Singles' Day Chasing More Growth
The big bull of ecommerce festivals comes charging into town this Saturday to much anticipation. Singles' Day and the week that follows will see millions of frenzied electric scooters ferrying an estimated one billion deliveries to offices and apartments across the mainland. If you wanted proof that the Chinese consumer has become a force to be reckoned with, then this is it.
Purchases during the 24-hour period and presales represents over one-fiftieth of China's annual ecommerce sales, with some brands even making half of their annual turnover on the day. However, many sellers will not make a dime from it. For a number of brands it is an opportunity to accumulate much-needed sales numbers and consumer reviews which are vital to Alibaba's, JD's and other platforms' search results algorithm. It's also important for consumer perceptions given they are much more likely to buy products that already have sales histories and glowing reviews, further emphasising the need for top notch end-to-end service, even with the added volume from the festival.
Although consumers are very much in a spending mindset, it is not just a case of throwing up a promotion on Tmall and expecting the masses to tap 'buy'. There will be 140,000 brands - including 60,000 international ones - promoting 15 million products during the festival, so much like the rest of the year, smart marketing tactics will help.
Alibaba has taken the day from just being an online shopping fair to an annual celebration firmly cemented in the festival calendar, arguably the one that generates the most buzz after the Spring Festival-Lunar New Year celebrations. Its evolution to an entertainment-focused event has been vital to its continued growth. Every year, countless pundits have commented that its growth rates couldn't continue, but with every 11.11 it continues to soar, growing 32% last year to $17.8 billion. This year is likely to be tougher for such growth, with consumers already showing fatigue from the endless ecommerce festivals playing on word associations with dates and China's festivals. But falling on a Saturday will help, particularly with the entertainment and brick & mortar focus is likely to see sales figures continue to climb.
For a consumer who has been conditioned to expect more glitz and lights with each subsequent promotion, Alibaba has to deliver an ever-more engaging experience. Alibaba is following many of the themes from last year, with big name celebs herded together in a TV countdown gala again directed by David Hill. Tapping into China's growing love for hip hop, Pharrell Williams will be making the trip to Shanghai's Mercedes Benz Arena to perform and give the inevitable fly hand gestures and selfies with Jack Ma. ¥250 million ($37.7 million) worth of hongbaos (red envelopes) will also be there to sweeten the deal.
Offline continues to be an ever-bigger part of 11.11, with Alibaba opening 60 new 'Retail-powered Pop-up Stores' across 12 cities in China taking inspiration from innovations such as Lancôme's augmented-reality virtual makeover app at Singapore's Changi Airport. There is also the conversion of nearly 100,000 stores throughout China into "smart stores." If you're in China, it would be worth going to have a look.
If your brand is participating in 11.11, we wish you success and sustained growth following the event. If you're shopping on the day, we hope you find some good deals and are entertained.
In other news, China Skinny is seeking a smart, passionate marketing manager to join our all-star line up in central Shanghai. If you or a friend is looking to be titillated during working hours and learn oodles about China marketing and consumers, please let us know.
Here are this week's news and highlights for China:
Digital China
Alibaba Takes to the Streets for this Year’s Singles’ Day: “18% of China total retail is ecommerce. We don’t want to grow that number, instead we want to digitalize the other 82%.” All over China Alibaba has linked up with brands like Levis and Calvin Klein to provide a “special experience” for those seeking a fully integrated O2O shopping adventure this Saturday.
Singles’ Day - the World's Biggest Online Shopping Day: Millions of overseas brands and overseas-based Chinese will be jumping on the 11.11 wagon this Saturday.
Chinese Consumers Numb about Ecommerce Festivals, Except 11.11: 45% of Chinese consumers feel their enthusiasm has sagged in the face of too many ecommerce festivals, with the exception of this week's 11.11 festival [paywall].
China Aims to Clean Up Internet Shopping: Changes to China's Anti-Unfair Competition Law will see Chinese websites that engage in unscrupulous activities such as paying for positive reviews and deleting negative feedback facing fines of up to ¥2 million ($301,000). The new provisions also ban false or misleading advertising about a product’s features, functions or quality, forbid falsifying sales data, user comments and awards, and prohibit “organizing fake transactions” that amount to false or misleading commercial publicity. A 2014 report highlighted over 1,000 websites and messaging groups offering to make fake purchases, with fabricated online sales amounting to more than ¥600 billion ($90.6 billion).
Jack Ma to Promote Malaysia for One Week Next Year: Alibaba will promote Malaysian food, products, culture and places to visit for a week next year - the first such promotion according to a conversation between Jack Ma and the Malaysian PM. Malaysia has long been a loyal supporter of Alibaba and is the first country to sign up to its eWTP platform and consequent Digital Free Trade Zone. 1,972 Malaysian SMEs are on board so far, exceeding the original target of 1,500.
