end and low-end properties, not helped by sluggish business travel. High-end hotels have been offering 50% discounts whereas the cheapest hotels have struggled due to impressions that they place less focus on cleanliness.
China Says 95 Foreign Airlines Can Apply to Resume Flights: China’s aviation authority said on Thursday that 95 foreign airlines that have suspended services to China can now apply to resume flights. It estimated the number of weekly international flights would increase by 50 from June 8, from 150 flights currently, with the average of passengers arriving per day rising to 4,700, up from around 3,000 now. Airlines will be punished if passengers have COVID-19 under China’s new system for flight and travel restrictions.
L’Oreal’s YSL Opens Global Flagship Store in Shanghai: Yves Saint Laurent, L’Oreal’s high-end cosmetics brand, opened its global flagship store in Shanghai’s Xintiandi Plaza today after L’Oreal’s sales in China bucked the coronavirus downturn, growing 6.4% in Q1 versus a 4.8% decline worldwide. The new store will focus on perfume lines as it aims to change the huge disparity between China’s population, which accounts for 20% of the world’s population, but just 1% of the perfume market.
CBA Gets Creative for New Tipoff: China’s national basketball league will resume play on June 20 with empty arenas in two host cities – Qingdao and Dongguan. The league will have one-off playoff games and revised rules on foreign players, with one foreigner on the court against opponents with all-Chinese lineups who have suffered due to immigration issues.
Adidas Says China Sales Back to Growth Faster Than Expected: Adidas announced that sales had returned to growth in greater China faster than it had expected after the coronavirus lockdown, while the reopening of business in Europe and the Americas was going more gradually. While traffic to its stores in greater China stayed below that of last year in May, Adidas said that was more than offset by a rise in how much shoppers were spending and a surge in ecommerce sales, leading to an overall increase in revenue and Q2 sales will be similar to last year.
On China’s popular reality TV show, You Who Came From Mobile Phones (Láizì shǒujī de nǐ) livestreaming Diva Viya was asked how much she earned. Her reply was “less than ¥10 billion ($1.4 billion).” Anyone who has been following the renaissance of livestreaming in China over the past 18-months – and particularly since the coronavirus outbreak – is likely to have shaken their head if she’d said anything that wasn’t in the billions.
On Singles’ Day alone last year Viya clocked ¥2.7 billion ($380 million) of sales. With a six-figure set-fee for a slot on her stream, and commission charges between 20-40%, it’s fair to say that Viya has a pretty good business at the moment. Not many people could attract over 4 million viewers to watch an hour-long Telsa test drive; and even fewer could sway more than 800 people to pay ¥500K ($71K) deposits for discounted rockets within 5 minutes. As China Skinny’s Andrew Atkinson noted this week, “is there a more powerful marketer than Viya on the planet at the moment?”
The success of livestreaming spans far beyond Viya and other big names like Austin Li, Mingzhu Dong and Yonghao Luo. Everyone from chefs broadcasting cooking lessons and farmers shifting their harvest, to shop attendants selling fashion and curators giving museum tours have jumped on the livestreaming craze. Just last week, JD entered a partnership with Kuaishao to ensure it maximises the livestreaming opportunity in the leadup to its 618 shopping festival. In the first three months of this year, more than 4 million commerce-enabled livestreaming sessions took place in China across various platforms.
Chinese cosmetics brand Forest Cabin did its bit to bolster those numbers. After the outbreak saw it temporarily close about half of its 337 brick and mortar stores in China – and very little footfall came to the stores remaining open – things were looking grim. Revenue dropped 90% and losses topped ¥30 million ($4.26 million) a month. As a matter of survival, the company embarked on a turnaround strategy, with livestreaming at its centre. Forest Cabin trained 1,600 shop attendants on how to host a livestream and were soon adding around 3,000 new loyalty members a day, up from their run rate of 800 to 1,000 people. The brand’s founder even hosted a two-hour session in front of 60,000 viewers, who collectively spent close to ¥400,000 ($56K) on camellia moisturising oil. Since the outbreak, the brand’s online sales have increased from 25% to 90% of revenue.
