October 30, 2015
Chinese shoppers’ tastes, behaviours and usages are under scrutiny, and will be ever more on November 11, aka 11.11 or Single’s Day, their “D-Day”. China’s market growth is driven by young urban consumers without taboos, eager of discovery, demanding and hyper connected. Cosmopolitan, they set the agenda, and as a consequence, future consumer markets will increasingly be sinicized. Here are 5 things he’s addicted to you’d better know
# 1- Addicted to Smartphones …
One calls China the “Smartphone Nation”. Mobile users in China are beyond 1 billion, and 45% of them have a smartphone. They should be 49% of over 1.2 billion in 2017. Smartphones in China will be the primary purchase channel of the Chinese, far ahead of the Americans, and even more of the French, German or English. Besides, the Chinese mobile users exceeded the number of online PC users for the first time in 2014, and Q1 2015, Chinese using mobile devices (smartphones, tablets, and other mobiles) achieved almost half of online purchases (vs. 33% in the UK, 22% in the US, and less than 20% in France). To reach its core target Pepsi has become the first marketer to launch its smartphone , in China, this October…
The youngest of Chinese consumers spend most of their time interacting with applications. Whether to play (leading their usages), buy, or watch videos, nowhere these behaviors of the “Head-Down” generation, are more massively visible in the streets and metro. An evidence of the tourism boom – by far first in the Mainland, and abroad – the downloads of Ctrip tour operator app exceeded 800 million in Q1 2015, and its mobile channels accounted for 70% of the transactions over the same period. Mobile revenues of its competitor Qunar increased by 300% in Q2 2015 vs. the same period in 2014.
# 2- Addicted to Social Networks
There are as many social network users as Chinese Internet users, about 660 millions, of which 575 millions connect via mobile. QQ messaging platform leads with nearly 850 million monthly active users, WeChat has over 600M. But it’s especially the influence of social media on purchasing decisions, that is stronger than in any other country: for 90% of the Chinese consumers, this interaction is more incentive to purchase vs 62% in Global (2). They will spend more time than their American counterparts, and the overall average, to follow their favorite brands, look for a brand, discover a new one, comment an experiment, or for having seen a video showing a product/a brand.
As a matter of fact, projections of social networks ad spendings are on par with a respective 53,8%, 39,6% and 28,1% growth in 2015, 2016 and 2017
Tencent by integrating ecommerce player JD.com, and Alibaba in taking a stake in social network Weibo, have measured the importance of social in Chinese shopping habits. The Japanese retailer Uniqlo is a good example of the engagement generated towards its fans: a third of them on WeChat wil buy in its stores, and more than 25% of its customers browse on its application. Tencent’s WeChat first ever released report shows WeChat is used for shopping by 15-29 years old, favorite shopping times are 10AM and 10PM, and Men shop 1/3 more/month than women
… and bargaining
It’s not seldom to see online flash sales of exclusive series cars, widely shared on social networks, selling out hundreds of units in a few minutes. Hundreds of thousands of Xiaomi mobile phones were also sold exclusively on Weibo
# 3 – Addicted to… traditional stores
eCommerce is booming: online sales were up 48.7% in H1 2015, and the Chinese are buying in priority, ready to wear and accessories, cosmetics, and consumer electronics. Cross-border eCommerce, if still a niche business, will grow: with a constantly growing middle class, quality insurance is the top item that determines the cross border purchase, far ahead of price. Adding that since October 11, WePay Crossborder allows consumers to pay with their WeChat account in RMB, and money directly ends in your foreign account in 8 local currencies (Euro, english Pound, US/Hong Kong/ Autralian/Singapourian Dollar, Korean Won, Japenese Yen). A real alternative to Alipay, not accessible on WeChat.
Still, sales in traditional retail dominate by far (90%) and are expected to still represent 80% by 2020.
But if Showrooming is a global reality and a Chinese standard (1), the Chinese is a web-rooming adept. 85% will begin their research online. 30% of Chinese e-commerce buyers validate their online purchase first in-store, and 63% of buyers will increase their spending in a traditional store thanks to an eCommerce website. But for luxury brands, Chinese millenials who should spend twice as much as their Asian Pacific peers in 2016, still prefer the traditional store for 64%, rather than a local eCommerce Site (9%) (1).
