Online shopping in China is the new black. Almost 250 million Chinese consumers shop online, together shelling out 55% more in 2012 than in 2011. That’s pretty good growth even by Chinese standards. With Internet-connected smartphones costing less than $100, coupled with pollution and Bird Flu outbreaks keeping shoppers in their apartments, the rise of Chinese eCommerce is showing no signs of abating.
There aren’t many successful western brands in China without a strong online and eCommerce presence. We’re increasingly seeing retailers such as Walmart pulling back on their bricks & mortar expansion plans, to focus on their eCommerce. Many businesses, from Costco, Macy’s and Top Shop to small and boutique brands, are entering the Chinese market through online channels first, and testing the market without the expense and risk of physical stores. A recent McKinsey study found online retailers in China enjoy higher margins than their high street equivalents. The same study concluded that online retailing isn’t just replacing brick & mortar store sales, but actually creating 40% more consumption.
A smart online marketing strategy is one of the most cost effective ways to get results in China and adapt to the ever-changing market, especially for smaller businesses without Fortune-500 budgets. Nevertheless, offline marketing strategies shouldn’t be discounted. Even if your main focus is online, offline initiatives can help build brand awareness to be recognised in China’s crowded online marketplaces. In this week’s skinny, you’ll find some tips, views and news that should help with your online and offline strategies. We hope it helps!
How To Engage Chinese Consumers: With Partnership And Respect: Western brands in China are increasingly respecting the target market through partnering with and acknowledging Chinese people in their communications. Nike’s sponsorship of champion hurdler Liu Xiang, GAP’s fusion of key Chinese and foreign influencers in their “Let’s GAP together” campaign and Sprite’s NBA legend Kobe Bryant versus local pop star Jay Chou, are all good examples.
Pricing Retail Right To Win Chinese Consumers: It’s Complicated: Many Chinese shoppers make a direct connection between price and quality, however they still love love discounts and freebies in certain product categories, especially those they’re familiar with.
China’s E-tail Revolution: McKinsey’s report on eTailing in China, where marketplace platforms such as Taobao & Tmall account for 90% of sales. The market is not dominated by big retail chains, unlike in the US. Margins are still high at 8-10%, slightly higher than the average brick & mortar store. Rather than replacing offline retail, online is actually spurring shopping overall, with every $1 spent online only cannibalising 60c of offline retail. That’s creating 40% incremental purchasing overall, with less developed cities seeing consumption increasing 57%.
Costco, Macy’s Eye China E-Commerce: Costco & Macy’s Chinese market entry strategy is reportedly through eCommerce, in an increasing trend that’s seeing Western businesses enter and test the market through a lower-cost & risk digital channels.
Surging Costs and E-Commerce Prod Foreign Retailers Into Slower China Expansion: Walmart are slowing down their China store expansion plans as they focus on eCommerce. 10-15 year rent concessions are now running out, so they know they have to get smarter about growing profits in China, and realise eCommerce is the most obvious route. Walmart’s eCommerce sales grew 65% last year to 6.3% of total sales, up from 4.4% in 2011.
5 Reasons You Should Sell Online in China and How Best to Do It: If you are looking for reasons to sell online in China, this should see you right, with some good tips on how to do it; late-2012. Our view.
Marketers Heed China’s Social Media Explosion: A good overview into Chinese social media’s key opinion leaders – celebs, commercial accounts, everyday Chinese building a name for themselves and industry experts. When determining who to show love, look at the type of followers, not just the numbers.
CKGSB’s Professor Sun Sheds Light On Chinese Consumers: According to Professor Sun, just 6% of Western MNCs in China use social media in their sales strategy compared to 50% of local companies.
China’s Bird Flu H7N9: The Winners and Losers: China’s Bird Flu H7N9 has led to changes in consumer behaviour which has it’s share of winners and losers. Our view.