Whilst there are many success stories, livestreaming isn’t just a case of jumping in front of a smartphone and broadcasting on one of the numerous platforms, as home appliance giant Gree will tell you. It’s first livestreaming attempt grossed ¥230,000 ($32,268). But with some better planning and execution, its second session on Monday notched up sales of ¥1 billion ($140.2 million) in just three hours.
So what’s next for livestreaming? We may well see more virtual livestreaming stars such as Luo Tianyi, who charges close to ¥1 million just to show up – notably higher than all of the other livestreamers, including Viya! It’s also likely that livestreaming will expand abroad as Chinese platforms hope to emulate the success of Tiktok’s global expansion. Alibaba has already started its international recruitment drive, in which it hopes to lure over a million Insta and Tiktok influencers over the next three years to help attract users to the service. Whether you’re selling in China or beyond, it would be wise to be across this channel. China Skinny can assist you.
Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
China’s Economy Is Inching Out of Virus Slump, Early Data Shows: China’s economy continued its slow recovery from the coronavirus slump in May, with better sentiment among companies tempered by the grim global outlook. Indicators are now neutral instead of contracting. Smaller firms were more confident in May than they have been since the outbreak of the coronavirus, with production and new orders up, according to a Standard Chartered survey of companies.
Chinese State Media Says US Demonstrations Are ‘Beautiful’ as It Hits Back at American Support for Hong Kong Protests: Chinese state and social media have been filled with reports highlighting the nationwide demonstrations against police brutality in the US and attacking American politicians who supported the Hong Kong protests.
Gender-Reversing Drama Where Women Rule is Applauded and Criticized: China’s newest hit drama, The Romance of Tiger and Rose imagines a kingdom where women rule society and men take care of the home, putting an unprecedented spin on period drama tropes. In the fantasy world, every gender script is flipped on its head: women pass down the family name and fight in wars, while men are slut-shamed for the way they dress. Its hashtag garnered over 3 billion hits on Weibo and its Douban rating is 7.5, although it isn’t without its share of critics.
What Could Be the Next Trend for Livestreaming?: Some of the fastest-rising livestream stars don’t fit China’s typical online celebrity mould, some aren’t even real.
Gree Sells $140 Million in Three-Hour Livestreaming Event: Chinese home appliance giant Gree Electric notched up sales of ¥1 billion ($140.2 million) in just three hours of livestreaming on Monday, an enormous improvement from its first livestreaming sales of ¥230,000 ($32,268) on April 24. The improvement was a result of better preparation and expanding from just livestreaming on Douyin to promoting on six platforms. The company plans to embrace the era of new retail, turning its 30,000 offline stores into warehouses and experience centres.
JD.com Teams With Livestreaming Site to Boost Sales Ahead of Mid-Year Promotion: JD has formed a partnership with short video and livestreaming site Kuaishou allowing users to buy products from JD without leaving the Kuaishou app. Kuaishou has 300 million daily active users with more than 100 million users engaged in ecommerce. More than 4 million commerce livestreaming marketing activities were held in Q1 this year, with 560 million livestream users in China at the end of March.
Alibaba Hunts for a Million Influencers Keen to Make Big Money: Alibaba wants to repeat China’s livestreaming success globally with the help of a million influencers on forums from TikTok to Instagram. It’s looking to attract more than 100,000 content creators this year to its recently launched AliExpress Connect, targeting shoppers outside of China, rising to over a million in three years. Its initial focus is Europe, where Russia, France, Spain and Poland comprise the majority of users.
Food & Beverage
Consumers Closely Monitor Fats and Oils in Packaged Food, Global Study Finds: 89% of Chinese consumers pay attention to the type and amount of fat and oil in their packaged food – the highest in a Cargill survey of 12 countries. The global average was 68% of consumers, with Germany the lowest at 48%.
PepsiCo rolls out Osmanthus Pepsi in China: Pepsi has launched a limited-edition Osmanthus Pepsi flavoured with the flower of the same name. The company had previously tried fruit flavours in China, but they had little relevance to young Chinese consumers, who want a product that has local relevance with local comfort ingredients.
