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Many brands are aware of how China’s innovations around New Retail, digital and mobile payments are fundamentally changing the way consumers research and buy products. Yet, what is often overlooked is how they are altering the format and even the type of product they buy.

Research was recently published claiming that Chinese mothers are moving away from traditional frozen ready meals, like dumplings and buns, and instead opting for frozen full meal sets such as beef noodles. Whilst this isn’t untrue, our research has found a much bigger trend pointing to a shift away from frozen foods altogether.

On numerous research projects, China Skinny has visited many homes across different China cities. In the kitchens, small freezers are stuffed with once-popular products like bags of dumplings coated with freezer-burn, seemingly untouched for many a moon. The ageing packs are representative of frozen formats falling out of favour with Chinese consumers as alternatives perceived as healthier become more convenient and accessible.

With healthy and natural having become key criteria for purchasing food, frozen options sit many rungs below fresh on the hierarchy of healthiness. That’s nothing new, but what has changed is the accessibility of fresh food, particularly for busy mothers. With stores like Hema/Fresh Hippo, 7Fresh and even the massive RT-Mart now delivering orders within 30-minutes, the incentive to have quick access to frozen products has diminished. There are currently 355 million users of delivery apps in China – a quarter of all Chinese are regularly having food brought to their homes and offices.

While the booming restaurant meal delivery service is cannibalising many food categories and changing countless restaurants and cafés’ strategies, China’s ever-discerning mothers still want an element of food preparation. They wish to have more control over their cooking, ensuring it is fresh when served – not soggy or luke-warm – while still deriving the emotional self-satisfaction of feeling they having played a part in cooking the meal. These factors, coupled with being time-short, have contributed to a stark rise in the demand for ready-to-cook fresh/chilled meals in China.

As brands define the appeal of their products, ingredients, packaging and sizes for the Chinese market, they should also consider the format. Frozen, tinned or other forms of preservation has provided a way for food to make the long trip to China and still be good for sale. While there is likely to long be demand for such food, brands should consider product development for alternative formats that will meet the growing demand for fresh, natural and convenient food.

Food is just one category that is being turned upside down by New Retail, and brands across almost every category should be cognisant of the changes to ensure that they aren’t left behind.

On a not-entirely unrelated tangent, China Skinny will be in Australia later this month with Austcham and Westpac to launch the 2019 Australia-China Business Sentiment Survey results. We’ll share the differences we found from last year’s survey, and how Australian businesses are tracking in this interesting geopolitical and economic climate. The events are in Sydney on 26 March, Brisbane 27 March, Melbourne 28 March, Perth 29 March and Shanghai 18 April. Let us know if you can make any of the events, it would be great to catch up there. Go to Page 2 to see this week’s China news and highlights.

As China’s urban millennials have become the most sought-after consumers on the planet, marketers have been seeking less contested consumer groups to target their wares. The next growth areas that we often hear about are the rural consumers and those with silver hair.

For the rural folk, many expect their latent demand to step up and fill the gap from the city dwellers – those who already have everything from cars to appliances to smartphones. 577 million Chinese lived in rural areas in 2017, and the big tech companies have been all over it. Alibaba and JD are investing in rural fulfilment centres, marketing and even drone delivery. Interestingly, the latest Internet growth data points to a rural population that may not be as enthused about spending up a storm as many had hoped.

China’s heaving Internet population stood at a whopping 829 million at the end of 2018 – 57 million or 7.3% more than the year before. The segment that has the most room for growth – Chinese living in rural areas, grew just 6.2% to 222 million, indicating a widening digital divide between China’s urban dwellers and those in the countryside. That’s not a great sign for consumption in these areas. The Internet represents the most promising channel for rural consumers to buy things – they can’t just pop down to the local IKEA to purchase a new sofa. Another barrier for sales is that rural consumers make less than a third of what urban-dwellers make and are much less likely to spend it on aspirational foreign brands.

The other well-cited growth opportunity – China’s seniors – by sheer numbers along should be one of the greatest opportunities marketers have ever seen. Last year, the number of Chinese over 60 reached 249.5 million to outnumber those under 16 for the first time in history. Since 2010, the demographic has seen an average annual growth of 2.08 million. At the same time, the under-15 brood has been dropping at 2.25 million a year.

If we look to the Baby Boomers in the West – the empty nesters riding on the back of a lifetime of savings and equity gains on their house and other investments – they have been spoiling themselves while their joints still allow it. Yet most of the seniors in China aren’t such free spenders. They have grown up in austere times, and have an inherent necessity to save for a rainy day and be frugal, even more-so than those who were around during The Great Depression in the West. The rising consumer debt in China can almost be solely attributed to the consumption-crazed youth; people between the ages of 24 and 35 account for more than 70% of consumer borrowers in China.

While there will inevitably be increasing opportunities by targeting China’s silver surfers – there will be a half a billion of them by 2050 – they will remain much less likely to pay a premium for better products and services than their younger peers. They also won’t be as easily wooed by foreign lifestyles, products and services.

In short, millennials and the younger post-95s/Gen-Zs remain the most lucrative consumer group in China. Yet the rules to reach and resonate with them are constantly changing. Companies need to dive much deeper in understanding their emotional and functional needs, what influences them, where they research and buy, and how to make advocates out of them. If a brand can understand and serve those needs, there’s still plenty of legs in the contested younger demographics in the city – particularly the lower-tier cities. China Skinny can work with you to ensure you’re there. Go to Page 2 to see this week’s China news and highlights.

