There has been a slew of recent coverage about Chinese FMCG brands outsmarting foreign players with faster growth rates.  Local brands often better understand customer needs and meet them with nimble product development and marketing.  They also have strong distribution networks in Tier-3 and lower cities, which boasted 8% growth last year, versus 2% in Tier 1 and 2 cities.

However, FMCG is only one part of the supermarket shop for Chinese consumers, with premium imported goods increasingly taking up more space in trolleys.  Imported food grew three times faster than FMCG in China last year.  

China Skinny’s research has found that as consumers earn more in China, they are spending a larger share of their incomes on food and beverage – converse to how most developing countries evolve.  Companies like Danone are selling off local brands as they are struggling to compete with premium imported products attractive to affluent consumers, and local products which appeal to price-sensitive consumers. 

Savvy Chinese investors have been quick to recognise the rising demand for foreign food brands, scooping up companies such as America’s largest pork producer Smithfield Foods, Britain’s Weetabix, Italy’s Salov Olive Oil and Israel’s largest food producer Tnuva.  They’re not just going for brands too; having signed agribusiness deals in more than 40 countries since 2005, with Australia, New Zealand and the U.S. attracting the highest number of major investments.

Spurred on by their extensive insights, China’s cash-rich Internet giants are investing in the premium food supply chain, both online and offline.  Jingdong is one example – it has opened up pavilions for imported products, recently bought a share of Australia’s largest milk producer Murray Goulburn and invested $700 million into local supermarket chain Yonghui Superstores.

While many foreign food and beverage brands may not have the same depth of understanding and ability to adapt to the market as much as local brands, they have an enviable reputation for safe, clean and transparent products that Chinese brands won’t be able to match for some time yet.  If imported brands can compliment that with stronger insights and marketing, there’ll be no stopping them in China! China Skinny can help with that.  We hope you enjoy this week’s Skinny.

Consumers,  Chinese Consumers

When The Stock Bubble Burst, Did It Take The Rest Of China With It?What actually seems to be happening following China’s stock market fluctuations?

What A Cheap Yuan Means For Rest Of the WorldChina’s Central Bank’s decision to let the yuan drop 3.5% over two days last week will see commodities continue to slump, raise the price/lower margins on imports into China, and make overseas travel and shopping more expensive.  It won’t help the already-wounded luxury sector, where 70% of sales to Chinese are outside of the Mainland.

P&G Tripped Up by Its Assumptions About Diapers in ChinaPampers diapers positioned themselves too low for China’s growing middle class, with P&G recently launching a range of premium diapers made in Japan to better meet market demand.

A Worldwide China StrategyUnderstanding what influences Chinese consumers’ decisions – and where those influences are – is vital to succeeding in China.

Buzzwords: Chinese GovernmentSome important strategies and plans from the all-powerful Beijing and how they may impact the market.

Premium Food & Beverage

Chinese Eye Australia’s Outback in $43 Billion Foreign Farming FrenzyChina has made agribusiness deals in more than 40 countries since 2005, with Australia, New Zealand and the U.S. attracting the highest number of major investments.

5 Chinese Meat Scandals That Will Make You CringeLittle wonder food imports are soaring in China. A recap of some of the old favourites in China: glow-in-the-dark pork, rat meat sold as mutton, 40-year old poultry and more. Hungry?

One Code That Starbucks Corporation Still Hasn’t Cracked46% of Starbucks sales in the U.S. happen in the morning, but the chain’s 1,700 stores in China just can’t convince local consumers to do the same – Nescafe owns that space. 

Why Do We Drink Wine In China?Wines suit the new generation of Chinese post-80s consumers as they stress differentiation and personalisation, as opposed to Baijiu, which many consider an outdated form of unification.

Online: Internet, Web, Social Media, Mobiles & Ecommerce

Mobile Accounts For More Than Half Of All Sales In China For Alibaba55% of total spending on Alibaba’s platforms was on a mobile last quarter, with shopping up 125% from a year ago. The 307 million active mobile shoppers spent $195 on average last quarter. There were 367 million active buyers overall on Alibaba’s consumer platforms in the past year, placing 58 orders each on average, with sales growth slowing to 34.4%.  In other Alibaba news, the company has invested $4.6 billion in electronics retailer Suning.

JingDong reports 82% sales growth in the second quarterThe value of goods sold on JingDong reached $18.5 billion in Q2 – less than a fifth of Alibaba’s sales, but growth was more than double at 82%. The company also purchased a 10% stake in Chinese supermarket chain Yonghui Superstores for $700 million and will offer food delivery services through the chain.

China Telecom Says Slow Internet Not Sales PloyA Shanghai Television investigation has found visiting International sites through China Telecom is even more painful than normal in China.

WeChat Rockets To 600 Millon Monthly UsersWeChat added 51 million monthly active users between April-June this year, although Tencent is still tight-lipped about how many are based in China – we know that most are.

Xiaomi At 5 years OldInfograph illustrating the remarkable journey Xiaomi has made to become a $45 billion company in just five years.

Overseas Chinese Tourists

Priceline – The Big US Web Firm That’s Figured Out ChinaUnlike other big Internet players in China, online travel agency Priceline is making good headway, through its shareholding and integration with Ctrip, advertising spending on Baidu and Qunar, and 11 offices in the country.

Clothes and Fashion

How Western Fashion Brands Are Using Social Media In ChinaOtte, a small boutique chain in NYC is launching its first foreign store in Shanghai next March due to its significant sales in China, due to the success of its social media campaigns in the market.

That’s the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.

China’s smog gets a lot of airtime around the world, with footage like masked runners navigating the soupy air in the Beijing marathon, hordes of Zhengzhou residents lining up for bags of ‘fresh mountain air’, and kids playing at school under multi-million dollar domes. Given 99% of urban Chinese breathe air considered unsafe by EU standards, there’s plenty of opportunities for coverage.

China’s less visible soil pollution is equally concerning, with 19.4% of soil dangerously polluted according to a 5-year Chinese government study released last year.

However, possibly the most under-reported environmental issue facing China is its water pollution. Nearly two-thirds of China’s underground water and a third of its surface water has been rated unfit for human contact by China’s Ministry of Environment.  Just 3.4% of China’s water supply is classified as ‘Grade 1’.  Initiatives such as Jack Ma’s water monitoring app have helped raise awareness of the problem, but unlike air pollution, which marginally improved in China last year, China’s water continues to become more poisonous.

Toxic water isn’t ideal for taking a shower or family camping trips by the river, but of grave concern is its influence on China’s food and beverage industry.  As a consumer in China, how comfortable would you be eating food irrigated with, processed by machines cleaned with, and in packaged products made with water that could be dangerous to touch?  Would you be comfortable feeding it to your precious only child, or even your prized pooch?  Add that to a lack of trust in the supply chain and it’s no surprise that imported food is growing almost three times faster than FMCG overall.

China Skinny’s research across China has found spending on food and beverage is growing fastest amongst affluent segments.  This indicates that those who can afford it, are prepared to spend more on safe, quality, often imported food.  The growing demand is contributing to the soaring rise of cross border ecommerce, and is why companies like McKinsey are predicting that imported fresh produce is ‘about to get really big’.  We hope you enjoy this week’s Skinny  

Consumers,: Chinese Consumers

China’s Top-100 BrandsCampaign Asia and Nielsen asked Chinese consumers to rate their top brands. Interestingly Samsung came out on top, ahead of Apple in fourth place; whereas sales, particularly for smartphones, reflect quite a different picture in China. Chinese Traditional Medicine company Tongrentang was the top brand from Mainland China in 8th place.

Chinese Brands Lead China’s Top FMCG BrandsChina’s top three FMCG brands – Master Kong, Yili and Mengniu – were chosen by Chinese shoppers more than 1 billion times last year according to Kantar brand rankings. Danone’s Mizone was the top riser.

