China is a vast and varied land. From the western deserts of Xinjiang, to the factory sprawl of the Pearl River Delta, there are 700 cities with more people than Geneva. That’s a lot of consumers. However, it’s the consumers in Shanghai, Beijing, Guangzhou and Shenzhen and maybe Chengdu, Chongqing, Qingdao, Hangzhou, Suzhou, Wuhan, Dalian and Tianjin who get most of the attention in China. What about the other 98% of cities? By 2020, 75% of affluent Chinese consumers – those with the disposable income and inclination to make discretionary purchases – will hail from smaller Chinese cities that most people reading this will have never heard of.
Even the world’s mega-retailers cannot feasibly build and manage brick & mortar stores in all of those cities. Those consumers in Guiyang in Guizhou Province or Hengshui, Hebei don’t have a Zara shop to try on that summer dress or a GAP store for a new pair of kicks. But thanks to this beautiful thing called the Internet, they can be wearing them within a day or two. eCommerce is turning these cities around, allowing them to buy what they couldn’t before. In the landlocked Xinjiang for example, there’s not a surf shop in sight, but more bikinis are bought per capita on Taobao than any other province. Tier 4 cities spend 50% more of their disposable income on eCommerce than Tier 1 cities spend. On top of that, eCommerce in Tier 3 and 4 cities is growing 50% faster than Tier 1 cities.
China’s eCommerce platforms are just one example of how the Internet is opening up hundreds of millions of new customers to savvy businesses. Websites and social media are the channels most consumers turn to when seeking information about a product, brand or business. Below you’ll find the usual roundup of info that we hope will help you make more informed decisions about marketing in China, not just online, but the other channels as well. Enjoy!
Why Have Flagship Stores In China When Online Sales Are Soaring?: Online retail grew at 55% in 2012, more than 3 times faster than high street retail growth. It accounts for 6% of retail sales, although it’s picked to be 30% within 5 years. Nevertheless, flagship stores will still be a key piece of the marketing pie to build brand and complement other channels such as online retail.
9 Most Popular USA Brands Sold In China: The AsiaPac region is picked to have 2/3rds of the world’s middle class consumers by 2030, with 1 billion of them from China according to Ernst & Young. Today, Chinese consumers are worth $250 billion to American companies, and that figure is picked to soar. The current US brands best taking advantage of the market: (1) GM – 14.7% market share, (2) Apple – 83% of tablets, but not so dominant in the smartphone space; (3) Nike – 12.1%; (4) Starbucks – 61%; (5) Microsoft Windows – 91%; (6) KFC, although it’s taken a hammering lately; (7) Gillette, not that Chinese consumers have the same shaving needs as say Greece; (8) Coke – 16.6%; and (9) Intel 85.2%.
The ‘I’ of the Tiger: Internet Purchasing Holds Ferocious Potential In China: eCommerce is bridging the consumption gap between China’s big and little cities. In Tier 3 & 4 cities, ecommerce grew 60% last year, versus 40% in the largest cities. 36% of Taobao users are from Tier 2 cities, the largest demographic. Apparel is the most popular item online, purchased by 77% of shoppers, due to younger consumers getting more variety and lower prices. 59% also go online to read customer reviews about apparel, 59% compare prices and 58% browse the latest styles. Chinese consumers said they spent an average of ¥2,244 ($355) on clothes a last year, 32% more than in 2011.
Tech Companies Banking On More Smartphone Shopping: Alibaba & Tencent are both investing in Location Based Services smartphone apps to target consumers with advertisements and comparison shopping. An IBM survey found 24% of Chinese consumers look at goods in retail stores, then buy them online afterwards. In the US it’s 7% and the UK, 5%. 45% of those Chinese consumers used a mobile when shopping to compare prices, read reviews or learn more about products. 36% of Chinese shoppers were aware whether a retailer offered a smartphone app, versus 2% globally.