China’s Pork Imports in April Jump 170% to Record High: China boosted imports of pork this year as buyers took advantage of low prices to stock up on meat. Between January to April, pork imports grew 170.4% with April growing 169.9% year-on-year to a record 400,000 tonnes. Though Chinese pork prices have also fallen steadily since early February, they are still about double where they were a year ago, and were three to four times US pork prices in March, before plant shutdowns caused the US prices to spike in mid-April. China also brought in 160,000 tonnes of beef in April, up 28% from the previous year, with imports up 54% from January to April to 680,000 tonnes.
China Considers Street Vendor Return to Boost Economy: With unemployment currently a primary focus of the Government, Beijing is now actively encouraging street vendors as a source of employment, reversing recent crackdowns on the stall owners. It is great news for the vitality of China’s streets, but will add more competition to the already-struggling hospitality trade.
Dancing With Disinfectant: China’s Nightclubs Get Back in the Groove as Coronavirus Restrictions Ease: Nightclubs in China have mostly come back to life as owners and customers feel increasingly comfortable the coronavirus is under control. But disinfectant, disposable cups and masks have become part of the experience. “Our client flow began to recover quickly towards the end of April”, says Charles Guo, founder of 44KW, adding that business was back to last year’s average levels by mid-May.
Chinese Air Regulator Opens ‘Green Channel’ for Chartered Flights Serving Eight Countries: China’s civil aviation authority (CAAC) is allowing domestic and foreign passenger airlines to apply for “green channels” for chartered flights to airports in the Chinese mainland. Chartered flights can fly from eight countries: Japan, South Korea, Singapore, the UK, Germany, France, Italy and Switzerland. The news was followed by an agreement between China and Singapore to ‘fast lane’ arrangement for essential travel from early June. Business and official travel will initially be allowed between Singapore and Shanghai, Tianjin, Chongqing, Guangdong, Jiangsu and Zhejiang and gradually expanded to include additional areas.
Investments & Finance
Wealthy Chinese Families Say Pandemic has Eroded Appetite for Overseas Schooling and Investing: Economic uncertainty, Western responses to the pandemic, as well as rising anti-China sentiment in parts of the world are causing rich Chinese to reconsider plans. 10 million Chinese migrated in 2017: half ended up in Hong Kong and the United States, with Canada and Australia the third and fourth most popular destinations. A 2018 Hurun survey of wealthy Chinese found that education was the top reason for migration, followed by ecological reasons, food security, health care, social welfare and safety of assets. Meanwhile, wealthy Chinese buyers are making a move in property hotspots like Shanghai, Seoul and Sydney, in many cases to guard their wealth against anticipated inflation and a weakening yuan. Homes priced at about ¥20 million ($2.8 million) in China’s biggest cities have emerged as among the most popular since April.
China’s Same-Sex Couples Heartened By Property Protection Rights in New Civil Code: Chinese law does not criminalise same-sex relationships, but neither does it recognise them. With Beijing’s Thursday passage of China’s first civil code, which seeks to better protect the rights of individuals, same-sex couples have been offered hope in property claims. Tucked away among the code’s 1,260 articles is a chapter on “the right to reside”. It gives a property owner the power to grant another individual the right to live on the property for a term or for life, offering far more legal protection than a will which can be challenged by family members. The civil code will come into effect on 1 January 2021 and is second only to the Chinese constitution in legal effect.
Xinliangji is a Beijing-based seafood supplier, founded in 2015. Until recently, the company had earned a pretty penny supplying products like frozen crayfish and basa fish to restaurants such as fish hotpot chain New Spicy Way. But like almost every business in food service in China, its income sources fell off a cliff from mid-January with the abrupt closure of China’s restaurants.
