Mark Tanner
Mark Tanner
29 November 2017 0 Comments

It seems there is a new survey every month about increasing China consumer confidence, the latest from McKinsey noting the highest confidence in a decade. The positive responses are mirrored by actual behaviour, which has seen consumption contribute to around two-thirds of China’s GDP growth in the first nine months of this year. The news is further sweetened by a recent announcement from Beijing that tariffs will be reduced an average 17.3% to 7.7% on 187 imported consumer goods.

Soaring consumer confidence and subsequent willingness to spend, coupled with lower costs for imports into China are worthy reasons for foreign brands to rejoice, yet they should be taken in balance with the increasing presence of shrewd domestic competitors.  The same McKinsey confidence survey also highlighted the perceived difference between local and foreign brands has become less pronounced across many categories – something long-time Skinny readers will have noticed over the past few years.

Part of the reason behind the rise in the perception of local brands is that they understand local consumers and have evolved marketing propositions to better cater to them.  The dairy category is a good example where overseas origins have a natural trust advantage, yet local brands still achieve 39% higher prices per litre online and faster growth as they have tailored dairy formats and value-adds for Chinese consumer needs and specific customer segments.

Another area where domestic brands are performing well is understanding different contexts of use and making their wares relevant to them.  The importance of this is emphasised in recent research into the soft drink category from Publicis, which highlights the potential of honing in on consumption occasions, refreshment contexts and consumption state-of-mind, such as ‘studying’, ‘out with friends’ or even the heat of summer or depths of winter.

Using these ‘moments’ to position a product from being a generic ‘one-size-fits-all’ to one that makes a consumer feel that the product is tailored to their personal needs can be powerful, particularly in the ever-more crowded Chinese market.

Whilst domestic firms are showing savviness at understanding and servicing Chinese consumer needs at a micro level, many are also performing well at a macro level. Chinese companies have become some of the most innovative and nimble in the world, which has prompted JP Morgan to predict that more than a quarter of the world’s top-500 companies will be Chinese within a decade.

Last week’s announcement that Alibaba will be adding a controlling stake of the largest hypermart retailer in China to its suite of bricks & mortar assets should bring more world-leading innovation in China’s retail world, which will drive the overall standard of retail in the market.  This will present more opportunities for those brands who understand and tap into these innovations, much like the opportunities from understanding and serving Chinese consumer needs. Agencies such as China Skinny can assist to realise both opportunities.

On the subject of Chinese innovation, China Skinny’s Mark Tanner will be in Sydney next Wednesday evening 6 December moderating the ACBC event Insights into China’s Ecosystem and the Business Opportunities in the Digital Transformation Era, with an esteemed line up and fascinating subject matter.  If you’re in or close to Sydney, it will be well worth attending. Also downunder, Mark will be in New Zealand’s beautiful capital Wellington on Sunday 3 December sharing his views at the New Zealand China Mayoral Forum 2017. For our Beijing readers, Arami Zhu will be presenting at the Crisis Management Summit tomorrow (November 30) explaining how to best use social media at crunch time. Tap/click here to register. If you’re at any of the events, please pop by and say hello. Go to Page 2 to see this week’s China news and highlights.

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