94 million Chinese are expected to travel abroad this year. By some counts, it will be 400 million within five years. Those numbers have many of the world’s tourist hotspots busily upping their China marketing budgets, educating local tourism operators, simplifying visa processes, negotating Chinese flight paths, and doing whatever they can to woo the biggest prize in international tourism since the jetliner. Of the world’s tourist destinations, only Taiwan appears to be trying to reduce the Mainland tourists it hosts.
Chinese are helping fill the void left by slowing tourism from Western countries. In addition to tourist spending, they’re are also flying back to the homeland and buying products they saw on holiday. For many western businesses, returning tourists are the best brand ambassadors they have in China. But it’s not all happy holiday snaps and cash registers ringing. Chinese visitors at many hotspots have lower satisfaction rates than other tourists. In short, many aren’t feeling loved. Everything from limited Chinese language, to a lack of home comforts, to inhospitable locals, has countless tourists who could have been singing the praises all over social media, returning home disappointed. But it’s give and take.
There are wonderful Chinese tourists in most places, however there are many who could behave a little better. China is not the only country with that problem, nevertheless the sheer volume of tourists means they get their share of bad press. The recent acknowledgement by one of China’s Deputy PMs, and not long after, the Weibo post about a Chinese tourist defacing an ancient Egyptian statue has helped bring the issue to light. This can only help educate Chinese about being ‘better’ tourists. Hopefully better behaved Chinese abroad will be greeted with kinder hospitality, ensuring more Chinese tourists have a great time seeing the world and the flow ons that will come from it.
In addition to tourism articles this week, we’re top-heavy with some chunky insights into Chinese consumers. They’re applicable to almost any business selling in China from hotels to toothpaste sellers, so we hope you find it worthwhile. Enjoy!
China Looks For Freedom In Consumer Products: ‘Freedom’ in Chinese advertising is thrown around as much as ‘love’ in Chinese pop songs. An interesting article into how the definition of freedom differs in China, versus the west. “The Western notion focuses on civil and political rights, whereas the Chinese tend to emphasize economic, social and cultural rights as being the most important”. In short, exposure to the world outside of China, symbols of success and “freedom from the lack of choice dictated by poverty”.
Tapping Opportunity Among China’s Increasingly Sophisticated Consumers: In 2000, 1% of Chinese consumers had a college education. By 2011, it was 7%. Over the same period, the average income increased four times to almost $4K and the average household shrunk 15% to 3 people. Chinese consumers want new, exciting and convenient products for their busy lives. Examples include new “fusion” products, such as yoghurt drinks and milk tea, which grew 105% last year, while traditional ready-to-drink tea dropped 5%. Convenience products from ready-to-drink, to mobiles, to smaller convenient stores are on the up as Chinese consumer want things immediately. Higher incomes are also seeing a rise of premium and specialty products.
In China, Premium Sells: From Toothpaste To Cars To Banking: Consumers with average income consumers in China show interest in a wider variety of premium goods than wealthy Chinese. Chinese consumers’ needs are evolving from functional to emotional, from basic needs to self-realization. Products best suited to China’s growing premium market are natural/green, have special features & benefits and standout packaging.
Chinese Consumers’ Demand For Luxuries Growing: Survey: Although luxury sales growth is slowing in China, there is still an appetite for premium goods and services. 53% of Chinese consumers earning $19,380 – $58,140 said they’d spend $40-$80K on a car according to a Neilsen survey. 21% overall and 45% in China’s big cities said they were planning to spend more on food & beverages. 15% of Chinese and 40% in big cities said they’d spend more on non-food items.
The Middle-Class Trap: China’s middle class are struggling between tradition, societal expectations and rapid social changes. Housing is the most important issue for urban Chinese families, then their children’s education. Housing is forcing demographic changes such as people leaving the big cities where they can’t afford to buy a house, moving into cramped conditions to be close to good schools and getting divorced to buy a second house.