Point of sale digital engagement ranks highest among the Chinese. Personalized real-time offers, couponing, QRcode to access additional content, mobile payment or via a mobile application such WeChat Payment, Video walls, sellers with tablets, wifi are all technologies and services to guarantee a better shopping experience for Chinese, far more than for the overall consumer (1). An experience people also searched for online. The Chinese can since this summer experiment with various environmental shopping simulations through the virtual fitting room Mota on B2C site Tmall, which attracted more than 130 brands, including Topshop, Gap, Levi’s. And JD.com recently launched the “JD Wardrobe” app for mobile (smartphones, tablets, and other mobiles): it allows users “mix-and-match” trials in a virtual dressing room, share a selection of articles with friends, and receive
fashion advices from virtual fashion experts.
Contrary to the majority in the West, shopping in China is first entertainment, and not to save time
# 4- Addicted to Services
Bring something new, practical, playful, and a good deal, and “mobile-first” Chinese shopper should grant you: during last February New Year, the Hong Kong jewelry retailer Chow Tai Fook has exploited iBeacon technology in 237 of its stores in four cities: people approaching were asked to turn on their Bluetooth function on their smartphones, received discount coupons while shaking their phones via WeChat. Results: +32,000 participants have activated the “Shake” function an average of almost 5 times, and conversion rate of 60% accounted for 21,000 sales.
Nowhere else than in China, O2O- click&collect, services such as pickup and home delivery of medicines, apparels, bookings of entertainment, restaurants, doctors, chefs, etc…geolocalization services- is as much a reality of everyday’s life: massages, manicures, dry cleaning, car wash, car sharing, catering, kakaoké, etc …
Robin Li, Baidu‘s CEO announced the O2O push as the company top priority at the Baidu World Conference mid-September: “We are actually transforming the company from connecting people with information (search) to connecting people with services (…). We need to win the” high-frequency war”. The one of services, like food delivery (with Baidu Takeout for example), movie tickets (with Wanda eCommerce) or cars trips (Baidu has invested heavily in Uber).
The virtuous triangle of the O2O promises ? Tablets and Smartphones technologies + Traffic congestion + (still) accessible labor cost
… and in-app payment
For years now, the Chinese pay, transfer money with their mobile. WeChat Payment in particular has brought to light their extraordinary appetite for these easy transactions and QR code payment.
Mobile spending in China is expected to hit a global record high in 2015 of 49.7% of all e-commerce, with projections for 2019 at 71.5%.
After Walmart last spring, the Chinese will start as early as October, and in 2 000 points of sale by the end of 2015, to pay at McDonald’s with their mobile and the Alipay payment system by scanning a QR code. The hotel chain Marriott International also announced this service in Mainland China, Hong Kong and Macau, and Asia by mid-2016. Beyond apps, Swatch just made the headline with the launch (before Apple), in January 2016, and in China first, of its Bellamy pay-by-the-wrist watch, allowing contactless payments thanks to its partnership with UnionPay
# 5- Addicted to Luxury
18-30 years old are the 1st luxury consumers in China, much younger than its counterpart in the West. Quality and authenticity insurance, quality/price ratio and fidelity are the pillars of Chinese Millennials’ (but also Vietnamese, South Korean and Hong Kongers) preference for Western brands.
… and travels
A preference he will illustrate while making nearly 70% of its luxury goods purchases abroad, firstly at the request and on the recommendation of his friends and family, on the other hand, thanks to a previous experience. More than 234 million Chinese tourists are expected abroad by 2020, with an average growing basket (2). Therefore, will the store in China become a “CRM Hub” – a source of information, place of education, and for building the relationship to promote brand’s preference – before being a sales point (3)?
Li Fung Group just opened Explorium in Shanghai, “a laboratory which aims to imagine the retail of tomorrow. Brands and retailers (members) can test and evaluate in real time consumers’ interaction with high-tech concepts, and exploit the insights and datas”. For Victor K Fung, chairman of Fung Group, “everything we thought we knew on how consumers decide what to buy, where, when, how, and how to pay, is changing- all over the world, and especially in China“.
Explorium: the video
What better place than China to decipher this shopper on steroids? For Andrew Keith, Lane Crawford President of the Hong Kong luxury department store, that is celebrating its 165 years, “We are not teaching them. They are teaching us“.
Laure de Carayon, CEO @ChinaconnectEU
(1) PwC report “Delivering on O2O: How can Chinese retailers respond to the blurring of online and offline” – PwC conducted its study on 19 territories: 3 results are given: China, the US and a global average
(2) China Luxury Advisors
(3) Albatross Global Solutions