It’s A Dog’s Life: How Affluent Chinese Are Falling In Love With Pampering Their PetsSpending on pet care in China is expected to grow by more than 50% in the next four years according to Euromonitor. Foreign companies Mars and Nestle currently account for more than 80% of China’s pet food market. Pets were banned during Chairman Mao’s reign, as they were seen as a bourgeois pastime.  Meanwhile, Chinese social pet network SmellMe reportedly has five million furry users – ten times more than a year ago.

Uber Is Logging 1 Million Daily Rides In China: 11 cities in China are said to be logging as many Uber rides as the rest of the world combined, although their claim of one million rides a day is quite different to recently reported numbers. Chengdu is logging 479 times as many trips as New York City did at the nine-month mark, and Hangzhou is logging 422 times as many trips. The company says it is creating 100,000 “new equivalent full time jobs” a month.

Pollution &: Environment

More Than 60% of China’s Underground Water ‘Not Fit For Human Contact’Nearly two-thirds of China’s underground water, and a third of its surface water, are rated as unsuitable for direct human contact in 2014 according to the Environment Ministry, with rates worsening from 2013. Anyone for a swim in the river?

Chinese Stick With Cars Despite Pollution Concerns55% of Chinese consumers were worried about environmental pollution and traffic jams caused by cars in 2014, up from 48% in 2010. Nevertheless, the portion travelling by private car at least once a week grew from 8% in 2010 to 33% last year.  In related news, just 1% of Chinese don’t want an international agreement addressing climate change, versus 17% in the U.S. and 7% in the UK according to a YouGov survey.

Premium Food & Beverage

China’s Cross-Border eCommerce To Rise Ten-Fold In 5 Years As Taste For Imported Food GrowsChina’s ecommerce imports and exports are expected to hit $245 billion by 2020 according to a report by Alibaba and Accenture.

Exports of Fresh Produce to China Are About to Get Really BigMcKinsey sums it up well, ‘Imports = Safe’. Buying fresh produce directly from the country of origin makes consumers more comfortable.

Starbucks in China: A Matcha Latte and Mooncakes, PleaseStarbucks doesn’t just localise with green tea lattes and red bean scones, but has its own versions of traditional festival treats such as mooncakes and zongzi. It also invests heavily in staff and making them feel loved. Starbucks has over 1,600 stores in 90 cities and accounts for around 60% of China’s coffee chain market, versus McDonalds McCafe’s 14% and Costa’s 11%.  Starbucks’s same store sales have grown 12% in the China-AsiaPacific region this quarter, versus 7% in the U.S.

Online: Internet & eCommerce

Alibaba Invites U.S. Small Businesses to Enter Chinese Market“Our U.S. strategy is quite simple and clear: We want to help U.S. entrepreneurs, small business owners, and brands and companies of all sizes sell their goods to the growing Chinese consumer class,” said Jack Ma prior to a three day trip to the U.S.  More than 200,000 companies are running cross-border e-commerce businesses in China on more than 5,000 online shopping platforms.

Music and Entertainment

Q&A: How Tencent Plans to Get Chinese Consumers to Pay for MusicTencent has a difficult task ahead to convince Chinese consumers to pay for music.  It is teaming up with global music companies such as Warner Music Group and Sony Music to create innovative value adds through its QQ and WeChat platforms.

Finance &: Investment & Migration

Overseas Real Estate Investment Hits Record $7.5b in Q1Chinese companies invested a record $7.5 billion in the overseas commercial and residential real estate market in the first quarter of this year, with reported transactions expected to hit $20 billion this year according to JLL. With the domestic market slowing, overseas investment by Chinese companies reached 52% of all real estate transactions last year.

Premium and Luxury

Can “Made in China” Become a Luxury Label?In less than a decade, China has positioned itself as the world’s biggest producer of caviar. 44% of Chinese consumers are willing to try an emerging luxury fashion brand in the next three years according to Bain. Cosmetics and wine are other areas to watch.

What Luxury Brands Can Learn From Alibaba About ChinaWhile less than a quarter of luxury brands have online shops, Chinese consumers flock to ecommerce platforms to buy and research products. Foreign luxury brands in China can learn from Alibaba by: 1) Localising; 2) Pricing competitively; 3) Developing authentic brand advocates; and 4) Embracing mobile ecommerce.

Over 60% of Chinese Purchase Luxury Items Abroad64% of Chinese consumers choose to purchase luxury products overseas instead of in China.  88.9% cite lower prices and 83.5% claim guaranteed authenticity as the reason according to a Fortune survey. Chinese account for 46% of global luxury spending overall, with 76% of it happening abroad.

That’s the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.

It’s upon us.  No sooner have the Christmas decorations come down, and the red lanterns, woolly sculptures and giant inflatable sheep have popped up in every corner of China with even more gusto.   The excitement is further fuelled by infinite fireworks explosions, gushy television commercials, and the biggest consumer spend-up of the year.

19 February will mark the start of the Year of the Sheep (Yang). Its auspicious placing as the eighth sign in the 12-year cycle counts for little for many superstitious Chinese, who rank the animal lowly versus the luckier Dragon, Tiger, Horse and even next year’s Monkey.  Would-be parents often hold back, believing kids born as sheep are destined to be docile followers, rather than leaders.  An old Chinese idiom remarks that only one in ten born in the Year of the Sheep will find happiness. 

Nevertheless, countless businesses in China have some form of Spring Festival promotion and sheep symbolism.  Online shopping platforms, to the NBA Chinese New Year uniforms and TV commercials, and sheep-themed Reebok Pumps are all jumping on the wagon to play their part in commercialising the traditional festival.

The current Year of the Horse (Ma) has been a two horse race between the namesakes – Tencent’s Pony Ma and Alibaba’s Jack Ma, whose companies were rated the two most valuable brands in China in 2014.  Some may recall that Tencent was quick out of the starting gates with its hugely successful WeChat Virtual Hongbao campaign, used by more than 8 million people during the week of Spring Festival, fast tracking the adoption of WeChat Payments for millions.  

The Virtual Hongbaos are back again this year, yet not without a spat between Tencent’s WeChat and QQ and Alipay, who are not accepting each other’s virtual hongbaos – taking some of the shine out of the holiday tradition.  It won’t be the last drama between China’s online giants this year, in what is destined to be another colourful and dynamic year in China’s online sphere.

China Skinny wishes you the happiest of Chinese New Years.  If you’re on one of the 2.8 billion trips over the festival period, we hope you travel safe.   We’ll be back with the Weekly Skinny in the Year of the Sheep; until then, we hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

For Chinese New Year 2015, Brands Are Getting Their Ram/Sheep/Goat OnAnother Chinese New Year rolls around with the usual slew of zodiac wares, from sheep-themed Reebok Pumps, to thermoses, to watches and purses.

The Two Worst Lies About Chinese ConsumersBefore you put a dragon on your label to sell to the Chinese market, it’s best to note a couple of common myths: 1. You should Sinofy your brand for China; and 2. The Chinese only pay more for “face”.

JLL City Momentum Index 2015Five of the world’s ten most dynamic cities are in China. Rounding out the top-20 Chinese cities and their global ranking are 3. Beijing; 4. Shenzhen; 5. Shanghai; 8. Wuhan; 10. Chongqing; 19. Tianjin; and 20. Nanjing.

Online: Internet, Mobiles, Social Media & Ecommerce

What WeChat Account Is Best For My Business: A Service or Subscription Account?WeChat is the most popular social network in China, providing businesses plenty of opportunities to grow brand awareness and engagement with Chinese consumers. What type of account is most suitable for your objectives?

China’s Internet Population Hits 649 Million, 86% on Phones557 of China’s 649 million Internet users accessed from a mobile phone in 2014, 57 million more than in 2013 according to the China Internet Network Information Center (CNNIC). Online shoppers increased by 20%, and users of messaging tools’ such as WeChat grew 10%. Online travel and group buying both grew 22.7%, whereas online video users grew just 1.1% and microblog users were down 11%, following a 9% decline in 2013.