Top Chinese Brands Increase In Value: Not a lot of change in China’s top domestic brand standings for 2013. Chinese brand values haven’t risen as fast as their international equivalents, although the shining star is Tencent, increasing 52% in value to be worth more than Facebook. 6 of the top-10 Asian brands are Chinese, no doubt bolstered by the domestic market. Apple is still top globally, growing 1%. Samsung, still a way behind, grew 51%.
Chinese Travelers Moving Up The Value Chain: Chinese travellers are increasingly choosing natural and historic sites, rather than hurried sightseeing box ticking. 60% of Asian billionaires say travel is their top recreational activity, echoing our research. Nevertheless, shopping dominates traveller spending, accounting for 34.1%, however there is a trend to spend more on lodging. Quality accommodation is picked to be the next big thing for Chinese travellers.
China In Your Hand: How To Win Tourists’ Spend: When selling to Chinese tourists buying luxury goods, it’s imperative to understand their motivation behind purchasing them: Face – reputation, status and worth all reflect well on the individual, family, community and business – that’s from spending on themselves and others as gifts. Overseas, many big brand retailers such as Harrods, have poor brand recognition with Chinese, whereas shopping centres such as Bicester Village are much better known in China. Mandarin websites and social media are an effective way to raise awareness and make Chinese shoppers feel appreciated. For high end shoppers, offer online VIP appointment shopping. Instore Mandarin catalogs work well, especially iPads with sections on claiming VAT back. Accepting UnionPay payments is essential.
Chinese Tourists Warned Over Bad Behaviour Overseas: One of China’s Deputy PMs, Wang Yang, says Mainland tourists’ spitting, speaking loudly and other ‘uncivilised behaviour’ is damaging China’s reputation – apparently it is one of Disney’s biggest concerns opening up their Shanghai Disneyland – trying to retain the clean, family-friendly atmosphere.
Netizen Outrage After Chinese Tourist Defaces Egyptian Temple: Shortly after the Deputy PM said his thing, a Weibo post spread about ‘Ding Jinhao was here’ graffiti defacing a 3,500 year old temple in Egypt, apparently scratched in a few years ago. Chinese users showed their disgust on social media. People’s Daily noted “this instance shows our families and schools have failed to deliver to the children something that should be expected first and foremost of any education: moral principles and civic virtues.” In response, the National Tourism Administration published guidelines advising eight points of etiquette, from not spitting and littering to waiting in queue.
Surge In Chinese Spending Compensates For Fall From New Zealand’s Traditional Markets: Chinese tourist spending in NZ rose 42% year on year, to become the number two source of tourists after Australia. However just 30% of Chinese tourists gave the country a top mark for satisfaction, versus 48% of overall visitors.
China’s Consumers Fight Back: Technology in China is allowing market forces to shape products and services, bypassing Government rules & SOEs. Alternatives to Government-regulated wares include alternative taxis, WeChat instead of government-run mobile operators, and wealth management alternatives to state-run banks.
How China Fell In Love With Fruit Ninja: China is the only country in world where significant localization of apps is necessary according to Halfbrick, the developers of the world’s 2nd most popular smartphone game, Fruit Ninja. The main adaptions being monetisation and new content. In-app purchases are by far the best way to make money. For new content, they ask fans to contribute ideas.
Chinese Consumers Pig Out: Sweet & Sour pork served up on American plates, may soon come from a Chinese company. Shuanghui has offered to buy Smithfield for $4.7B, the largest takeover of a US company by a Chinese one. No doubt this will improve food safety and supply for China’s pork eaters, from both imported pigs and best practice. No shortage of commentary on this deal. Chinese consumers who eat almost 40kg of pork a year each, with consumption growing more than three-fold since 1980. Overall, China consumes more than five times the pork of the US, the next bigger eater, but is very inefficient in production.