Sitting on a stockpile of crustaceans and catfish, Xinliangji did what a number of successful businesses have done during these unique times: it adapted. It swiftly pivoted its target market from businesses to consumers – knowing consumers had swapped dining out for eating at home. With many seeking convenient cooking options, it launched ready-to-eat seasoned crayfish on ecommerce channels including Tmall and JD, and social commerce through Douyin. Between February 7 and 17, online sales increased more than 10-fold from ¥80,000 ($11K) to ¥1 million ($140K).
On April 1, when online celebrity Luo Yonghao held his first livestream to an audience of 48 million on Douyin, his top seller was Xinliangji crayfish, which topped ¥20 million ($2.8 million) of sales. It has since launched new products including a Sichuan-flavoured ready-to-eat fish set, which sold over ¥1 million ($140K) the first evening it launched.
With traditional B2B companies such as Xinjiangli entering the consumer market, competition has further increased. However on the flip side, there are also many brands who have been “waiting it out, to see what happens” and have done little to move with the new trends – this has freed up opportunities for businesses who are across new trends and preferences, and have evolved their strategies accordingly. In addition to diversifying their revenue streams, those adaptive brands have been appreciated by consumers, who are experiencing stronger emotions than ever as a result of the COVID-19, and are more likely to be loyal in the future, as Hema has discovered.
Xinliangji provides plenty of angles on how successful companies are adapting to the new environment that has resulted from the virus. Firstly, they understood changing customer preferences and habits and launched new products that appealed to these. They had a strong focus on ecommerce and tapped into the livestreaming trend, which saw an 88% growth of merchants in Q1 on Taobao Live alone.
Although ecommerce still has a long way to go before supplanting traditional brick & mortar retail in China, the pandemic has further accelerated its importance. In the first quarter – the height of China’s outbreak – retail sales in China fell 15.8% overall, while online sales of products grew 5.9%.
Just as ecommerce is rising, the diversity of online commerce is also growing – and its slew of acronyms. There are many options beyond traditional listings on Tmall or JD. In addition to livestreaming, the adoption of social commerce has boomed, and the greater margins, higher price points and customer ownership that come with it. Similarly, private groups have been a popular and intimate way to connect with consumers. C2M (consumer-to-manufacturer) models have also seen rapid adoption over the past few months driven by both Alibaba and JD, as have DTC (direct-to-consumer) models and the connected MLM (multi-level-marketing), although this hasn’t been without regulatory issues on both sides of the Pacific. Contactless delivery, one of the winners from ecommerce during COVID-times has also seen its share of challenges, as Hive-Box will attest. And the list goes on.
Chinese consumers’ every-day lives have slowed and become simpler as a result of COVID-19, but it has done nothing to simplify marketing strategies for China. Adaptable brands who can understand and navigate the new retail environment are likely to be rewarded, and in many cases, come out stronger than before, as we have seen with Xinliangji.
This week’s China market and marketing news:
China Unveils $500 Billion Stimulus for the Economy as it Scraps Growth Target Due to the Pandemic: The pandemic has seen China shelve its 2020 GDP growth target for the first time in decades. It has promised a more aggressive fiscal response to the crisis, pledging ¥3.6 trillion ($500 billion) in extra stimulus this year in a bid to create 9 million jobs and blunt the fallout from COVID-19. The money will be used for tax cuts, rent reductions and investments such as 5G networks, railways, airports and other infrastructure projects. The stimulus is about 4% of GDP – a similar scale to the country’s response to the global financial crisis in 2008 and 2009.
Gain the Momentum, New Jobs Light Up Post COVID-19 Chinese Labor Market: Although unemployment is on the rise in China, soaring job listings for occupations such as livestreamers, blockchain operators, health assistants, nutrition advisors and nucleic acid testers, indicate that technology-spurred economic transformation is faster and fiercer than ever, along with the hit of the coronavirus. During COVID-19, internet-related jobs were responsible for about 60% of new job hiring in major cities in China.
