One of the giveaways of a newbie to China is the bafflement about being unable to access Google, Facebook, Youtube, Instagram and Twitter – unless they’re chewing through their data roaming quotas or have planned ahead with a VPN. It quickly becomes apparent that China’s digital ecosystem is unlike anywhere else in the world.

Those same newbies are likely to try and make sense of it all by making direct comparisons of Amazon with Alibaba, Facebook with WeChat and Twitter with Weibo. Yet the Chinese platforms aren’t just different by appearance and namesake; their features and, more importantly, the purpose they serve in the consumer journey are often quite disparate from platforms in the West. In many cases, they are functionally more advanced (often by years) than overseas apps, which has seen companies like Apple, Amazon and Facebook replicating features from Chinese apps.

Many brands understand these differences and focus on localising tactical campaigns to take advantage of Chinese platforms’ rich and engaging features online and offline. Yet a number still miss the bigger picture of how China’s tech giants differ from the West: their touch points with consumers are far deeper, wider reaching and offline than those overseas.

One of the important growth strategies executed by China’s tech companies has been to expand beyond their core industries, even if links seem tenuous to outsiders. We saw this in 2014 when Alibaba began purchasing brick & mortar stores and then again in 2018 with their investment in screen advertising.

There are a number of reasons why this type of expansion has happened much more in China than other countries: 1. In most countries when companies get too large and dominant, they are usually forced to split. In China there is barely a whiff of this; 2. Most of China’s bigger companies with real money to invest are tech firms and State Owned Enterprises (SOEs). As SOEs are comparatively more conservative, there is less competition for big tech companies when making major acquisitions; 3. Traditional channels are less mature and more fragmented in China, enabling lower acquisition costs for market leaders and much more scope for disrupting tech giants to break in; 4. Accumulation of user data is far more liberal in China, providing significant scope for tech companies who already have the data. This enables them to utilise data synergies across new acquisitions, which can help justify paying a higher price for them; and 5. Consumers are much more open the commercial use of their data and appreciate the convenience it brings.

The approach hasn’t just been adopted by China’s famous tech giants though. We’ve also seen lesser-known tech companies utilising their presence, channels and data from their category. For example, mid-sized travel portal Tuniu has tapped into the nuptials industry, launching a marketplace just for wedding photography.

What does this mean for brands? Brands should understand just where Alibaba, Tencent, ByteDance, Meituan and other niche platforms are playing, even if they don’t appear to have an obvious connection with their industry. Awareness of their reach and subsequent opportunities can help determine how best to partner with and leverage them. Even the biggest brands in China rarely attempt to approach the market alone and will buddy up with one or more of the tech giants. Similar to the many brands who have co-located marketing staff close to Walmart or Carrefour in the West, close proximity to China’s tech leaders is likely to be an increasingly common strategy in China. Contact China Skinny to assist you in identifying these opportunities and recommending how best to leverage them. Go to Page 2 to see this week’s China news and highlights.

Finding a steaming plate of pad thai or a hearty massaman curry in China is infinitely easier today than it was five years ago. In Shanghai alone, there are now more than 225 Thai restaurants. The snowballing of Thai cuisine is representative of the overall growth of foreign cuisine in China – a product of rising discretionary income and increasingly adventurous diners, but also by the growth of tourism.

9.8 million Chinese tourists visited Thailand last year, almost 600% more than in 2011 – the days before the 2012 hit movie Lost in Thailand brought the country into the spotlight in the mainland. The most interesting driver behind the rise of tourists is the number of Chinese coming from lower tier cities. This has been helped by stress-free visas on arrival, which are typically harder to get in lower tier cities, and the accessibility of the country. Direct flights between cities in China and Thailand grew from 69 to 148 over the past three years.

Although sun-seekers hoping to have Thai beaches to themselves won’t be too delighted, soaring Chinese tourism to Thailand has benefits far beyond Thailand’s touts and business owners. In the years that China Skinny has been tracking Chinese tourists, we have noted a speedy evolution in the way they travel. The first few trips are almost all to locations in close proximity – historically to Hong Kong, Macau and Taiwan but increasingly to Thailand, Japan, South Korea, Singapore, Malaysia and other Southeast Asian countries. This whets their appetite and builds confidence for more exotic, long haul destinations that are more aspirational and build status and street cred from WeChat Moments’ posts.

