In the Weekly China Skinny on March 26, we wrote about the rise of the China brand, a trend that has been further confirmed in a recent online survey by Global Times and QQ.com. The survey found that 41.8% of Chinese consumer’s impressions of foreign brand standards in China has worsened in the past year. In the Chinese film industry, once dominated by a small number of western movies, Chinese movie box office takings grew 144% in the first half of 2013, whereas takings from foreign movies were down 21%. It may be from maturing Chinese film makers understanding the local market, bad choices for the 34 foreign film quota allowed into China each year, or Chinese movie-goers preferring foreign films before Hollywood went to great lengths to ‘China-fy’ their blockbusters. Whatever the reason, it’s further validation that Western products and services are going to have to keep working harder and smarter to retain their advantage in China.
Another survey from Pew found 53% of Chinese have a negative view of the USA, up 9 points from 2011. Couple that with a worsening economic outlook for Chinese consumers and it could seem like Doom & Gloom for any Western business selling in China. Fortunately, the reality is quite different. Take the perception of the USA, although it is at an all-time low, in 2012 USA became the top country for Chinese foreign investment and is expected to be even higher in 2013. USA is the top international destination for Chinese immigrants, Chinese students, and the top tourist location outside of Asia, and growing swiftly for product exports. Although a run of recent bad press isn’t helping USA’s image in China, USA, and many Western countries for that matter, have such a strong and established brand which provide natural advantages for businesses trading on their Western roots.
If we look deeper into the worsening impressions of foreign brand standards, almost as many Chinese surveyed bought more foreign goods, as bought less. Around half of those surveyed believe the problem is isolated to a small number of Western brands. No doubt, they’re the Apples, KFCs, Nikes, P&Gs and milk powder brands who have been singled out by the Government as not treating Chinese consumers well enough. Further proof of the influence the Chinese Government has over consumers. Although Government campaigns have targeted specific brands, the overall strength of foreign brands remains strong. Just look to food and beverage, where 28% of Chinese consumers plan to buy more imported food – that’s why Tmall is going to all the trouble of shipping fresh produce directly from the USA and Tesco is bringing in more Thai food than ever to their supermarkets. Cosmetics, dominated by foreign brands, along with fashion, apparently accounts for 37% of the average Chinese woman’s income. In the luxury products segment, almost no Chinese would buy a local brand. The list goes on.
The biggest shining light for Western brands in China is the rise of the urban upper-middle class, the demographic most likely to purchase Western goods and services, and pay a premium for them. They currently make up 14% of China’s urban households, and are expected to account for a whopping 54% by 2022. It is inevitable, with State campaigns or not, that Chinese brands will get better at marketing and quality control, and will win larger shares in some segments, but with more disposable income to go around in China, there’s still swathes of significant growth opportunities in China for those who are smart with their marketing and, for those operating on scale, their Government relations. Below are the usual news, views and insights that will hopefully assist. Enjoy!
Foreign Forfeit: A survey of 1,394 Chinese consumers found 41.8% worsened their impression of foreign brands in the past year, following a run of bad press. 7.7% had an improved impression. 30.8% reduced consumption, while 28.7% bought more foreign goods. 46.6% believed the problem was a small number of foreign brands, 31.7% a large number and 8.5% all foreign brands. In another survey, 53% of Chinese have a negative view of the US, up 9 points since 2011 [not viewable inside China].
Credit Suisse: Economic Outlook Among The Chinese Is Deteriorating: An even split: 22% of Chinese feel safe about their income and job, whereas 22% are pessimistic – up 7% from last month, and the highest percentage since surveys began in June 2011.
Pay Better, Grow Faster: With service such an important factor in the marketing mix, it is little wonder those companies who pay their retail staff more, experienced higher growth in China. Nice analysis.
Chinese Consumers Seek Safety, Reliability and Status: Chinese consumers are looking for more intimate relationships with brands they can trust. Value is a key driver. Some consumers are starting to show less interest in new things, wanting to slow down a bit as some feel they are being left behind. Nevertheless, many are far from tiring of novelty and new news, and brands that connect will always attract Chinese consumers.
Report: Rise of Stylish Chinese Consumers – Trust is the Key to Build Loyalty: Trust is the key to build loyalty in China. Important factors: 1) Poor service, not price, is a key factor consumers switch retailers; 2) Consumers in a higher income bracket are more loyal; 3) Brand loyalty is manifested through relationships for 3 or more years (49%) or ‘liking’ on social media (23%); 4) High-Middle income consumers prefer brand email communication (74%), then SMS (~53%). Low income prefer SMS (52%) and TV (39%); 5) Word of mouth is most trusted when making a purchase decision.