Many people in the West still believe that China’s tech giants are built on thieving IP, not creating it. Those folk will probably be startled to learn that the US-based magazine Fast Company ranked a Chinese firm as the world’s most innovative company in 2019.

Perhaps even more surprising is that the Chinese company is not the well-known Tencent of WeChat fame, or even Alibaba (they were 15th on the list), but a mere $43 billion company, Meituan Dianping, which most people outside of China have never heard of, and probably can’t pronounce.

Meituan is best known for food delivery, restaurant reviews, hotel booking, movie tickets and acquiring bike share giant Mobike. The company topped the table for “pioneering transactional super apps” making the most profound impact on both industry and culture while showcasing a variety of ways to thrive in today’s volatile world. In the first half of last year, the company facilitated 27.7 billion transactions (worth $33.8 billion) for more than 350 million people in 2,800 cities. That’s 1,783 services every second of every day, with each customer using it an average of three times a week.  The company leverages user consumption data, including price sensitivity, to recommend other services they’ll like, taking advantage of its consolidation of service offerings, much like China’s other all-serving tech giants.

One of Meituan’s core services, food delivery, is representative of one of the most exciting consumer developments that has been happening in China over the past few years. We’re not talking the meandering Postman Pat or the daily milk round, these are on-demand delivery services that can have everything from noodles and coffee, to meds and adult toys, delivered around the clock in less than 60 minutes, often in half that time. It is a service that plays to a Chinese consumer who craves convenience and possesses little patience.

Delivery in China takes advantage of its densely-populated cities, allowing a concentration of delivery people. In addition, the broadening of products being delivered that are core to the New Retail explosion means delivery is no longer just at meal times, or located around ecommerce logistic hubs. Instead, this revolution is creating economies of scale across wider geographies, spreading the costs of delivery workers throughout the day.

One of the most powerful innovations in delivery is what happens behind the scenes. Like many things in China, companies are utilising their enormous pools of data, and making sense of it with Artificial Intelligence. Meituan’s Smart Dispatch system, for example, calculates 2.9 billion route plans every hour to optimise the delivery for its 600,000 electric bike riders to pick up and drop off up to 10 orders at once in the shortest time and distance. Since Smart Dispatch launched in 2015, it has reduced average delivery time by more than 30%, and riders complete 30 orders a day, up from 20, increasing their income.

Whilst economies of scale and tech systems are increasing efficiencies in the delivery space, this is accompanied by challenges forcing companies to continue to innovate. Labour costs of delivery folk seem to be increasing every few months and new laws are being rolled out to protect the workers. In answer to this, JD has been making deliveries by drone and is testing unmanned vehicles. Mckinsey estimates that autonomous vehicles and drones will deliver 80% of all products within 10 years.

For brands selling in China, the penetration of delivery is another example of the unique way that Chinese consumers shop and their expectations. This and other distinct purchase behaviour in China should be factored into development of marketing strategies. China Skinny can assist with this. Go to Page 2 to see this week’s China news and highlights.

Chinese buyers have been the top foreign buyers of US residential property for six years straight. Similarly, no other overseas vendees buy more in Australia, New Zealand and a host of other countries. One common characteristic purchasers share is a preference for the shiny and new over the battered old character home.

In China, you won’t find locals spending their weekends combing garage sales for deals, and even the ecommerce-mad populous buy a much smaller share of second-hand goods than the eBay-Craig’s List-Gumtree-Trademe-type shoppers of the West.

Chinese consumers’ reputed love of all that is new comes down to a number of factors. We don’t need to look back far in history – during the reign of Mao – when new goods were in scant supply, creating a sense of prestige when buying something brand new. This has been passed over a generation, and its legacy has contributed to the all-important status that comes with buying new versus the stigma attached with goods that have been loved by someone else.

Another contributor is Chinese consumers’ inherent lack of trust. In China it is far more common to fake a second-hand good, and more difficult to trace, than a new product that can be bought directly from the source or a trusted vendor. There are also more reliable courses of action if something goes wrong. Couple that with the seemingly-infinite supply of cheap, new things, and all roads appear to lead to brand spanking new.

Nevertheless, the single-minded view that everything must be shiny and new is starting to waver. One of the most notable signs is the car industry. Half a decade ago, five in every six cars purchased smelt new (although not the new car smell as we know it in the West). Last year, as new car sales contracted 2.8%, there were 11.5% more secondhand cars bought. Although the ratio is still far behind America, where pre-loved outnumber new by more than double, China’s split is growing fast, from 43.0% in 2017 to 49.1% last year. The rise in the desirability for second-hand cars is followed by other segments from luxury goods to clothing swaps.

The trend is being driven by millennials who don’t have the same historic hang-ups as earlier generations and seek value. They’re familiar with consuming things used by others with the explosion of the sharing economy, covering everything from fashion to bicycles.

What does that mean for brands? In many product categories, the competitor set will increasingly span beyond the other new things for sale online and in stores to include second-hand goods. Consumers may also look to resale value, service and even sell-back options when making decisions around purchasing.

The trend spans beyond goods too, contributing to preferences in the service industry such as tourism. More Chinese travellers are finding allure in the edgy, hipster interiors for hotels, restaurants, attractions and stores, when in the past, it would have been considered dirty and rundown. It is another sign of maturing Chinese consumers, driven by the youth – one which will hopefully giving the environment a small reprieve.

