China’s top eCommerce company, Alibaba, bought an 18% share of Sina Weibo this week. It’s the biggest thing to happen for China’s Internet this year and is likely to have implications for any business selling to Chinese consumers. Weibo is one of the hot marketing channels in China right now, although it has lost some of its mojo lately. With WeChat closing in, the Alibaba deal may just give it the shot in the arm it needs.
Alibaba understands Chinese consumers and businesses, and how to make money from them. When the big-swinging eBay rolled into China, backed with a decade of global insights, best practice and experience, they were no match for Alibaba. Alibaba had figured out how merchants liked to sell, what consumers wanted and how they wanted to pay. 90% of China’s online shopper’s spending now happens on Alibaba’s Taobao and Tmall, and their payment system Alipay accounts for about half of China’s 3rd party online payments. Weibo on the other hand, has struggled to cash-in on its popularity. It sells some advertising and has dabbled with successful social commerce trials such as Mercedes and Xiaomi smartphones, but it’s likely that Alibaba’s insights, data, payment methods and service crossover will take Weibo to the next level.
The kink in Alibaba’s armour was that it didn’t really have its finger in China’s influential social media pie. Chinese consumers spend a lot of time on social media and there’s much interdependence between social media and eCommerce. Most of China’s online shoppers are influenced by what they read on social media and 85% use it to frequently share their online shopping experiences. Weibo is the most influential social media service in China, with a treasure trove of user data. If Alibaba can dig through that treasure and create some real synergies, it’s likely to have an impact for anyone selling online in China or marketing to Chinese consumers through social media. Even America’s big boys from Facebook, Twitter, Google, eBay and Amazon will be closely watching the innovations that come from the Alibaba-Weibo relationship, and we may see a few imitations from the west. But as always, there’s more marketing news and views than just eCommerce and social media below. Enjoy!
Insight – China’s 2020 Consumer Is In A Town You’ve Never Heard Of: China’s 18-35 demographic are the most optimistic and take more risks. Their disposable income is high relative to their earning power and they haven’t yet seen tough times, so they’re not saving heavily. Since the end of 2010, disposable income has risen 30% per capita in China. China’s eastern seaboard accounts for 35% of China’s $2.9 trillion retail market, although inland China is closing in.
Chinese Investment 2.0: The next stage of Chinese globalisation has arrived, and policy makers and businesses need a more holistic and sophisticated approach to take advantage of it. 1.5 million Chinese tourists visited the US last year, making it the number 1 destination outside of Asia. Since 2007, China’s outbound direct investment to the US has grown 300%, or as much as 1300% if you include alternative sources such as flows through third countries. China’s global direct investment is at the stage Japan was in the 70s, and is expected to grow from today’s $400 billion to more than $1 trillion by 2020. Chinese firms now employ 30,000 Americans, up from fewer than 10,000 in 2007, and Chinese consumers are increasingly important for exporters and local services including hospitality and retail. Times are a-changing.
China Retailers Shift From Ostentatious: China’s Government corruption clampdown is affecting everyone from flower sellers to luxury watches. Retail sales for Q1 grew 12.4% year on year, down from 14.9% in Q412. Restaurants and catering grew just 8.5%. Ferrari, Pernod Ricard and a slew of other luxury brands actually saw negative growth. In brighter news, China retail sales overall grew 10.3% in March, up from Jan and Feb’s 9.5%.
Alibaba Buys Stake In Weibo: Alibaba has bought an 18% stake in Sina Weibo for $586m, with the option to increase it to 30%. The agreement concludes 40 meetings to negotiate the deal. The move will see China’s dominant eCommerce player and top social media service create synergies in user account connectivity, data, payments, marketing and more. Taobao ads have already made their way onto Weibo – and that’s just the start of it. The move will help Alibaba’s mobile aspirations, including helping its Nascent smartphone operating system gain traction against Android and iOS.
Chinese Online Shoppers Spent $190 billion In 2012. Here’s A Look At How—And What—They Bought: More than 12 million Chinese consumers bought overseas goods online in the second half of 2012, of which 30% were purchased from an overseas website. An average of 4 purchases were made each, totalling $275. 40% bought online because it’s cheaper than in China, 34% as it wasn’t available locally and 30% because of product quality guarantees. Apparel is the top purchased item overseas, by 6m shoppers. Cosmetics are next: 3.2m, milk powder: 1.8m. Overall, online shoppers are growing at more than two and a half times the rate of internet connections in China. 13.2% on online shoppers are using their mobiles, of which 53% used an app from a given online store.
Chinese Online Shoppers Purchase 117% more from Overseas in 2012: More on China’s online shopper’s overseas purchases: It grew 117% in 2012, with 51% of orders costing 100-500RMB ($16-$81). 51.8% of spending was from consumers born 1980-1989. Consumers are cautious about risks in return policies and custom clearance issues.
