China's KOL Rules from Beijing Not Affecting Popularity
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.
Here are this week's news and highlights for China:
Chinese Consumers
China Reducing Massive Influence of Social Media Celebrities: China's top-10 online celebs have 67-90 million online fans, dwarfing celebs like Oprah Winfrey. China is trying to contain the influence of these social media celebrities.
China Trademarking that Resonates: Important considerations when registering Chinese trademarks.
Alibaba Looks to Push the Business World into the “She Era”: “Just think about it carefully, what do women do better than men other than giving birth?” With sentiment like this Beijing investor’s present in China’s business world, much needs to change. Alibaba held the second She Era Conference last week – China Skinny was there and reflects on women’s role as businesspeople, mothers and consumers.
Time for Chinese Convenience Stores to Form Distinct Identities: Chinese convenience store chains need to look at ways to differentiate their stores from those of their competitors in a sector that saw average annual growth of 13.6% between 2011-2016 - ahead of supermarkets and hypermarkets. Over half of urban Chinese convenience store shoppers cite product quality as their main concern when deciding a store, followed by proximity and in-shop services according to Mintel.
China June Trade Data Buoyed by Robust Demand at Home and Abroad: First-half imports rose 25.7% from the same period in 2016 to ¥5.93 trillion ($870 billion) and exports grew 15% to ¥7.21 trillion ($1.1 trillion).
Digital China
Alibaba Launches Platform To Link US Businesses With 500 Million Chinese Consumers: Alibaba is launching Taobao Global U.S. Merchants Network to link small- and medium-sized businesses with Taobao merchants, making it more efficient for merchants to identify and work with US businesses.
Flagging Chinese Smartphone Maker Xiaomi Rebounds with Record Second Quarter Shipments: Xiaomi shipped 23.2 million smartphones in the second quarter of 2017, up 70% on the first quarter of this year. The company credited the turnaround to increasing investment in research and development (the company was granted 2,895 patents in 2016), a comeback after supply issues last year, and moving from an ecommerce-dominated strategy to opening 123 physical stores.
Food & Beverage
JD bringing Japan closer to China: JD.com is making it easier for consumers in China to purchase products from Japan, with a new logistics partnership and flagship online stores on the way. The goal is to launch a delivery service later this year that will get fresh fruit, vegetables and other produce from Japan into the hands of Chinese consumers within 24 hours.
Chinese Tourists
'Buy Buy Buy' is No Longer the Mantra of the Chinese Tourist: In 2016, the average Chinese tourist spent about ¥6,705 ($988) on shopping when travelling (33% of travel expenditure), down from ¥8,050 ($1,186) in 2015 (41% of expenditure). Overall holiday spending - including on hotels and sightseeing - rose 3.5% to ¥20,317 ($2993) from ¥19,635 ($2,893) according to a survey of 2,000 Chinese travellers. Easier access to foreign products in China is believed to contribute. Chinese travellers remain the biggest spenders in the world, shelling out $261 billion in 2016, up from $249.8 billion in 2015.
5 Reasons Why Wanda Made the Surprise Move to Sell Its Chinese Theme Parks: Wanda has sold 13 Wanda Cultural Tourism City parks and 76 hotels for around $9 billion to Sunac China, likely to be a result of mounting debt and investigations from financial regulators.
Cars
Porsche Reports Record Sales as Chinese Demand Soars: 28% of Porsches sold this year have been marked for Chinese consumers, making China Porsche’s largest market. The average Chinese owner of the Panamera model tends to be about 15 years younger than owners in the US and UK.
Global Automakers Call on China to Ease “Impossible” Electric Car Rules: Keen to combat air pollution, China is planning to set goals for electric and plug-in hybrid cars to make up at least a fifth of Chinese auto sales by 2025, with a staggered system of quotas beginning in 2018. The strict new rules plus planned harsh penalties for non-compliance, such as the cancellation of licenses to sell non- electric cars in China have automakers world-round hoping to see some compromise from Beijing.
Luxury
China's Super Rich Set to Splurge $58 Billion on Gifts: By 2020, China's super rich are expected to spend $58 billion on gifts - 30% more than this year. An emerging trend is the growing popularity of paying for unique experiences as gifts over physical goods, as these experiences are novel and stand out to impress more.
Burberry Boosts Sales, Thanks in Part to Chinese Social Media Drive: Burberry's online sales in China have more than doubled since last year, with Burberry crediting a social media drive that more than tripled the number of consumers who encountered its marketing material on WeChat.
UK 'Now Less Appealing' to Rich Chinese: Britain slips to 3rd in preferred migration destinations, trailing the US and being overtaken by Canada, where Montreal has trumped Vancouver for Chinese real estate investors. Around half of millionaires surveyed are considering a move with pollution, education and the devalued yuan the main reason for going according to Hurun.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
