Localising For China - Not Always What You Think
As Chinese consumers are becoming more sophisticated, so are their diets. Increasing awareness of healthy living and food safety issues, coupled with rising affluence is making Chinese more particular about what they eat.
Food and beverage imports are expected to grow 15% a year to $80 billion by 2018. Yet Chinese still have many different flavour preferences to the consumers in countries these imports are coming from.
A look at the most popular Western food and beverage brands in China is case in point. Red Bean Green Tea Frappuccino isn't exactly a top seller in Starbucks stores in Seattle, and red date-flavoured crackers from Oreo's Mondalez probably wouldn't go down well in Oklahoma. Many of the big Western companies such as Nestle and Pepsi Co have set up research centres in the Mainland to develop products that appeal to Chinese palettes.
One of the interesting food and beverage sectors that is likely to see more localisation is China's fast-growing wine industry. An example of this is a partnership between wine growers in Southwest France and the French Institute of Wine Laboratories who are developing wine growing techniques that will appeal to the unique paletes of Chinese consumers.
Whilst developing flavours and localising marketing strategies to appeal to Chinese can be very effective, it is also an art form. Asking Chinese residents in San Francisco or Sydney what they think about your product could provide a skewed view. A study into cross cultural perceptions of colour and odour by Plos One drew a surprising conclusion that Chinese living in the Netherlands make quite different associations than Chinese Malaysians. This illustrates that living in a different environment and culture can influence a Chinese consumer's perception. The most robust understanding of Chinese consumers' preferences will almost always come from the source, Mainland China. We hope you enjoy this week's Skinny.
Chinese Consumers
Cross-Cultural Colour-Odour Associations: An interesting international study comparing how consumers associate smells with colours. Although no Mainland Chinese were surveyed, Malaysian Chinese and Chinese living in the Netherlands surprisingly had quite different perceptions.
Chinese Consumers Turn Less Confident: Chinese consumers' sentiment dropped from 114.8 to 113.3 between July and August according to Westpac Bank's confidence index. This is 6.4% below its long term average, and a stark contrast from improved confidence among Chinese companies. Consumers were less positive about their financial position and more concerned about their jobs outlook last month.
China's Toilet Paper Makers Flush With Cash: Chinese used 4.2kg of toilet/tissue paper per capita in 2012, well below HK's average 10kg, Japan's 15kg and 24kg in North America. But as Chinese consumers get wealthier and move to cities, consumption is growing - up 12.1% in Q2 this year. China created toilet paper in the 6th century - one of the lesser-known great inventions from the Middle Kingdom.
Digging For Diamonds Among China’s ‘KOLs’: China's KOLs (Key Opinion Leaders) aren't always what they seem, and its best to look across their online presence and engagement, study previous work with other brands and consider 'micro-influencers'. An updated draft to China's advertisement law says celebrities should use products before they represent them.
Internet, Mobile, Social Media & eCommerce
Marketing in China: Ecommerce Not Just a Way to Shop—It’s a Lifestyle: eMarketer speaks to China Skinny about eCommerce in China, some of the powerful new insights Alibaba is obtaining, shopping apps and a handful of smaller businesses doing it well.
WeChat and Alipay Ramp Up eCommerce Race With New Features for Online and Offline Merchants: WeChat and Alipay have both launched new features enabling businesses to better take advantage of China's mobile commerce boom. Features are focused around travel and hospitality, bricks & mortar stores and loyalty/promotional deals. The average Chinese smartphone user has more than three Tencent apps installed compared to almost one Alibaba app.
Alibaba Posts Surge in Sales in Advance of IPO: Ahead of the imminent IPO, Alibaba's revenue growth grew 46% in Q2 to ¥15.8 billion ($2.6 billion) with net profit almost tripling to ¥12.3 billion ($2 billion). Mobile sales have helped drive revenue, accounting for a third of all sales, compared with 12% just 12-months ago. Smartphone shoppers grew from 136 million in December 2013 to 188 million in June this year.
14% of Chinese Digital Consumers Shop Online Everyday: A PWC survey found 14% of online shoppers are buying every day, versus 5% globally. 62% purchased weekly, compared with 21% globally.
Interview: Inside Google Brain Founder Andrew Ng's Plans To Transform Baidu: A long and thorough interview with former Googler Andrew Ng, who has been hired as the chief scientist at Baidu's Silicon Valley lab to focus on Artificial Intelligence.
Food & Beverage
Wine Co-Operatives to Target Taste Buds of US, Chinese Consumers: A cooperative of leading wineries from Southwest France is partnering with the French Institute of Wine Laboratories to develop techniques to produce wine that will target the unique palates and aromatic preferences of Chinese and US consumers. [Not viewable in China]
Chinese Retailer Introduces Infant Formula Insurance: Retailer Suning Redbaby has introduced insurance offering consumers up to ¥2,000 ($325) per tin if their infant Formula purchase becomes subject to a recall. Insurance will be free for the first 40,000 tins sold, then can be purchased online.
Chinese Consumers Slightly More Confident in Milk Products: China's confidence in liquid milk crept up slightly to 75.9 out of 100 in 2014, up 0.5 points from 2013, but still below the survey-high of 76.2 in 2009. 56% surveyed considered the brand over other factors when buying milk products. Price was most important for just one in 10 consumers.
Chinese Tourists
Chinese Tourists, With Korean Drama Stars in Mind, Flock to Seoul for Cosmetic Surgery: 56,075 Chinese visitors had medical treatment in South Korea last year, rising 26.5% from the previous year and up from just 4,725 in 2009. Although a breakdown of 2013 visitors has not been released, 10,000 Chinese had plastic surgery in Korea in 2012. The 15-story BK Hospital cosmetic surgery in Gangnam employs 30 Chinese-speaking staff.
Fashion
Vipshop Active Customers and Total Orders More Than Doubled in Q2 2014: Helped along by the acquisition and integration of cosmetics retailer Lefeng, Vipshop's revenue grew 136% to $829 million in the year ended June 2014. Customers increased from 3.5 to 9.3 million. More than 90% of orders came from repeat customers in 2013. Vipshop had the third-highest revenue from mobile shopping for China's B2C stores, after Tmall and Jingdong.
Finance
Winning Over Financial Consumers in China's Gilded Age: Accenture estimates that one third of conventional bank revenue will be eroded by non-bank sector competitors by 2020, due to products such as Alibaba's Yu'eBao. To compete in China's finance industry, players should focus on areas such as providing personalised service, adopting an omni-channel digital strategy and thinking beyond traditional industry boundaries.
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.
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