Reflections on 2019 from CEO Jonathan Smith

Hot Pot China: My Reflections on 2019

By Founder and CEO Jonathan Smith.

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While I have always been excited and energised by the day to day of running a business, 2019 was an exceptional year at Hot Pot.

Revenue growth was solid, stemming from a set of exciting new client wins, making for a good year. However, what factors make for an exceptional one?

In a word - transformation. China’s shifting consumer landscape is great at keeping you on your toes and hence creativity, innovation and adaptability are at the heart of success. In January 2019 I worked with our leadership team to take a deep look at the business and ask a set of searching questions. Top of the list was how could Hot Pot deliver more closely on our vision - to be the first choice for forward-thinking brands looking to deliver long-term value in China?

Over the last year we uncovered, mapped out, and implemented a series of changes that helped us get ever closer to this goal. As we head into 2020 I have rarely been more energised and excited about the 12 months ahead. Below is a short summary of what we changed and why.

1. Hot Pot China took a holistic approach

Digital, social, e-commerce and m-commerce are that the heart of everything Hot Pot does. Working in China’s ever-changing landscape it is vital to have best-in-class fluency in digital trends for planning and execution purposes.

Coupled with the compelling trends around digital, our experience to date has been that far too many brands take an "arms-length" approach to China, hoping that a simple Tmall store managed from outside of China will lead to long term success. While this can be a quick route to start selling, brands that don’t build value beyond ecommerce typically find that sales grind to a halt in year 2 and beyond.

Increasingly we do valuable work with clients, planning and setting up online and offline initiatives in harmony and under a cohesive creative concept, designed to deliver tangible long-term value. Brands need to grow not only awareness, but also affinity. Chinese consumers need to see and touch products and feel part of a meaningful and memorable brand experience, something which ecommerce, social posts or paid ads alone simple cannot deliver.

As a result we have built an exceptional team of adaptable digital-first (but not digital-only) China specialists, with the ability to adapt and integrate based on the needs of a campaign or business initiative.

2. We stopped being an “agency" and doubled down on delivering value for clients

I believe Hot Pot’s greatest value has always been in leading clients through strategy, planning and execution in China. With China already a complex and challenging market there is a clear need for brands to find a genuine partner that not only understands the China landscape, but who can also work cooperatively with senior teams in globally diverse locations.

This year we have strengthened our strategy team and reorganised our execution teams to deliver on a wide range of marketing challenges. Building a longer term strategic view with clients allows us to do this. Rather than simply taking on a brief, campaign by campaign, we build in greater continuity in marketing activity, and create series of initiatives that move the needle on major business goals over time.

As a result we’ve been able to drive meaningful growth, traffic, footfall and sales with Chinese audiences for our clients. The growth comes not only in terms of number, but importantly in terms of quality. This has added up to a marked increase in our clients’ customer LTV as we see repeat interaction and purchase by engaged brand advocates.

The traditional agency model of "get brief > deliver brief > repeat" chiefly delivers on hollow vanity metrics with little link back to meaningful ROI/ROAS, sales, footfall. Which is why Hot Pot is not an agency - we are a team of specialists that deliver concrete value with China.

3. We productised and became more effective for our clients

After many years of working with China we know the commonalities in client needs - from new market entrants right through to well-established players. As a result we developed a menu of options for that can be tailored to suit our clients’ needs. The menu takes care of the core commonalities, which leaves headspace, talent and ability to focus on highly personalised solutions that work with the detailed nuances of each business we partner with.

This model empowers us to dig deep into the specific elements that really deliver impact in China - namely the nuanced understanding of a brand, its target audience in China and the individualised strategic initiatives that will deliver quality engaged customers across all channels. All this while respecting the brand’s core DNA in global markets.

This also means we are able to staff initiatives with the best skills in the industry - digital-first, bi-cultural China specialists with deep experience where it counts. I strongly believe all of this makes Hot Pot simpler to work with in a landscape that is typically complex, opaque and where the route to success is unclear.

4. We reinforced our culture and built a rock solid team

Perhaps most rewardingly as a founder, all of the above has allowed us to have a tighter focus on our most important asset, the Hot Pot team. This year we re-explored and reinforced the values that bind us together and have hired based on our commitment to these values. Yes, we’ve also made tough decisions and fired based on the same - a necessity if values are to have any meaning or resonance at all.

