Chinese brands are growing in influence and global brands must take discerning Chinese consumers more seriously in 2020.
Amid heightened political tension, scrutiny of global brands’ China activities has grown considerably in the past year. International marketing teams take their Chinese consumers for granted at their peril. The list of organisations falling foul of some of the most basic rules of China engagement is endless – Coach, Versace, Gap, NBA – and without true care and attention we expect more fatal errors in 2020.
This comes as local Chinese brands start to truly assert themselves and can no longer be disregarded as weak competitors – they are taking market share. Indeed, national pride, driven by the 70th anniversary of the PRC, has re-hashed itself in the form of guochao (国潮) with storied local brands like White Rabbit and Feiyue reinventing themselves with cross-over and ancillary products.
Meanwhile, domestic Chinese brands like Anta are taking the fight to the previously untouchable Adidas and Nike in the sportswear sector. Whilst we don’t expect demand for mega brands like Nike, Apple and Estée Lauder to dwindle, we do believe that domestic pride will form an increasing part of discerning Chinese consumers’ purchase decision process – particularly if US trade war strong-arm tactics continue.
From a UK perspective, Brexit is unlikely to affect demand for travel to the UK or for British goods within China. The one exception being if the pound appreciates significantly on exit. Chinese shoppers watch exchange rates closely and fluctuations in pricing can have a noticeable effect on travel itineraries.
Male consumers as well as lower tier city consumers are the ones to watch.
We predict further increases in male spend and influence. Brands can no longer afford to rely on female-heavy targeting, even in traditionally female-dominated categories such as beauty and luxury. Brands such as Dior have already made significant progress in this area, including the launch of a men’s collection in collaboration with Rimowa.
Additionally, the growing significance of lower-tier city consumers will push brands to adopt truly regional approaches and focus marketing spend outside of the “known worlds” of Beijing and Shanghai. As part of this trend, platforms such as Pinduoduo as well as Tmall and JD have made dramatic improvements in logistics, enabling brands to deliver products more efficiently. It was recently revealed that 4th tier city Putian represents the highest sales by volume of Budweiser beer versus any city globally. Collaboration with local singers has become a core part of their renowned EDM campaigns.
Brands will need to work harder, smarter and spend more to reach both new AND existing audiences.
By now, everyone and their grandparents know the ins and outs of WeChat and Weibo and even comparative enfants terribles Douyin and Little Red Book have become standardised marketing tools for brands in China.
New-channel noise can be difficult for brands to cut through, especially as the price and quality of traffic from these channels is brought into question. Marketers will need to look at opportunities to connect with new audiences through emerging platforms. One example is sneaker trading app turned comprehensive street-style community Poizon/毒, which already has over 30 million downloads. Brands like New Balance and Casio have already set up an official presence on the platform and offer an enticing ecommerce proposition with exclusive product drops launching regularly.
As emerging platforms bring innovation into the market, the big players will keep wanting to drive innovation on their own platforms. Expect 2020 to see WeChat launching live-stream ecommerce and increase its dominance in search.
Additionally, influencers will continue to increase their hold on the market with many brand marketers insisting they’ll increase their spend on KOLs and KOCs (Key Opinion Consumers) in 2020 to reach new audiences. Brands should ask the tough questions around true value and ROI measurement of influencer activity and should focus efforts on longer term partnerships and revenue share initiatives to maximise value.
As marketing fatigue sets in, engagement rates will continue to decrease. Brands will need to push technological boundaries to move beyond digital content to deliver digital experience.
WeChat open rates were once the thing of legend when compared to the Western equivalent of email marketing, but now a rate of 5% is considered strong. Even the top 500 WeChat accounts have seen an average reader decrease of 9.3%. As there are an increasing number of accounts vying for consumer attention, competition is fiercer than ever. Basic, solid brand content is no longer enough to retain an engaged audience.
China is one of the most innovative and fast-paced markets in the world and consumers consider well-designed, engaging and interactive content a must on most platforms. If content is to have meaningful cut-through however, brands will need to invest in elevating their “always-on” and assess how they can bring technologies like AR, VR and O2O experiences into their digital strategies. A lot of initial brand engagement will continue to be driven by celebrities and influencers (some brands see up to 95% of their total engagement driven in this way) as well as amplification through paid media. A key to growing organic engagement will be using data to create highly personalised content based on deep learning and understanding of consumers within owned communities.
Social commerce will continue to grow with new sales channels emerging, but channel growth cannot compensate for a poorly-communicated value proposition.
With the evolution of key platforms and the emergence of new ones, expect further integration of offline, social and eCommerce in 2020. A consistently cited hot topic is livestreaming eCommerce. This was brought sharply into the spotlight during the 2019 Singles Day festival in November where brands such as L’Oréal generated over RMB 1 billion sales in part due to a marathon 392 hour livestream extravaganza featuring the influencer Austin Li.
While we do expect brands to continue to tap into this trend (WeChat is set to launch livestreaming eCommerce this year) we recommend a focus on full price “selling” rather than “selling out”. To date livestreams have been highly deal- and discount-driven, so brands must deliver a clear value proposition, providing a compelling reason for demanding Chinese consumers to buy full-price on an ongoing basis. Brands and products that can drive affinity with their core values, provenance and quality will have the best chance of doing this long term.
Data will continue to define the market, enabling brands to adapt more quickly and offer deeper personalisation.
Brands continue to fail to take data in China as seriously as they do in their home markets and will need to significantly up their game in 2020. Chinese consumers increasingly demand an authentic and personalised experience with, speed and agility of delivery a core factor.
Expect more data driven and award winning campaigns like Nike’s Next% running shoe launch focussed exclusively on China’s fastest runners and Booking.com’s drive to build emotional connections with premium independent outbound travellers through relevant social influencers.
Beyond campaigns, ecommerce behemoth Alibaba is working with over 81 brands through its Tmall Innovation Center to develop products specifically for the China market based on data and insights culled from its vast ecommerce ecosystem.
Leveraging of bespoke China CRM tools to capture, integrate, segment and target consumers must become a standard.
WeChat remains the prominent platform for social integration and content targeting with Dyson (highly targeted, continuously engaging and regular content and promotions) and Costco (customised entry and user journeys based on expressed preferences and interactions) strong examples of international brands using this to engage, convert and retain their customers.
We also anticipate moves from Weibo, Weitao, Douyin and Little Red Book over the next 12 months to enhance and tailor the experience of their individual users.
In conclusion…
As we roll into 2020 and the Year of the Rat, China remains a market of countless opportunities with accompanying pitfalls. Brands must:
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Understand their regional and demographically diverse audiences more deeply
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Focus efforts towards emerging platforms to supplement core channel activity
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Redefine “content” to deliver digital experiences that bring real cut through
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Deliver a solid, localised brand proposition to validate ongoing full price sales
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Work with data to deliver personalised experiences across marketing, product and delivery