On the subject of Chinese tastes and preferences, if you’re looking to learn more while taking in a few memorable spring days, China Skinny’s Mark Tanner will be speaking at China Connect in Paris on March 12-13. It is one of the most-established and thoughtful China-focused conferences outside of China – we hope to see you there! More information here. Go to Page 2 to see this week’s China news and highlights.

What caught our eye in the build-up to this Chinese New Year is not the nearly-3 billion trips to be made via China’s transport system, not the thousands of ways to make pigs cuter including carving one into a watermelon, but the NBA’s pick for its Chinese New Year ambassador: 20 year old boy band member Cai Xukun from the group Nine Percent.

In a land where there has been much public debate and negative state media over the influence of ‘sissy boy’ role models, the decision caused the expected uproar online. On popular sports platform Hupu, known for its masculine user base, 82% – 39,363 voters – checked the option “I’d rather die” in a poll about Cai’s NBA mission.

On the surface the choice seems like an outrageous misalignment with the esteemed NBA brand. The NBA has some of the most athletically-impressive beings of the sporting world – poles apart from the effeminate 65kg pop idol. Yet the expensive decision is likely to bear fruit.

For a start, although the NBA already has an epic following in China including the largest social media fanbase of any sports league with 150 million followers, that only accounts for a small portion of China’s population. Like any business, they will be wanting to grow that base.

In choosing a target market, they will look to the Gen-Zs (those born in the mid-90s to early 2000s) as having a high propensity to support and spend on the game. Gen-Zs are an open-minded generation in a society that has never been so enthusiastic about sport, causing them to explore and embrace sports more than the generations before them. They’re also big spenders. Although most haven’t yet banked a single pay cheque, they account for 15% of household expenditure, versus just 4% in the USA and UK. As the only child/grandchild of six doting adults, and having never lived through tough times, they are free spending with seemingly few worries in the world.

You’ve probably guessed that many of Cai’s fans are Gen-Zs, and particularly females – another lucrative yet untapped sector by the NBA. Last year’s NBA All-Star Celebrity Game featured Chinese-Canadian singer Kris Wu, which reportedly increased female viewers by 30%.

There are plenty of examples where endorsements of effeminate pop-idols have bolstered sales for brands in China, albeit most are more closely-aligned to each other’s core values than the NBA and Cai. Yet the NBA’s China fans are so deeply rooted in the game, they are unlikely to stop supporting the game en masse due to a Chinese New Year endorser who doesn’t fit the league’s image. Most brands in China would struggle to pull that off.

There have never been more options for consumers to spend their money. Sport – like everything – has to find ways to boost the entertainment factor to stay relevant. Whilst there would be better ways to entertain their loyal fan base, they are likely to entertain a segment who may have never considered the NBA before. Although many of the NBA’s execs are unlikely to get down to Cai Xukun’s music, they are putting their own opinions aside to attract a new and wider pool of fans. Hats off to the league for embracing China’s countercultures – those who dare to rebel from entrenched traditional values – something brands are increasingly having to do to reach the younger, freer-thinking generations.

On that note, we’ll leave you to celebrate the coming of the Pig. Happy Chinese New Year, wishing you a prosperous and productive Zhūnián. We’ll be back after the break – enjoy this week’s Skinny. Go to Page 2 to see this week’s China news and highlights.

We have just passed the 200-day mark of the US-China trade war, and what a 200 days it has been! Whilst we are finally seeing some positive signs that an agreement could be imminent, there has been plenty of commentary about the beating that America’s reputation has taken in China.

There’s no discounting that the spat has sped up the rise of nationalism in China, and there are consumers who may have directed their spending away from American businesses, but the impact has been much less severe than it could have been.

If we look back to the row between China and Japan in 2012 over the Daioyu/Senkaku Islands, many Japanese brands were hammered and some even shuttered. Similarly, the South Korean fiasco over THAAD in 2017 was estimated to cost the Korean economy $6.8 billion that year. Apple has attributed its poor results to the trade war, and Ford and GM have had better years, nevertheless all-American brands like Coke have reported no impact, and Nike saw a stunning quarter last December. Even Tiffany & Co. saw a double digit rise in Mainland China sales during November and December of last year.

One of the key differences between the US-China trade war and the disputes with Japan and South Korea is that the propaganda machine has not yet ramped up criticism of the US. China also hasn’t introduced regulations such as it did banning tour groups to South Korea. Such plays wouldn’t be well timed during the already-precarious trade negotiations with the US.

Tourism to the US was a sector that many commentators expected would take a hit as a result of the frosty relations, much like Japan’s visitors fell 34.3% in 2012, South Korea’s dropped 60% between March to October 2017, and numbers sunk at other ‘out-of-favour’ countries like the Philippines and Vietnam.

In late September, Ctrip reported that flight bookings to the US were down 42% for the October Golden Week holidays – one of the busiest weeks of the year for international travel. Other anecdotes have flooded in from travel agencies, echoing similar falls. So it will come as a surprise that Chinese tourist numbers to the US actually looked quite healthy in 2018. Although the national figures are yet to be published, Los Angeles reported a 6.9% increase in Chinese tourists last year to 1.2 million visitors. New York also hit record numbers last year, hosting 1.1 million Chinese visitors. It appeared Chinese tourism to the US took a hit in the early months of the trade war, but by November, the US Commerce department was projecting a 2% increase in Chinese tourists.