Wine Consumption Trends: How are Chinese buying wine? (1) Mass retailers – over 75% of Chinese buy wine in hypermarkets, compared with two-thirds in France and 46% in Germany. (2) Online – where 27% purchase, and it’s increasing. Two of China’s top-5 retailers are online, TMall and Yesmywine. Chinese consumers main motivations for buying wine are for pleasure, health reasons and status.
Decanter World Wine Awards 2013: 20 Chinese Wines Nab Awards: The Chinese wine makers are coming … 20 Chinese wines in the Decanter World Wine Awards 2013 received a ‘commended’ or higher. The commended were predominantly Domaine Helan Mountain and Xi Xia Wang in Ningxia, Dynasty, Great Wall & Chateau SunGod.
Hershey Unveils New Candy Brand for China: Video: Hershey’s only has 2% of China’s $2 billion chocolate market, versus Mars’ 18% and Nestle’s 6.8%, however the brand is trusted by consumers due to the perceived quality controls of the supply chain – especially important for dairy-related chocolate given the wounds are still raw from the 2008 melamine scandal. The company is spending several million dollars marketing three kinds of condensed milk candy, the fastest growing segment in China’s candy market. The premium chocolate market is growing around 20% a year due to Chinese wanting more sugary products and increased trust in premium dairy products. Catering for the low-income mass market is a good bet, as they are the most optimistic segment. There is still a preference for dark chocolate, especially in the 60+ demographic, as it’s considered better for the heart.
China Milk Powder Firms Court Foreign Cachet For Domestic Gains: Since the 2008 melamine milk scandal, foreign infant formula brands have doubled their share to around 50% of total sales. Chinese brands are now marketing 100% imported products, with pictures of western children in their ads and competitive prices.
Danone Invests In 2 deals In China: While on the subject, Danone is spending $417 million buying up Chinese dairy producers to strengthen its position in the Chinese market; best of luck sorting out the supply chain standards.
Greying China Taps Rural Elderly To Care For Those Even Older: 25% of Chinese will be over 60 by 2030. 2/3rds of China’s elderly live rurally. The rise, especially in rural areas where 95% of elderly seek care from families, is unsustainable due to urban migration trends. The Government is looking at creative ways to deal with the burden and may roll out a self-help model practiced among the 1,500 residents of Qiantun which offers a cheaper and streamlined alternative to a state-run system.
Report: China To Become World’s Largest Movie Market By 2020: Even with all the pirated DVDs and downloads, China is still picked to top the market in 7 years, and its influencing Hollywood’s script writers, casting and even placements. Even more funding is forecast to come from China.
‘Iron Man 3’ – ‘So Young’ Duel Smashes Chinese Box Office Records. Are Hollywood’s Fortunes Turning?: Yet another box office week record smashed last month in China, with Hollywood movies taking 3 of the top 5 movies, although low-budget Chinese movies are almost grossing as much.
Half Of The Silk On Sale In Beijing Contains Little Or No Silk, Study Finds: In this weeks news of fakers: half of the silk on sale in Beijing does not meet safety or quality standards, containing little or no silk. At least it won’t make you ill or break any one-child rules.
Chinese Consumption Changing, Not Slowing: Chinese consumers’ maturing tastes are changing the market landscape, and the most successful brands will be those who adapt. Luxury products and services in China are driven by classical, social and personally-focused needs, as well as Chinese cultural and political uniqueness. Conspicuous consumption is increasing with China’s wealth, which is driving consumer’s desire to distinguish themselves through luxury purchases. Because the state formally rejects flashy luxury consumption, it becomes more subtle and intelligent. Chinese spend nine hours a week shopping compared to Americans who spend less than four.
Luxury-Goods Companies Change Strategies To Attract Chinese Consumers: 3:24 vid about winning in the Chinese luxury market- analyse your brand DNA, understand how the market is changing and don’t discount as it damages your brand. Don’t focus on the masses, focus on the real customers with targeted initiatives such as fashion shows in Paris, auction dinners in HK or bringing goods to consumer’s homes. Some predict that the extraordinary, limited series products will become less and less in the market, with the focus on basic luxury products.
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.