Mark Tanner
26 March 2014 0 Comments

China has long been known as the land of fakes. The country was the source of two thirds of fake goods seized globally between 2008 and 2010.  Street-side stalls, shops and entire shopping malls are dedicated to counterfeit bags, garb and DVDs.  Staff in a fake Apple store were fooled into believing that their employer was the real thing.  Rat meat has been sold as beef and lamb.  Even the kids aren’t sacred, with a local zoo in Henan duping visitors with a fake lion.  From the minute Chinese are old enough to consume, they are exposed to a myriad of phoneys.

Having your brand and products ripped off in China is an unfortunate reality of doing business in China.  Even though the China Government is focused on addressing the issue to meet the World Trade Organization mandate, and to protect its own growing innovate and creative companies, China’s vast and disparate supply chains mean it’s a difficult puzzle to solve.

However, not everything is looking grim.  Online shopping, once a breeding grounds for peddlers of fakes, is one of the beacons of hope for fighting the fraudsters.   China’s B2C platforms such as Tmall, JD.com and Yihaodian are the fastest growing eCommerce channels in China, and are close to accounting for half of all online sales.  Much of their growth can be attributed to consumers trusting the platforms to sell genuine and safe products.

Sites such as Tmall only allow registered trademark holders or associated parties to list on their platform.  Vendors pay a sizable deposit which can be used as refunds if goods aren’t what they’re meant to be.  And customer reviews, which are a large factor for consumer perceptions and search results, soon weed out the fraudsters.

Buying goods online is often more reliable than elsewhere in China.  We only need to look to wine as an example; even at a swanky bar in Shanghai, you could drop $100 on a bottle of wine, which could turn out to be fake plonk in a real bottle. On Tmall or Yihaodian, you can be pretty sure it’s the real thing, which has why 47% of wine consumers are expected to buy online by 2020.

Alibaba’s imminent IPO in the USA will bring even more focus to cleaning its platforms of fakes.  Expect to see smaller players like Amazon and Dangdang clamping down on third parties selling fake cosmetics and other wares following CCTV accusations.  Online platforms are working with the authorities to help the cause.  ¥172.9 billion ($27.8 billion) worth of fakes have been seized and 59,000 people have been arrested. The war hasn’t been won yet, but the good guys are winning a lot of battles.

For our readers in Hong Kong and Southern China, China Skinny’s founder Mark Tanner will be sharing valuable insights at the Fashion Access Conference in Hong Kong on 1 April.  It would be great to see you there.  In the meantime, we hope you enjoy this week’s Skinny.

Consumers, Chinese Consumers

Alibaba Shakes Off Counterfeit Label Smoothing Path to U.S. IPO: 18 months after Alibaba was under US scrutiny for supporting counterfeiters, it may now be the biggest IPO in America since 2008. Alibaba has removed 114 million allegedly intellectual-property infringing listings and has teamed up with brand owners and law enforcement to arrest suspects from 51 counterfeit rings. Tmall is now more trusted than some physical retail outlets.

How China (and the Rest of the Emerging Markets) Spend Today: Unlike in Western countries where older people make more, young and educated Chinese have higher incomes and spend more of it. Consumers aged 18-29 earn the most, more than those aged 30-45, and significantly higher than older age groups.

In China, the Customer Experience Is Better Online: Chinese consumers rate online retailers easier, more enjoyable and having better customer service than physical retailers. Four of the top five ranked retailers only sell online.

Chinese Consumers Fastest to Adopt Ultra-High Definition TV: Of the 1.6 million ultra-HD TVs shipped in 2013, China accounted for 84% of them.

Online: Internet, eCommerce, Mobile & Social Media

China Mobile Search Development in 2013: Reading is the most searched category on Baidu mobile, accounting for almost one in five searches. Life service, tool & inquiries, health and education searches rose in 2013, however Chinese sites were of poor quality in these areas.

WeChat Sees Resurgent Growth, Now Has 355 Million Active Users: In December 2013, 355 million WeChat users sent out one or more messages via WeChat or used other features such as logging into Game Centre or updating Moments. Weibo has 129 million active monthly users, although it is hard to compare like with like as it is often used for different purposes.