Online Retail Spending in China to Exceed $1 Trillion By 2019Forrester forecasts that online shopping will grow from $307 billion in 2013 to over a trillion by 2019. Mobile sales average growth will be 44.2% a year – more than double the overall growth rate of 19.9%. More categories traditionally sold offline, such as pharmaceuticals and furniture, are moving online, with a wide variety of high-end products, such as fresh food, imported goods, and automobiles increasing in popularity.

The One Barrier China’s Smartphone Companies Can’t Seem to BreakAlthough Chinese smartphone shoppers are falling over themselves to drop at least ¥5,288 ($847) on an iPhone 6, Chinese brands just can’t break the ¥3,000 ($480) mark.

Apple Commemorates New Year in Its First TV Spot Created Specifically for ChinaApple is further reinforcing its increasing focus on the China market by launching its first TV ad specifically for the market, with some nice subtle references to Chinese culture.

Premium Food & Beverage

Bend Baijiu Like Beckham: Diageo Talks Up Chinese Turnaround But Sales Keep FallingDiageo’s super premium baijiu brand sales growth of 25% were driven by the launch of the lower-priced premium option – Master Distiller’s No.8.  The austerity campaign is still hurting Diageo’s scotch sales, dropping 22% last year.

Haagen-Dazs Eyes China’s Coffee MarketHaagen-Daz is hoping to tap into China’s growing taste for coffee by launching its “Rainbow Latte” made with its ice cream and Illy coffee. It plans to open coffee shops to expand beyond its staple of ice cream.

Overseas Chinese Tourists

Sentiment Bullish on China’s Hotel SectorLong held concerns about a glut of China’s hotels are being allayed by the rise in occupancy rates last year, on the back of the rising purchase power of China’s middle class. Beijing’s hotels were 63.6% full in 2014, up from 59.5% in 2012. Shanghai’s 2014 occupancy rate grew to 71% from 66.2% in 2012.

Consumers May Mistake Daffodils for Chinese Vegetable, UK Stores WarnedAnother example of how Chinese can view food differently, with a number of Chinese poisoned in the UK from eating daffodils.

Recreation and Sports

China Digital Football Index 2015Chinese football fans tend to follow a team due to their star players, with Lionel Messi having more online fans than the combined Weibo followers of Spain’s six teams. Manchester United’s Weibo account attracted 11 million new followers over the past 12 months.

Premium and Luxury

76% of China’s Luxury Consumption Happens OverseasChinese consumers’ consumption of luxury goods worldwide was $106 billion last year, 4% higher than 2013. Goods bought in Mainland China totalled $25 billion, down 11%, whereas goods bought overseas – 76% of consumption – were up more than 9% to $81 billion.

Cars &: Auto

New-Car Smell? No Thanks, Say Chinese Car BuyersThat sweet scent of new cars – the off-the-factory-floor plastics, glues and leathers – that appeal to many in the West does not have the same attraction for Chinese buyers, and so brands like Lincoln are doing what they can to deodorize them.

That’s the Skinny for the week! See previous newsletters hereContact China Skinny for marketing, research and digital advice and implementation.

Full credit to Tim Cook and the team at Apple who sold more smartphones in China than any other brand in the last three months of 2014.  It’s the first time Apple achieved this, and especially impressive with the new iPhone 6 only launching halfway through the quarter.

Perhaps the most notable feat is that the hugely popular phones are almost twice the price of their nearest competitor – further reinforcing that China’s premium market is as alive as ever for those brands who give consumers what they want.

There have been many foreign brands who have risen to remarkable heights in China, only to fall out of favour overnight and struggle to find relevance again with consumers.  Apple could have gone that way back in 2012, losing its hero status following a barrage negative state media coverage for being ‘arrogant’, contributing to a drop from 9% to 5% of market share in six months. 

Apple wasted little time in analysing how it could improve in China, and made fundamental changes to the way it operated in the market. One of the company’s biggest changes was toeing the Government line, a necessary reality of doing large-scale business in China.

Apple has done a great job at listening to what Chinese consumers want, launching the iPhone 6 and 6 Plus with larger screens to meet market changes. It also made phones that better supported the country’s biggest mobile network, China Mobile. Its retail footprint has expanded rapidly to 20 stores in China, and is set to double again in the next 18 months to take advantage of rising wealth in lower-tier cities.

On top of that, Apple has realised how difficult it is to make decisions about China from afar.  They have added a China-based executive to the top table, as well as recruiting 200 Apple retail staff from the U.S. to continue to grow their business in China.

Apple will never be able rest on its laurels in China with many cheaper, lower margin and formidable competitors such as Xiaomi, Samsung and Lenovo nipping at its heels, but we have faith it will continue to set the standard by understanding the market, constantly innovating and adapting to China’s ever-changing environment. 

If you’re wanting to better understand and adapt to China’s market, contact us to see how we can help. We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

Why 2015 Marks a Turning Point for Chinese BrandsFour of the top five most valuable brands in China are Internet and mobile firms according to the BrandZ 2015 ranking. Of the top-100 brands, 47 are market-driven businesses – not state owned, up from 29 a year ago. More on the infograph.

China Amazed as Alibaba Fights Publicly With RegulatorFurther reinforcing the increasing clout of market-driven businesses in China, Alibaba publicly challenged a state regulator’s report about fakes, based on the small sample size that bore no statistical credibility. Yesterday, Jack Ma announced that the problems with the regulator were resolved “at first stage,” and the company will continue to fight fakes with its 2,000 full time employees who help monitor counterfeits.

Super Rich Continue to Cut Back on Gifting: Gifting spend by China’s uber rich dropped 5% last year according to Hurun, adding to an overall drop of 30% over the past two years. Apple was the most-favoured gift brand, followed by Louis Vuitton, with 2013’s no.1, Hermes, dropping to seventh for 2014. The popularity of giving wine fell by a third.

Online: Internet, Mobiles, Social Media & Ecommerce

Seven Things We Learned from Apple’s Earnings CallApple blew Wall Street expectations out of the water with its $74.6 billion sales in the last quarter of 2014, on the back of soaring demand in China for its new iPhone 6. Mainland China sales grew 100% from a year ago – particularly impressive given the iPhone 6 launch was delayed more than a month, entering the market halfway through the quarter.

Alibaba Reaches 334 Million Shoppers Who Spent $126 Billion in Q4Active users on Tmall and Taobao grew 45% from a year ago to 334 million shoppers, spending an average of $378 each in the last 3-months of 2014. Tmall accounted for 37.2% of sales and grew 60% from a year ago – 40% faster than Taobao.

Tencent’s WeChat Ads Under Fire80% of respondents in a CCTV survey considered WeChat’s sponsored ads trial to be commercial harassment. Brands such as Coca-Cola, BMW, Cadillac and Chinese smartphone maker Vivo were included the trial.

Precious Little Emperors

Toy Story: What Toy Sales Tell us About China’s FutureChina makes 75% of the world’s toys. Over the past few years, manufacturers have started targeting Chinese consumers, with sales growth averaging 13% a year between 2008-2013 to just shy of $20 billion. Euromonitor predicts sales will rise by 57% by 2018 – the world’s fastest growing market, with affordable and aspirational products like Lego selling particularly well.

Chinese Ecommerce Site for Babies Raises $100M Funding: Ecommerce site Beibei sells products for infants, toddlers and mums including clothing, accessories, toys, and diapers. 100,000 items are sold daily, with 70% bought on mobile devices. The site launched in just April 2014 and is now valued at $1 billion.

Premium Food & Beverage Taps International Suppliers for Broad Imported Food InitiativeJingdong is following Tmall’s lead with promotions to drive online sales of imported food. The platform’s first promotion focuses on American food, with Canada, France, Australia, New Zealand and Chile to follow.  Japanese rice has become one of the fastest growing imported foods, with sales more than tripling last year amid safety fears with locally grown rice.