‘Behaviour is Even Worse’: China Steps Up Protection of Intellectual Property in Courts, But Foreign Firms Still Wary: Foreign businesses and experts say protection of intellectual property in China has been stepped up through the courts, but it is still a big concern – and economic pressure from the COVID-19 pandemic may bring more infringements. Last month, Chinese firm New Barlun was fined $1.54 million in damages to New Balance for unfairly using an “N” symbol, and China’s top court overturned the rulings of two lower courts in favour of Michael Jordan, finding that Qiaodan Sports had illegally used his Chinese name – Qiao Dan. China revised its Trademark Law in April last year, targeting “trademark squatter” firms like Qiaodan Sports. The amendment tightened conditions for filing a trademark and increased penalties for infringement from ¥3 million to ¥5 million ($423K – $706K).
Couples Clamour to Get Married on ‘Once-In-A-Lifetime’ Date: Chinese lovebirds flocked to marriage registration centres last Wednesday, as the date May 20, 2020, sounds similar to “ai ni ai ni wo ai ni”, or “love you, love you, I love you,” in Chinese. A total of 2,567 couples tied the knot in Shanghai on Wednesday, compared with the normal daily 300 to 400.
Alibaba Digital Economy Gross Merchandise Value (GMV) Exceeds $1 Trillion for 2020 Fiscal Year: Just 16 countries have a GDP higher than Alibaba’s $1 trillion digital merchandise value sales, including $945 billion from its Chinese retail marketplaces. Amazon’s GMV for its online market place in the US was $339 billion in 2019 for context. Annual active customers on China retail marketplaces grew 72 million year-on-year to 726 million, although surprisingly, just 15 million were added in Q1. Over 70% of new customers were from less developed areas. GMV grew 10%, driven by the growth of fast moving consumer goods and resilient demand for consumer electronics, which together grew 25% year-on-year. JD.com posted a 20.7% surge in first-quarter sales amid the pandemic, with mobile daily active users growing 46% year-on-year.
JD.com Partners With LG to Sell ¥5 Billion ($704 Million) in Goods Using C2M: Chinese ecommerce giants are increasingly partnering with manufacturers to facilitate product development and marketing. The trend propelled emerging ecommerce models such as consumer-to-manufacturer (C2M), which connects consumers and producers to manufacture tailored products at lower prices. JD has partnered with electronic brands such as Lenovo, Konka, HP, and Dell to develop tailored products under the C2M model. Alibaba boosted its C2M push recently with plans to transform 1,000 manufacturers into “Super Factories” with output exceeding ¥100 million ($14 million) each within the next three years.
Herbalife to Pay $123 Million to Settle China Bribery Allegations: Herbalife Nutrition Ltd will likely pay US authorities $123 million in penalties for its multi level marketing company’s Chinese unit in an alleged decade-long scheme to bribe Chinese government officials to win business and evade regulatory scrutiny. The bribes were intended to help Los Angeles-based Herbalife obtain direct selling licenses, reduce government scrutiny of its Chinese operations, and suppress negative coverage by state-controlled media.
How Can the World’s Largest Locker System Hive-Box Be In Crisis at a Time Like This?: The current move to contactless delivery should have Hive-Box in cloud-9, but instead it provides a lesson about how not to operate during a pandemic.
Food & Beverage
I Scream, You Scream: Shanghai’s Weirdest Ice Cream: With inspired creativity and savvy marketing, China’s food manufacturers excel at coming up with off-the-wall snacks and turning them into viral trends. Customers, often snap-happy urbanites, have been known to stand in hours-long queues just to try the latest culinary fad, from milk tea to pastries. Bubble milk tea, durian, scallion pancakes, calamari and crab roe ice cream all earned a mention.
Nestle to Build New Plant-Based Food Facility in China Under $100 Million Investment Plan: Nestle will build its first plant-based food facility for Asia in Tianjin Economic-Technological Development Area (TEDA) and could launch faux meat products by the end of this year. There has been a small shift to plant-based diets over the past few years, in part due to the African Swine Flu and trade war driving up meat prices. And now with the coronavirus crisis, some consumers are also rethinking their diets.
China’s Government Debates Aquaculture Policy Shift as Investments Pour Into Premium Operations: A spate of recent investments in China’s aquaculture and feed sectors appear to suggest an acceleration in the move towards more premium species, as well as greater emphasis on value-added production in mass-volume freshwater aquaculture.