Evolving travel is good news for well-marketed and China-ready destinations beyond Asia – not just those in the tourism industry, but many sectors exporting to China.  Food exports are an obvious beneficiary: 55% of Chinese overseas travellers claim enjoying food is a key objective when heading abroad according to Nielsen research. Tourism Australia research has found Chinese who visited Australia in 2016 are 40% more likely to rate Australian food and wine as good. Similar research discovered that Chinese tourists to Australia spent 40% more on Australian products after returning to the mainland. It makes sense, when you’ve returned home after spending time in China, you’re probably more likely to seek out dumplings, Sichuan peppers and the like.

The positive flow-on effects go well beyond food. Our research has found similar affinities with Chinese tourists to Nordic countries who are much more likely to purchase and advocate Nordic furniture, fashion and other design, as well as meatballs.

Those tourists from lower tier cities who are filling planes to Thailand are also the next generation of travellers to European, North American and Australasian destinations.

Of the 820 million Chinese who live in urban areas, just 73 million – less than 9% – live in first tier cities. Although almost all of the other 91% have never travelled, they are starting to consider places like Thailand, and then further afield. They will get a taste of foreign products and lifestyles, sharing them with their networks back home, all of whom will be a little more inclined to buy things from afar. They are the 750 million reasons why the China opportunity still has so much upside. Agencies such as China Skinny can ensure you are best placed to tap that opportunity. Go to Page 2 to see this week’s China news and highlights.

Chinese Valentine’s Day Qixi fell on Monday with the usual barrage of schmaltzy ads and online deals. Yet not everyone was out spending a month’s wages on heart-themed handbags or posting romantic dinner snaps on WeChat.

There are more than 200 million singles in China, with the number of Chinese adults living alone growing 16% since 2012 to reach 77 million. By 2021, they’re set to rise to 92 million according to Euromonitor. China’s much-publicised shortage of 30 million females has been exacerbated by ‘left over’ women in urban areas whose evaluation of Mr. Right has become more rigorous, while careers are increasingly more important and eligible bachelors get distracted with gaming (although girls do find love on Honour of Kings and other games).

China’s singledom trend is being led by higher tier cities: Women in Shanghai average 30 years old when they first marry, up from 27 in 2011. They’re also twice as likely to get divorced than a decade ago. In universities – where many Chinese traditionally meet their spouse – 70% remain single, with 68% of them wishing they weren’t.

For a large share of high-spending urban millennials, Me is the new We. Brands are showing ever-more love to appeal to the valuable single demographic’s functional and emotional needs. The best-known example is Tmall’s Single’s Day but on a smaller scale, there are a host of examples brands can learn from to ensure their products and services are relevant to this lucrative segment.

Hot pot chain Haidilao offers solo diners a choice of large, cuddly soft toys to join them for dinner to help them feel less lonely. Qixi saw legendary snack brand Three Squirrels target China’s “single dogs” by crafting a promotional campaign to let their voices be heard. Japanese chain Muji has introduced smaller rice cookers, ovens and kettles aimed at Chinese singles. Food & beverage brands are increasingly offering single-serve formats for dinner and other meals and the explosive rise of food delivery has been largely driven by singles with 65% of food delivery orders on Meituan-Dianping going to unmarried folk.

Tourism is a segment that stands to benefit from having single-focused offerings for Chinese travellers. Solo travellers are much more likely to prefer sightseeing and experience local culture than groups, and safety is more important than ever. Accommodation and activities that strike a chord with this are likely to experience the greatest growth.

With China’s consumer market now the world’s most contested, brands that take a broad brush approach to appeal to everyone are likely to appeal to few. More targeted marketing to specific segments such as singles is likely to have a greater impact. Agencies such as China Skinny can assist with that.

For our readers in Southern California, the esteemed Ann Bierbower will be sharing valuable China marketing tips and insights at the Export 101 workshop in Los Angeles next Wednesday September 6 organised by the CalAsian Chamber, US Department of Commerce and DHL Express.  For more information and to register, tap/click hereGo to Page 2 to see this week’s China news and highlights.

Chinese love property. 90% of families in the country own their home, giving China one of the highest home ownership rates in the world. The majority of Chinese investors’ portfolios are dominated by property.