Like we’ve noted in previous Skinnies, tourism generally builds an affinity with the country, its cuisine, culture and lifestyles, which has a halo effect on preference towards many other product categories. In a world that seems to be more divided than it has been in a long time, China’s tourist growth to the US is refreshingly good news!

On the subject of tourism, China Skinny’s Mark Tanner will be sharing some insights at the beautiful Terranea Resort in Los Angeles for the Visit California Outlook Conference on February 12 & 13. Please pop by and say ni hao if you’re there. More information here. Go to Page 2 to see this week’s China news and highlights.

While you may be lamenting the need to constantly evolve your marketing mix to stay ahead in China, you can rest assured that even WeChat faces a similar challenge.

Although China’s super app hit 1.083 billion monthly active users in September last year, each sending any average of around 45 messages a day, WeChat faces headwinds to stay relevant to Chinese consumers. Readership for articles referred by friends on Moments has been dropping and Tencent’s share of screen time is being cannibalised by newer, easier-to-use and more entertaining alternatives such as short video platform Douyin.

That’s why all eyes were on WeChat’s founder Allen Zhang’s four hour speech at Tencent’s conference last week, about how he plans to reinvigorate the app to mitigate the risk of it becoming obsolete. Zhang got philosophical in acknowledging that WeChat has lost the veneer of authentic discovery that endeared it to users, because people were becoming too sensitive to their online personas on Moments.

Across the board, Chinese consumers are seeking more authenticity: from the way they travel, to the brands they buy, to how they project themselves on digital platforms. Women ‘beautification’ app Meipai discovered this as user numbers plunged 55% as Chinese women sought more natural and less formulaic portrayals of themselves. WeChat is hoping to evolve from photoshopped and choreographed Moments feeds, to a more real account of what people are really experiencing. To enable this, WeChat has launched a new video-streaming feature, not unlike Instagram’s feed, so people share their lives in real time, not through carefully curated photos and messages. Even the user interface aims to keep it real, with the typical ‘send’ button, replaced with ‘this will do’ to remind people their social feed doesn’t have to be airbrushed and polished.

Another area in which WeChat is pinning its hopes to counter the app’s saturation and encourage more engagement per user is Mini Programs. The WeChat-embedded ‘light apps’ are already hugely popular, but curiously, the majority of traffic isn’t coming from the famous mini programs you may have heard of, but rather the long-tail applications used by niches such as parent-teacher groups or your neighbourhood grocery store. Given WeChat is installed on virtually every smartphone in China, app developers are not concerned with having to create separate tools for Androids and iPhones, it is one simple app, seamlessly installed and launched from the comfort of WeChat. Tencent is thinking, if ‘there’s an app for it’ wouldn’t it make sense to make it a Mini Program?

Something that hasn’t received due airtime is the impact that the new ecommerce laws will have on WeChat. Commerce is one of the areas showing great promise on WeChat, with its transactional nature providing a logical way for the platform to grow revenue. Yet many of those stores have been run by smaller vendors and daigou, attracted by WeChat’s low barriers to entry. The new laws mean that it will be a lot more trouble to set up and maintain a simple WeChat store – or any online store – with the new taxation and reporting requirements. There are already signs of changes in the way smaller vendors promote their wares on WeChat as they try and skirt the laws, but for many, the effort won’t be worth the reward.

Regardless of its challenges, WeChat remains China’s super app with no other app being better positioned to evolve and stay relevant to Chinese consumers. To Allen Zhang’s and Tencent’s credit, they have recognised that they need to do this. There are some good lessons for any brand in China – you may be ‘killing it’ in China today, but you need to constantly review your position to stay that way. China Skinny can assist you with just that. Go to Page 2 to see this week’s China news and highlights.

‘Tis the season to be jolly. Well maybe not in Langfang, in northern China’s snowy Hebei province where folk can be arrested for selling Christmas apples and Santa suits. The parishioners of the renowned 40-year old Rongguili Church in Guangzhou may not be feeling so festive either after a children’s bible class was raided in the third unregistered Protestant church to be shut down in China this winter. Last year, it was a Chinese university banning Christmas to avoid “corrosive” Western culture that made it into the annual anti-Christmas headlines fuelled by a small brood of emphatic nationalistic types in China.

On a grander scale, the raining down of Christmas tree emojis that have brightened up WeChat message feeds for many Decembers are notably absent this year. Tencent has had a tough year with its stock price almost halving between January and November, and the new cool kid ByteDance eroding its share of screen time and now talking about launching a messaging competitor to WeChat. Perhaps Tencent is trying not to rub Beijing the wrong way by celebrating western holidays, in hope of them lifting the new game ban, but come on Tencent, cheer up!

For those of us who still love the magic of the festive season, fear not. Aside from a few sensational stories and WeChat policy-makers, a stroll down the streets of China appear as Christmasy as ever. Christmas trees that match China’s skyscrapers for architectural pizazz and neon brace the public plazas and shopping malls.

Online, smartphone screens are again filled with countless brands from Starbucks to H&M peddling their Christmas jeer, KOLs sharing their Christmas list ideas, kids showing off their advent calendars, and millions of Christmas paraphernalia bought from the ecommerce platforms, hopefully some of it in sustainable packaging.

