China Edging Closer to Tech Supremacy
The last few weeks have been abuzz with tech chatter in China. You’re probably thinking that’s nothing new, but the significant change in tone has piqued our interest. IPOs for Xiaomi and Tencent Music and the expansive 2018 China Internet Report have been grabbing headlines, but beneath all that many experts are starting to ask the question: has China taken the mantle from Silicon Valley as the leader in tech?
In the blink of an eye China has done the unthinkable and transformed its cheap, copycat perception into that of a world leader in innovation. And this trend is contagious amongst China’s brands both in and outside of the tech sector; in 2018 consumers view 82 of China’s biggest 100 brands as highly or moderately innovative.
Leading the pack the stories of Xiaomi and JD are representative of how brands here are tracking. Xiaomi’s founder Lei Jun proclaims his company “a new species”, blending internet services within its product ecosystem and shrugging off any classification as a hardware company. JD notes they’ve now spent 12 years as a retailer and want “the next 12 years to be as a technology company”. We even just looked at Luckin Coffee creating an innovative New Retail-type model to combat one of the last truly unchallenged foreign mega-brands.
As the world begins to note what this host of dynamic Chinese brands is doing, it pays to keep in mind what this has meant for the average Chinese consumer and what they expect from brands across all aspects of consumer engagement. A few examples:
Social: Half of WeChat Accounts lost followers in 2017.
We have seen a dramatic rise in gaming, VR, animation and development within accounts to try stand apart on social media. The boom in mini-programmes has only exaggerated this and many foreign brands are in dire need of rethinking their WeChat approach.
Retail: 61% of consumers think pop-up stores provide more attractive shopping experiences.
Retail is constantly in flux, with opportunities and pitfalls abundant for brands who aren’t diligent. In China’s uber-competitive space, pop-ups can bring the oomph today’s shoppers are looking for as they increasingly crave an experience.
Advertising: China in 2018 is a different animal, and misaligned messages are throwing good money after bad.
Tired or uninformed advertising has seen many a brand fall short in China, yet some well-considered research and understanding can see a brand ride the wave. Last month through a challenging but well-embraced campaign, Nike captured the end of the mollycoddling one-child policy, a huge national push to get children into sports & activity, and the competitive and individualistic millennials ascending into parenthood.
As everyone in China knows, the market moves faster here than anywhere, and for that reason many brands will fall in the wake of its constant innovation. China Skinny ensures our clients are on top of and ahead of market trends. If you want to be in the best position to tackle China, drop us a line.
Go to Page 2 to see this week's China news and highlights.Here are this week's news and highlights for China:
Digital China
China Internet Report 2018:Comprehensive 97 page report about China's vibrant internet ecosystem covering a high level view, with four overarching themes and a deep-dive by sector.China’s Technology Sector Takes on Silicon Valley: China is pursuing perhaps the most ambitious and unorthodox industrial policy in its history, with tech ‘zones’, ‘sectors’, and cities popping up throughout China affording very favourable policies to domestic innovators in hopes to vastly accelerate progress. 2018 marks the first year where VC investment in China has outstripped the US.Opinion: How Did China Leapfrog Everyone in eCommerce?: B2C ecommerce retail penetration in China, as measured by the share of retail sales that are transacted online, far exceeds that of any other market in the world. One of the theories behind this is that ecommerce has filled the gap created by a highly fragmented bricks and mortar market. For example, in the US the four largest grocers account for roughly half of the food market. In China, the top four grocers amount to just 5.7% of food retail spending.The Rise of China as Global Tech Superpower: The largest tech conference in Asia took place in Hong Kong last week with the core debate on where China stands as a global tech leader, with strong sentiment that “China is leading and people elsewhere in the world have no clue.”After Underwhelming IPO, Xiaomi has Positive Week: An underwhelming IPO may be restricting some of the hype around Xiaomi, but plenty of positive signs remain for the self-branded ‘new species’ company. Now the fourth-largest smartphone brand in the world, the brand is ambitious and has even hinted at electric vehicles. Xiaomi has swiftly become an aspirational brand in the enormous India market with 26% wanting to buy a Xiaomi versus 14% a Samsung according to a recent poll.Why are China’s Internet Users So Hooked on Short-Video Apps?: Stemming from the China Internet Report 2018, 600m people use short-video apps in China and at such a volume that large player Douyin had to install ‘anti-addiction measures’, cutting users off after 2 hours.
