Chinese Consumers Still Love America - Just Look at the Singles' Day Numbers
Another Singles' Day and another dizzying array of records: Almost $70 billion worth of goods sold just on China's top two platforms including $38.4 billion on Alibaba and $29.2 billion over the 11-day sale on JD.com. It was a 27% rise across the board from 2018. On Alibaba alone, 299 brands surpassed ¥100 million ($14.3 million) in GMV. One million new products were launched and over 50% of Tmall merchants engaged in livestreaming. Delivery companies hired an extra 400,000 workers to handle the 2.8 billion packages expected to be delivered this week - two packages for every person in China!
Studying the behaviour of the 500 million shoppers on Alibaba platforms during the festival (100 million more than last year), delivered some interesting findings. According to research conducted when emotions were still raw from the NBA incident, 78% of Chinese consumers claimed they'd avoid buying US products on Singles' Day. Like so many insights and data in China, this looks to have been a little far-fetched. On 11.11, the US was the second-most popular origin for imported goods after Japan and, of the 15 brands whose sales blew past ¥1 billion ($143 million), more than half were American: Apple, Bose, Estée Lauder, Gap, Levi’s, Nike, The North Face and Under Armour.
The cheerful results for American brands comes off the back of more positive news for another country currently in the 'dog box'. Last week, coinciding with the plethora of announcements at the China International Import Expo (CIIE) in Shanghai, Canada's four-month ban of beef and pork exports to China was lifted. Although the Huawei arrest issues persist, the decision reflects the impact that the African Swine Flu is having on China's favourite source of protein. By last month, the number of live pigs in China had fallen 41.1% year-on-year and pork prices surged 101.3%, including a 20.1% rise just in the last month.
Much like Canadian beef and pork, the outlook for imported food and beverage looks strong overall. Food safety continues to be the top societal concern amongst consumers in China. Food is just one area that continues to show promise for foreign brands based on Singles' Day and last week's CIIE. At the expo, global health care giants such as AstraZeneca, Boston Scientific, Eli Lilly and Thermo Fisher Scientific made it no secret that they are increasing their focus on China to capitalise on its soaring health needs.
All in all, Chinese consumers' enthusiasm to spend continues, providing plenty of reasons to invest in China. Yet not everyone is feeling happy with their lot. 49.6% of Chinese residents feel either "satisfied" or "very satisfied" with their overall quality of life, 5% less than in 2017. For China's younger demographics, top concerns are education, employment, housing, healthcare and entrepreneurship.
The good, bad and ugly are obviously all important for brands seeking to understand, connect with and inspire Chinese consumers. Talk to China Skinny about how we can delve much deeper to provide you with that objective view.
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Here are this week's news and highlights for China:
Digital China
Infographic: Alibaba’s 2019 Singles’ Day: Alibaba has done it again with another huge 11.11, 26% bigger than in 2018. Find out the major milestones, exporting countries and others factoids. JD also had an enormous Singles' Day with their 11-day long festival hitting $29.2 billion growing 28%, with 70% of new customers from lower tier cities.
Tmall Global Wants to Build an Ecosystem of Global Influencers: Kim Kardashian West sold out of her stock of her name-brand KKW perfume in just a few minutes during a livestream with China’s top livestreamer, Viya Huang. She drew 13 million viewers to mark her entry into China via Tmall Global. The Tmall Global Influencer Ecosystem plans to train and support 2,000 'mega-popular' influencers, building on the current 500 influencers from 10 countries, including China.
China’s Commercial 5G Rollout, Explained: 5G is now available in certain areas of 50 Chinese cities, including Beijing, Shanghai, Guangzhou, and Shenzhen. There are nearly 20 5G-enabled smartphone models available, although they accounted for just 787K of the 288 million phones shipped in the first three quarters of 2019. In addition to downloading large files and opening webpages more quickly — 5G will also aid the development of cloud computing, artificial intelligence, and the internet of things.
Chinese Consumers
National Livelihood Satisfaction Survey Released, Rural Professional Associations and Farmer Incomes: A survey of 51,606 people by the State Council’s Development Research Centre found 49.6% of residents in urban and rural areas were "very satisfied" or "satisfied" with their overall quality of life, down from 52.8% in 2017. The gap between urban and rural is widening. Those "relatively dissatisfied" or "very dissatisfied" increased to 13.4%, up from 12% in 2017. 68.9% were "confident" or "very confident" about the future, with 10.2% not. 75% saw no increase or a decrease in income, while 70.8% saw expenditures increase as a portion of incomes. Food safety was the top societal concern noted by 26.4% of respondents.
A Look Back at China’s Favourite Imports: 2:30 video explaining popular imported products and music, which were introduced to the Chinese mainland in the 70s, 80s and 90s.