Few things influence the consumer confidence like house prices in China and prices are soaring – in Shanghai they climbed 31.7% year-on-year in December 2016 for example. With house prices varying city by city, recent home purchases will have spent a lot more in cities like Beijing and Shanghai than Xi’an and Changsha, which can alter their spending on other consumer goods.

Few things polarise the disparity among Chinese cities quite like house prices, as the following infographic will illustrate…

China House Price Infographic

When a Chinese consumer makes a decision – from picking a bottle of water, to choosing which country will best educate their child – the influence of KOLs (Key Opinion Leaders) can be dramatic. A feature of Chinese thought since the days of Chairman Mao, the KOL economy is set to boom; 2016’s value of ¥53 billion ($7.8 billion) is estimated to near double to ¥102 billion ($15.1 billion) next year. To bring some perspective, that is three times the forecasted value of China’s newspaper and magazine advertising in 2018.

Chinese consumers are well aware that influencers are rewarded for endorsing brands (in addition to ‘tips’ from fans). Despite this, their social media broadcasts have become some of the most authoritative and trusted sources for information.

One of the reasons for this can be traced back to 2011 when two of China’s new fast trains crashed, killing 40 people. While state media attempted to cover it up, consumers posted about it as it happened on Weibo, which was the primary social channel at the time.  This had two notable consequences: 1. Chinese began to trust what they read from reliable sources on social media much more than traditional state-run media channels like TV, radio and print; and 2. Beijing, having already lost a lot of face from the Weibo reports of the train crash and subsequent citizen exposés and protests, saw the need to wrestle back influence from the people.

In 2013 legislation was passed threatening jail to those who created viral social posts that weren’t aligned with the Government mandate.  This fundamentally altered the way influential Chinese posted on social media.  With several celebrity social media accounts shut down in recent weeks, Beijing continues to tighten control on what KOLs actually say.  In short, any KOL who doesn’t toe the party line will be shut down and in most cases, lose their livelihood.

The reality of operating in China on any scale, whether you are a celebrity, brand, or any type of business, you need to play by Beijing’s rules.  Notwithstanding, although some would say KOLs are increasingly becoming state cheerleaders, their attraction certainly isn’t waning.

40% of food & beverage advertising in China is fronted by a KOL, versus around 10% in the US and UK. Luxury brands are among the most prevalent users of KOLs with watchmaker Jaeger-LeCoultre paying Papi Jiang over ¥5 million ($740K) for a campaign which saw their awareness more than double.  Michael Kors threw a birthday party for actress Yang Mi.  Brands are also using lesser known individuals, but who are well respected in their fields to appeal to an increasingly discerning Chinese consumer who are looking deeper into KOL endorsements. An example of this is Giorgio Armani supporting Chinese designer Xuzhi Chen.

KOLs can help break through the extraordinary clutter in China and amplify messages at a time when just 28% of 12-14 million official WeChat accounts saw an increase in content readership last year.  But much like WeChat, a relevant and smart KOL strategy is imperative to ensure brands aren’t throwing good money after bad.  Agencies such as China Skinny can help devising such a strategy.

On the subject of marketing strategies for China, our US-based readers in the Bay Area should consider attending the Export 101 Series on Thursday July 20 in San Jose. China Skinny’s Ann Bierbower will be sharing wisdom, joining the US Department of Commerce, DHL Express and the CalAsian Chamber at the event. Register here. Go to Page 2 to see this week’s China news and highlights.

Last week Alibaba hosted their first conference outside of China – Gateway 17 in Detroit. China Skinny was there.

Jack Ma has long had a personal dream of cracking the US and with plenty of cash in the coffers, Alibaba was out to dazzle the audience. Jack Ma was joined by Martha Stewart, Lisa Ling, Charlie Rose and robots, backed up with an arsenal of big statistics and some sage advice to entice more American businesses to export to China.

The focus of Gateway 17 was to sell the Alibaba dream, yet exporters would be wise to consider the multitude of other options when planning a market entry into China. For big brands, a presence on Alibaba is an essential hygiene factor for both sales and marketing.  Marketing on Alibaba’s platforms is becoming more powerful with new tools such as the Uni Marketing system offering features such as personalised and targeted communications.

Whilst there are great success stories on Tmall and Tmall Global, the platforms aren’t right for every brand.  It is not cheap to set up and operate, and new stores are competing with over 10 million other vendors who are often well established. Smaller brands may also have difficulty being accepted by Alibaba.