Bird Flu Season Becoming a Serious Concern for Chinese AuthoritiesGovernment officials taking measures to restrict the live poultry trade, such as closing markets, to reduce the risk of bird flu over the particularly notorious winter period.

Overseas Chinese Tourists

Chinese Tourist Spending Hit Record Last Year Amid Income GainsChinese tourists spent a record $164.8 billion overseas in 2014 – 28% more than 2013. 109 million travelled abroad, helped by disposable incomes rising 10.1%.

Beauty Health

Wearable Devices Have Bright Future in ChinaAn international survey into wearable health devices by Accenture found that 65% of Chinese consumers have an interest in buying one by 2020, versus 39% globally.

Premium and Luxury

The Japanese Buy Luxury To Fit In, But The Chinese Buy It To Stand OutChina is the only male-driven luxury goods market, whereas Japanese consumption has been essentially female driven. Beyond that, there are many more consumer profiles in China and differences in culture, history and sociology which are likely to continue to drive strong growth in China’s luxury market for some time.

Cars &: Auto

Car Ownership in China Tops 154 Million in 2014Cars have replaced motorcycles as the main method of private transportation, accounting for 58.6% of motor vehicles in China. Five years ago, cars made up 43.9% of vehicles. 12% of licensed drivers have less than a year of experience. 35 cities have more than a million cars, with Beijing having the highest rate of private car ownership at 63 per 100 households, versus an average of 25 for China.

That’s the Skinny for the week!See previous newsletters hereContact China Skinny for marketing, research and digital advice and implementation.

WeChat’s global ambassador, Lionel Messi, was in Beijing last week for the all star football clash between Argentina and Brazil. What should have been a celebration of the beautiful game, turned out to be a demonstration of China’s abominable pollution. 

As PM2.5 levels soared as high as 499 on Thursday – 20 times the WHO recommended safe levels – during practice Messi frequently covered his nose and mouth, had to stop for plenty of rests and ended up leaving early.  Brazil’s team left the sanctuary of their hotel for just 2-hours to train over a 24-hour period.   The toxic air also filled the lungs of some of the world’s top riders in town for Tour of Beijing, and pop diva Mariah Carey at her outdoor concert at Worker’s Stadium.

It is yet another China pollution story, coming soon after National Geographic published their 2014 global Greendex.  The index compares impacts of consumer behaviour on the environment across different countries.  China came in just behind India in second place – a great result.  But digging a little deeper, many of the categories China scored highly on such as high public transport and scooter use, and consumption of locally grown food, are characteristics of a developing economy and generally aren’t decisions made for environmental reasons. 

Some concerning findings from the survey were that Chinese are the least likely consumers to want second-hand goods, placed little faith in environmentally friendly products, and had the largest portion of people dreaming of owning a big house.  Other statistics not covered in the Greendex such as SUVs being the fastest growing auto segment in China, are equally worrying.  This indicates that a lot of consumers aren’t taking individual responsibility for the environment, even though they see the effects all around them.  Many Chinese believe that it is the Government’s responsibility to solve the pollution problem.

Whilst on one hand affluent Chinese consumers are turning their nose up at things such as fuel efficient cars, the environment is a key factor for purchases related to their health, that they can influence on an individual level. 59% of Chinese consumers consider environmental quality as important when buying food and beverages. Tourism, construction and real estate in many unpolluted Western cities are also reaping many benefits.

Although consumer behaviour is just one piece of China’s pollution problem, it’s an ever-growing part.  Let’s hope behaviour becomes a little more sustainable as consumers grow even more affluent. 

China Skinny looks forward to seeing our Australasian readers next week in Brisbane, Melbourne and Sydney, where we’re moderating the China Digital Conference. There’s an excellent line up of speakers and topics in what will be an insightful and enjoyable event. New to the table this year, Chinny Skinny will be providing ‘Speed Consulting’ for a few lucky attendees, to run though their marketing plan, positioning, target market and channels to market, to ensure they’re on the right track to take advantage of the incredible opportunities here in China. Find out more here.

We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

China Overtakes the US as the World’s Single Largest Economy: By calculating GDP alongside the cost of living, the IMF has declared that China is now larger economically than the US for the first time in history. China’s adjusted GDP of $17.6 trillion compares to the US GDP of $17.4 trillion. China’s economy was less than half the size of the US in 2005.

China Opportunities from a European Perspective: Two themes of consumption growth are emerging in China, demand for aspirational goods and improved quality of life. Europe’s economic strengths lie where these themes converge.

Pollution and Environment

Increased Fears About Environment, but Little Change in Consumer Behavior: A global study by National Geographic ranked China 2nd on the Greendex, just behind India. It wasn’t all rosy though, with Chinese consumers the least likely to buy used goods. They were also among the least trusting that environmentally friendly products work well. Chinese consumers have the largest proportion stating that owning a big house is a very important life goal.

LG Electronics Launched “Localized” Air Purifier in Chinese Market: LG has launched an air purifier localised to the specific needs of China’s booming market. The filter is said to have enhanced performance for the fine dust particles and pollution that plague China, and is also a round shape in gold and silver, representing good luck and wealth.

Online: Internet, Mobile & Social Media

Two Charts That Show Why Larger iPhones May Be a Big Deal for China, Bigger Pain for Samsung: 40% of Android smartphone sales in China in December last year had screens larger than 5 inches. In August this year, it was 78%. This represents how Chinese consumers are increasingly looking for richer experiences on their mobiles.

Online Purchases Get a ‘Smart’ Touch: 71% of China’s smartphone users have had a mobile shopping experience. 37% have used their phone to order food and 35% to trade stocks. Of the average 3.7 hours that Chinese consumers spend online a day, 2.2 hours are on mobile.

Chinese Online Shoppers Favour U.S. e-Retailers: Of the 4% of China’s online purchases that happen overseas, US sites have the highest frequency – more than double the second highest UK according to Visa. Hong Kong, Germany, Japan, France and Australia are the next highest. The average value for purchases on US and Australian websites is 50% higher than the average. On the topic, Guangzhou has just streamlined customs for overseas ecommerce sites.

Overseas Chinese Tourists

Holiday Spending Habits Change: Union Pay spending habits of Chinese abroad during the Golden Week holiday reinforce tourists are moving to experiences, with spending on entertainment up 56.6%, dining and hotels increasing 52.2%, whilst the old favourite shopping grew just 30.4%. Tourist spending in South Korea, Germany, UAE, New Zealand, Spain, Australia and Canada increased at least 80% over last year.

Premium Food & Beverage

Would You Trust Chicken from a KFC in China? The Chinese Still Don’t: KFC and Pizza Hut’s parent company Yum Brands has big plans to grow its existing 6,387 restaurants in China to 20,000 by 2020. That wouldn’t have been helped by the latest expired meat scandal, which saw same store sales drop 14% in the third quarter of this year. Reassuring consumers their food is safe food is vital to success, but given their advertising campaigns prior to expired chicken focused on this, it will be even harder to play that card.

Dutch Dairy Giant Eyes Further Success in China: Royal FrieslandCampina has established a joint venture with Huishan Dairy in China, hoping to hit €1 billion ($1.3 billion) in turnover in China next year. The company aims to tap into the local partner’s “professionalism in terms of farming,” and add its “control mechanism and quality control professionalism”. Some recipes will be tailored for Chinese babies.

Smell the Coffee: The average Finn drinks 1,340 times the amount of coffee that average Chinese consumer consumes – a paltry 10 grams a year. But times are changing.  Between 2012 and 2013 Starbucks opened 500 stores in China, more than the last 12 years combined, in addition to new cafes from the Brits, Australians, Taiwanese, Koreans, Singaporeans and a slew of local cafes. Between 1965 and 1980, demand for coffee in Japan grew six-fold by comparison, seeing the Japanese consume almost as much as the Americans per capita.