Have Chinese Youth Gone Cold on the Climate?: A survey by Youth.cn found Chinese youth's top concerns to be education (79.8%) and employment (77.1%), followed by housing, healthcare and entrepreneurship. The environment was sixth of the nine topics. Climate change wasn’t even specified. In 2018, carbon emissions worldwide rose 2.8%. In China, the rise was 4.8%.
JD.com Opens its Largest Offline Store to Date, and in Western China: “JD E-SPACE,” a custom-built, 50,000-square-metre shopping destination in Chongqing opened its doors in Chongqing on November 11 with Singles' Day specials. The store features top-selling electronics, home appliances, digital accessories, health, fitness, beauty, office supplies and more, including brand-experience zones from Apple, Microsoft, GE and ninebot. The store promises shopping convenience with an immersive and interactive experience including robots who guide customers and introduce products.
Food & Beverage
King Of Beverages Zong Qinghou Aims To Revitalize Wahaha: It's not just foreign brands who are struggling to keep up with China's dynamic FMCG category, China’s largest privately held beverage company Hangzhou Wahaha Group has seen revenue slide from ¥78 billion ($11.1 billion) in 2013 to ¥47 billion ($6.7 billion) last year. It hasn’t captured the trading-up trend as well as it could have, but it plans to change that, vowing to lift sales by at least 50% next year.
China is Hungry for Australian Beef, but Every Second Kilo Shoppers Buy Could be Fake: Australian beef exports to China grew 73% on last year, with Chinese consumers prepared to pay hundreds of dollars a kilogram for the right cut of steak from a country they trust. But they often don't get what they think they're buying. PwC estimates that every second kilogram of beef sold in China under the banner of Australia isn't Australian. The African Swine Flu-driven culling of pigs - China's dominant source of protein - has seen more enthusiasm for beef imports from Beijing, with the government ending a 20-year ban on British beef in deal expected to be worth £230m ($296 million) and lifting a 4-month ban on Canadian beef and pork imports.
Chinese Tourists
China’s Trip.com (formerly Ctrip) Ties Up With US Giant: A joint venture between Trip.com and TripAdvisor will see shared inventories in travel categories. TripAdvisor will also provide content for distribution across many of Trip.com’s foreign and China-focused brands including Trip.com, Skyscanner, Ctrip and Qunar. Ctrip will have a person on Tripadvisor's board and the right to purchase shares. Chinese outbound travel accounts for 20-25% of Ctrip's revenue.
Healthy
US, EU Health Care Giants Jump at Opportunities in China During Import Expo: Global health care giants such as AstraZeneca, Boston Scientific, Eli Lilly and Thermo Fisher Scientific unveiled massive floor displays at CIIE last week to promote their products to Chinese buyers. The primary contingent of American companies participating in the expo was concentrated in the medical and health care industries. Timed with CIIE, Britain's AstraZeneca has launched a $1 billion China investment fund with CICC, and announced expansion of its Shanghai R&D centre and the establishment of new regional headquarters in Chengdu, Guangzhou and Hangzhou, in addition to Beijing as it doubles down in China.
Property & Investments
China Now Has an Answer to its Housing Crisis - It’s Called Rent: Upwards of 30% of new home purchases in China were being carried out due to an impending marriage. In 1991, the average age for a couple to get married was 23.7 and have a child was 24.2 years. Last year, it was 27.8 for marriage and nearly 30 for a child. Although property prices in China have become some of the most expensive in the world - having more than quadrupled since 2000 - rent is still very affordable. For example, as of June 2018, the average monthly cost of a mortgage in China’s top cities was ¥16,000 ($2,274) per month, while the average rent was less than half of that at ¥7,000 ($995). Over 200 million people in China are now renting their homes, although the rental market makes up just 2% of the housing market value. The stage is now set for China to create a dynamic rental market.
60% of Chinese Household Debt Tied up in Home Loans, Existing Homeowners Dominate Lending: Residential property loans account for 55.6% of all household debt according to Ant Financial. Between 2017 to 2018, the share of residential loans made to existing homeowners rose from 62.9% to 65.9%, greatly exceeding the share of first home loans. In 2019, the Chinese loan participation rate was just 28.7%, compared to 78.0% in the US. The wealthiest 10% of Chinese households have 80% of the savings, while 40% save nothing. The average Chinese household controls ¥1.62 million ($230K) in assets, with real estate accounting for most of it, whereas only about a third of US household assets are property.
Luxury
Western Luxury Brands Showcase China Love at CIIE: High-end luxury brands had their own dedicated section at the fair this year. LVMH's 500 square meter exhibition showcased its 13 iconic brands, with Louis Vuitton presenting their latest flexible-screen handbag from LV and Fendi offering a special handbag inspired by the Chinese Forbidden City. Kering devoted its space to the sustainability effort, and L’Oréal brought its latest beauty-tech products, including an AI-aided consumer insight system, a one-stop skin detection app, and more. Even Dolce & Gabbana was there trying to crawl back into favour after last year's clanger.
That’s the Skinny for the week!
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