Alibaba has a finely tuned sales machine attracting foreign brands to its platforms.  It has set up offices across North America, Europe and Australasia, has shiny campus tours for visiting delegations and now hosts overseas events to woo Western brands to its cross border channels.  Yet with all the good news stories, there are some cautionary factors.  For example, Tmall Global’s sales drive saw the number of brands selling on the platform grow 169% last year, with sales growing just 30% – a similar rate to ecommerce overall.  In short, there are many more foreign brands competing for a smaller piece of pie.

Cross border commerce is also much more fragmented than Mainland based commerce.  Alibaba commands around 80% of overall ecommerce sales in China and 57% of B2C commerce.  Whereas Tmall Global accounts for just 18.9% of the cross border market and Taobao Global 15.4%.

There are a host of smaller cross border platforms that are often more targeted to specific segments such as food, wine, cosmetics, mum & baby, health and fashion.  They may only have 10 or 20 million shoppers, but they are generally qualified for your segment, often more affluent, and the competition is less fierce.

Alibaba is China’s most popular ecommerce platform and a great option for many brands, however China is a large market with a number of online and offline sales channels, so take some time to consider them. Agencies like China Skinny can help you work through your options. Go to Page 2 to see this week’s China news and highlights.

In 1990, Greater China’s metro systems covered just three cities. By 2020, over 40 cities will sport modern, efficient underground commuter networks. In that same three decades, Beijing has gone from a couple of lines and Shanghai from nothing, to the two largest and busiest networks in the world.

Anyone who has immersed themselves in the swarms of China’s metro systems will have noted that subways are playing their part in fuelling the mass movement of consumers. Even with barely any room to move, heads are fixed on smartphones – be it social media, ecommerce, playing games or watching video, all consciously and subconsciously feeding China’s consumption machine. Yet more importantly, the zealous expansion of China’s subways represents something much bigger. It signifies the rapid rate of change and progress altering Chinese consumers’ cities and as a result, their residents’ lifestyles, behaviour and expectations.

While [often highly indebted] local governments are funding the expansion of subway networks, private enterprise is driving another transport phenomena that makes the metro expansions look slow. By Q1 this year China’s bike loan schemes accounted for more trips than all on-demand transport in North America, Europe, Middle East, Africa and India combined with their Ubers, Lyfts, Olas, etc. Two thirds of China’s bike-loan users now ride three or more times a week.

China had just a few small single-city bike loan schemes until last year, when funding allowed them to expand nationwide and internationally. The rest is history. Ofo alone is said to have 20 million registered users and 6 million yellow bikes in 100 cities. Mobike claims to be even larger. And another 30 rivals vie for market share in yet another example of how spoilt for choice Chinese consumers are, and how quickly they embrace new trends.

No one saw it coming.  Brands looking to build long-term strategies for China should keep that in mind. Everything from the types of holidays Chinese consumers choose, to the food they buy, where their health budgets go, to their preference for cars is changing as quickly as the adoption of new transport options.  Add that to the regular stream of new regulations and sales channels and a China strategy is hard to pin down.

It is not unusual for foreign brands to want to build 5 or 10-year plans for China. While it is important to have a long-term focus in China, rigid plans will very quickly become irrelevant. Things that have taken 5-10 years to evolve in some markets can take 12-18 months in China.

Chinese entrepreneurs have been brought up in a constantly changing environment and many run their businesses with the same expectation, ensuring they maintain the agility to adopt new initiatives in weeks that bureaucratic corporations can take years to do. Anyone in the China market is competing against such companies, meaning staying ahead of the trends is imperative. Agencies like China Skinny can assist with just that. Go to Page 2 to see this week’s China news and highlights.

Years ago, China’s sprawling network of street-noodle vendors began utilising the curious new commerce features of an app called WeChat. A willingness to embrace change signifies the innovative spirit that pulses through modern China. From those polystyrene bowls of late-night fry up all the way to billion-dollar-plus bike loan schemes a now near necessity in the lives of many Chinese, there is no shortage of inspiring innovation coming from the Middle Kingdom.

China’s rich history spans 5,000 years. Yet few periods have seen the velocity at which China has evolved as these 4 decades past. In a little over a generation Chinese consumers have seen mass urban migration, internationalisation, globalisation, a fast-track to modernity, the effects of a one child policy and steady episodes of cultural upheaval and redirection. Moulded by constant flux, the resultant consumer class is not only unfazed by change but expects and embraces it.