Overall Health & Beauty

China’s Skincare Obsession Goes High-Tech With Growing Device Market: Combining China’s love of tech with its compulsion for skincare, LVMH-owned Sephora stores are selling Talika’s device that uses LED lights to treat signs of aging.

Recreation and Entertainment

Who’s Betting Big on China’s Growing Box Office: Although China’s box office is a third the size of the US & Canada’s, it grew 27% last year versus 1% across the Pacific. PWC picks China’s box office will rise 88.5% to $5.9 billion by 2018. Banking on that growth, Chinese investment in US entertainment, including film, has been around $2.7 billion since 2000.  iQiyi, a Netflix-type service, is picking China’s online movie market could rival its physical box office in 5-years.

Cars and Auto

Chinese Luxury Car Market: An Overview: 60% of surveyed Chinese car users consider selecting a car as important a decision as choosing what to pay for their kid’s education, or buying an apartment according to McKinsey.

That wraps up this week’s Skinny!  On the to-dos this week, why not contact China Skinny to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at 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.

Although eCommerce is going gangbusters in China – Tmall sales grew 90% last year – one of its key challenges is logistics. According to GLP, it costs twice as much to deliver a parcel in China as in the USA, even with China’s lower wages.

Delivering packages to consumers in China’s biggest cities may be a speedy and cost effective service, but that’s not the case for thousands of other municipalities, including many of China’s 114 cities with more people than New Zealand

Whilst they earn less, consumers in China’s smaller cities actually spend more online than those in China’s larger cities – a cheaper cost of living coupled with fewer high street stores drives small-town folk to Taobao.  Last year, the average consumer in Tier 4 cities spent a third more shopping online than in those in Tier 1 & 2 cities. 

Alibaba’s founder Jack Ma wanted to do something about China’s logistics issue.  In October last year, he announced that he was spearheading a ¥100 billion ($16 billion) 8-year project that would enable online purchases to be delivered anywhere in China within 24-hours.

Well, late last month it looks like Mr. Ma may have achieved his dream 7 years ahead of schedule, inking a logistics partnership with China Post to deliver parcels anywhere in China within 24-hours, and potentially opening up the world through China Post’s global networks.

Whilst many postal businesses around the world are struggling, the deal with China Post will be good for both parties.  Last year, 5 billion parcels – almost four for every woman, man and child in China – were delivered from Taobao and Tmall’s stores.  Prior to the China Post deal, 950,000 staff were employed by Alibaba’s 14 logistics partners alone. 

With the China Post agreement, and general investment in China’s warehouses and distribution centres soaring 38.8% last year, it’s likely that eCommerce in China will continue to grow from strength to strength – something to consider.  We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

Something Is Making Chinese Consumers Want to Save More and Spend LessJust 18% of Chinese consumers were up for spending more in the second quarter of this year, versus the first 3-months. Probably not helped by slowing property sales, which account for 67% of the average middle class family’s wealth.

What Are Chinese Consumers Thinking?High level overview into the changing Chinese consumer: luxury goods still equals prestige for many consumers; rising health concerns grip consumers’ minds; and the importance of smartphones and social media.

Online: Internet, Mobile & eCommerce

Alibaba, China Post to Cooperate on LogisticsAlibaba and China Post have signed a deal to deliver online purchases anywhere in China within 24 hours. The deal will allow the companies to share warehouses, processing centres and delivery resources.

Alibaba Issues New IPO Filing, Reveals People Spent $272 Billion on Taobao and Tmall in Past YearTmall sales were up 90.1% in the past year, while Taobao grew 32.3%, although it still accounts for 70% of Alibaba’s retail sales.

Baidu: Search Share Loss; Mobile, Video StrengthenBaidu’s share of China’s search market in Q2 dropped to 59.8% of page views from 60.6% in the previous quarter. Qihoo’s climb continued to 25.6%, up from 24.8%

Premium Food & Beverage

Starbucks to Replicate US Strategy Successes in ChinaStarbucks is planning to open stores in close proximity to one another in Chinese cities and opening in suburbs as it does in the US. It is also planning more cafes in 2nd tier cities. Last year the chain opened 206 new outlets and 111 franchise stores in China, contributing to 27.1% growth in revenue for Asia Pacific region at $917 million. Sales should top a billion in the region this year.

Wellness, Health

Women’s Health App Meet You Nets Another US$30M in FundingThe Chinese app that originated as a menstruation tracker that since evolved into a social network for “all-things-ladylike” has netted more cash to grow its 3.5 million active user base.

Overseas Chinese Tourists

Chinese Outbound Trips May Exceed 115 Million This YearsFollowing an 18.8% increase in international Chinese tourists for the first five months of this year, more than 115 million Chinese are expected to travel abroad this year, up from 98.2 million in 2013.

More Chinese Opting for Summer Sea CruisesCruise bookings on Ctrip have doubled in June compared to a year ago, on the back of travellers shying away from SE Asian destinations. China’s cruise ship visitors are forecast to surpass 4.5 million by 2020, making it the largest cruise market in the Asia Pacific region.

Skyscanner Aims to Challenge Baidu in the Chinese Travel MarketEdinburgh-based Skyscanner is planning to take on the big boys through its acquisition of local travel price comparison startup Youbibi. With Chinese travellers expected to spend $75 billion online in 2017, there’s a lot to play for.

Recreation and Entertainment

How Baidu, Alibaba, and Tencent Will Dominate China’s Movie Industry in 3 YearsChina’s domestic film market and spinoffs are estimated to be as much as ¥100 billion ($16 billion) a year, and the big Internet companies are all over it. Crowdfunding, movie ticket sales, media group acquisitions, networking, movie funding are all examples of them closing in. Chinese movies accounted for seven of the top ten grossing movies last year.

Banking, Property

For a Century, the Mansion Sat Above Sydney Harbour. Then China’s Nouveau Riche Arrived.Credit Suisse estimates that 18% of all new houses and apartments in Sydney, and 14% in Melbourne, are bought by Chinese citizens. That portion is expected to rise.

Cars and Auto

Chinese Consumers Switch Gears from Cash to Credit for Car Buys85% of Chinese car buyers still pay with cash, but the country’s auto financing industry is forecast to double to ¥525 billion ($84.55 billion) by 2025, driven by the younger demographics. Buyers currently require a 20% deposit on cars in China.

Premium and Luxury

Chinese Luxury Consumers Named Their Favourite BrandsGiorgio Armani, Chanel, Rolls Royce, Singapore Airlines and Australia come out tops for China’s uber rich.

Kooky, Weird & Wonderful

Beijing From Above, Aka The Story Of How I Was Detained By The Police Because Of My DJI QuadcopterLucky to get out with his footage – some great shots of China’s capital filmed from above using a drone.

That’s The Skinny for the week!  We’d 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 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.

If China’s polluted air and water supply wasn’t doing enough to bring on heart disease and other illnesses, there’s a another scourge that’s stepping in – the bulge. 

More than a quarter of China’s adult population, around 350 million, are now considered overweight.  Those classified as obese number more than 60 million, rising 20% over the past four years in the 20-39 age group.

Busy lives in China’s cities are driving demand for convenient, processed, oily and sugary food. That, coupled with more sedentary lifestyles, is fattening up the average urban dweller. However even with consumers in cities spending twice as much on food as their rural counterparts, obesity rates are growing faster in the countryside.

China’s growing waistlines present plenty of opportunities.  Sales of weight management health products and services grew 15.4% annually between 2007 and 2012 and are likely to surpass ¥8 billion ($1.3 billion) this year, spurning everything from fat-fighting bloggers to weight loss camps for kids.

Weight Management is part of a bigger subset of an increasingly health-conscious Chinese consumer spanning pharmaceuticals, health care, food and beverage, fitness, beauty, tourism and more. Three of the top-five reasons wealthy Chinese emigrate are health-related.  Overall, 73% of Chinese consumers pay a premium for products that they consider healthier – something to think about with your products and positioning.

We hope you enjoy this week’s Skinny.