For the vast majority of Chinese, Christmas isn’t a time to acknowledge newborns in mangers millennia ago. There remains little understanding of its religious or cultural associations, with most festival-thirsty consumers viewing it as an excuse to party and shop in the void between Singles’ Day and the Year of the Pig.

One thing we’ve noticed this year is how cities outside tier 1 are embracing Christmas. The China Skinny team has been crisscrossing the country on research projects and were out in Chengdu two weeks ago where they noticed more ceremony around Christmas than even in Shanghai this year. Most of the big hotels – Hilton, Waldorf Astoria, Wanda, Kempinski – had a grandiose celebration for the ‘lighting of the tree’, complete with VIPs, children’s choirs, elaborate Santas, and a host of delicate Christmas-themed foods. In the ‘lower’ tier cities – like for many things – celebrating Christmas en scale is a more recent tradition than in Shanghai, and therefore more of a novelty.

This will be the last Skinny for 2018. Thanks for reading this year. To our clients and partners, thanks for working with us – you’re awesome! The Skinny team wishes you the Merriest of Yuletides, Hanukkah, Kwanzaa and New Years. We’ll be back again in 2019. Go to Page 2 to see this week’s China news and highlights.

If you’re already exporting to China, we’re guessing you’re probably also selling to a host of other countries – markets like Dubai and the other six emirates could be on the list. In the UAE, there’s a good chance you’ve engaged some localisation for the country – culturally sensitive and resonant branding & communications, legal & regulatory allowances, logistics & distribution, and possibly even some new product development and packaging. In China, it’s probable that you’ve also localised the mix. But how local is your localisation?

Few people come to China without hearing that the country is like Europe; made up of varied and diverse regions. Yet in the same moment of acknowledgement, many will turn around and ‘localise for China’ with a homogenous strategy that they hope will win the hearts of consumers spanning the country.

China Skinny does a lot of research across different cities and provinces in China, and we usually find notable variances between the regions. There are the obvious differences in food tastes, climates, lifestyles, pollution and even body size, but it is the emotional cues that are often the most pronounced. We only need to look at one of the most common themes in Chinese advertising – families. Even in Guangzhou and Shenzhen – two tier 1 cities just 30 minutes apart on the fast train, the reality for families can be quite different: a large share of millennials in Guangzhou live with their parents and see them most days. In Shenzhen – a city built by domestic migrants – many millennials may only see their parents every few months, or just once a year during the Spring Festival.

Whilst some overarching localisation should be implemented across China, there is often a case to get city-specific with marketing and other initiatives. Take Shanghai, it has population greater than Australia, and a 13% larger GDP than the UAE, yet unlike the UAE-specific localisation, many brands will roll out the same strategy for Beijing, Guangzhou, Shenzhen and many other cities across China.

China’s metropolises are of a scale and affluence that they justify an element of localisation. The hyper-competitive nature of marketing in Chinese cities is finding it increasingly harder to connect with consumers without it. That means localising messaging, and even sometimes the digital platforms you use to share it. In certain demographics in some cities, digital channels aren’t always the best option to reach Chinese consumers, highlighting the need to have regionally-specific plans.

Over the past few years, brands have become increasingly focused on cities beyond tier 1, and even tier 2, with good reason. These ‘smaller’ cities are often much less contested and less apathetic to interesting, new foreign products. Half of the 50 million Chinese households entering the middle to affluent classes between 2016-2020 are expected to reign from cities outside of the top-100 cities according to BCG. They’re buying more imported products, and travelling abroad more which influences more purchases. The number of direct flights between cities in China and Thailand grew from 69 to 148 over the past three years for example. Yet with such variances between lower tier cities, brands would be wise to do their due diligence before entering and localising for them.

On the subject of cities, China Skinny has launched a new tool on our site to help you make sense of it all. We’re often getting questions about which cities fall into which tier, so we have created out City Tier Calculator which provides detailed information about which tier Chinese cities are, some of the key indicators, their rankings in that tier, and even how many Starbucks they have. Use the tool here. The tool is part of an overall redesign of chinaskinny.com, which is long overdue – we’d suggest you take a look. Go to Page 2 to see this week’s China news and highlights.

Since 1990, the People’s Liberation Army (PLA) has accounted for more than 60% of the growth in global defence spending. In close to three decades, China has built a remarkable armament, with military drones and the odd unreliable stealth fighter, and is making some solid progress with AI. Just like the superpowers before, China aspires to have strong armed forces. But any good military needs good soldiers – for now at least.

Last September we noted the PLA slammed young Chinese males’ high failure rates in fitness tests, attributing unhealthy lifestyles, too many fizzy drinks, masturbation and video games, which has contributed to a complete freeze of new game approvals. But it turns out the Military’s issues with the male gene pool span far deeper.

It seems China has a masculinity crisis. Whilst Beijing has banned hip hop culture and tattoos from TV, for now it is a free-for-all for ‘feminine-looking’ boybands, which has led to much debate online. In September, state media outlet Xinhua declared “these sissies promote an unhealthy and unnatural culture which has a not-to-underestimate negative impact on the youth. The sissy culture, driven by consumption, challenges the public order and worships a decadent lifestyle”. Niángpàonán, or ‘sissy-boys’ has become a popular term online for Chinese males paying much attention to their clothing, hair, and make-up.

In some Chinese cities, males born in the 80s are more likely to own a pair of platform shoes than work boots or cleats. Yet effeminism is less of a concern than other trends seducing Chinese males. One teenager in eastern China bankrupted his parents by tipping a livestream host $37,000, claiming she was his girlfriend. China has more than 150 live stream sites, mostly funded by tipping from the 80% male viewership.