WeChat payment is one example. The seamless purchase of goods, services and content that can be integrated almost anywhere online and offline has opened the door for infinite new ways to buy and consume things. Similarly, live streamingvirtual reality and augmented reality from innovators like Alibaba has merged with ecommerce.

Yet innovation in China spans far beyond the well-known smartphone apps and ecommerce platforms. China Skinny is seeing it across every piece of the marketing mix. From packaging to pricing models, brands are localising best practice from overseas, and some even innovating in a way that is native to China.

One of the more interesting pricing models is subscription-based. Whilst we are yet to see any game changers like the Dollar Shave Club, burgeoning niches are constantly developing.  Each initiative helps lock in consumers who are well known for their promiscuity.

Chinese consumers find subscription models attractive for a number of reasons. Van Diemen’s Land’s subscription to fly in fresh milk from Tasmania ensures a stable supply of healthy, tasty, fresh milk for those families aware of the benefits of drinking it. Another interesting initiative is the Drinking Buddies scheme which sends members a box of six different craft beers every month and offers access to tastings and workshops. It appeals to craft beer drinkers as they can try niche beers that they may not have been able to get elsewhere – something that China’s craft beer enthusiasts crave. It’s a great low-cost way for the brand to get in front of grassroots influencers who will gain social credit from sharing new undiscovered beers among their beer drinking friends.

There are obviously plenty more innovative and cost effective ways to reach and appeal to Chinese consumers beyond the traditional distributor model. Agencies like China Skinny can assist in developing such plans.

On the subject of milk, beer and food & beverage in general, China Skinny’s Mark Tanner will be joining a host of excellent speakers from the industry to speak about food and beverage trends in China at AmCham’s Future of Food Conference on Wednesday 24 MayMore information here. Go to Page 2 to see this week’s China news and highlights.

Happy Year of the Rooster. Welcome back from what was a consumption-driven Lunar New Year break with spending up 48.1% from last year.

Much of the crowing leading into the Rooster was about China taking the lead in driving global trade as other major economies speak of regressive trade policies.

“Pursuing protectionism is just like locking oneself in a dark room. Wind and rain might be kept outside but so are light and air,” noted Xi Jinping at Davos.  Whilst President Xi’s speech and much of the subsequent media commentary is cheerleading China’s stance on trade, it should be tempered with some facts and developments illustrating that China may be coming to the party, but the punch could still do with more fruit.

While the much-heralded Free Trade Agreements can be a boon for exporters, many non-tariff measures such as regulatory barriers, inconsistent application of ­import rules between different ports, and lengthy, uncertain processes to register products and ­export facilities still throttle trade. Exporters also commonly get caught up in political differences, as South Korean brands recently discovered.  Regulations often favour local players.  Take the cosmetics industry for example – foreign brands have to test on animals to sell in China, while local brands don’t. The all-present state media propaganda also regularly advantages domestic companies.

One of the more curious recent developments was last month’s announcement that China would be making it even harder to use a VPN to access websites outside the Great Firewall. China has its reasons for its Internet policies, but its timing around President Xi’s Davos address was interesting. As Jack Ma will profess, few things assist international trade more than unobstructed Internet access.

One category that is likely to see less trade is residential property investments overseas.  New policies aimed at slowing China’s capital flight appear to be taking effect – in the short term at least – much to the relief of first home buyers in cities like Vancouver, Los Angeles, London, Sydney, Melbourne and Auckland.

Nevertheless, Chinese trade has come forward in leaps and bounds since opening up in 1979 and is generally moving in the right direction. Countless foreign brands from wagons to wine have enjoyed its benefits. With the number of Chinese earning more than $35,000 a year set to quadruple over the next decade, many more brands are likely to benefit too, particularly those who understand their target market and the tools available to reach them. Agencies like China Skinny can assist with that.  Go to Page 2 to see this week’s China news and highlights.

In January 2013, Bloomberg reported that Beijing’s pollution was worse than the average US airport smoking lounge. The study was one of the most polarising accounts of the severity of China’s pollution at the time.

By 2014, the Chinese Government, state organisations and consumers were talking much more openly about the problem.  State organisations such as the Shanghai Academy of Social Sciences, published statements claiming that Beijing was “uninhabitable for human beings” and the China Agricultural University suggested that China would suffer conditions “somewhat similar to a nuclear winter” if smog persisted.  Consumers became more aware that the soupy mist wasn’t fog, but a toxic vapour that could harm their health.

