Mark Tanner
Mark Tanner
6 November 2013 0 Comments

There are new stats and figures coming out about China every day.  They are often staggering, and regularly inconsistent.   China’s diversity and opaqueness means there’s often a few stray figures, but after studying enough China research and data, consistent trends and themes do come through.  Notwithstanding, sometimes even the most reputable of sources don’t align with these trends. 

Late last month, FT, backed by data from Credit Suisse released some stats and an opinion piece outlining China’s preference for foreign brands.  The article includes stats such as ‘91% of Chinese consumers intend to buy a foreign handset in 2013’, whereas in reality, just one of China’s top-six selling handsets isn’t Chinese.  The opinion piece alludes to Chinese consumers having an unwavering preference for foreign brands across many segments.  Whilst Chinese do hold many foreign brands in high esteem, the article could give foreign companies the impression that there is limited competition coming from Chinese brands.  We disagree. 

It is important for foreign brands to be aware that local companies are upping their game, and Chinese consumers no longer unconditionally put foreign brands on a pedestal – they need to earn that reputation.   Brands from Apple, to Nike, to KFC, once some of the most-trusted Western businesses in China, have seen their brand reputations slide and market share diminish recently.  Foreign films no longer dominate China’s box office.  The biggest foreign fast food chains aren’t keeping up with the segment’s growth.  And although domestic car maker’s share of the local market has actually dropped, local manufacturers are being recognised for improving their standards, and it’s likely they’ll start growing their share. The FT article made good points that local brands better understand how to appeal to traditional ideas, but they are also making inroads in classic Western-style marketing and messaging as well.  Many foreign brands remain aspirational and have an advantage of perceived higher standards, but marketing needs to be smarter than ever to convince Chinese consumers that its worth spending more on imports.  Hopefully this week’s Skinny will help you do just that.

For our Australasian readers, China Skinny’s founder Mark Tanner will be presenting at the China Digital Forum in Melbourne on 19 November and Sydney on 21 November. Mark will be joined by executives from Baidu, Alibaba (Taobao), Tencent (WeChat) and China Telecom in what is destined to be an excellent event.  China Skinny Weekly subscribers can receive special full and half day rates by entering the promo code ‘CS’. Find out more at the Australian Business Forum website.

We hope you enjoy this week’s Skinny!

Consumers, Chinese Consumers

China: Foreign values: According to FT, Chinese brands only really making headway at the commoditised end of consumer goods in China. Reading this, a foreign brand could be led to believe that Chinese brands aren’t too much of a challenge. Chinese products and services are upping their game across the board in the domestic market and are increasingly challenging established foreign brands, with a little help from the authorities.  In addition to that, Chinese consumers are much more discerning when choosing products and services and no longer just automatically assume foreign = better.

How Chinese Consumers Prioritize Spending: Watches, Handsets, Perfume and Autos top categories for purchasing foreign brands according to FT and Credit Suisse. Bottled water, cigarettes, dairy and tissues top domestic purchases. Some of these stats largely contradict countless other studies, including China Skinny’s own research and actual sales figures. Take mobile handsets for example, the research claims 91% of Chinese consumers intend on purchasing foreign brands in 2013 – Samsung is the only foreign brand in the top-six in China at present – just try buying a limited-offer Xiaomi online. And dairy at 92% of local brands?

Lane Crawford’s President, Andrew Keith, Talks About Why Selecting the Right Mix of Goods for Chinese Consumers is Like Conducting an Orchestra: “Our consumers are moving from buying products that reflect status toward really appreciating products and how it reflects their lifestyle. It’s not buying a statement piece to show off. It’s about feeling confident in purchasing to your lifestyle requirements,” says Andrew Keith, president of Lane Crawford.

Chinese Consumers See Their Rights Enshrined in Major Legal Review: China’s consumer protection law has had its first major overhaul in 20 years. Changes include online shopping and harsher penalties for businesses that mislead shoppers.

Wal-Mart to Accelerate China Expansion With 110 New Stores: While some foreign bulk retailers are struggling in China, Walmart is upping its expansion, especially in smaller cities. Net sales grew 6.3% in Q2, but shopper traffic declined 6.8%.

Consumers, Internet, eCommerce, Mobile & Social Media

Asia Messaging Apps Seek to Upend Rivals with Marketing Might: WeChat has big plans outside of China, budgeting up to $200 million on marketing this year alone. 150 million of WeChat’s 600 million users globally are now outside of China.

Report: Only 13% of Chinese Consumers Will Buy Smartphones Priced Over $330: Chinese consumers have an overwhelming preference for a mid-ranged Chinese smartphones, with 57.8% wanting to pay $165 to $246. Just 13% are prepared to pay over $330, ensuring the Apples and Samsungs of the world still have the premium end covered.