Whilst every male in China isn’t a gaming, live-stream-addicted ‘sissy boy’, as marketers it’s important to consider that this group has more spending power than the total consumption of many countries. They have their own distinct needs and respond differently to marketing than males on the streets of Sydney or Seattle, and even other sub-tribes in China. China Skinny can assist your brand with defining their needs and planning how to best resonate with them.

Not all is lost for concerned parents across China. Their desperation for their one-child to be a boy saw the male:female birth imbalance hit 1.15:1 in 2016 (second only to Liechtenstein). For those wanting their boy to be a hǎohàn – a real man, there are ¥10,000 ($1,400) training camps aimed to tackle the “crisis in boys’ education” and “help them find their lost masculinity.”

On another note, a big hat tip to Alibaba who continue to reach new heights with their 11.11/Singles’ Day extravaganza, growing 27% from last year’s massive base (in RMB terms) to $30.8 billion in gross merchandise value. See the infographic here. JD had similar growth of 26% on their 11-day Single’s Day festival, with sales climbing to $23 billion.

Your Thoughts: We received some passionate responses to our article about CIIE last week, not all of it positive. Over the past week we’ve spoken to a number of brands who exhibited at the event – some considered it a roaring success, other reviews were mixed. We’d love to hear your thoughts if you were there. Similarly please let us know how Singles’ Day went for you. Just reply to this email with any comments or feedback. Go to Page 2 to see this week’s China news and highlights.

China’s daigou are both loved and loathed, depending who you talk to. For Chinese consumers, they deliver quality western products – from vitamins to luxury handbags – that are sometimes unavailable in the Mainland, often at a lower price, and more likely to be authentic. For consumers in places like Australia, they have been known to empty supermarket shelves of products like infant formula, prompting supermarket chain Woolworths to reintroduce the two-tin limit this week.

Some brands detest daigou for undercutting their traditional sales channels and diluting their branding with rogue messaging, however brands who used to oppose them have increasingly embraced daigou as another channel to build awareness and preference for their products. The success of brands like Blackmores, Swisse and A2 Milk in China can be widely attributed to the daigou trade. Even Unilever is targeting Chinese in Australia to sell their soup in the Mainland.

By some estimates, there are half a million people working as daigou globally, from large sophisticated operations, to easy-come-easy-go students studying abroad who can earn some extra money as easily as sending out a few WeChat posts. These foot soldiers can be another powerful marketing and advocacy channel, particularly when they are harnessed strategically.

Yet daigou can be a fickle bunch. Bellamys discovered this in 2016, when they alienated the same daigou who had built their brand in China and saw their stock price collapse by more than half and the CEO ousted. Bellamy’s isn’t alone with its reliance on Daigou. Earlier this month, the share prices of many of the world’s luxury giants took a hit as Chinese customs ramped up anti-daigou efforts with prosecutions for people bringing in over ¥5,000 ($728) of undeclared goods for ‘personal consumption’, with one flight seeing 100 passengers arrested after arriving at Pudong Airport.

The Chinese Government is another player in the daigou-loathing camp. They have little view into daigou trade and would much prefer legitimate cross border commerce through the big platforms so they can better monitor, control and tax imported products. Now there is also increased impetus as Beijing hopes to maintain consumption growth in light of the trade war and a slowing economy. Shifting some of the estimated $100 billion annual daigou goods trade to legitimate channels will further increase official retail growth.

The new ecommerce laws coming 1 January, although still vague, are likely to impact daigou in the most concerted effort yet to temper the grey trade. It is expected that daigou will be made to register with the industrial and commercial administration departments and pay tax on imports. This will include Daigou who have traditionally been less visible by conducting business on WeChat Moments and streaming on live platforms. Beijing is unlikely to be able to stamp out all daigou trade, but it can certainly have an impact as we saw with the daigou tax in 2016 which froze virtually all grey trade before being retracted.

The new regulations should be a wakeup call for many brands on the vulnerability of Chinese regulation and fickleness of the daigou themselves. Since 2016, numerous brands have shifted from having all of their eggs in the grey trade basket to more balanced strategies. For those who haven’t, you’d be wise to start as soon as possible. China Skinny can assist with identifying these risks and developing such a strategy. Go to Page 2 to see this week’s China news and highlights.

11.11 or Singles’ ‘Day’ 2018 officially launched last week, with about 500,000 items available for pre-order on Tmall. The world’s biggest shopping festival has long been a yardstick for Chinese consumer sentiment and spending, and this year it will be watched particularly closely. Sales over the 24-hour period will provide some indication of the impact that slowing GDP and the Trade War is having on consumption – the sector that Beijing hopes will keep the economy chugging along. This year will mark the 10th anniversary of 11.11 and will be Jack Ma’s last before he ‘retires’, so there are plenty of reasons Alibaba will be wanting to blow last year’s $25.3 billion in gross merchandise volume out of the water.

Each 11.11 festival is a display of Alibaba’s might, and a signal of its areas of focus for the year ahead. 2014 was all about getting consumers to shop on their mobiles, 2015 drove international products through cross border commerce, 2016 was about blending entertainment with shopping, and 2017 took New Retail and offline integration to a new level. This year will demonstrate the depth of Alibaba across China’s online and offline worlds.