Sales growth of products such as air purifiers, face masks and even canned air soared into triple figures.  China Skinny started noticing a wholesale movement of consumers seeking healthier products, of which pollution was a strong contributor.

In addition to the obvious effects of pollution such as lung cancer, asthma and other respiratory diseases, there have been a number of other harrowing side effects such as increased obesity, Alzheimers and lower sperm counts.  A recent study found bacteria in Beijing smog can lead to antibiotic resistance. Gulp.

Whilst China’s water and soil pollution continues to worsen, the result of Government policy and enforcement and slowing manufacturing, energy and construction sectors has seen air pollution improve slowly since 2014 – it’s gone from really, really, really hideously bad, to just really, really hideously bad.

So what does this mean for brands selling to Chinese consumers? With every new study revealing something evil about China’s pollution, it provides more emphasis on being proactively healthy – growing consumption of supplements and vitamins, healthy food grown in clean environments, and sports and fitness products. Tourism is also a beneficiary, where Chinese choose clean spots over polluted domestic destinations to enjoy their free time. Parents see overseas education institutions more attractive and migration increases – and foreign real estate sales as a consequence.

For those pinning their hopes on a positioning strategy revolving around ‘clean and green’ to lure Chinese consumers, there are a million other brands doing the same. Whilst it is important, you probably want to include other points of difference as well – China Skinny can assist with that.  Go to Page 2 to see this week’s China news and highlights.

Beijing recently acknowledged that it needs to attract more foreign talent to help its transition to an economy led by consumer spending and innovation.  It has even announced plans to set up its first immigration office to assist.

China is right in doing more to attract foreigners to its shores.  44% of startups in the Silicon Valley had at least one immigrant according to a 2012 survey.

Whilst China has unique characteristics and shouldn’t be blindly trying to replicate the world’s international cities and innovation hubs, it could probably learn a thing or two from them.  Around 40% of residents in New York, London, Singapore, Sydney, Toronto and Los Angeles are born overseas, whereas Shanghai and Beijing have less than 1%.  Shanghai’s foreigner population actually declined 2% in the first quarter of last year.  About 600,000 foreigners officially live with China’s 1.4 billion people – there are five times more migrants in London alone.

In follow up to the announcement about opening an immigration office, the State Administration of Foreign Experts Affairs stated it would be ‘simplifying’ the working permit process for foreigners.  From 1 November, expat eligibility for work permits will be scored on current salary in China, educational background, number of years of work experience in China, Chinese language proficiency, age and location.

Although the scoring system hasn’t been announced, it is likely that adventurous youth will find it very difficult to legally work in China unless they graduated from a top university, speak incredible Chinese, are on an epic salary and live in the middle of nowhere.  The Beijinger did a great speculative quiz on how expats’ acceptability could be ranked.

As we’ve said before, youth present some of the greatest opportunities for China to up its game for innovation and marketing.

For innovation, youth often have a different way of looking at things and are less biased by long-held beliefs or habits – two of the key ingredients for game-changing innovation.

Youth can play an even bigger role in China’s ability to market itself and its brands.  China spends an estimated $10 billion annually on “external propaganda” with very little return. A global study by London-based Portland Communications recently found China ranked dead-last of 30 countries for soft power.

While hosting a few big events, opening Xinhua news offices and Confucius Institutes around the world, and building sports stadiums all helps; the most powerful gains in China’s brand will come from the viral digital channels of the grassroots influencers championing the country through their social networks.

Trends worldwide are rarely set by crusty middle-aged men with love handles, but rather the digitally active youth with cooler haircuts and a better fashion sense.  There are plenty of them wanting to live in China, so the country should be doing what it can to welcome them to cities like Shanghai, Beijing and beyond.

We appreciate that China shouldn’t just let anyone in, but when the new pilot expat ranking system is launched on November 1, we hope that Beijing has considered the importance of youth in continuing their momentum to becoming a true world leader for innovation.  We will all be richer for it.  Go to Page 2 to see this week’s China news and highlights.