Chinese Food and Beverage

China Pushes Genetically Modified Food: Beijing’s propaganda machine is talking up Genetically Modified foods, possibly laying the groundwork for a roll out of more GM stock in the Mainland. The social media sphere, bloggers who are already acutely aware of the toxic food scandals rarely respond positively online on the subject.

Yihaodian to Offer More Choices of Imported Food: Online food retailer Yihaodian is looking to develop partnerships with trade commissions and agricultural organizations in the United States, Australia, South Korea, the United Kingdom, Italy and Spain. Yhd.com sells more than 18,000 imported products on its site, of which 78% is imported food. ¥63 billion ($10.4 billion) worth of imported food came into China in 2012, with growth averaging 15% a year for the past 5 years.

Local Tastes Tempt China Diners Away from Golden Arches: McDonalds is looking to slow its expansion in China as local competitors eat into market share. Despite heavy investment, McDonald’s market share has been stagnant at 2.7% since 2007. Consumers eating cheaper alternatives or dining at home has seen their growth rate halve over the past 5 years to 8%.

China’s Dairy Market Policies Clear as Milk: Among high-end baby formula brands in China, foreign companies currently hold more than 75% of the market. The Chinese Government wants that portion to be 30% by 2015. In related news, Japanese dairy giant Meiji has quit China’s baby milk market, citing rising costs, however analysts believe it is more political and safety fears could be involved. The company remains optimistic about liquid milk in the Mainland.

Sweet-Toothed Chinese Consumers Turn to Chocolate: Chocolate in China is picked to grow 10.1% a year in value and 7.4% in volume until 2017.

Cooking Oil Blends Worry Chinese Consumers: Blended oils in China often only contain a tiny percentage of the promised oil – less than 5% peanut oil or a drop of pure olive oil, bulked up by often more than 50% palm oil.

You May Never Eat Street Food in China Again After Watching this Video: On the subject of cooking oil, if you’re a fan of the local hole in the wall, or street vendor, probably best to skip this 2 min vid. An estimated 10% of oil in China is the gutter stuff.

Tourism and Travel

How the Chinese Learned to Embrace Independent Travel: 90% of Chinese travellers are under 45.  They are focused on individuality and making their own choices, and finding it easier than ever to get visas. Bloggers such as Gu Yue (who backpacked from Beijing to Berlin to see his girlfriend) is creating a huge amount of romantic adulation for the idea of life out on the open road.

LVMH’s DFS Group Plans First Europe Shops as Chinese Travel More: Tax free shopping by overseas Chinese tourists grew 20% in the first quarter of 2013 and DFS is hoping to tap into it by opening its first store in Europe.

Recreation and Sport

Sina Expands NBA Partnership to Woo Advertisers: Sina and NBA enhance their partnership to focus on mobile broadcasting, community interaction and live video in a bid to sell more data-driven advertising.

Q & A: Tom Byer on Soccer in China: Tom Byer hired as head technical adviser for the Chinese School Football Program to teach football to tens of thousands of Chinese children.

Film and Entertainment

Co-Produced Movies Gain Popularity in China: 190 million Chinese went to the cinema last year, next year it’s expected to be 290 million.

Sculpture and Art

Forging an Art Market in China: After peaking in 2011, China’s art market dropped 24% in 2012, some say due to a lack of trust in authenticity. “Eagle Standing on a Pine Tree,” a 1946 ink painting by Qi Baishi, turned the art world upside down in 2011, selling for $65.4 million, but it still sits in a warehouse as the winning bidder still thinks it’s a fake.

Auto and Cars

Chinese Cars: More Reliable Than You Think: Four Chinese auto brands outperformed industry average for issues. Although it doesn’t appear to be helping with Chinese manufacturers having just 27% of the local market, down from 31% in 2010.

Understanding Chinese Consumers in 2013: Younger, More Savvy and Not Lacking Money: Chinese car buyers are getting younger, and females are increasingly playing their part, accounting for 31% of auto purchasers in China. More and more buyers are looking for individuality and branding.

Premium and Luxury Goods

Luxury Goods Sales Slowed as High-End Chinese Consumers Cut Purchases: Luxury sales in China are picked to grow just 2.5% this year.

Luxury Brands In China Face Four Major Challenges: The four biggest problems with luxury brands in China: 1) Intellectual property; 2) High costs; 3) Finding qualified staff; and 4) Protectionism.

That’s The Skinny for the week!  China Skinny would 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.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s 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.