As a result we have an even stronger set of people in both London and Shanghai with a shared sense of purpose and shared values. This has not been a simple task when factoring in a distance of 9,000 km, 13 hour overnight flights and an 8 hour time difference. Our team fully share in the ups and downs of client projects, plus all have stepped up and taken ownership of key actions that move the whole business forward. It’s been an exciting, rewarding and ultimately humbling experience and the Hot Pot team has emerged as an even stronger force this year.

Channelling the Rat ...?

So, we head into a new year and decade in 2020. We also enter the year of the Rat, marking a brand new round of the 12-sign cycle of the Chinese zodiac. Now, for a western audience it might be hard to surface the positive traits of a lowly rodent, however in China there is always something to be admired in each of the 12 signs, the Rat included.

As we take our clients through China’s ever-shifting consumer landscape, we’ll all be aiming to learn from the Rat’s ingenuity, creativity and adaptability. Hardy creatures that learn quickly, adapt and proliferate - perhaps a fitting analogy for our client’s China success strategies in 2020.

Wishing everyone a prosperous new year from myself and the team at Hot Pot China.

Jonathan

 


 

At Hot Pot China we partner with forward-thinking brands on their China activity. We guide our clients in maximising ROI from their short, medium and long-term marketing activity in China, as well as executing the same in-market.

Contact Hot Pot China here to discuss how our team of China specialists can help realise greater value in your brand, digital and eCommerce initiatives.


11.11 Singles Day Predictions from Hot Pot China

11.11 Singles Day Predictions from Hot Pot China

This coming Monday is November 11th. For China this means only one thing - retail.

11.11 is Singles' Day and marks the largest online shopping event globally. Last year, Alibaba's Singles' Day saw sales of more than $30.8 billion (£23.9 billion) in just 24 hours, with the first billion in sales completed within 1 minute 25 seconds.

For comparison, Amazon's Prime Day sales reached $4.2 billion (£3.3 billion) over its entire 36-hour online sale. Alibaba's Singles Day eclipsed this mark just 10 minutes into their online event, making it 7x larger.

Even other famous retail days fall short. In 2018, sales on Black Friday reached $6.2 billion (£4.8 billion) and Cyber Monday rose to $7.9 billion (£6.1 billion), both of which are dwarfed by Alibaba's event.

Now well established in the minds of global retail brands looking to reach a Chinese audience, what does 2019 hold in store? The team at Hot Pot have looked at consumer trends, Alibaba's strategic initiatives and crunched some of this year's Tmall pre-sale data to compile a list of predictions.

Hot Pot China's predictions for Singles Day 2019.

  1. Premiumisation: Luxury brands will be more present and able to hold their premium positioning without excessive discounting. This will be a big win as Tmall have been keen to upgrade, with the launch of Tmall 2.0 (improved brand presentation capability on flagship stores) and a focus on Tmall Luxury Pavillion.
  2. A shift from apparel to cosmetics: it is widely believed that female fashion, long a mainstay of sales on Singles' Day, will be eclipsed by cosmetics sales in 2019. 3 days out from the festival itself, pre-sale stats show Estee Lauder with over 520,000 units sold of its Advanced Night Repair eye cream, with over RMB 1 billion in total pre-sales ($150m).
  3. Live-streaming boom continues: Live streaming saw a major rebirth in 2019 and will be highly prominent during the festival, with KOLs and KOCs (Key Opinion Consumers) inspiring purchases (and likely pocketing commission to fuel their own spending). Tmall is increasingly encouraging global brands to involve their superstar brand ambassadors in. Kim Kardashian partnered with Chinese influencer Viya for a livestream that drove pre-sale of 150,000 units of her KKW perfume brand in a single day
  4. Lower tier consumers: With incomes rising, growing sophistication and an increasing interest in a wider array of brands, the proportion of sales coming from lower-tier consumers is expected to rise significantly. Tier 2 and beyond is a major battle ground for Alibaba where impressive logistical infrastructure for eCommerce offsets consumers' reduced access to physical retail. Savvy global brands are on top of this trend and will be targeting on a hyper-local basis
  5. Going green(ish): Alibaba have been making a lot of noise around building a more sustainable footprint for the festival. We expect some movement her and plenty of PR fanfare from Alibaba around sustainable practices, but with more than a billion packages shipped, how much packaging will be generated?
  6. Returns: to compound the sustainability point above, Tmall's newly-implements returns policy will lead to higher volumes of deliveries sent back to distributors. Based on polling of our network, many fashion brands expect to see returns close to 50%.
  7. A Rival to Chunwan? With Taylor Swift due to appear at this year's Single's Day extravaganza broadcast online and on TV, the event is increasingly similar to the chunwan. A late night is in store for all as many will be gathering, watching the show, meeting and eating with friends poised to convert their presales at the stroke of midnight on Sunday. Could 11.11 become a cultural rival to the chunwan - the traditional Chinese new year's eve gathering?