Online-to-Offline (O2O) is one of the most used buzzwords in China today, and with good reason.  In most Western markets, O2O refers to ‘click-and-collect’ items – goods bought online and picked up at a brick & mortar store.  Whilst retailers such as Ikea and Walmart are dabbling with it in China, cheap delivery and low car ownership means that click-and-collect hasn’t taken off here like other countries. Nevertheless, China is leading the world in O2O adoption.

Physical and digital objects are far more intertwined in the Middle Kingdom than in the West. This leads to a much broader definition of O2O, including services that are ordered online and delivered in the physical world. O2O covers everything from ride sharing and travel to in-home massage and dry cleaning pickup. The value of China’s O2O ecommerce sales is picked to grow from $335 million in 2015 to $626 million in 2018 according to iResearch.

Although most O2O forecasts are based on ‘Online-to-Offline’, ‘Offline-to-Online’ is equally important, particularly for marketers. Chinese consumers are increasingly interacting with brands online, with 72% online throughout the day according to Epsilon.  However, 40% of consumers prefer to interact with a brand in a store – making it the most popular channel and one of the most effective touch points to connect online to build a sustainable and engaging relationship. Stores that integrate online channels backed up with great service, can take advantage of the 63% of consumers who follow brands on WeChat after a good experience.

Shopping centre operator Intime is one retailer starting to tap into O2O opportunities to drive foot traffic and sales to its stores, growing revenue at a time when offline sales at China’s top-50 retailers declined 3.1%.

Although most Chinese consumers use O2O services, it is the all-important females who are embracing it like no one else; 73% of women have used O2O restaurant and dining/food delivery services in the past 12-months versus 49% of men. Females are also 38% more likely to have used O2O travel services than males.

China’s leadership in the O2O space can be attributed to factors such as high smartphone usage, an eagerness for new technology including online payment platforms AliPay and WeChat Pay, QR code adoption, cashed-up tech startups constantly offering deals to win market share, convenience for busy urbanites, and Government policy encouraging Chinese innovation and leadership in the area.  Having an understanding of Chinese consumers’ rational and emotional drivers means that O2O services can be best integrated into channel initiatives to ensure the greatest chance of success.  China Skinny can assist with that.  Go to Page 2 to see this week’s China news and highlights.

An article in the Sydney Morning Herald last week highlighted some common misnomers about localisation and translation for China: After researching in China, an Australian vitamin brand found that their Mandarin-speaking Chief Science Officer would be most compelling speaking English in the brand’s promotional videos for the Mainland market.

For some, it may be a strange concept that communicating to the Chinese target market in Chinese can hurt sales.  But it comes down to authenticity.  If you are trying to promote yourself as an Australian brand, or from another English-speaking country, you appear to be the real thing if your communications are in English.

Similarly with packaging.  If a brand’s labels are translated in Chinese, many consumers are less likely to associate the product with the positive attributes around that country of origin and will question how the Chinese supply chain has been involved.  The less similar it looks to the same products in the supermarket of an item’s home country, the less Chinese consumers will trust it.

Notwithstanding, there are countless touch points where translating into Chinese is advantageous.  Even though over 300 million claim to have English skills, it is rudimentary for many.  And even fluent English speakers will instinctively turn to Chinese and be more comfortable in their native tongue. Chinese language is often preferred in the details, such as searching for facts on a website, or reading a visitor guide on holiday.

Whilst some videos look more authentic with spoken English and Chinese subtitles, there are many examples where videos in Chinese or with a Chinese speaker translating on the fly are hugely successful, such as Tmall’s streaming video service.

Getting the mix of English and Chinese language right, and in the correct places is just the start – localisation should be much more than just translating messaging word for word.  Chinese consumers often have completely different buying behaviour and motivations which is best reflected in positioning and communications.  And those motivations regularly differ from region to region. Go to Page 2 to see this week’s China news and highlights.

Last week, WeChat’s owner Tencent agreed to pay $8.6 billion to gain control of Finnish mobile games maker Supercel. This was less than two weeks after the game-to-movie adaption Warcraft stormed the Chinese box office with a record-breaking $156 million in just five days – more than Star Wars: The Force Awakens total haul of $125.4 million in China.

Tencent had also invested in the Warcraft. Following the Supercel purchase, we are likely to see the company backing more film adaptions of games and the corresponding Marvel-type merchandise, theme parks and everything else they can make a buck on.

