China's Changing Retail Scape
Few activities excite Chinese more than browsing the latest boots and blazers at the mall or on their mobile. Even as tourists, shopping continues to be the top motivator for going abroad, accounting for 30% of the trips' total expenditure.
There's no shortage of building going on to cater to this obsession. Of the ten cities that created the most shopping mall space globally last year, nine were in China. More than half of the world's total mall space currently under construction is in the Middle Kingdom.
Yet, even with Chinese consumers becoming wealthier and spending more every year - retail sales grew 12% last year - simply building a mall in China does not ensure its success. Online shopping has become an alluring alternative and intense competition is seeing the bar constantly rising for brick and mortar stores.
Retail in China is no longer just transactional and is increasingly about the experience. And that experience goes beyond just great service, modern floorspace and nice window displays. Pioneering retailers such as Suzhou Village are combining art and retail in a thoughtfully crafted Italian setting, Shanghai's IAPM happens in an architectural monument that gives New York's Guggenheim a run for its money, and Chengdu's Global Centre bundles shops with a 300 metre-long indoor beach in the world's biggest building.
Another trend in retail is the integration with technology. Alibaba and Tencent have been introducing online to offline innovations into physical stores, and now Baidu has joined the party, partnering with China's largest residential developer, Vanke, to develop tech-savvy malls that capture and analyse consumer behaviour data.
China's retail sector is no different to many other market segments in China, with broad competition creating a host of exciting, tech-centric innovations that cater to Chinese consumer needs. More on that below. We hope you enjoy this week's Skinny.
Chinese Consumers
Vanke and Baidu Team Up to Build “Intelligent” Malls: China's biggest home builder Vanke is moving into mall development, teaming up with Baidu to create malls that use location-based mobile apps to tell consumers which stores have products and promotions, and even help shoppers find a park. It will track and analyse consumer behaviour and provide insights to retailers.
IKEA Sets Sights on Building Shopping Malls in China: Speaking of malls, Ikea is changing its tack in China to build malls in Tier 1 and 2 cities. It is beginning by investing $1.6 billion in three properties in Wuxi, Beijing and Wuhan - not in central locations, but in new districts and suburbs. This new business model will bring IKEA an additional new income stream through the mall's rental income.
China’s Wealthiest – Where Are They?: There are 2.9 million US dollar millionaires, with an average age of 38. There are 67,000 super rich with wealth of at least ¥100 million ($16 million), averaging just 39 years old. Off those, 30% live in 3rd tier cities or lower.
Internet, Mobile & eCommerce
Alibaba Challenges Amazon With Invitation-Only Site: Jack Ma's dream of taking on America is happening, and we expect to see more of this post the IPO cash-injection. Alibaba is part of a growing number of Chinese companies expanding globally.
China Leads Shopping Revolution: 45% of Chinese consumers think of online shopping when they hear the world "shopping". 73% believe shopping online helps them be more spontaneous, with 57% seeing themselves using fingerprints or eye scanning as payment authentication in the future.
The Third Tier - Revealing China's Largest User Base: 58% of more than 780 million active smart phones and tablets are from third tier cities or below. Third tier cities and lower cities experienced 27% growth in daily sessions from 2013 to 2014 and are close to catching first tier, which grew 10%. Third tier city users downloaded entertainment and gaming apps, whereas first tier tended to focus on travel, business and education.
Food & Beverage
Weetabix Eyes Chinese Breakfast Tables: Chinese-owned Weetabix launched in 4,000 retail outlets in the Shanghai region and plays on its royal roots - if it is good enough for the Queen of England, what better guarantee of safety and quality.
Chinese Celebrities Urge Boycotting Dog Meat Festival: Chinese celebs are campaigning against the annual festival in Yulin, Southern China where attendees eat dog meat hotpot with lychee wine to celebrate the summer solstice. Last year there were more than 10,000 dogs expected to be eaten in the festival.
Chinese Tourists
Chinese Tourists Still See Shopping As Top Travel Motivator: China's international tourists spent $129 billion on travelling in 2013, up 26% from a year earlier. Although travellers are becoming more adventurous, shopping remains the number one spending activity, estimated to account for 30% of trip expenditure. Much of it is to take advantage of tariff-free shopping.
Accor to Develop Over 30 New Hotels Near China’s Tourist Destinations: Accor hotels are nearly doubling their global hotel footprint, with new hotels in mainland China accounting for a third of their expansion plans, which will help the brand with international Chinese travellers as well.
Chinese Dominate Global Luxury Hotel Reviews: Chinese travellers account for 42% of all online luxury travel reviews between 2012 and 2014. Chinese luxury social postings grew by 89% over the period versus 5% for the other AsiaPac regions.
Health
Baidu Turns to Big Data to Forecast Flu Outbreaks: Baidu is following Google's lead and working with the Chinese Center for Disease Control to identify flu outbreaks based on spikes in searches for terms like 'cold' and 'fever'. 160 million users do mobile searches on Baidu a day.
Property & Finance
China’s First-Home Buyers Shrink as Market Slows, Survey Shows: The era of Chinese property being driven by first home owners is over. In 2000, 90% of house sales went to first home buyers, dropping to 48% in 2012 and 20% this year. 22% of urban houses were vacant in China in 2013.
Payment Service Alipay Holds Key to Alibaba's Growth: With Chinese paying deposits for house purchases using Alipay, it's no surprise that Alibaba's eCommerce sites accounted for just 37.6% of Alipay's $519 billion worth of payments in 2013. $150 billion was transacted on mobile, almost six times Paypal.
Education
Look: Nifty Chinese Test-Cheating Devices Put the KGB to Shame: The cheating equipment seems to be getting more hi tech every Gaokao College entrance exam.
Sports
Will China’s Golf Communities Boom or Bust?: Although golf was banned in China until 30 years ago, the number of golfers grew to 1 million in 2012, 16% up from 2011. Golf is one sport where Chinese athletes are excelling, especially in younger age groups, which will be helped by the PGA China debut this year with 12 tournaments across China. Property developers appear to be profiting well from the sport's rise in popularity.
Auto
Porsche to run 24-hour Social Media Race on Twitter and Weibo: Porsche is putting Weibo users up against Twitter users with a social media version of Le Mans encouraging users to post quickly to get ahead.
That's The Skinny for the week! We'd love to discuss how we could help with your marketing, online initiatives or research to take advantage of China's opportunities. Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
If you've missed earlier news or need to learn more, there's a library of information about Chinese consumers in prior China Skinny Weekly's right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed. If you have any feedback or suggestions for future articles, please let us know.