Premium Food & Beverage

Weetabix Explores ‘Savoury’ Flavours as it Sets Sights on Chinese Consumers: Weetabix is incorporating ingredients such as green tea and sesame seeds, to align with Chinese breakfast habits. Chinese also prefer hot and fast breakfasts.

‘Hedonic Expectations’: How to drive healthy drinks sales in China: The Chinese place more trust in the bigger beverage brands to deliver safe products.  They also link ‘naturalness’ to single-flavour varieties and are increasingly willing to pay more for quality, safety and nutrition.

Why Chinese brands stumble in the West: Some Chinese brands are focusing on data and customer experience in the domestic market which will help them expand globally. Hot pot chain Hai Di Lao ‘delivers happiness’ by creating a fun-loving employee culture and share that enthusiasm with customers.

Milk Flies Off e-Commerce Shelves as Site Sets a New Guiness World Record: 30 container-loads, or 600,000 packets of half-price milk imports sold in less than an hour on Yihaodian to set a new world record. The online grocery store expected it to take a day to break the record. Yihaodian sells 40% of China’s imported milk. In an average week, 5,000 litres of fresh Australian milk is flown from Melbourne to Shanghai and sold at $8/litre. Interestingly, OzDairy was singled out for dodgy use-by date labelling on CCTVs 315 Gala consumer protection show.

Chinese Pay Double for Organic Kale After Food Scandals: An online poll of 3.26 million people by People’s Daily found food and drug safety was the third-biggest concern for ordinary Chinese this year, up from seventh place in 2013. The number of certifications issued to ‘organic products’ more than doubled between 2009 and 2013 in China. Sales of those items reached ¥‎80 billion ($13 billion) at the end of 2012. Sales of packaged organic foods such as honey and cereals jumped 46% in China last year to ¥‎5.94 billion ($1 billion).

Overseas Chinese Tourists

Chinese Travel Willingness Report in 2014: A Ctrip survey found 51% of Chinese want to travel three or more times in 2014. 56% plan to increase travel spending this year. 81% wanted a self guided tour, with a little under half not booking those through travel agencies.

High-End Malls in Southern California Court Shoppers in China: 40 of the wealthiest 100 individuals made their millions in Tier 2 & 3 cities, and shopping malls in popular tourist destinations like LA are increasingly catering for them.

Samsonite Takes the Pulse of Chinese Consumers: Samsonite’s China sales grew from $92 million in 2010 to $192 million in 2013. Although sales increased just 5.3% last year, Samsonite are expecting sales to grow more than 10% this year due to rising wages and soaring tourism numbers. Some Samsonite retailers around the world are offering scales in stores as Chinese consumers like to double check the advertised weight of cases.

Accessories Jewellery

China’s Secret Vaults: Where Is All The Missing Gold?: Chinese consumers bough a record 1,066 tons of gold in 2013, 32% more than a year earlier. The value and status of gold remain high in China, where it represents financial security. Tight government control over gold in the past has contributed to this.

Pollution and Environment

Beijing’s Smog Ain’t Going Nowhere: In the Beijing and its surrounds, 58% of PM2.5 pollution comes from coal combustion in the power, steel, cement and brick industries, with an as little as 4% coming from cars according to one study. Even with all the attention on pollution in China in 2013, coal consumption still rose 2.5%.

Cars and Auto

Chinese Consumers Prefer Not to Buy Chinese-Built EVs – In Steps US-Made Tesla: “Modern electric vehicles are a new mass market technology, which adds to the apprehensions of the typical Chinese car buyer…Consumers must not only overcome this range anxiety but also Chinese-car anxiety.” Beijing, Tianjin and Shanghai are all subsidising electric, hybrid and fuel cell cars.

Premium and Luxury

Luxury Brands Look to South Korea for China Sales Boost: Brands such as Chanel, Gucci and Louis Vuitton have used product placement in Korean TV dramas to broaden their appeal to young Chinese consumers.

Kooky, Weird & Wonderful

Farmer Rides His Pig to Market After Illness Left Him Too Sick to Walk: A pig farmer in Chongqing who became too sick to walk after a bout of bronchitis, has started riding a 250kg hog to get around. Pigs may be the answer for China’s aging population.

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

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