At Hot Pot China we partner with forward-thinking brands on their China activity. As part of our strategic advisory work we help map out benefits of platform partnerships and digital marketing initiatives. We guide our clients in maximising ROI from their short, medium and long-term marketing activity in China.

Contact Hot Pot China here to discuss how our team of China specialists can help realise greater value in your brand, digital and eCommerce initiatives.


Alibaba and Double 11 in 2018: Beyond the Numbers

Alibaba and Double 11 in 2018: Beyond the Numbers

This November saw record sales of RMB 213.5 billion (approximately GBP 23.8 billion) from China’s Double 11 – a shopping festival that has become a major feature of the Chinese commercial and marketing calendar for domestic and international brands alike.

Much has been written regarding the mind-boggling total transaction value, however Hot Pot’s insight team in Shanghai have looked beyond to identify three key takeaways for brands looking to build understanding and maximize value from the 11.11 shopping festival.

 

Key Takeaways: 

  • Beyond the Day: A common misconception is that Double 11 takes place on a single day. The reality is that the festival begins with pre-sale and add-to-basket in late October and brands are increasingly choosing to extend their promotional offers beyond the 11th November. Given that the length of the festival continues to grow, brands must develop their strategic plan well in advance to capitalise and consider appropriate budget allocation and activations before, during and after 11th November. Typically any non 11.11 related sales will taper off sharply from mid October and this needs to be factored into quarterly sales forecasts.

  • Beyond the Discount: Tmall and the Double 11 festival have developed a reputation for heavy promotion and discounting. This year Hot Pot saw notable campaigns from brands, especially in the luxury sector, that provided consumers with an immersive and engaging experience to counteract this need to discount. Exclusive and limited-edition products hold huge appeal and were able to drive traffic and conversions demonstrating that brands can succeed online in China without purely discounting aggressively. Additionally Tmall’s increasing arsenal of gaming, voting, and user-generated content mechanisms can be leveraged to good effect and should be considered key elements of seasonal promotional plans.
  • Beyond Tmall: Platforms from across the Alibaba ecosystem are playing an increasingly important role in the festival. For example, Eleme (food & goods delivery services), Fliggy (travel & booking), Hema (O2O retail in fresh groceries), Xianyu (second hand marketplace) and Damai (ticketing platform) are all leveraging the increased 11.11 consumer interest to drive sales. Additionally, a new Tmall initiative introduced offline activations in 12 cities covering 100 high-performing retail districts areas and 180,000 offline stores. Users were able to use their Taobao and Tmall apps to scan 11.11 barcodes at physical retail locations to receive on-the-spot discounts and coupons.

  • Brands including L’Oreal, KIMISS and Beats were key participants looking to leverage the retail opportunity offered by the offline activations. As consumers increasingly look for a seamless brand experience online and offline it is vital that an integrated omni-channel strategy is implemented and this can now be factored in to festival-based planning.

(image credits: Alizila, Fortune. Retail Week)


About Hot Pot

Hot Pot continually monitors the rapidly evolving face of retail in China. We plan and execute omni-channel strategies for some of the world’s leading retail brands.

Get in touch to discover how Hot Pot can help you optimise returns from China eCommerce initiatives, both in and outside of the Alibaba ecosystem.