Chinese Consumers
Chinese Millennials are Identifying as ‘Spiritually Finnish’: A quirky insight into a very important understanding of the often introverted and solitary Millennials: “I believe that there are many more cases of ‘spiritually Finnish’ in our generation compared to our parents’ generation,” Chen says. For millennials who grew up under China’s one-child policy, isolation was the norm. “Now they find they can live alone happily,” she explains.“Shared Manufacturing Hub” a Next Step in China’s Tech Innovation Advance: Wanting to be the WeWork of manufacturing, members can rent everything from office space to forklift trucks, with businesses ranging from manufacturers of auto parts to producers of lubricant systems and multi-use plastics.China Says its Second-Quarter GDP Growth was 6.7%, Meeting Expectations: China's GDP growth for Q2 was its lowest since 2016, however in line with analysts polled by Reuters. It is slightly lower than 6.8% in 2018 Q1. Growth was pulled down by slowing manufacturing for export due to the US trade war.
Food & Beverage
Despite Growing Demand for Better Food, China isn't Quite Ready for Indoor Farming: Although indoor farming seems like it would be ideal for China with accurate monitoring and controlling, making the vegetables from unfavourable weather conditions, pollution, and pests, it is yet to take off in China with pioneers altering their business plans to survive.Tim Hortons to Roll Out 1500 Stores Across China Over Next 10 Years: Slightly late to the game, the Canadian coffee franchise has big plans for China sighting its ‘population and vibrant economy’ as an excellent growth opportunity.
Chinese Tourists
WeChat Pay to Keep Overseas Focus on Outbound Tourism Instead of Offering More Local Wallets: Tencent’s WeChat Pay said it will not seek to offer more local payment wallets to overseas customers over the next three years and will remain focused on serving outbound Chinese tourists better in popular overseas destinations. WeChat Pay currently has local digital wallets in Hong Kong and Malaysia. The service is currently available in over 40 counties and regions across the world in 13 currencies.U.S. and China Are in Tourism Standoff as Trade War Heats Up: The 3 million Chinese visits to the US and $33 billion in tourist spending in 2016 could be at risk with Chinese state media openly calling for making tourism a "main battlefield" in the trade war.
Chinese sport
Sport
Fifa World Cup: China Viewing Figures Skyrocket as Tencent Piggybacks on TV Ratings Wave: According to figures released by Fifa, 14 of the top 20 largest audiences globally during the group stage of the competition were in China. 44.74 million viewers tuned in to watch CCTV-5’s coverage of Argentina's 1-1 draw against Iceland (31.13 million watched China's qualifier with Iran last year). A total Chinese audience of 623 million watched matches during the Brazil World Cup, while 815 million had already viewed the tournament before the start of the knockout phase. Chinese appliance manufacturer Vatti, sponsor of the French football team will now have to find $12 million to refund customers who were promised their money back should France win following a promotion in June.Chinese Sports Market Points the Way Toward the Future of eCommerce: Ecommerce was the top trend at ISPO Shanghai earlier this month. Other trends included: 1. A growing number of Chinese citizens value performance; 2. Chinese consumers, and female Chinese consumers in particular, love the crossover of chic and functional sports fashion; 3. In the running segment, market shares can still be tapped selectively; and 4. The potential of the growing sports market in China is far from exhausted.
Entertainment
How Alibaba is Expanding in Entertainment and Leveraging its Growing Ecosystem: An informative summary of Alibaba’s recent focus in entertainment, from majority ownership in a film company, to ticketing apps, to online content. The current strategy is seeing profits hurting but with long-term integration with the complete Alibaba ecosystem in mind.That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
