7 Years of the Skinny News: Reflecting on the Big Changes in China

A little over seven years ago, our fledging little marketing agency wrote its first Weekly Skinny. The topics of the day were common myths about Chinese consumers, the importance of female consumers, food scandals, fakes and 300 million+ users on Weibo. On the surface, the subject matters weren't too different from those today. Yet open the hood and you see a Chinese consumer, national swagger and marketing landscape that is almost unrecognisable from 2012.

The level of consumer sophistication has changed dramatically. In those days, you could just put a foreign product on the shelf and many shoppers would think it was incredible. No self-respecting consumer would be seen dead with a Chinese smartphone (they now account for almost 90% of smartphones sold) or Chinese brands across a slew of categories. KFC was the pin up kid for foreign brands, managing to balance its 'aspirational' foreignness with thoughtful localisation. If Chinese wanted to do the pilgrimage to the source in Kentucky, getting a visa for travel to Western countries was very difficult for travellers outside of tier 1 cities, and many within. Over the seven years, the number of outbound trips has almost doubled.

Over seven years, 130 million people - more than Japan's total population - have moved from the countryside to cities, although a third of cities are shrinking. The average wage has grown almost 75%, and with it, a willingness to make discretionary purchases. There are around 150 million new passenger cars on the road and 125% more kilometres (29,000km in total) of fast train tracks. The Beijing-Shanghai connection has carried over 100 million passengers/year on average over that time.

One of the most obvious changes on the street is the ever-present smartphone. In 2012, just 288 million Chinese sported a smartphone. By the end of 2018, it was around 785 million. Online shoppers have increased from 242 million to 610 million last year, with their share of total retail growing from 5.3% to 25%. Gone are the wads of 100 kuai notes stuffed under the mattress, with mobile payments, and increasingly facial payments seeing the endangerment of legal tender. Mobile payments in China are now estimated to be over 100 times the size of the US.That's China speed for you. They say China years are like dog years - what happens in seven years in some countries, takes a year in China. Based on that, we should be celebrating 50 years of the Skinny sometime in September.

Writing the Skinny every week has forced us to keep up with the macro and micro trends in China. It's enabled us to see through the hype and often-dubious data and understand the constant changes in this market, something which is incorporated into every project we do. To mark seven years of the Skinny, we thought it would be fitting to share 7 Trends that are impacting Chinese Consumers today. Here they are.

One last note, any recent history of marketing in China would be amiss without including WeChat, which had around 150 million users when the Weekly Skinny was first published. It has now become a big part Chinese consumers' lives. There's no better way to learn about marketing on the super app than the China Chat conference in Shanghai this September. China Skinny's Mark Tanner will be joining the esteemed lineup of speakers. More information here.

Here are this week's news and highlights for China:

 Chinese Consumers

7 Trends that Should Shape Consumer-Centric Strategies in China: Seven key trends that are important to consider when marketing to Chinese consumers.

Retail Sales Point to Growing Consumption Power: Retail sales of consumer goods in China grew 8.4% to ¥19.5 trillion ($2.83 trillion) in the first half of this year. Online sales grew 17.8% to occupy nearly 25% of overall retail sales and totalled ¥4.8 trillion ($700 billion). In 2018, 52% of Chinese consumers spent more on experiences, such as travel, dining out and activities, than the previous year, compared with 26% in the US. Consumption that satisfies solo consumers is rising in the night time hours, including spas, manicures, yoga and reading are on the rise. More parents are spending money on parent-child services in their evenings, such as parent-child swimming.

Chinese Consumers Have Strong Appetite for Imported Products: Survey: 9.7% of Chinese retail and wholesale respondents expect to increase consumer product imports in the next year, 2.5 percentage points higher than those planning to decrease their imports according to a survey by the Ministry of Commerce. 24.1% of consumers surveyed planned more purchases of imported products, with strong demand for food, maternal and infant products, cosmetics, watches and glasses, jewellery and passenger vehicles. Brand is the top consideration when businesses import consumer products, while safety also matters in food and maternal and infant products, and design in apparel and jewellery.

China’s Trademark Law Amendments Tighten Restrictions on Bad-Faith Filing: In April this year The Standing Committee of the National People’s Congress announced amendments to six Articles of the Trademark Law which will go into effect on 1 November 2019. They mainly address bad-faith trademark registrations, punitive and statutory damages for trademark infringers, and the disposition of infringing goods by China's courts.

Digital China

Demystifying The Hot Social Commerce Platform Little Red Book: A year ago, to work with a micro KOL with less than 10K followers, was about ¥1000 ($150), but that’s rapidly gone over ¥10,000 ($1500) however it’s not uncommon for a KOL to send different prices to different brands, as they often charge less to work with a brand they love. A typical conversion rate would be 50,000 receives 2,500 (5%) clicks to ecommerce and 50 (2%) sales.