5 Habits That Set Chinese Online Shoppers Apart: What unique traits do Chinese online consumers have? 1) Good price is the top reason Chinese purchase online, in the West it’s convenience; 2) Access to products they can’t buy elsewhere (the top consumer of bikinis per capita on Taobao is the dry, landlocked western province Xinjiang); and 3) Presentation – Chinese consumers almost want a novel to explain products; 4) The homepage in China is about promotions and showing off as much of the stock as possible; 5) Payment systems, where a lack of trust in quality and vendors is more prevalent online in China.
A Field Guide To China’s Online Shoppers: Taobao shopper infographic: Females make up 2/3rds or more of bargain hunters, window shoppers, food buyers, bulk buyers, products from past eras, groceries and trend setters, although double the number of males spend more than 50K RMB a year.
Lenders Look To Tencent’s WeChat App To Cut Customer Service Costs: China Merchants Bank launches a WeChat application to cover basic account queries. More complex tools such as bill payments and sales of wealth management products may be launched by the end of the year. Great for consumers and saves the bank on service fees.
Delaying The Onset Of Aging: Some Chinese consumers are refraining from using the iPhone button, to keep it from looking tatty. They’re going for the ‘Assistive Touch’ on screen alternative. Interesting perspective when considering product design for China.
To Estee Lauder, Growth Prospects In China Look Beautiful: Estee Lauder’s future in China is looking pretty solid, with the growth of existing customers and new consumers coming into the business at the same time. The company is investing in Tier 2, 3 and 4 cities. Sales increased 40% in 2012, 2/3rds coming from eCommerce, mostly from cities where Estee Lauder doesn’t have a physical presence.
Guangzhou Oysters Contaminated by Cadmium: In this week’s food scandal, it seems Chinese oyster consumers are getting a little more than just an aphrodisiac with the local mollusks.
Good Morning China! Starbucks Will Soon Be Selling Frappuccinos In Your Grocery Stores: Starbucks is widening the net, offering foodstuffs, packaged drinks and coffee beans in grocery stores in addition to the 1,000 planned stores by the end of the year. They’ll be cheaper and covering a lot more locations than prior Starbucks offerings. Starbucks marketing and localization has lead to their highest per-store loyalty with 2,000 members in each store.
International Fast Food Needs A New Mentality To Grow In China: American fast food chains no longer have their exotic appeal and first mover advantage in China – the key to succeeding in the market is getting the right price points, products, locations differentiation and expansion model.
Yum’s China Sales Slump 29% In April On Chicken Safety Concern: April sales in China’s KFC dropped 36% amid bird flu concerns and negative press around pumping chicken with antibiotics – China accounts for 51% of Yum’s global revenue.
South Africa Wine Exports Setting Records On China Demand: South Africa is on track to have its biggest year ever for wine exports. Although shipments the UK and US have fallen in the past 5-years, China has stepped up to fill the gap, increasing consumption of SA wines six-fold over the same period.
Milk Powder Trademarked Abroad Dupes Consumers: A legal loophole in China allows Chinese companies to trademark a brand in the West, then produce in China and label as foreign brand.
Chinese Credit Surge Raises Property Fears: China’s house prices continue to rise with April seeing prices up 4.3% from a year earlier. Surging credit has been blamed for some of the rise with total credit, much of it spent on real estate, up 64.7% from a year ago for the first four months of 2013.
A Structural Comparison Of Conspicuous Consumption In China And The United States – Statistical Modeling, Causal Inference, and Social Science: A brief insight into some research that discovered Chinese consumers care twice as much about beliefs of their peer group than Americans.
Chinese Consumers Shift View On Luxury Goods: More about the shifting view of luxury goods in China – with consumers are putting a lot more emphasis on quality & function, not just the label, with brands focusing increasingly on memorable customer service and exclusive products.
China Officials Seek Career Shortcut With Feng Shui: China may be governed by Marxist ideology, but ancient mystical beliefs, once banned by the Communist Party, are now a huge industry and on the rise. A 2007 report found 52% of China’s county-level civil servants admitted to believing in divination, face reading, astrology or dream interpretation.
Fake-Condom Factory Busted In Fujian: There’s been fake meat, wine and walnuts lately, but now condoms? Millions of them being sold on taobao for 1RMB (US16c), although they cost a fifth of that to produce in a network of tiny workshops. And people thought their biggest faking concern was the meat on their kebab?
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.