Consumers, Chinese Consumers

Chinese Customers’ Lack of Loyalty Puts Pressure on BrandsBaby milk has the highest rate of loyalty among consumers across China’s FMCG segments.  The top-5 brands in all other segments have 40%-80% of their customers as newbie’s each year. Chocolate, skincare and shampoo have the least loyal customers.

Boost in Chinese household consumption by 2020China’s Household consumption could grow from today’s 35% of GDP to between 45% and 50% by 2020 according to Nielsen – a rise of as much as ¥26.9 trillion ($4.3 trillion) on 2012 levels. Just 13% of Chinese have ever held a loan. 38% of consumers in Tier 2 cities and 37% in Tier 3 cities said they’d buy more premium products, versus 28% in Tier 1 cities.

Customer Service ‘Leaves Shoppers Cold’As many as 75% of Chinese consumers are not satisfied with their customer experience through multiple channels. This is contributed to by processes that aren’t integrated such as inconsistent promotional info across channels and sales staff unaware of policies and offers on social media.

Chinese Consumers Like Socially Responsible Firms, Study Finds69% of Chinese online consumers said they will pay more for companies that are socially or environmentally active, 14 percentage points higher than the global average and 10 percentage points more than last year.

Wellness, Health

Chubby Little Emperors: About 350 million Chinese consumers are considered overweight or worse, with the obese count the same as the entire UK population.  More than a third of Chinese die from heart disease. Meals in China now contain more than twice as much oil and meats than in the 1980s, although Chinese aren’t eating more as they get richer with the average daily calorie intake dropping around 5% since 2002, pointing to more sedentary lifestyles.

Immigration and the Chinese High Net Worth Individuals: 64% of China’s high net worth individuals have emigrated or want to do so in 2013, up from 60% in 2012 according to Hurun. Three of the top five reasons Chinese are emigrating abroad are related to health including pollution, food safety and the standard of medical care.

How Eating Broccoli Can Help Your Body Cope With Air PollutionAn international study in Jiangsu province has found a tea made from boiled broccoli sprouts helps the body to more speedily eliminate some ingested air pollutants. The potion is said to taste pretty bad, cause mild stomach complaints and possibly have a high concentration of pesticides when grown locally.

Online: Internet, Mobile & eCommerce

Alibaba’s New Filing Shows Mobile Growth, But Also ChallengesIn Q1 this year, 27.4% of Taobao and Tmall’s transactions happened on mobile, up from 10.7% a year earlier. During the quarter, the number of active mobile shoppers grew from 136 million to 163 million.

These 7 US Startups Show That Your Business Can Survive in ChinaWhilst many of America’s Internet behemoths have been blocked or failed in China, there are some making good inroads – here’s a brief summary of seven who are, with a common theme of self-censorship.

Premium Food & Beverage

Coffee May Not Dethrone Tea, But China Could Be the Largest Coffee Consuming Market By 2020Although Chinese consumers drink just five cups of coffee a year on average, consumption is rising at 15% a year. At current growth rates, China is poised to become the top coffee drinking nation by the end of the decade.

China Unveils Plan to Consolidate Dairy IndustryBeijing has vowed to form ten strong domestic dairy companies by the end of 2018 which will account for more than 80% of China’s total market share.

Alibaba Promotes a Mobile Marketing System with Pepsi and Tsingtao BeerTaobao’s mobile app has a new feature allowing consumers to scan QR codes on Pepsi and Tsingdao beer bottles to win prizes. Consumers can also use the scan feature to get product info and sales support from 300,000 online and offline merchants.

Overseas Chinese Tourists

Winning Today’s Globe Hopping and Shopping Chinese Luxury ConsumersMore than two thirds of Chinese tourists are under 35 years old – 25 years younger on average than American tourist. In 2012, nearly three-quarters of the traveling Chinese consumers surveyed by McKinsey bought a luxury product while abroad in the past 12 months. 95% of Chinese visitors to Louis Vuitton shops in Paris were on organized tours.

Banking, Property & Finance

Q&A: What does London’s China currency deal actually mean?The China Construction Bank has been appointed as a renminbi clearing house in London – the first outside of Asia. European firms will be able to receive and pay China’s currency in the western time zone, allowing easier, quicker and cheaper transactions.

Chinese Property Firms’ Overseas ExpansionChinese institutional investors’ offshore property investments in Q1 2014 rose 25% year-on-year to $2.1 billion, with investments in residential property growing by 80% according to JLL. Savills analysis suggests that Chinese consumers invested $13.5 billion in the overseas market during 2013, almost double the 2012 figure.

Recreation and Sports

Weibo Lights Up with First Kick of the World CupBrazilian defender Marcelo became the top-trending term on Weibo after scoring an own-goal . Within 6-hours of the opening match, there had been 1.3 billion posts related to the Football World Cup on the network. CCTV’s post sparked 220,000 discussions, of which 65% of the interactions came from users aged less than 25 years and one third by women.

That’s The Skinny for the week!  We’d 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 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.

Smartphones were always destined to take off in China.  On a surface level, there’s an inherent love of gadgets, the shiny and new.  More importantly, it’s China’s leisure activities that really lend themselves to surfing on the Samsung.  Playing sports and going to the pub aren’t as common as in most Western countries, however popular activities such visiting shopping malls have seen the smartphone become the must-have accessory. China’s consumers spend a lot of time at home in the evenings and weekends, but it’s generally not out in the garden and increasingly not watching TV – China’s middle class are online 34% more than in front of a TV

Chinese spend more time on their smartphones than consumers in any Western country.  The high usage rates have been self-fulfilling, incentivising more content and services to be created, which in turn, encourages more consumers to use them.  With highly-specced smartphones selling for under $150, and 72.4 million 4G mobiles set to sell in China this year, China’s smartphone user experience will only keep improving.

The mobile space is a source of much nationalistic pride in China.  Home-grown devices such as Xiaomi are marketing with the best of them, and apps such WeChat and Alibaba’s mobile shopping, are setting international standards for innovation.  While online shopping is currently more popular on PCs than mobile, commerce will follow general online usage trends in China and soon be dominated by mobiles.

All of this is contributing to smartphones becoming a bigger part of Chinese consumer’s lives, touching more points in the consumer journey, right through to purchasing and after sales loyalty.  There’s plenty more on that below. 

For our Australian and New Zealand readers, China Skinny’s founder Mark Tanner will be in Melbourne on 27 March presenting at the Australia China Business Week, sharing insights, advice and best practice for succeeding in China’s dynamic market.  More information here

In the meantime, we hope you enjoy this week’s Skinny.

Consumers, Chinese Consumers

Smog Pushes Emigration: More than 80% of Chinese who want to emigrate cite pollution as the main reason. 70% of those who’ve already gone were the same. Recent bad smog has seen some emigration and overseas property consultancies have a 300% rise in inquiries.

2014 Forbes Billionaires List: Growing China’s 10 Richest: China’s middle classes aren’t the only ones getting richer.  China’s billionaires were up 25% in 2013 to 152.

Why Western Companies Like LinkedIn Need Chinese Brand Names: Chinese brand names often take on more meaning than the original Western brand names, and brands are more likely to go viral if they have a Chinese name.

Online: Internet, eCommerce, Mobile & Social Media

Vulnerability of China’s Online Shoppers: Mobile channels such as WeChat are allowing businesses to communicate on an intimate and individual level with consumers. With mobile shopping becoming simpler and more familiar, the point of purchase is directly where a relationship has been nurtured. But recent QR code fraud highlights that mobile shopping still has some vulnerabilities.

Chinese Consumers Will Now be Able to Buy Almost Anything Inside WeChat: WeChat users can buy a product online or in store payments through scanning a QR code. Companies with a Service Account can offer products and services which can be used to assist with loyalty, customer service and online selling campaigns.

Online and Mobile Luxury Spending on the Rise in China, Lower Prices a Key Driver: The gap between official offline prices and online parallel imports for high end brands can reach 30-100% in China, driving online and mobile purchases.