Western Tech Brands are Recognized in China, but Their Products are Rarely Used: Even though Western tech brands are mostly banned without a VPN in China, consumers are very much aware of their business according to a survey by Statista. 87% are aware of Google and 45% claim to use it, Microsoft (86% aware and 62% usage), Amazon (82% aware and 32% usage), and Facebook (66% aware and 17% usage).

First 'Tmall Experience Centre' Opens in Shanghai: Tmall has designed a new space for showcasing brand experiences at one of Shanghai’s trendiest shopping malls, K11. Tmall will partner with brands to feature pop-up activations exclusive to the venue, including everything from a street-culture exhibition from American skate-shoe brand Vans to live-band performances and ice-cream-themed immersive plays. Bobbi Brown, Make Up For Ever, Abercrombie & Fitch, Swisse, Oral-B and Scotch whisky brand Ballantine’s are also among the first to use the space. Tmall sends invitations to the brand’s premium customers, although anyone can sign up using the website for Tmall Club.

Food & Beverage

Healthy Snacks Enjoy Bumper Sales: High-calorie biscuits, chocolate and candies are no longer as popular as they used to be in China as young consumers seek healthier snack food. One of the beneficiaries has been Wuhu, Anhui-based Three Squirrels which IPOed earlier this month on the Shenzhen Stock Exchange and shot up 58% in three days. By late July, the company had a market cap of almost $3 billion. Three Squirrels, Bestore, and Huatai (ChaCha), account for an unusually high 52% share of nuts, seeds and trail mixes in an otherwise fragmented market of 2,500 industrial players.

Baking Lessons Help Spread a Little Love for Family and Friends: Baking cakes for family and friends has become a way to show affection, especially for mothers and young women. Chinese consumers are paying more attention to products' "emotional connections" according to Ferrero China.

China’s KFC Gives Up and Starts Selling Chinese Street Food: The most recent addition to KFC’s Chinese menu is perhaps the most dissonantly-branded item yet: a darling of Chinese midnight snacks, boiled skewers, or chuan. KFC plans to launch these, and more Chinese-snack-type menu items, like lou mei, in ten major cities, including Shanghai, Chengdu, Chongqing and Harbin. It is the next phase of localisation which has seen KFC make a seamless brand transition into a go-to establishment for traditional Chinese breakfast food over the past 20 years. Many consumers have slammed the move online.

Chinese Tourists

Hong Kong Protests Will Put Off 350,000 Mainland Chinese Tourists This Year, HSBC Estimates: HSBC believes mainlanders visiting Hong Kong will grow this year, but at a slower rate after millions demonstrated against the now-suspended extradition bill. The 350,000 less tourists only accounts for a fraction of the 56 million expected. Visitor numbers increased 14% in 2018. The bank expects a drop of 5% in mainlanders visiting the US because of the trade war. HSBC also cut its estimates for Thailand, Japan, Vietnam and Malaysia. It expects China’s global outbound tourism growth to slow to 6% in 2019, a downward revision from an 7%. The Hong Kong Retail Management Association expects a double digit percentage fall in retail spending over the busy summer season.

Majority Support Hotels in Cutting Down Single-Use Items: Although many Chinese are accustomed to hotels offering disposable consumables, 77.7% of Chinese consumers support hotels in stopping supplies of single-use everyday items ranging from toothbrushes to plastic disposable razors according to a China Youth Daily Survey.

 Healthy

Cipla Inks Pact with Acebright Group to Build Respiratory Biz in China: In China, respiratory diseases are the second largest cause of death. It is estimated that of the 100 million Chinese — who are thought to have asthma or chronic obstructive pulmonary disease — just 30% have been diagnosed and only five million are receiving any kind of treatment.

 Entertainment

China's Tightening Censorship Is Making a Bad Box Office Year Even Worse: As Beijing tightens its grip on media and entertainment, at least half a dozen local movies have been blocked from release. China's total box office for the year is down 4.9% compared to the same period in 2018 — the deepest decline in the past decade, a period during which the market instead has grown by an average of more than 20% per year. Meanwhile, as of July 14, IMAX China has reported over ¥1.6 billion in box office receipts, a 35% increase year-on-year and is opening 40 new theatres across the country.

 Luxury

What China’s Gen Z Really Thinks of the Fake Luxury Market: An International Trademark Association (INTA) study of Gen-Zs in 10 countries found 99% of Chinese said they had some knowledge of IPR, compared with a global average of 85%. Chinese Gen Zers were the fifth-most-likely consumers to purchase fake products, with 84% saying they had done so “at least rarely” over the past year, versus 79% globally. About 80% of Chinese thought “it’s important to buy genuine products,” versus 74% globally. 70% of Chinese respondents said they expected to buy fewer counterfeits in the future.

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