Stop Hiding Your Periods, Says Chinese Pad Commercial: Swedish female hygiene brand Libresse has generated a shower of praise on social media with messages from Chinese actress Zhou Dongyu saying “The average woman has more than 400 periods in her lifetime. More than 400 menstruation cycles. These days shouldn’t be crossed out carelessly on calendars. These days are important events that deserve to be emphasized with red markers in our life” – a refreshing approach for the category in China as it aims to break down stigmas and normalize periods.
Chinese Super League Club Tianjin Tianhai Folds: Chinese Super League (CSL) football team Tianjin Tianhai, which once employed World Cup winner Fabio Cannavaro as coach and signed Brazilian forward Alexandre Pato, has declared bankruptcy and folded. Things started to unravel after the arrest of former owner Shu for running a pyramid scheme in January 2019.
China Keeps Germany’s Car Makers in the Fast Lane: Chinese consumers are still spending at the top end of the market on big ticket-items with premium car brands clocking 13.6% growth in April versus 4.4% for the overall auto market. German brands dominate China’s premium segment, with Volkswagen, Porsche, Audi, Mercedes-maker Daimler and BMW accounting for 90% of the market, versus 85% globally. China’s wider car market has been shrinking since mid-2018, while premium sales have kept growing. Premium brands account for 15.3% of total sales, up from 9.6% in 2016. In top tier cities, they accounted for 25-29% [paywall].
This week’s China market and marketing news:
American Families Only Half as Rich as Those in Chinese Cities: A People’s Bank of China survey of urban families’ finances found that median household net worth stood at ¥1.41 million ($198,330) at the end of 2019. A similar survey from the Federal Reserve conducted in 2016 but adjusted for inflation estimates the median US household net worth at about $104,000 in 2019. However the US average household is 80% higher due to the really wealthy American families pulling the average up.
China Home-Price Growth Accelerates in Property Market Boost: China’s home sales have almost returned to pre-virus levels. New-home prices in 70 major cities, excluding state-subsidized housing, gained 0.42% in April, up from a 0.13% increase in March. Prices in the secondary market, which is free from government intervention, rose 0.22% last month after edging up just 0.05% in March. The central bank has cut the cost of funding to banks, pledged liquidity to virus-hit industries and lowered requirements on banks’ buffers to allow them to lend more.
How Has China Handled the Economic Fallout of Covid-19?: 4:30 video: How will economic issues playout at China’s National People’s Congress taking place this week? Scott Kennedy, CSIS Trustee Chair in Chinese Business and Economics, explains China’s efforts to economically recover from the outbreak of the novel coronavirus.
China Tries to Revive Economy With $205 Billion of Projects in 2020: China will likely spend about $205 billion this year on projects ranging from 5G networks to power grid enhancements to rail upgrades as it tries to revive its economy after the coronavirus pandemic. Those sectors are among seven that China has identified as “new infrastructure,” which it wants to prioritize in its recovery, with ‘old’ industry unlikely to see much of the stimulus.
Germans Turning to Beijing for Friendship as Relations With US Cool: Germans are now as likely to want to forge close ties with China as with the United States, according to a poll that suggests the public mood has tilted significantly over the past 12 months. Only one in ten respondents identified the US as Germany’s principal ally, half as many as this time last year. In all, 36% said it was more important for Germany to have “warm relations” with China than with the US, while 37% said the opposite. A year ago 24% preferred China and 50% the US.
National Survey Lays Bare the Sex Lives of Chinese Students: Female students are less satisfied in relationships. Men are more comfortable with live-in partners. A majority of women at Chinese universities have never masturbated, and one-third have never experienced an orgasm or don’t know what one is according to a survey of 45,540 students from 1,764 universities nationwide. 3.6% of respondents said they had had sex with a teacher. Only half of the surveyed students said they received sex education in school, and less than 15% said they felt “very satisfied” with what they were taught.