Online Spending Raises China’s Total Consumption: 18% of disposable income in Tier 1 cities is spent online, versus 27% in Tier 4 cities. By 2020, the market could be the size of the US, Japan, Britain, Germany,and France combined today. Independent operators should focus on customer service, fast & reliable delivery, a better shopping experience and more targeted marketing to win share.
5 Mobile Apps Chinese Smartphone Users Can’t Live Without: An interesting view into what apps China’s smartphone users are using. Curiously, Android users appear to use a greater variety of apps given the top 5 only account for 34%, whereas Apple’s top-5 is 44%. An interesting view into demographics – wealthy iPhone owners use Weibo 13% of the time, whereas for lower-on-income Android users, it’s only 4%.
Coming Soon: A Truly Chinese Internet: Dot com and dot net may soon be joined by dot 手机, after ICANN confirmed non-English top level domains availability in the 2nd half of this year, including Chinese characters. ‘Benevolence’, ‘cell phone’, ‘weibo’ and ‘company’ are among those being applied for in Chinese, with organisations shelling out $185,000 to apply for control of new Internet suffixes. We’d question how popular they will be, given Chinese characters are already available for the first part of a web address, eg. 你好.com, but haven’t been widespread. Online Chinese are already used to Romanised extensions, and given mobiles have limited keypads, it will be be a step or two longer to type it in.
What Apple Is Up Against In Two Growing Mobile Markets: China And Brazil: With 7.2 million smartphones sold in China last year, here’s how Xiaomi is edging in on Apple’s territory – with no advertising except on Weibo.
Chinese F&B Consumers Seek Self-Expression As Well As Sensory Fulfillment: Rather than just quenching their thirst and hunger, Chinese food and beverage consumers prefer consuming those products that are also ‘fun and relaxing’, satisfy them individually and provide a route to self expression and status. Chocolate and coffee, for example, are affordable ways to show social standing. Unfortunately you need to subscribe to read the full article.
China Turning Its Back On Top Bordeaux: Bordeaux wine is finding less favour Chinese consumers. China is the highest volume market for Bordeaux, however many Chinese were burnt by after paying high prices for the 2010 vintage, only to see prices since shortly afterwards. The Government’s no-corruption policy is also hitting wines priced over $750 the hardest with the majority of wine consumed in China costing less than $53 a bottle.
Cola Wars, China Style: Wanglaoji, the sweet, cold herbal tea in red and gold cans, is China’s most popular drink accounting for 7% of soft drink sales, outselling even Coke. The blend of seven medicinal herbs and flowers, including honeysuckle, mint and chrysanthemum, has built an image of youth, health and urban hipness. A key message is the semi-medicinal virtues counter the effects of spicy, greasy food. Sales have soared since 2008, when the company gave a ¥100m donation to Sichuan earthquake victims. Interestingly following the Sichuan earthquakes earlier this month, a suite of corporations including Apple and Samsung have pledged money to earthquake victims.
Israelis Cosmetics Companies Take Aim At $25 billion China Market: Chinese cosmetics sales are $25 billion a year, growing 17% annually. 5,000 local cosmetic companies are already active in China, 90% who are SMBs, although international brands hold 80% of market share.
Auckland Airport First To Partner With Weibo In Travel: New Zealand’s Auckland Airport has become the first Weibo partner for it’s new travel planner app to allow online Chinese to find out about NZ travel, plan and book their holidays. The agreement includes use of its content from its luxury tourism website xindaohualv.com and new independent traveller site xinxilanlvcheng.com.
Blockbuster Seeks Chinese Actors: Another example of Hollywood studios increasingly catering for Chinese movie-goers: Transformers 4 will have four Chinese actors on the cast and will be partially shot in China.
Chinese Disposable Income Jumps, More Consumers Use Credit: A 3:30 video on the rise of credit cards in China. In 2005, just 13.5m credit cards were in circulation; this year it’s expected to grow to 320m, helping to unlock the purchasing power of Chinese consumers. Younger consumers are much more likely to buy on credit, with clothes, cosmetics and TVs being popular items. Credit limits are low, and cc revolver rates for under 28 year-olds are around 11-12%. Although 80% of vehicles in China are bought with cash, auto makers are offering financing options which will help drive credit.
The Hot New Immigration Destinations For China’s Wealthy: China’s foreign investors are looking further afield than the traditional destinations of the US, Canada and Australia due to high costs, scandals, tax laws and application difficulties.
Eating Insects in Southwest China: Not quite on KFC’s scale, but a small Yunnan minority restaurant is serving up insects as a sustainable alternative to increasingly costly meat – a grass hopper has more than three times the protein of beef. Bamboo rat, giant Mekong catfish, ferns, fungi and all sorts of wild vegetables are all on the menu!
That’s the skinny for the week!
If you’ve missed earlier news or need to learn more, there’s a stack of information about Chinese consumers in prior China Skinny Weeklys right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed. If you have any feedback or suggestions for future articles, please let us know.