2014 Marketing in China: The Year That Was
A lot can happen in a year in China, and 2014 is a testament to that. It was the year China's face-kinis went global, girls with armpit hair went viral and Yao Ming's campaign to save sharks helped fin soup sales dive 82% since 2012. Over the past 12-months, China surpassed Japan to become the world's second largest advertising market, with spending on online ads usurping television ads for the first time.
Retail growth slowed a little this year, but still rose a respectable 12% in the first 9-months - two-thirds faster than GDP. Not all segments have grown though; the Government's crackdown on corruption, coupled with changing tastes, has seen mainstream luxury brands continue to struggle, while also giving the state-run media a wakeup call.
Smartphone usage has continued to soar, fundamentally altering the way Chinese consumers shop both online and offline. 42.6% of sales at this year's record Singles' Day festival on Tmall were by mobile, up from just 5% in 2012. More than 83% of online Chinese access the Internet from their phone, while many business's China websites still remain unfriendly to mobile visitors. WeChat strengthened its top standing for social media with a slew of new features, but not everyone is impressed.
Health is the word on most Chinese consumers' lips with worsening pollution and countless food scandals from bean sprouts, to mineral water, to expired meat from the floor at Western fast food chains, driving demand for safe, imported food and beverage.
Ever-rising wealth, coupled with new FTAs, visa agreements and Government policies have made it easier for Chinese to travel, invest and migrate abroad. This aided China to become the first country to ever send 100 million tourists overseas in a year this November. That growing wealth has also enabled more Chinese to get behind the wheel, with licensed drivers surpassing 300 million, collectively buying 23 million new vehicles this year - around 50% more than in the U.S.
There's little doubt that 2015 will be another fascinating year in China with its share of curiosities and challenges, but no shortage of opportunities. With Xmas next week, this is our last Weekly Skinny for the year. We wish you the happiest of Festive Seasons and hope you enjoy the last Skinny until 2015. 圣诞节快乐！
Chinese Consumers
'Authentic Christmas' in China – Another Shopping Holiday: Whilst there are an estimated 100 million Christians in China - more than Communist Party members - and one 'village' in China produces 90% of the world's festive supplies, Christmas is still typically observed as a shopping holiday by most Chinese.
Retail Traditions Hit a Wall at Wal-Mart China: With rental for commercial premises rising 3-5% a year and 10% in premium locations, and retail staffing costs up 10% a year over the past few years in China, Walmart is hurting as it grapples with the rise of ecommerce in China.
HSBC Asks: How Big is China?: IMF's announcement earlier this year that the Chinese economy is the world's largest based on purchasing power parity has been questioned by some. HSBC recently announced rankings based on measuring GDP in USD, concluding that the U.S. accounts for 22% of the world's economy, versus China's 11%. Although the U.S. reigns supreme on those measurements, there's no disputing China's rapid rise since 2000, when the U.S. accounted for 31% and China just 4%. China's contribution to global growth will be double that of the U.S. next year.
What You Need to Know About the Global Ad Market: China has passed Japan to be the world's largest ad market after the U.S. Whereas ad spending on TV globally is almost double that of the Internet, in China this year, ad spending on the Internet has surpassed TV. Red Bull spends 38% of its global ad budget in China; KFC's owner Yum Brands 35.5%; Estée Lauder 29.2%; and Mars Inc. 25.9%
Internet & Social Media
Does Social Media Influence Buying Decisions in China?: 68% of 26-35 year old Chinese consumers frequently make purchase decisions based on what what's happening on their social networks versus 7% of Americans according to AT Kearney.
Chinese Tourists
Luxury Hotels Chains Expand in China: Hotel chains such as JW Marriott and Sofitel are rapidly expanding into China's Tier 2 and 3 cities. The Marriott is opening a new hotel each week in Asia and is expanding its China coverage from the current 16 cities to 59 cities by 2017. Chinese chains are increasingly moving into the space, with local developer Dalian Wanda looking to build 150 premium hotels globally by 2018.
New Transit Card to Ease Travel for China Tourists: More than 2 million Chinese tourists who visit Singapore each year can now pre-purchase a transit card using their Alipay account, with collection at the airport. Transport is a top concern for Chinese tourists, who prefer travelling by public transport overseas according to World Tourism Cities Federation.
Food & Beverage
KFC Calls on Chinese Diners to Inspect its Kitchen: KFC is advertising on its placemats for tours of its kitchens and suppliers in a bid to restore faith in the safety of its chicken. KFC's parent company Yum Brands plans to open 700 new restaurants in China in 2015.
Chinese Tests Find Quarter of Drinking Water 'Substandard': China Food and Drug Administration (CFDA) found excessive bacteria in 23% of purified drinking water products. Brands with unsafe water included China's biggest drinks maker, Wahaha Group, as well as C'estbon Beverage Co Ltd and Danone SA's Robust brand.
Digestibility Drives Yogurt Consumption in China: 80% of Chinese consumers seek probiotics as an ingredient when purchasing yoghurt, with 76% buying yoghurt for gut health benefits versus an average of 48% in US, Brazil, Turkey, Poland and France.
Fashion
Abercrombie’s Still Having Its Heyday In China As American Teens Walk Away: As sales tumble in North America and Europe for Abercrombie, the rare bright spot is China. The company's flagship store opening in April drew “huge crowds and strong sales”, exceeding forecasts and generating 500 million social media impressions and more than 30,000 new Weibo followers.
Environment
Xiaomi Answers Jack Ma Pollution Jibe With Air Purifier: Just a month and a half since Jack Ma asked Xiaomi's Lei Jun how much making a good smartphone mattered when the air and water were so bad, the company has announced a ¥899 ($145) air purifier. In related news, local purifier brand Baomi is following Xiaomi's marketing model with flash sales, and U.S. company Alen looks to join as many as 300 competitors in China's contested air purifier market, developing products tailored to China's requirements.
Insurance
Online Insurance Sales Growing Amongst Consumers in China: Over the past decade in China, 56% of insurance buyers purchased through an agent, 13% through a bank and 8% through insurers' websites. Last year, that shifted to 23% through an agent, 13% through banks and 40% through insurers' websites. Males make up a larger share of online purchasers and females dominate banks' customers.
Luxury
Consumption of Luxury Brands in China: 50% of luxury consumers in China plan to spend more on travel - the highest category according to IPSOS and Ruder Finn. 57% reported greater confidence in buying luxury goods online, but 78% of online shoppers still prefer to visit a physical store first. 90% of Tier-1 consumers affirmed the relevance of social media to their everyday life.
China's Luxury Consumers Buy for Quality While Americans Seek Bargains: 'Exclusivity' is a purchase decision for 86% of Chinese luxury consumers, versus 51% of Americans. 81% use the web to research luxury products compared to 65% of Americans.
Tastes are Changing, but Appetites Remain Keen: Since 2008, 70-80% of global growth in the luxury sector has come from China. Spending on luxury by the rich will nearly quadruple between 2012 and 2020, according to Exane BNP Paribas. Female's share of luxury purchases in China have gone from around 10% in 1995 to 50% last year.
That's the Skinny for the week! See previous newsletter here. If you have any comments and suggestions about our newsletter, please contact us at newsletter@chinaskinny.com.