Nearly $1.6 Trillion in Mobile Payment Transactions Were Made in 2013: Last year, China’s central bank handled 1.67 billion mobile payment transactions, 213% more than 2012. Transactions were up 317% to ¥9.64 trillion ($1.6 trillion). 25,000 mobile Alipay transactions take place every minute. PC transactions still dwarf mobile at ¥1,075 trillion ($177 trillion), up 29.5% for the year.

The Future of the Mobile Internet is in Asia: If you wanted some perspective of the rate of growth of the Mobile Internet in Asia, check out this animated chart – Asia was already the biggest market in 2010, but its lead has runaway since. Last year, 351 million smartphones sold in China, 80% of all mobile sales.

MasterCard Survey Finds That Nearly 60% of Chinese Online Shoppers Made Purchases via Smartphones: 59.4% of Chinese online shoppers used their smartphone to make purchases, the highest in the Asia Pacific region. Security remains the top concern for 91.8% of Chinese.

Go Long-Tail for Your SEO Strategy in China: Hosting in China improves pages included in Chinese search engines and if paid ads take over brand engagement, then long-tail should be a key SEO strategy.

Premium Food & Beverage

Costa Coffee to Make China its ‘Second Home’: Costa Coffee plans to more than double its stores to number 700 in China by 2017. The number of coffee shops overall in China grew from 15,898 to 31,283 between 2007-2012, with Shanghai having the highest consumption per capita. At this stage, many consumers place more value on the experience and environment than the coffee itself.

Overseas Chinese Tourists

How Important is Getting on the Chinese Tourist’s ‘Shopping List’?: Chinese women travelling for the first time have 2-30 carefully researched items on their shopping list. Those who have travelled five or more times have 1-2 items, and plan to just choose a location and make impulse purchases, spending just as much.

Retail and Fashion

Defining Chinese Style: 22 min vid: The social capital gained from trendiness and an increasingly sophisticated sense of fashion is seeing Chinese consumers more willing to mix and match multiple brands, putting their own individual style at the centre, more so than the brand. Personal styles are expressing who they are, rather than having labels define them.

Gap Inc Seeks New Berth in China With Old Navy: Old Navy plans to overcome poor brand awareness in China, opening it’s first store in China and putting a lot of attention on online marketing and eCommerce. The fast fashion market is showing further potential, with Zara and H&M beating store opening targets, while two thirds of high end retailers missed theirs.

Fluffy little Pets

With Pet Ownership Set to Boom, Chinese Pet Product e-Store Nets $25 Million in Funding: 2% of Chinese households own a cat, 7% a dog – and just 10% of those are fed commercial dog food. Rising incomes in China are expected to drive pet ownership closer to the 40% of American households who own at least one pet. Pet-related goods sales growth rates at around 10% a year have contributed to online store Boqii receiving $25 million in funding.

Beauty and Health & Beauty

Male Vanity Helps Drive Cosmetics Sales in China: The average man in China’s top tier cities uses 2.5 facial products daily, whilst only 13% regularly use deodorant. Sales of personal grooming products aimed at men grew by 7% in 2013, higher than the overall 5% market growth, albeit from a smaller base. 73% of men believed looking good is essential for success with both women and work.

What Money Failed To Buy: The Limits Of China’s Healthcare Reform: Between 2003 and 2011 the number of Chinese with health insurance grew from 30% to 95%, with hospital bed utilisation up from 36% to 88%. Nevertheless, by late-2013 80% of Chinese still found it hard to see a doctor, with 95% believing it was expensive to seek care.

Premium and Luxury

Made-in-USA Luxury Brands Win Fans in China: American luxury brands such as Coach, Michael Kors and Kate Spade are appealing to Chinese consumers with lower price points and an affinity with the USA.

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 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.

Mention Shanghai to a Beijinger, and there’s a good chance they’ll scoff. Talk about Beijing to Shanghainese, and there may also be some jeering.  Northern Chinese like noodles, southerners have a preference for rice.  Travelling between regions in China, differences are evident in people’s appearance, diet and aspects of their culture, as well as climate variations. Whilst most of us are aware of this, curiously a lot of our marketing efforts still treat China as one big homogenous land, or at best, separates sophisticated high tier city consumers from the smaller ones.

The Regional Differences video below, explains how we need to think about China in terms of a matrix, considering city-tier sophistication, alongside regional differences in culture, climate and diet.  There’s the often-cited example of skin care needs across China, with consumers in the humid south having different requirements than those in the dry north.  There are cities where smog-protection is most important for skin cream, and others where it is sun-protection.  

Localising your product or service’s features is just the beginning, the other elements of your marketing mix and customer experience should also take the regional differences into account.  It’s seldom practical to have a something unique for each of the hundreds of Chinese cities with millions of people, but there’s often room for improvement. Advertising in general, even at a superficial level will be more effective if it’s regionalised.  A backdrop of the Great Wall or the CCTV building and a pirate-sounding voiceover will be better received in the North, than say, The Pearl Tower.   With many of us increasingly using the web, social media and mobiles in our marketing, we can be quite specific in targeting different areas of China.  

Maturing Chinese consumers are becoming more confident, and as a consequence, are increasingly developing their own identity and unique parochial traits.  So it’s best to take that into account with your marketing.  Hopefully regionalisation, coupled with what you’ll read below, will all help with your China plans.  Enjoy!

Consumers, Chinese Consumers

Regional Differences: 17:52 video about not just grouping Chinese consumers by city tier, but working with a matrix that considers city-tier with region, to account for distinctive differences in culture, diet and weather. Regionalised examples include McDonalds, slower to localise its menu in China, but now with regional menus catering for noticeably different palates across China. Unlike those interviewed, China Skinny is a believer in regionalising advertising where appropriate, as Chinese can be very parochial. It doesn’t always have to be expensive.

American Execs Say China is Getting Expensive, and Profitable: 90% of American businesses surveyed now have profitable operations in China, but their optimism is tempered by soaring costs and finding the right talent.

Number of Chinese Billionaires Skyrockets: China ‘officially’ now has 6% of the world’s ultra rich (although the actual number is likely to be much higher) – those with a net worth of over $50 million – higher than every country except the USA. USA accounts for almost half of the total.

CCTV Interviewed Chinese on Streets: “What is Patriotism?”Although Chinese receive systematic patriotism education from day one, there are some interesting responses when they’re asked what patriotism is [not viewable inside the Great Firewall].

Haier, Sina Weibo, ZTE in New Foreign Tie-Ups: Three quite different tie-ups between Chinese and American organisations is likely to be an increasing trend which sees Chinese brands make more of a mark abroad.

Consumers, Internet, eCommerce, Mobile & Social Media

Mobile Use Differs Markedly Between Cities: 54% of 18 to 32 year olds in China’s Tier 1 & 2 cities use social media apps on their smartphones, versus 41% in Tier 3 & 4. In China’s big cities, consumption, sports, tourism and navigation apps are hugely popular, whereas entertainment is a focus in smaller cities.  It would be interesting to see how it differs regionally.

China’s Online Retail Turnover Rocketed 70% YOY To 880 Billion Yuan In 2013 H1: A cool 271 million Chinese shopped online in the first half of 2013, 29 million more than the six months before. That number doesn’t even count consumers who have someone else do the shopping for them.

Trending in China: Cross-border E-commerce: Still a minnow compared to the local sales, but cross-border online shopping from China is picked to grow from $35 million this year to $160 million by 2018. Chinese consumers are the most worried about product safety and authenticity when buying online.

Macy’s Shelves Internet Expansion Plans In China, But It Isn’t Worried About Slowing Chinese Economy: Macys is holding off on big China plans as it needs to learn more about Chinese shoppers.  It hopes to get some insights from it’s minority shareholding in local online retailer VIPStore.

