Has China Just Defined Web 3.0?
Every day this year, an average of more than 120,000 new Chinese consumers signed up to the Internet. Most of them on their smartphones, and many of them using it to run a big part of their lives.
Growth in internet users coupled with an evermore online savvy population has contributed to an impressive rise of Chinese who are active online. In the past year, 18% more consumers shopped on Alibaba platforms, 65% more bought on JD and Weibo's active social media users surged by 36%. Yet the most interesting growth story is the convergence of commerce and social media on WeChat.
Although WeChat sales are small relative to traditional ecommerce channels, its growth potential is enormous. Every official and personal account has the ability to sell to their followers and friends. This has prompted tens of millions of enterprising WeChat users to try and pry a few bucks out of their WeChat networks - a subtle version of Amway if you like.
There are now more than five times more stores on WeChat than there are on Taobao, Tmall and JD combined. Although individuals make up the majority of stores, brands such as Dior - who don't even have their own ecommerce store yet - are dipping their toes into social commerce. WeChat's all-in-one nature is creating a whole new level of commerce-related sharing opportunities that is unrivalled globally.
On top of trading products on WeChat, app usage rates for services such as ride sharing, food delivery, cinema, massage booking and health, to name a few, are among the highest globally.
The phenomenal uptake and usage rates of smartphone commerce has been driven by massive sweeteners - for example Meituan Dianping was estimated to have provided ¥58 billion ($9 billion) worth of discounts and subsidies for restaurants and movies in 2015. Such incentives have been enabled by countless sums of investment cash utilised to grow users, often with little regard for profits. Last year over $20 billion dollars was invested in Chinese internet businesses - quadruple that of 2012.
A result of the investments are some significant mergers and consolidations, including ride hailing apps Didi-Kuaidi-Uber, group buying and food apps Meituan-Dianping, classified ads Ganji-58.com and online travel Ctrip-Qunar. The mergers have created virtual monopolies and, by proxy, less incentives to subsidise and discount. The most recent example is the Didi-Uber merger which has seen a typical ride that cost ¥8 in May, now costing ¥13.
Fewer subsidies may slightly slow down the adoption rate of many apps, but Chinese consumers will continue their deeply-embedded habits of using smartphone apps in most facets of life. Brands should factor this into their marketing strategies and creative tactics as a powerful way to engage Chinese consumers. China Skinny can assist with that. Go to Page 2 to see this week's China news and highlights.Here are this week's news and highlights for China:
Chinese Consumers
China Retail Sales up 10.2% in July: Retail sales in rural areas increased 10.7% versus 10.1% in urban areas in July. In the first seven months of 2016, retail grew 10.3% and online sales soared 27.5%. Online shopping now accounts for around 14% of all retail sales.Chinese Gen-Y and Gen-Z Brand Relevance Report: The most relevant brands for China's Gen-Y (born 80s to mid-90s) are Apple, WeChat, Alipay, Taobao, Adidas and Zara. Gen-Z (born mid-90s to 2000s) are Xiaomi, Adidas, Nike, Uniqlo, Zara and Converse according to RTG.Chinese Furious Over Flag Error at Olympic Games: After heated rants online in China following an incorrect Chinese flag in Rio, it turns out the flags were made in China.
Digital China
China Now Has 656 Million Mobile Web Users, and 710 Million Total Internet Users: China has added another 22 million online users in the 6 months to June 30. Of China's 710 million online, 92.5% use smartphones. With just 51.7% of the population online, there is still plenty of scope for growth.
The Twilight of China’s Online Consumer Paradise: Last year, $20.3 billion of venture capital surged into Chinese internet businesses, eclipsing the $16.3 billion that flowed to US internet firms. But with startups consolidating and absorbed by the tech giants, constant discounts and subsidies are likely to temper.
How China Is Changing Your Internet: 6 minute video on the Chinese Internet and just how WeChat's all-encompassing ecosystem is altering the concept of virality.
Why American Internet Giants Fail in China: Uber's 'surrender' in China follows other American tech heavyweights in the market including Google, Yahoo, Amazon, eBay, MySpace, Groupon, YouTube, Twitter and Facebook - all for reasons such as: cut and paste doesn't work; slow and steady loses the race; cheap is good, free is better; the long shadow of the Chinese Government; and Chinese clones often outwit US masters.
Alibaba is Now a Mobile Majority Business: Alibaba's revenue grew 59% last quarter year-on-year, helped by a 24% growth of sales and 18% growth in users. Shoppers now number 434 million and 75% of sales are on mobile. Second-placed JD increased direct sales by 40% and indirect sales by 67%, following an active customer increase of 65% to 188 million.
Weibo MAUs Grew to 282 million in June 2016: Weibo’s monthly active users grew 33% year-on-year to 282 million in June 2016; 89% were mobile users. 126 million are active on the platform daily - 36% more than a year ago. Short video and live video are taking off.
Chinese Tourists
HK Retailers Could Benefit, as Rising Yen and Won Scare Off Mainland Shoppers: Credit Suisse: Climbing Japanese and Korean currencies may provide some hope for Hong Kong retailers, who just experienced their 16th consecutive monthly contraction as mainlanders shop elsewhere. Chinese visitors to Japan almost doubled last year on the back of a lower Yen. Tourists were up 26% year-on-year in June, but spending per person fell 23% following the rise of the Yen. Currency has an impact on holiday decisions, with Chinese travel agencies seeing a rise in interest to the UK after the pound plummeted following Brexit.
Chinese Theme Park Operators on the Hunt for IP Acquisitions, Alliances to Quell the Disney Challenge: 21 theme parks opened in China in the past year, with 20 more under construction. Such intense competition has seen Chinese firms investing in strong themes to draw visitors, such as Wanda's $3.5 billion purchase of US film studio Legendary Entertainment, which produced movies like Jurassic World, The Dark Knight and Godzilla and other parks covering everything from Hello Kitty to Monkey King to Transformers.
Entertainment
China's Cinema Boom Loses its Lustre as Sales Slump: Following more than 50% growth last year, China's box office in the three months to June fell by 10%.
Health
How do Health IT Investment Trends in China and U.S. Differ?: Direct-to-consumer health tech companies are the main target of investors in China, whereas B2B services account for much more of the focus in the US.
Luxury
Dior Taps WeChat’s Direct-to-Consumer Potential in Social Selling Effort: Dior has followed brands like Michael Kors, Chloé and Montblanc, listing its customisable ¥28,000 ($4,210) Lady Dior handbag on WeChat, which sold out in a day. The bag was designed specifically for Qixi - China’s Valentine’s Day, appealing to the 58% of Chinese consumers who value cultural familiarity in merchandise or services, versus 11% in HK.That's the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.