Tencent Posts First-Quarter Beat as Users Turn to Hit Mobile Games During Coronavirus Lockdown: Tencent’s results beat expectations, with revenue up 26% to $15.2 billion in Q1, thanks to its gaming business, as well as better-than-expected performance in both social media advertising and fintech services – although this fell from the last quarter as people stayed at home. Mobile games got a boost from Tencent’s hit titles including “Honour of Kings,” which saw new upgrades during the quarter, and “Peacekeeper Elite.” Tencent’s gaming AI Wukong has won 99.8% of games against human players since launching in August 2019, including defeating five-versus-five professional esporters in Honour of Kings.
Smartphone Shipments in China up 17% in April, Signalling Likely Rebound: Phone makers shipped 40.8 million handsets in April in China, up from 34.8 million in April 2019.
Food & Beverage
With 5 Kids Sick, Hunan Authorities Investigate ‘Infant Formula’: In yet another scandal in China, parents in the central China city of Chenzhou noticed their children’s heads had become swollen, a media investigation found that they had been consuming a protein powder drink instead of hypoallergenic infant formula. This is the second time in six months that Chenzhou has made headlines because of unsuitable products being marketed for young children.
Long Lines For Grand Opening Of Popeyes Shanghai, Which Ran Out Of Food: After withdrawing from China in 2003, New Orleans-based fried chicken fast food chain Popeyes has returned with its first store opening on Shanghai’s Huaihai Road. By 8am, there were already hundreds of people queuing, which stretched for hours before the crowds eventually dispersed as the food ran out.
Luckin Coffee Still Expanding Stores and New Offerings Despite the Scandal: Luckin is still opening 10 outlets a day, even as its shares are suspended. While the 10 stores is slower than the 20 stores/day in Q1 – it’s more than the same period a year ago. Last week, the brand also launched a line of lifestyle products, which range from beauty masks and hand soap to Apple Airpods and Beats headphones. Most of the non-beverage merchandise is third-party, except for a small collection of Luckin-branded items such as coffee mugs. Luckin’s scandal-related boost saw daily users jump four-fold overnight to 4.4 million. The growth was short-lived, with daily users hovering around 1.5 million as of last week, albeit higher than last pre-scandal.
Chinese Fitness App Keep Raises $80 Million on the Rise of Home Workouts: After falling on hard times in late 2019 – seeing it lay off 15% of its staff – fitness app Keep saw user numbers jump 15% in Q1 to 18.1 million a month, averaging 20.4 minutes a day. The company now has over 200 million registered users and more than 3.6 billion user exercise data entries. The company, now valued at $1 billion, will invest the $80 million into the development of a comprehensive sports solution which integrates its various businesses from content generation and workout community management to hardware.
Inside Revlon’s China Re-Entry Playbook: Revlon is ‘re-entering’ China, expanding from its current cross border Tmall Global sales. On the surface, the launch seems to be lacking anything creative or smart: a 100%-digital domestic Tmall launch and engagement of former K-pop girl band member Jessica Jung as its new global ambassador.
China’s Air Pollution Overshoots Pre-Crisis Levels for the First Time: It was good while it lasted. Levels of health-harming air pollutants in China have exceeded concentrations at the same time last year over the past 30 days, for the first time since the start of the COVID-19 crisis. The rebound appears to be driven by industrial emissions, as the pollution levels in the largest cities, Beijing and Shanghai, are still trailing below last year. More broadly, pollution levels tended to increase more in areas where coal-burning is a larger source of pollution.
COVID-19 is Making the Luxury Industry Even More Dependent on Chinese Shoppers: Chinese shoppers are the world’s biggest luxury buyers including purchases made inside and outside their country. A faster economic recovery in China than in the US and Europe could widen this gap further. Bain and Altagamma estimate by 2025 Chinese shoppers will account for 49% of global luxury purchases, up from about 35% in 2019. The rest of Asia (excluding Japan) will retain 11% over the 6-year period, with every other nation seeing their market share drop. Luxury purchases in Chinese-based stores will account for 28%, from 11% in 2019. Just 37% of luxury purchases are forecast to come from non-Asians.