Fancy some caffeine to keep you awake as you find the deals? Starbucks will be delivering discounted coffee through Alibaba’s Ele.me. Or how about a bite to eat, some beauty treatment or a spot of karaoke to provide a break from shopping on your smartphone? 150,000 of Alibaba’s Koubei merchant partners will be offing half price fare. This Singles’ Day will be the first time Alibaba has exhibited full might (almost) of Alibaba’s bricks and mortar investments.

The 11.11 promotions and festivities will be very present on Alibaba’s supermarket chain Hema, its hypermart operator RT-Mart, Intime malls and home improvements chain Easyhome which will all be showcasing New Retail. 200,000 mom-and-pop stores using Alibaba’s LST will provide online sales promotions and augmented reality-based red packets. Partners such as L’Oreal and Hasbro are coming to the party online and in stores.

At the heart of 11.11, Tmall will engage 180,000 Chinese and global brands. Tmall Global will provide 3,700 categories of imported goods from 75 countries and regions. And beyond China, Alibaba’s Lazada will aim to make Singles’ Day as much as an event in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam, helped along by Google and Line joining together to promote the event. Altogether, Alibaba hopes to break the billion order mark on November 11. Given last year’s orders grew from 657 million to 812 million, and the many new dimensions in 2018, we think this could be conservative.

One of the interesting dynamics for Singles’ Day this year is Pinduoduo entering the mix. Singles’ Day was built around special deals, which no one does better than the Pin. It also has a stronghold in lower tier cities which have been more challenging to reach over previous Singles’ Days. There are reports of Tmall pressuring some brands to choose between its platform and Pinduoduo, so clearly Alibaba feels they will make an impact. One thing for sure is that it will make the day even more interesting.

For our readers who are participating in Singles’ Day, we wish you all the best in building awareness, launching new products or whatever else you are planning to achieve. We hope you are using it as a Trojan Horse to build more sustainable engagement with consumers.

In other news, China Skinny is proud to again be working with Austcham Shanghai and Westpac on the second annual Australian-China Business Sentiment Survey. The previous survey gave rich insights into the health, opportunities and challenges in the Australia-China economic relationship, provided a valuable benchmarking tool for all organisations working with China and strengthened the Chamber’s advocacy efforts to advance Australia-China business relations. Any readers representing Australian organisations connected to China please spend 10-15 minutes to complete the survey – we’ll all be better for it! Take the survey here. Go to Page 2 to see this week’s China news and highlights.

The brains trust at Amazon are likely to be scratching their heads wondering how thathappenedAfter spending hundreds of millions of dollars and 14 years to wrestle market share from the almighty Alibaba and JD-Tencent-Walmart syndicate, they have managed just a meagre 0.7% share of ecommerce retail in China. Ebay suffered an even worse fate after throwing hundreds of millions at China before effectively giving up on the market in 2006.

Yet in less than three years, ex-Google engineer Colin (Zheng) Huang has managed to defy all odds with his ecommerce platform Pinduoduo. Not only has he blindsided Alibaba’s rural operations, he has also surpassed JD’s daily user count by cleverly targeting China’s underserved smaller cities. 65% of his 343.6 million active buyers live in third tier cities or lower.

The new consumer economy isn’t about giving Shanghainese the life of Parisians. It’s about providing paper towels and good fruit to people in Anhui province,” says HuangThe strategy has paid off. Pinduoduo’s IPO last week valued the company at $23.8 billion, catapulting him to become China’s twelfth richest person.

Pinduoduo has also changed the online shopping experience into a social one where users are constantly reminded of other shoppers and their friends incentivised to join – something that has a struck a chord with lower tier shoppers who have traditionally been less forthcoming about buying online. Every Chinese consumer loves a deal, but those in smaller cities are themost price sensitive, unable to resist ten boxes of tissues for $1.90, bed sheets for $1.50, umbrellas for $1.51 and PCs for $150even if there’s a good chance of fakes. Unlike the search-focused interfaces of Taobao and JD which deliver thousands of results, Pinduoduo displays products more like a news feed with a few hero products, making the whole experience less overwhelming and more fun for many.

There are countless takeaways that we can learn from the success of Pinduoduo; here are four that we found particularly interesting:

1. Pinduoduo’s success is a metaphor for many businesses hoping to tap the China opportunity. They have gone beyond theovercrowded megacities and into the less glamorous outcrops in the hinterland. Given half of the 50 million new households expected to enter the upper and middle classes between 2016-2020 will be located outside of China’s top 100 cities, there is no shortage of opportunities out there. The right products, targeted in the right smaller cities, in the right way, can be very fruitful in China;

2. Pinduoduo is further proof that investing squillions in building your own app could be better spent developing a Mini Program inside WeChat. Users need a very good reason to download a standalone app, whereas something embedded in WeChat is seamless, hence the 62% of users who shop on Pinduoduo through their WeChat Mini Program;

3. The power of social advocacy shouldn’t be underestimated in China. Pinduoduo has done a remarkable job of tapping into shoppers’ WeChat contacts and taking them along for the ride by incentivising them with discounts, prizes and even free goods;

4. And lastly, much like we saw with Luckin Coffee a few weeks ago, even markets like ecommerce that appear to be sewn up by the giants can still be ripe for the picking. The speed, complexity and fragmentation of China’s growth is constantly opening up gaps and new opportunities, some which may turn into $23.8 billion operations giving the gorillas a run for their money.

