China Retail Briefing

China Digital Consumer Trends 2019

China’s rise as a global leader in ecommerce has been nothing less than stunning. This year, online retail sales are expected to swell to $1.5 trillion, representing a quarter of China’s total retail sales volume, and more than the retail sales of the ten next largest markets in the world – combined.

McKinsey released the China Digital Consumer Trend 2019 report, below are key takeaways:

  • Omnichannel shopping: since 2017, Chinese shoppers have made a noticeable shift back to physical stores,especially shopping malls and mono-brand retail stores. The proportion of consumers saying they use their mobile phones to research products while shopping in a store, what is often referred to as the “showroom effect,” has more than doubled to 63 percent in just the past two years. Young consumers in tier 1 and 2 cities are leading the trend.
  • Social media and commerce: China is the land of social media, and some brands are already monetizing the attention they are generating through social channels.
  • Small town youth is the next pocket of growth: Most marketers have focused their attention on capturing consumers in high-tier cities. While tier 1 cities like Beijing, Shanghai, and Guangzhou have exploited by many brands, more than 50 percent of the digital purchasing power is actually coming from lower-tier cities in China. Online has provided lower tier cities accessibility to brands that lack footprints in their area, especially for premium and luxury brands that have not yet entered lower tier cities. Ecommerce spend in lower tier cities has caught up with that of top tier cities.
  • Digitization is the new trend: tier 2 and 3 cities don’t have that many high-end shopping malls or CBD, hence consumers are more reachable through digital platforms. Many luxury brands start to open e-commerce stores on Tmall and JD.com or build WeChat Official Accounts and Mini Programs before having physical stores in the new market, which also saves the cost of a brick-and-mortar presence. We have seen tremendous success from this strategy, which again proves that digitalization is the new trend.
  • Content Marketing is the game-changer in China’s digital market. Most of the Chinese customers would seek reviews, feedbacks, and recommendations from the peer, industry professionals, celebrities or opinion leaders through different sources. Thus, KOL and KOC campaigns on popular social channels are the key to expand brand exposure, increase awareness and product consideration at the top of the Marketing funnel.
  • KOLs and KOCs wield tremendous influence over consumer decisions and an endorsement by a celebrity or a community leader can still move product off the shelves and out of warehouses— and quickly. But with the rising sophistication of Chinese consumers, brands need to take a far more nuanced approach to managing KOLs and KOCs if they want to engage more effectively with consumers and maximize the impact from their marketing budgets.
  • Seasonal sales and discounts are the keys to the Chinese customer’s heart. Most millennials and middle-class shoppers love to purchase trendy, quality products with rational prices, while higher-end shoppers prefer unique, limited-edition and creative products that enhance their social status. It requires oversea brands to have an up-to-date and more sophisticated product and pricing strategy in order to win Chinese consumers in this digital battle.

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How luxury brands celebrate China’s 70th National Anniversary

After launching special moon cakes to celebrate China’s Mid-autumn festival, luxury brands and retailers continued to come up with new efforts to capture attention from Chinese consumers, including launchinh special products or campaigns to celebrate China’s 70th birthday in the past two weeks.

  • Givenchy released limited edition T-shirt,with embordered number from 1 to 70, and each personally signed by their creative director Clare Waight Keller. Also, they posted the video of Clare sigining the T-shirts on WeChat post, another one with a model expressing her love to China. The posts garnered 332k page views, over 200 likes, and initiated discussions across different Chinese social media platforms.
  • Beauty retailor Sephora, also chose to celebrate this national holidy by launching a new China Red themed makeup collection. The kit is beautifully packaged in red; the colors of the eyeshadow, blush and lipsticks all seem to be sofisticatedly designed to cater to Chinese consumer’s taste as well as skin tone.

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Three Future Trends in Chinese Luxury

According to Jing Daily’s latest market analysis, Chinese millennial shoppers are leading global luxury consumptions. This generation is known for being modern, affluent and tech-savvy. Here are a list of some key trends for luxury brands to follow in order to stay on top of the game in China Market:

  • Millennial shoppers still have a strong disposable spending power, luxury goods continue to be on top of their shopping lists. Most of them prefer to spend more on brands with innovative styles, skilled craftmanship and relatable stories.
  • As over half of the world’s self-made female billionaires are from China, female empowerment is a concept brands cannot ignore anymore. Chinese female consumers, especially younger generations, are no longer depending on men to make a living. As a matter of fact, they consume even more luxury goods than male consumers according to reports since back in 2015. Brands that infuse their products and campaigns with female empowering concepts win the key to consumers’ hearts.
  • Cultural respect is a top consideration when Chinese shoppers are making luxury purchases. Having a healthy, diversed and inclusive brand image is the fundamental and key to of success in China Market. Examples include luxury brands using beautifully designed moon cake gift packs during Mid-Autumn Festival to show their respect for Chinese culture, to win customer loyalty and increase brand stickiness.

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How Luxury Brands Leverage WeChat Moments Ads to Make An Influence

92 percent of luxury brands in China has opened WeChat Official Account, according to media’s report. Here are some of the reasons:

  • Digital channels have significantly penetrated every aspect of Chinese people’s life, many brands have noticed the huge trend and taken the opportunity to benefit their growth.
  • Wechat Official Account allows brands to push articles to followers, publish news about products and also deliver content using H5 pages. With social media accounts, luxury brands have been successfully engaging target customers with unique storytelling, company culture sharing, and online fashion education, etc.
  • In 2014, Burberry launched a special campaign using their Wehcat Official Account, allowing users to shake thei phone, to view the London Fashion Show in real time, and also follow designer, celebrity actitities as well.

Industry Best Cases:

  • Skincare brand SK-II, has been investing heavily on video ads on Wechat Moments. This summer, they invited celebrities from US and Japan to shoot a video campaign called BareSkin, in which celebrities wore no makeups, shared their skincare experience, in an interactive and funny way. They successfully delivered brand concept and product specialty to followers, building a deeper, more long-term connection with existing customers, as well as winning new customers. Comment rates achieved 5x higher than industry standard during peak month.

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