China’s Box Office Surges In First Half: The Chinese box office surged 36% in the first half of 2013 to $1.79 billion. Chinese movies grew 144% to ¥6.9 billion, while foreign movies were down 21.3% to ¥4.1 billion, even with so many Hollywood movies pampering to China’s audiences. On the subject, the Government is making small steps to relax film censorship in China.
Tesco’s Chinese Customers Get Taste For Thai Goods: Chinese consumers trust Thai food for safety and quality and Tesco hopes to tap into that by doubling imports of fruit, veges and other products from Thailand.
Online Shop Connects American Farmers With Chinese Kitchens: More than 60 food products from New England lobster, to Alaskan salmon, to NW cherries are being sold and shipped directly to online shoppers in China. Imported food sales on Tmall have surged 500% in the first six months of 2013.
Bordeaux’s Firsts Too Expensive For China: Even though prices for Bordeaux’s first grows have dropped, Chinese consumers are increasingly substituting them for other European regions such as Burgundy and Italian regions priced ¥600-1500 (€76-190).
Australian Wine Labels Confusing Chinese Drinkers: There were 500 wine importers in China in 2008. In 2012 there were 4,200 – many acting more like trading companies than wine experts. Unbranded imported wines, branded and labelled in China is causing confusion for Chinese wine consumers – for example, there are a lot more Australian wine brands in China than in Australia.
China Now Has 591 Million Internet Users, 460 Million Mobile Netizens: A cool 591 million Internet users in China as at the end of June – 44.1% penetration, up around 4% in 6 months. 464 million are mobile Internet users, up 43.75% in 6-months. Online news, online travel and group buying saw the biggest growth of users.
3rd Party Tracks Show Sina Weibo User Activity Declined More Than 30%: Weibo activity from Influential verified users (those with more than 10K followers) peaked 2011-early 2012 and has declined 30% since. The outcome.
Alibaba Tunes In China’s Internet TV Market With Smart OS: In hope of becoming an even bigger part of Chinese consumers’ lives, Alibaba’s new TV-top box will allow users to access digital content, share content with smart phones and other devices and pay bills with Alipay on their TV. Taobao & TMall won’t be included with the service at launch.
The Economics of Beauty in Asia: Asian women score their looks as 6 out of 10, but aspire to be an 8 on average. Chinese women claim to spend 37% of their salaries on looking good.
China’s Wealthy are Getting Wealthier and Younger: The average age of affluent Chinese – more than ¥500K in liquid assets – is 36, compared with 48 in HK.
Chinese Buyers Flood U.S. Housing Market: Chinese buyers spent $12.3b buying US residential real estate last year, 18% of total foreigner spend. More than half of homes sold in California to foreigners were Chinese. The median price was $425K, versus the US median of $276K. 70% paid cash.
World’s Largest Building Opens in Chengdu: The world’s largest people-made structure, the New Century Global Centre, has opened in Chengdu. 500m long, 400m wide and 100m high it could fit 20 Sydney Opera Houses and three Pentagons within its walls. It includes two five star hotels, offices, IMAX, an ice rink, arts centre and a beach resort with ocean-smelling air. Chengdu’s smog won’t be a worry either as there’s an artificial sun.
Beijing Airport Scores as Worst for Flight Delays Globally: Not a great start to the holiday: Beijing Capital and Shanghai Pudong are the worst two airports for delays in a survey of 35 major world airports. Flights left on time 18.7% of the time in Beijing and Pudong 28.7%, compared with an average of 69.2%.
Why Chinese Internet Companies Can’t Afford to Miss Out on Online Education: Video: No clear business model has been developed for online education in China yet, although some sites are already turning over millions of dollars a year. Consumers are more likely to pay if sites offer more than just lectures [subscription].
Late To The Chinese Market, Ford Aims To Catch Up: 58 out of every 1,000 Chinese own a car. 800 of every 1,000 Americans do. 19 million cars and trucks were sold in China last year, with 70% costing under $14,500. 30 million vehicles are predicted by 2020, and Ford wants to win more than its 3% of the market in 2012.
A New $1.6 Billion Deal Could Help Renault Benefit From China’s Electric Car Push: Renault inks ¥10 billion ($1.6b) JV deal with Dongfeng Motor Group, reducing its reliance on Europe. The Chinese factory will start with minivans and SUVs. With Renault commanding 51% of electric vehicles in Europe, it is likely this will be one of Renault’s key opportunities in China’s underdeveloped market, which is helped by subsidies and exemptions from license plate lotteries. McKinsey believes 273,150 electric vehicles will be produced in China by 2017, up from 12,552 in 2012.
Consumers in Lower-Tier Cities Spur China’s Luxury Market: Tier 1 cities have a combined disposable income of one trillion RMB, 2-4 Tier cities are eight trillion.
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