China’s Cross-Border Ecommerce Remains Strong: Chinese consumers’ cross-border ecommerce spending grew 32% to $1 trillion on in 2016 - about one fifth more than the 26% growth of ecommerce overall. Shoppers born in the 80s account for 59% of overall orders, with 90s-kids 23% and those from the 70s accounting for 14%. Beauty products and mother and child goods remain the most popular categories according to the China Cross-border E-commerce Index Report.
iPhone 8 Cheaper in China than in Hong Kong after Falling Demand Forces Retailers to Offer Discounts: Pre-orders for the iPhone X are looking good, following lacklustre iPhone 8 demand which has seen the device selling for less in China than the normally cheaper territory of Hong Kong. Apple faces stiffer competition from local brands such as Huawei which have outsold globally Apple since June despite the launch. Nevertheless, iPhones remain among the top gifts for China's wealthy and the launch has helped Apple reverse six-consecutive quarters of declining revenue in China to grow 12% year-on-year.
Chinese Consumers
Five Key Consumer Trends for 2018: Mintel's five trends for China next year (it's hard to believe these are coming out already) are 1. Consumers will embrace machine learning and artificial intelligence if it makes their life easier; 2. Young consumers are actively looking for ways to deal with social stress with escapes such as gaming; 3. Traditional native Chinese philosophy, remedies and forms of exercise will be important; 4. Consumers will want brands that allow them to enhance who they really are, and experiment and express themselves however they choose; 5. Mobile will be essential for brands.
P&G Succeeds in China with the Human Touch: P&G has turned around the fortunes of two of its beauty brands by showing more consumer empathy. This has seen a shift in studying consumer desires from impersonal and 'skin deep' insights to understanding about consumer's larger emotive needs - they should have spoken to the Skinny years ago! A transformative moment for P&G, as it examined how to boost flagging sales of its VS Sassoon brand, came when they realised target consumers liked photos which didn't just a model’s hairstyle, but also her accessories and full outfit.
Food & Beverage
Infant-Formula Makers Milk Chinese Consumers’ Wallets: Chinese families with 2-3 month-olds spend on average $286 per month on infant formula - 40% of the average income versus the equivalent in Europe costing around 1-3% of local household incomes. Premium products cost up to 2.5 times more without any scientifically proven beneficial value, but on parents’ willingness to pay for features highlighted from research into consumer preferences.
Healthy and Cool? Packaged Water Sales in China Driven by New Consumer Preferences: Sales of packaged water grew 14% by value, well ahead of the 2% growth of FMCG overall in the first half of 2017. The top five local brands accounting for 70% of market share, but in the upscale segment, imported brands have an upper hand. The bottled water market, worth ¥60.7 billion ($9.2 billion) in 2016, is set to grow to ¥86.5 billion ($13.1 billion) by 2021.
Chinese Tourists
The World's 5 Fastest Growing Cities for Tourism are All in China: Chongqing is the world's fastest growing tourism city growing at 14% annually, followed by Guangzhou at 13.1%. Shanghai, Beijing and Chengdu round out the world's top-5. Shanghai has the largest tourism and travel GDP contribution in the world, at $30.2 billion. It also accounts for 11% of China's total travel and tourism GDP contribution. With China's domestic tourism whetting the appetite for outbound travel, the future looks bright for China-related tourism the world over.
Chinese Tourist Behaviour Changing Amid Boom in Overseas Travel: The number of Chinese travellers mostly planning holidays themselves grew from 49% to 74% from 2015 to 2016, with the those mostly planned by travel agents dropping from 15% to 2% according to Oliver Wyman. Spending while away is both increasing and becoming much more diverse.
Health & Beauty
How Duty Free Shopping is Changing the Beauty Industry, by Forcing it to Innovate: Travel retail is one of the biggest markets for prestige cosmetic brands such as Estée Lauder and L’Oréal, with many new collections now being sold exclusively in airport duty-free shops. At Singapore’s Changi Airport, Lancôme recently introduced the Lancôme augmented-reality virtual makeover app, Virtual Mirror, as an in-store experience. Beauty vending machines, like Sephora and Benefit Cosmetics, also came into prominence at airports.
Luxury
The Changing Nature of Luxury in China: Changing expectations of Chinese luxury consumers include minimalism; lifestyle where architecture, cultural events and the sporting arena are used as vehicles to convey exclusivity; naturalness; and local cultural confidence.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