But don’t go flipping the birdie to Alibaba and JD just yet – they may be expensive, hyper-competitive and in many cases unprofitable, but Pinduoduo is unlikely to be a white knight for many foreign brands at this point in time. The average order value is just $6, compared to $60 on JD and $30 on Alibaba’s platforms. Discounts as much as 90% are not a sustainable strategy we’d recommend for the guardians of premium products that form the faithful Skinny readership. But take the opportunity to learn some good lessons from Pinduoduo’s success, keep abreast of how it evolves and give China Skinny a call to ensure you have the optimal ecommerce and marketing strategy for China. Go to Page 2 to see this week’s China news and highlights.

A quick quiz to start this week’s Skinny: What is the most valuable marketing company in the world? Most people probably couldn’t care less, but there are a few folk in the industry who would say WPP. Whilst the company hasn’t had a great year, it remains the largest marketing company in the world measured by billings and revenue. The London-based conglomerate has a market cap of $18.9 billion, putting them ahead of the other well-known marketing companies such as Omnicom at $15.3 billion, Publicis at $12.6 billion and Interpublic at $8.3 billion.

Before using your guess on the familiar marketing giants, you may want to consider the lesser-known companies, like Focus Media. Last week Alibaba acquired a 10.32% stake in the company for $2.23 billion, which as of yesterday had a market cap of ¥162 billion ($23.8 billion). Focus Media is the company behind many of the digital advertising screens in streets, subways and elevators across 300 Chinese cities.

With the acquisition, Alibaba plans to collaborate with Focus to merge offline media and digital marketing, slated as an upgrade to “New Marketing” which will support the growth of New Retail across all sectors. Focus has ambitious plans to soon control 5 million terminals covering 500 Chinese cities and reaching 500 million consumers.

Powering the evolution of Focus’s screens will be Alibaba’s vast banks of consumer data from the more than 550 million online shoppers on its platforms, 520 million AliPay users, and potentially the hundreds of millions watching Youku videos, navigating with AutoNavi maps, taking Didi taxis, browsing on UCWeb, ordering food on Ele.me, cycling on Ofo, using Weibo along with the more than 100 other businesses Alibaba owns a share in. When Alibaba figures out how to truly integrate and harness its massive data, there will be few stones unturned in consumer knowledge that can help direct what gets displayed on advertising screens or whatever they evolve to. Throw that in with their facial recognition technologies and you’ll have Minority Report-type advertising folks!

Alibaba’s investment into Focus Media will support its irrepressible expansion into physical retail and further strengthen its presence across the whole customer journey. What does it mean for companies such as the WPPs and Omnicoms of the world? The continued structural shift in marketing and advertising will force them to evolve beyond their traditional services.

One thing we have found at the Skinny is that while big data is valuable in planning, marketing and product development, it is a complement, rather than a replacement, to human creativity for determining how to best push consumers’ emotional buttons. It is likely to be a while before any machine can do that. Based on the early stage talks involving Alibaba and Tencent to buy a stake in WPP China, the big tech companies may be thinking so too. Go to Page 2 to see this week’s China news and highlights.

The last few weeks have been abuzz with tech chatter in China. You’re probably thinking that’s nothing new, but the significant change in tone has piqued our interest. IPOs for Xiaomi and Tencent Music and the expansive 2018 China Internet Report have been grabbing headlines, but beneath all that many experts are starting to ask the question: has China taken the mantle from Silicon Valley as the leader in tech?

In the blink of an eye China has done the unthinkable and transformed its cheap, copycat perception into that of a world leader in innovation. And this trend is contagious amongst China’s brands both in and outside of the tech sector; in 2018 consumers view 82 of China’s biggest 100 brands as highly or moderately innovative.

Leading the pack the stories of Xiaomi and JD are representative of how brands here are tracking. Xiaomi’s founder Lei Jun proclaims his company “a new species”, blending internet services within its product ecosystem and shrugging off any classification as a hardware company. JD notes they’ve now spent 12 years as a retailer and want “the next 12 years to be as a technology company”. We even just looked at Luckin Coffee creating an innovative New Retail-type model to combat one of the last truly unchallenged foreign mega-brands.

As the world begins to note what this host of dynamic Chinese brands is doing, it pays to keep in mind what this has meant for the average Chinese consumer and what they expect from brands across all aspects of consumer engagement. A few examples:

We have seen a dramatic rise in gaming, VR, animation and development within accounts to try stand apart on social media. The boom in mini-programmes has only exaggerated this and many foreign brands are in dire need of rethinking their WeChat approach.

Retail is constantly in flux, with opportunities and pitfalls abundant for brands who aren’t diligent. In China’s uber-competitive space, pop-ups can bring the oomph today’s shoppers are looking for as they increasingly crave an experience.

Tired or uninformed advertising has seen many a brand fall short in China, yet some well-considered research and understanding can see a brand ride the wave. Last month through a challenging but well-embraced campaign, Nike captured the end of the mollycoddling one-child policy, a huge national push to get children into sports & activity, and the competitive and individualistic millennials ascending into parenthood.

As everyone in China knows, the market moves faster here than anywhere, and for that reason many brands will fall in the wake of its constant innovation. China Skinny ensures our clients are on top of and ahead of market trends. If you want to be in the best position to tackle China, drop us a line. Go to Page 2 to see this week’s China news and highlights.