Chinese Consumers' Customer Journey
A Chinese consumer's purchase journey is like no other. It begins online for most, with 85% using search engines, brand websites, or social media as their first step for researching a new product or purchase, according to a PWC survey.
Whilst online research is not unique to Chinese consumers, the way they do it is. For a start, they are less trusting of products and services, and investigate more, across a wider range of online channels before making a decision.
Globally, 56% use a search engine as their first port of call for doing research, whereas just 33% do in China. When Chinese search, it isn't just on Baidu as it is on Google elsewhere. Consumers are more likely to research products on ecommerce platforms like Taobao, particularly when they are getting closer to making a purchase decision.
Food and beverage is one illustration of Chinese search habits. For example, consumers do twice as many searches for wine on Taobao/Tmall than on Baidu. And wine is a product most consumers still require further education about. Products such as packaged snack food - which consumers are more familiar with - often account for ten times more searches on Taobao/Tmall than on Baidu.
32% of Chinese will go directly to a brand's website - much higher than the 19% globally, and almost as many as those who will use a search engine initially.
When we talk about online research in China, it's a good idea to be thinking about mobiles. Wherever Chinese are thinking about making a purchase - in a store or online - they will always have their smartphones with them, so it is important to factor this in to customer touchpoints.
PWC's findings are polarising: 85% are online for their first step of research, whereas just 11% of retail sales happen over the Internet. This signals a disconnect in the customer journey and represents an opportunity to further integrate online and offline channels to better tailor to consumer preferences. China Skinny can assist with that.
Here are this week's news and highlights for China:
Chinese Consumers
Reverse Retail: China’s Changing Retail Landscape: Over the next three years, 40 million square metres of shopping mall development is expected to be built across China. Even the mature and already well-served market of Shanghai will get 55 new malls. Retail is increasingly playing a supporting role in multi-use centres that are wired for data and mobile interaction.
China's Workers Earned More in 2014, but Percent Raises Shrank: The average annual salary in China rose 9% last year, the lowest growth since 2011. Salaries for employees in the public sector and state owned entities increased slower that the private sector at 7.1%, but their incomes are still 66% higher overall.
Formal Signing of China-S.Korea FTA to Enhance Economic Cooperation: First K-Pop, then cosmetic surgery tourism, and now an FTA has been signed with China to give South Korea another string in its bow to win over Chinese consumers. Hopefully the MERS situation will improve soon.
Growing Demand For Lavish Funerals in Asia Boosts Annual Expo: China's funeral industry is changing faster than anywhere. During the Cultural Revolution, lavish memorials paying tribute to ancient beliefs were replaced by Socialist Funerals culminating with a short speech by the head of the deceased's work unit praising the departed's contributions to socialism. Few lasted more than 15 minutes. Extravagant Chinese funerals are now back, with some costing as much as ¥5 million ($800,000) complete with massive LED screens, 100-piece orchestras, lines of gold-painted cannons and fleets of Lincoln limousines. Village funerals are even bringing in exotic dancers to bolster crowds.
Internet, Social Media & Mobile
As China's eCommerce Market Booms, Physical Stores Becoming Testing Sites for Online Shoppers: 85% of Chinese consumers choose a digital channel - search engines, brand websites, or social media – as the first step when researching a new product or purchase according to a PWC survey. 86% have intentionally gone to a physical store to check out a product before buying it over the web, compared to 68% globally. 90% said interactions with retailers on social media had driven them to buy more, versus 62% globally.
The State of Chinese Social Media in 2015: What You Need to Know: Six social media trends in China: 1) WeChat still dominates, while its role and influence evolves; 2) Weibo is still relevant, since it takes the pulse of what's viral; 3) Interest communities have gone mobile; 4) New forms of expression emerge; 5) E-commerce reviews explode; and 6) Retailer-generated content is a 'fourth media'.
China’s Weibo: No More Smut: 'Modelling agencies' on Weibo can no longer "send images of [models] in swimwear or black lace.” In 2013, Sina closed about 100,000 Weibo accounts for violating its terms of use, including spreading “vulgar and pornographic” content.
Food & Beverage
Going Organic: Investing in China’s Growing Health Foods Market: China's organic food market has tripled since 2007 with rough estimates valuing imported organic goods at around $20 million. Research in Beijing and Shanghai found 71% would pay a premium of 20%-50% for organic products. The top five reasons for buying organic were all related to food quality assurance.
China Ramps Up Food Safety Laws: On October 1, China will amend its Food Safety Law for the first time since it was introduced in 2009. Under the changes, regulatory bodies will hold more power, there will be harsher penalties for violations, and food production and labelling guidelines will be updated.
KFC Suing Chinese Companies Over Mutant Chicken Rumors: KFC is suing three Chinese companies for spreading rumours on WeChat, such as the restaurant using chickens with six wings and eight legs, and maggots in a delivery order. KFC identified 4,000 defamatory messages that were read more than 100,000 times by the end of April.
Chinese Tourists
Chinese Airlines - Premiumisation and Trust: Four airlines made China's 60 most valuable brands last year, with three making the 20 most trusted list. They are evolving by adding premium services, launching subsidiaries in the underserved budget airline category, and focusing on the fast growing international travel segment.
Health
Selling Hope: How the Business of Cancer Is Taking Off in China: Someone is diagnosed with cancer every 10 seconds in China.
Education
Why Do So Many Chinese Students Choose US Universities?: Chinese students account for a third of all international students in the U.S., numbering 274,000 - 17% more than last year, and the tenth consecutive year of growth.
Luxury
When It Comes to Jewellery, Chinese Believe Local Companies Are Best: Hong Kong and Mainland China consumers prefer to spend more on the materials of jewellery, such as a bigger carat of diamond or a larger amount of gold, than paying the 20-30% premium for an imported luxury brand according to Morgan Stanley. It is more difficult to show off the brand on a ring than on a handbag or car. In saying that, Chow Tai Fook's profits dropped 25% for the year ending 31 March, with jewellery sales falling 16% in China and 33% in Hong Kong and Macau.That's the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.