Chinese love gaming; Tencent alone made $9 billion in gaming revenue last year. Chinese gamers account for more than half of the 5 million World of Warcraft players globally.  You’ve got a winning formula when you can couple that with China’s growing affection for cinema, which soared around 50% last year and is expected to be the biggest market globally by 2017.  15 new cinemas open a day in China providing more and more consumers with an accessible and affordable experience.

What is interesting about the Warcraft in China, is that it bombed in the US, earning just $24.4 million on opening weekend, and receiving a rating of just 4.2/10 on Rotten Tomatoes. It is another sign that success in the US is becoming less crucial for the overall triumph of blockbusters worldwide.

The increasing importance of wooing Chinese cinema-goers is already changing the face of film, but this is just the beginning.   Tencent, like Alibaba, is scrambling to invest billions in the entertainment and film industries.

With China’s middle classes being so active online, its big Internet companies have immeasurable insights into consumer preferences.  Take Tencent, they have an enormous bank of user insights – of Chinese likes and dislikes, just from WeChat Moments, messages and games.  This is likely to factor into themes and paraphernalia for film and game development.  Alibaba’s customers’ ecommerce, Youku and other preferences will also help shape the direction of movies.

What does that mean for brands? It should reemphasise the popularity of gaming with Chinese consumers, and urge brands to incorporate this into marketing initiatives where relevant. There are also increasing opportunities with film associations and product placements. On a deeper level, it is likely that companies like Tencent and Alibaba will increasingly integrate their gaming and movie assets into their platforms such as WeChat and Tmall, allowing a new suite of targeted and engaging marketing opportunities on digital channels.  Stay tuned! Go to Page 2 to see this week’s China news and highlights.

Xiaomi is a brand that many Chinese companies want to emulate. It has utilised China’s army of engineers and manufacturing nouse to produce decent products at low prices. But unlike most local brands, it has delivered great marketing to sell those products.

By 2014 – less than four years after launching, Xiaomi had become the top-selling brand in China’s hyper-competitive and enormous smartphone market.  It had beaten shrewd foreign brands such as Samsung and Apple and impressive local operators such as Huawei and Lenovo.

Xiaomi’s rise was a showcase for the power of China’s Internet users. Virtually all of its marketing and sales were Internet-based, led by online flash sales. On Single’s Day in 2014, Xiaomi sold more than ¥1 billion ($163 million) of goods by lunchtime, contributing to the company’s mouth-watering growth rates of 185% that year.

After selling 61 million smartphones in 2014, Xiaomi set its sights on 100 million devices for 2015. Although sales grew a respectable 15% to 70 million phones last year, it appeared Xiaomi’s flash sale gags had lost their novelty factor with China’s consumers. Even in the fast-growing Indian market, ideally suited to value devices such as Xiaomi, Apple has overtaken the company for shipments – a kick in the guts for the company which had pinned its hopes on other emerging markets to fuel much of its continued growth.

The fading of Xiaomi’s mojo comes down to three main things: 1. Chinese marketers are great imitators, meaning Xiaomi has less of a point of difference and hasn’t innovated its marketing fast enough; 2. Chinese consumers are trading up to premium products across many segments, including smartphones. While China’s smartphone market grew just 2% last year, handsets over $500 grew 45%. 74% of Xiaomi’s 2015 revenue came from smartphones costing less than $200; and 3. Lack of an offline retail presence.

Although China’s rising ecommerce sector hogs the headlines for leading China’s consumption growth, it is still very dependent on complementary offline channels. Likewise, physical stores are very reliant on digital. That’s why China’s smartest online companies such as Alibaba, Tencent and Baidu are investing heavily in integrating offline assets. Chinese consumers often like to see, touch and try products in the real world, even before buying them online. It helps them build a relationship with the brand, particularly in higher-end categories. Adidas is a good example – their online sales are booming, yet they recently announced plans to open 3,000 new outlets in China by 2020.

Xiaomi recognises the need to have a physical retail presence, which is why it plans to open 300 new stores in China to complement its online strategy.

The Chinese consumer’s purchase journey has many touch points, and understanding the most effective online and offline contacts will bring the greatest chance of success in China. China Skinny can assist with that.

For our Australia-based readers in the tourism industry, China Skinny’s Mark Tanner will be presenting at Tourism Australia’s Destination Australia Conference 2016 on March 17 in Sydney. If you are at the event, please pop over and introduce yourself. Click here for more information. Go to Page 2 to see this week’s China news and highlights.