Making Sense of Rising Nationalism and Consumption Behaviour
The ongoing Trade War, HK protests, NBA, Huawei and other geopolitical issues continue to accelerate the rise of nationalism in China and, as a result, growing consumer preference for domestic brands. We only need to look at Tmall as an indicator, where three-quarters of brands have incorporated the phrase "Made in China" on their product pages - up from less than half in 2017.
Yet, like much media about China, 'fears of mass boycotts' of US and other foreign brands are fiercely overstated. Whilst many commentators cite the fall of Apple in China as a pin up example of nationalist-consumption, the reality is much more multi-faceted. For a start, Apple phones have become quite common in China, meaning its long-held appeal as a status symbol no longer resides. Budding status-seeking Chinese are much less likely to blindly buy the most expensive product on the shelf or screen, instead becoming more focused on value - the new status in China comes from being 'in-the-know'. For many Chinese, Apple's features are no longer considered innovative, often behind or inferior to local brands such as Huawei, and don't justify their premium price. This has seen Apple's market share in China halve over the past four years
Apple's sinking share is in contrast to the fortunes of many other foreign brands in China. Chinese consumers still appear to embrace good quality and thoughtfully-marketed western products. Several US and European luxury brands, including giants Kering, Louis Vuitton, Hermès and others have reported strong growth for their goods in China. Although there are a few local luxury brands rising in China, the majority still value foreign brands for their craftsmanship, design and heritage.
At the other end of the affordability-spectrum, fast food remains dominated by American (but quite localised) brands KFC, McDonalds and Burger King, who only entered the market in 2005, but had opened over 1,000 restaurant in China by 2018. Although domestic brands are growing fast, the three US brands remain the most popular in the category which grew 9.4% in the first half of this year.
Even more interesting is the NBA, which has been villainised by many Chinese nationalists. Nevertheless, 25 million Chinese were simultaneously glued to their devices for Tencent's stream of the Los Angeles Lakers opening match against the Clippers, despite the full force of state media urging consumers to boycott.
While university campuses in China ban cuddling, dying hair and access to dorms during the day, young Chinese are unlikely to blindly consider everything better in China. Foreign brands that have localised their strategies such as brand purpose, and remember that origin - whether domestic or foreign - continues to be just one piece of the puzzle for brands, can still be well-placed to win in China. There remains plenty of other moving parts needed to create strategies that will win the hearts of Chinese consumers - something China Skinny would love to chat to you about.
On the subject of building the optimal strategy for China, our British readers looking to learn from the best practice case studies about how to win in China should sign up to join China Skinny's Andrew Atkinson sharing his nuggets of wisdom. The interactive and insightful event is on 25 November in London in association with CBBC. More info here.
Here are this week's news and highlights for China:
Chinese Consumers
US Fears Mass Boycott as Chinese Turn to Homegrown Brands: Local names made up half of the top 50 brands in 2019 according to Prophet's annual survey, compared with 18 three years earlier. Alipay and Huawei took the top-2 spots. Huawei's share of the smartphone market grew from 15% to 37% between 2015-2019, whereas Apple has dropped from 14% to 7%.
Why Would People from China, the World's Second-Biggest Economy, Risk their Lives to Enter the UK?: Although it is now believed most, if not all, of the 39 people found dead in a truck in the UK were Vietnamese, the tragedy has prompted a lot of analysis and soul-searching. Of the 10 million Chinese nationals living abroad, they typically aren't the poorest of the poor. In fact, many are wealthy and highly educated. Even those seeking entry into a country through less scrupulous means to work in low-paid jobs generally aren't the poorest either, as they've had to pay smugglers high fees. 25% of Chinese living abroad live in America, 7% in Canada, almost 5% in Australia and 10-20% are in Africa. In the UK, more than 730,000 visas were issued to Chinese nationals last year, 25% of the total. Almost 100,000 Tier 4 study visas were granted to Chinese citizens - up 13% on the previous year.
Exclusive: Chinese Consumers Want Brand Purpose but Expect it to be Localised, Says Report: Where consumers in other markets take a broader world view (sustainability, inclusivity, etc), Chinese consumers expect brands to focus locally and prioritise China’s development. This means brands must look to define their role domestically and to build new levels of trust and respect with Chinese stakeholders. 49% of Chinese respondents said brands should focus on making local communities better (nine points higher than the global average), and 39% felt they should focus on both local communities and global issues (14 points lower than global).China Leapfrogs France for Ease of Business as Emerging World Gains: China jumped from 46 last year, to the 31 in the World Bank's annual rankings of ease of doing business. China has made it easier to obtain construction permits, getting electricity, and resolve insolvency, reflecting government efforts to create working groups focused on each of the report’s indicators. Some 115 of 190 countries made it easier to do business, although no Latin American economies and just two African economies made the top-50. New Zealand retained its top spot.