Chinese Food and Beverage

China’s Coffee Industry is Brewing: Chinese consumers drink an average of four cups of coffee a year, with instant coffee accounting for 80% of that. Nevertheless, the number of cafes has doubled in the last 5 years with more than 30,000 in 2012. Coffee drinking is growing 10-15% a year.

Trends and Developments in the Confectionery Sector in China: Quality and taste have become the primary motivations for Chinese consumers buying chocolate. Dark chocolate’s low sugar and fat content and rich taste has helped drive chocolate sales in China. Women eat the most.

Sausage Ceasefire May Not End War Between China’s Noodle Kings: China’s $8.8 billion a year instant noodle industry has seen competition heat up so much, margins have taken a big hit. Firms have been giving away sausage, drinks, extra seasoning and gifts to get a larger share of the 44 billion packets of noodles consumed in China each year. Another reason to position yourself as a premium brand in China if you can.

Chinese Losing Taste for Fried Chicken: Once the darling of Western businesses in China, KFC sales in China have plunged 11% in the past three months, following a disastrous quarter before that. Chinese consumers are opting for cheaper, healthier and more Chinese. Curiously, there’s nothing in the article about the string of scandals and negative press from Government media that hit KFC around poor products and the birdflu outbreak, something KFC has never been able to claw back from. Apple, Fonterra, Nike and Japanese car brands will be watching with interest.

Tourism and Travel

China Gambles on Theme Park, Whale Sharks to Lure Punters from Macau Casinos: Construction of a $5 billion resort and theme park development is well underway, 10 minutes drive from Macau, said to be China’s answer to Orlando.  The park hosts a mega rollercoaster and whale shark tank, hoping to capitalise on the 30 million tourists who went to Macau last year.

The Online Travel Industry in China is Booming, as China’s Largest US IPO in 2 Years Shows: 20% of Ctrip’s hotel bookings and 15% of flights were booked through its mobile app in Q2 2013.

Air China’s Expired Food Causes Dozens Vomit, DiarrheaChina’s only national flag carrier, Air China, served up expired food causing at least 30 passengers to get really crook.

Learning and Education

In China, Parents Bribe to get Students into Top Schools, Despite Campaign Against Corruption: Want to get your precious only child into a good Chinese school? Maybe gifting the school an elevator or telescope would help. Almost everything, from admission to grades to teacher recommendations, is negotiable if you have the right contacts and the cash, parents and teachers say.

Recreation and Sport

In China, Golf Has a New Hazard: Killer Smog: Players’ health has been sacrificed for the financial benefits of establishing golf tournaments in China’s lucrative market [not viewable inside the Great Firewall] .

Fine Art

Chinese Buying Frenzy Helps Sotheby’s to $540 Mln Record: More collectors from China and elsewhere in Asia helped Sotheby’s HK break records with US$540 million, including a $3 million Zeng Fanzhi painting, a $3.9 million bronze Buddha and a $2.4 million Chenghua-era “Palace” Bowl. China’s new wealthy “don’t just want to collect and enjoy, they want to be No. 1,” says HK-based dealer, William Chak.

Is Chinese Contemporary Ink Painting the Next Big Thing?: Traditional ink paintings are picked to be the next big thing in Chinese are as art dealers and auction houses look to expand and diversify the art market in the Mainland.

Auto and Cars

Chinese Auto Marketing Shifts from TVCs: More than 100 auto companies organised micro-movies in the last quarter of 2012, and had product placements in close to 500 micro-movies. 60% of Chinese surveyed believe it helps brand image, with 33% believing it made people more likely to purchase a car.

Premium and Luxury

Luxury Companies Are Making Budding Aficionados of Chinese Consumers: Including luxury experiences as part of the luxury goods offering ensures a much stronger proposition. Good examples are Johnny Walker “experiential brand centres” and Porsche multi-city road show, with support online activity.

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 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.

Welcome to this week's skinny on China.  Legend has it, about 1200 years ago, a goat herder in the Ethiopian Highlands noticed his animals getting frisky after eating berries from a coffee plant. Intrigued, the herder picked some fruit and took them to a nearby holy man, who wanted nothing of it, tossing the berries into a fire.  But the sweet scent of the roasting coffee soon became irresistible, and the men raked up the embers, grounded and dissolved them in hot water, creating the first cup of coffee.  By the 17th century, the good drink had spread up the Nile to north Africa and across to the Arabian Peninsula, before making it’s way to Europe and then much of the world.  But not to China.  

China has long been a steadfast nation of tea drinkers.  But over the past few years that has changed with Chinese increasingly drinking coffee.  Starbucks are picking China to be the 2nd largest coffee market outside of the US in two years.  That’s great for the coffee industry, but it also represents a shift in Chinese attitudes towards western lifestyles and products that were not even considered a generation ago.  Below you’ll find a few articles about how coffee and cafes have been adapted to appeal to Chinese tastes as well as the usual spread of news and views on how to woo more Chinese consumers. 

If you have any friends or colleagues looking to grow their coffee business, tourism revenue or exporting anything to China, please lend them a helping hand and pass this newsletter onto them. After that, grab yourself a coffee and enjoy the news…

Chinese consumers Understanding Chinese Consumers

A Letter to China, from America: How Starbucks, KFC & McDonalds represent the first step for Chinese consumers into western products and the opportunities it brings for exporters. Some good data on American exports to China.

China's Middle Class Muscles In On Luxury Class: What Chinese consumers are spending their money on these days.

Social Responsibility Could Be Key To Deeper Connections With Chinese Consumers : Will social responsibility be the key for brands to evolve in China as consumers get over their bling fixation and become a bit more sophisticated?

Chinese food Food & Beverage – Coffee

Nestle to Battle Starbucks Over Chinese Portioned Coffee Market: The average Chinese consumer drinks just three cups of coffee a year, less than 1/200 of the cups the French do, but its growing 19% p.a. and Nestle hoping to tap into that.

China’s Coffee Industry is Starting to Stir: How Coffee's big boys (& girls) Starbucks and Nestle have made big bucks in China. Getting China's tea drinkers to sip coffee has many their lessons for other industries pioneering in China.

Chinese tourism Tourism

Tips for Marketing to Affluent Chinese Consumers: Great article with advice to woo the 60m Chinese travelling overseas annually, much which can be applied to other industries.

How Can Brands Use China’s Media Landscape To Their Advantage?: Some advice on tapping into the media in China to attract Chinese tourists, students, investors and shoppers.

Chinese Internet Internet & Mobiles

Chinese Consumers Favor HTC Smartphones Less in September: Chinese mobile brands eroding the territory of some of the more established smartphone manufacturers in China – further signs that Chinese brands are becoming acceptable to Chinese consumers for certain categories.

How Luxury Brands Can Reach The Online Shopper in China: Good summary of Forrester research on online purchasing habits by Chinese consumers. An interesting outtake is that 79% of low income online consumers claim to buy some sort of luxury good on the Internet. It doesn't elaborate whether that includes fakes, however one third of online Chinese consumers are very concerned about buying fake goods online.

Chinese luxury goods
Luxury Goods

Chinese Shoppers Power Global Luxury Sales: Insights into the global market for luxury goods: Tourists account for 40% of luxury purchases with Chinese tourists making one-third of purchases in Europe. Overall, China accounts for 25% of the global market.

Luxury Goods to Slow as Chinese Spend Less: Carrying on from the last article, Mainland China growth on luxury goods is expected to be 18% this year – not bad until you compare it with the 30% and 35% over the past two years

Chinese retail Fashion

Hidden European Fashion Billionaires Undressed on China: In the middle of dire economic times in their own countries, a few European fashion manufacturers are doing very well out of China's appetite for their rags.

Chinese banking Wealth Management

Growing Popularity of Wealth Management Products in China: China's high savings are increasingly being invested in wealth management products – up 15.7% for the 1st half of 2012 from a year earlier, although nothing like the 123% growth in the 12 months before.


That's the skinny for the week!

If you've missed earlier news or need to learn more, there's a trove 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.