L’Oréal Tailors New Cosmetics for China’s Beauty Market: L’Oreal is tapping into fast growing men’s grooming products, set to grow 13.4% this year; faster than China’s overall $34b personal-care market. It’s Shanghai-based R&D centre has developed a cosmetic balm from traditional mushroom remedies for Chinese males to mask face blemishes & skin serums.
New-To-China Wines Struggle To Make Themselves Known To Domestic Consumers: Newcomers to the Chinese wine market such as Georgia, Austria, Greece, Moldova and India are struggling as Chinese consumers are opting for more familiar markets. There aren’t enough distributors willing to or capable of offering wine education about them, meaning they are predominantly sold in hotels and restaurants, not stores and supermarkets.
A Recipe For Food Safety In China: An interesting view into food safety in China: 106,000 regulatory staff in China’s Food Safety Department of the Ministry of Health may be an army, but it’s quite a battle monitoring 10 million registered businesses (not including unlicensed businesses and street vendors), and they’re only 1 of 7 agencies tasked to deal food safety.
China’s Online Clothing Sales Hit $50 Billion: China’s online fashion sales hit $50 billion in 2012, yet just 41% of luxury fashion brands have their own eCommerce sites. Fashion brand’s own sites account for 22% of sales, up from 6% in 2011. Weibo is the most popular social platform, with 85% of fashion brands having a presence, Youku is next popular with 56% present.
CFDA Partners with Chinese E-Tailer to Promote U.S. Fashion in China: US Fashion designers have one less hurdle entering the Chinese market, with data insights, marketing and PR assistance in a deal penned by Shangpin.com and the Council of Fashion Designers of America.
Zippo To Light Up Men’s Apparel Market In China: Zippo is hoping to capitalise on it’s strong brand recognition by launching a fashion brand targeting Chinese men 25-34, earning more than $1,000/month. It’s kicking off by launching 5-8 flagship stores in Beijing and Shanghai, with 50 in lower tier cities by 2015.
Falling Sales Paint A Bleak Picture For China’s Art Market: In 2012, almost every sector of the Chinese art market fell to around 50% of the 2011 value according to Artron (Arts Economics estimated a 24% drop overall). Traditional Chinese paintings and calligraphy are still most popular accounting for 50% of China’s market turnover. 2011 saw 26 items hit the ¥100m ($16m) market, while just 5 did in 2012. The lack of confidence is hurting sales, although ‘exhaustion’ of art sources is said to have contributed.
Apple Pursuit Lures Students Into High-Interest Loans: 20,000 students in Wuhan have opted for $25.7m of loans, of which 90% are using to buy Apple iPhones and iPads
Most Luxury Fashion Brands Struggling To Engage Chinese Audience: Many luxury fashion brands are missing the mark engaging Chinese consumers. Android Apps, Chinese language comms and mobile sites are all seriously lacking. Few brands are taking simple steps to capitalise on luxury Chinese consumers traveling abroad. Only Louis Vuitton has a simple feature offering prices in RMB on website for outbound tourists to compare prices before traveling.
On the bright side, Burberry has found success on social media, giving away a Burberry Body sample at a local Burberry boutique for Weibo user registers, on Jiepang (the Foursquare-type site) it encouraged users to check in, get badges (which were shared on social media) and gave winners perfume signed by Christopher Bailey. It’s Youku channel has had 3.5 million views. Louis Vuitton Express: From Paris to Shanghai and L’Invitation Au Voyage got more than 12 million views on Youku and Dior teamed up with media personality Hung Huang to live-tweet their DiorMag and racked up good likes, shares and comments.
China’s Luxury Market All About “Stealth Wealth” In 2013: Luxury brands that speak to the individualism of the buyer and focus on heritage, durability, and tastefulness are seeing the most success in China. Discreet but high-quality brands like Bottega Veneta and Loewe are good examples. Consumers are getting savvier and are less likely to believe what they read online than in the past.
That’s the skinny for the week!
If you’ve missed earlier news or need to learn more, there’s a library 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.