Rich Chinese Outnumber Wealthy Americans for First Time: Credit Suisse: 100 million Chinese ranked in the global top 10% as of the middle of this year versus 99 million in the United States. Despite the trade tension between the United States and China over the past 12 months, both countries have fared strongly in wealth creation, contributing $3.8 trillion and $1.9 trillion respectively. The ranks of the world's millionaires have risen by 1.1 million to an estimated 46.8 million.
Digital China
Pay With Your Face: 100m Chinese Switch from Smartphones: Some 1,000 Seven-Eleven convenience stores, as well as other retailers, restaurants, vending machines, ATMs and subway stations are those who have installed a facial payment system. More than 100 million Chinese have registered to use the technology. About 10% of customers at Seven-Eleven stores in business districts in Guangzhou already make purchases with the facial payment system. More than 200 million security cameras are installed across China.
Reading a Book in this Shanghai Toilet Could Be a Bad Idea if You Don’t Want to be Disturbed: Facial recognition technology is being applied to everything from airport security and crime prevention to garbage sorting in China. Shanghai has built around 150 smart public toilets, but you’d better not spend longer than 15 minutes inside or an alert will be sent to municipal workers to check on you. "Since I was a little kid I’m used to spending up to half an hour in the toilet, this would mean a toilet worker checking on me twice … this makes me nervous," says one Shanghai resident. The market size of China's smart cities is expected to exceed ¥10 trillion ($1.4 trillion) this year, and is predicted to reach ¥25 trillion ($3.5 trillion) by 2022.Pinduoduo Is Now Worth More Than JD.Com: Last Thursday, Nasdaq-listed Pinduoduo saw its share price rise more than 12% to boost its market cap to $46 billion, surpassing JD.com’s $45 billion. Pinduoduo is now the fourth-largest overseas-listed Chinese internet company, behind Alibaba, Tencent, and lifestyle platform Meituan Dianping. In other ecommerce news, Taylor Swift has been confirmed for Alibaba's Singles' Day Countdown Gala.China Rushes to Embrace Blockchain with Facebook’s Libra Just Around the Corner: The People’s Bank of China is preparing to launch its own digital currency, with President Xi Jinping urging an aggressive approach. Experts say Beijing was, for now, mainly looking at controlling the risks of capital flows in applying blockchain. Last week, Facebook founder Mark Zuckerberg told US lawmakers that Libra was essential to projecting American financial leadership around the world, a week after conceding defeat in China after years of schmoozing the PRC.
Food & Beverage
China’s Best Fast-Food Restaurants: These Are the 11 Most Popular Chains in the PRC: Fast food chain's popularity is growing rapidly growing 9.4% in the first half 2019 compared to last year. Western chains KFC, McDonald’s, and Burger King still dominate the top three, but local chains Laoxiangji, Dicos, and Real Kungfu are growing fast. KFC launched its first Chinese restaurant in 1987, McDonalds in 1990 and Burger King in 2005. Dico's is very KFC-esque, but Laoxiangji's menu is quite different serving classic pork meatballs, meatballs wrapped in fried gluten, hot and sour fish, or steamed eggplant with chilli and sour sauce. Real Kungfu is known for reasonably-priced meal sets usually including a rice bowl, soup, boiled lettuce, and a meat main dish.
This Beijing Restaurant Was Just Ranked the World’s Best: TripAdvisor's annual Travellers’ Choice Awards rated Beijing's TRB Hutong as the top fine-dining restaurant in the world - the first time a restaurant in Asia has received the honour since the award's inception eight years ago. Located in Beijing's hutongs the restaurant is in an historic Qing Dynasty temple courtyard and serves up "modern European dishes with innovative and harmonious adaptations using locally sourced, seasonal ingredients, alongside an over 1,000-strong wine list called Temptations."
Sport
25 Million Chinese Fans Streamed the NBA's Opening Game on Tencent: Despite calls to boycott the NBA, the first game of the 2019 season - The LA Lakers versus the LA Clippers - saw nearly 25 million simultaneous viewers on Tencent Video. State broadcasted CCTV has continued its ban on airing NBA games.
Education
Head-Scratching Rules at Chinese Universities: A Recent History: Following up rules such as no cuddling on campus or long hair, unconventional university rules in China that have made headlines in the past few weeks are: 1. no daytime dorm access; 2. no curtains around beds; 3. no dyed hair (although after a backlash, was lessened to 'discouraged'); 4. collect and unbox deliveries at a centralised collection point; and 5. social shaming for absentees.
Luxury
What Slowdown? China's Riding to the Rescue of Luxury Brands: Several large US and European luxury brands have reported strong demand for their goods in China, even as the economy slows. Hermès says its mainland China stores helped fuel a 19% sales gain in the region. Kering, owner of Gucci, Yves Saint Laurent and Bottega Veneta mainland China posted high growth rates, and luxury down jacket maker Moncler saw Asia-Pacific revenue grow 19% in Q3, with mainland China among its top performers. In June, Louis Vuitton announced 'unheard of’ growth' in China and Swiss watch exports to China are up 14% this year.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
