China Success - 3 Questions with Robin Trebbe, MD APAC, Intersport

China Success - 3 Questions with Robin Trebbe, MD APAC, Intersport

By Jonathan Smith, Hot Pot Founder & CEO

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Hot Pot has launched a new series -- China Success -- where we ask 3 key questions to China retail experts.

Jonathan is joined by Robin Trebbe, MD APAC at Intersport, to discuss running, sports trends in China, online sales, and digital channels, among other topics.

Watch the full conversation here:

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


'618' Netted £110 Billion in Sales. Did you miss out?

'618' Netted £110 Billion in Sales. Did you miss out?

4 minute read

By Adam Sandzer, Hot Pot Strategy Director

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618 is China’s mid-year shopping festival. Although less well known than Singles Day (11.11), 618 is gaining popularity. This annual shopping festival starts on June 1st and ends on June 18th (hence the name 618).

This year, the two Chinese giants – Alibaba, including Taobao and Tmall, and JD.com reported unprecedented sales of £110 billion ($137 billion) during 618. Alibaba led the way with £79.41 billion in gross merchandise value, and JD.com reported £30.62 billion in total transaction volume, up 33.6% vs 2019.

Did your brand miss out on the opportunity?

The short answer is, it depends on your category, as it so often does in China.

Top categories included beauty products, fresh food, medical and health care products, kitchenware, mobile phones, home appliances, food & beverages, baby & maternal products, and home appliances. For brand owners in these categories, this is a must-win moment.

However, luxury and fashion brands were less active during the festival, focused on other events in the China marketing calendar.

Luxury brands are increasingly launching official presences on China marketplaces such as Tmall and JD.com. However, we see a high degree of caution and scepticism amongst luxury brand executives who have concerns around presentation and discounting and the negative impact on equity and value.

Naturally, the platforms themselves, desperate to elevate their own image and increase the average transaction value, have been pulling out all the stops to make it difficult to say no. We know that Tmall have doubled down on Luxury Pavilion with the launch of Luxury Soho, while JD.com have partnered with Farfetch and very clearly articulated their luxury focus. In place of discounts and coupons, the platforms have built a proposition around exclusive product availability, celebrity activations and gifts with purchase.

However, the Covid-19 pandemic has abruptly paused brands selling to Chinese consumers travelling internationally and also limited domestic offline consumption. In this context, coupled with escalating global stock issues, participation in previously taboo events, like 618, has become much more acceptable and even attractive. It will be the same when Double 11 comes around later in the year.

The big question is then, how will luxury brands approach these traditionally promotion-driven events?

While luxury brands resisted these promotions as recently as Double 11 in 2019, this year’s 618 mid-year promotion has seen modest discounting on brand owned stores. It is reported that 178 luxury brands joined the promotion on Tmall Luxury Pavilion, including the likes of Ermenegildo Zegna, Cartier, Chanel, Prada, Alexander McQueen and Balenciaga. Some are offering deals or special prices, although it must be noted that the fabled slash lines are not universal. The discounts available on Farfetch are much more prominent and aggressive.

Given the current retail climate, platforms have been driving these festivals more than brands themselves. For brands, participating and discounting are more pragmatic and tactical plays than long-term strategy.

Indeed, the buzz from official channels outside the marketplaces such as WeChat, Weibo and Little Red Book is barely audible amidst the noise generated by the much more active and digitally savvy fast fashion, beauty and electronics brands.

In summary, 618 has not yet been afforded top tier campaign status by luxury brands. This is particularly clear when compared to recent 520 activations, where we saw brands such as Gucci put significant investment into creative content and celebrity endorsements. Many luxury clients are more focused on the aesthetically appealing Qixi (Chinese Valentine’s Day, August 25th) and have been for some time.

In a world where commerce and content are increasingly blurred and retail sales are increasingly shifting online, is there much difference between leveraging a high-volume marketplace platform to clear excess stock, in comparison with an offline outlet mall?

As 618 results pour in, luxury executives should consider this paradigm shift as they start to think about Double 11 and the broader role of China’s marketplace platforms.

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Looking to understand which events in the China marketing calendar are must-wins for your brand?

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


Hot Pot’s Guide to ShiHuo 识货 - the app for sport enthusiasts

Hot Pot’s Guide to ShiHuo 识货 - China’s app for sport enthusiasts

5 minute read

By the Hot Pot Campaign Team

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China’s health & fitness industry has boomed in the last decade, growing at an average rate of 8.6% YoY since 2014. Popular sport-product app Shihuo caters to this trend, providing a content sharing platform for a community of sport-obsessed and athleisure-wearing consumers.

Hot Pot’s Campaigns Team created a Shihuo platform 101 for brands looking to capture this audience, shining the spotlight on a few brands getting their approach right.

What is ShiHuo? 

Loosely translating to ‘Spot the Best Products,’ ShiHuo established itself as a male-centric, sports product platform. Six years after launch, ShiHuo has 4.8 million Daily Average Users (72% male) and is the third most popular app in the sports category on China’s Apple store. Content is focused primarily on those searching for genuine sportswear products, an often difficult task in a market littered with convincing counterfeits. 

The app offers 3 main attractions for users that sit across the conversion funnel. 

Pre-Purchase - Sports & Product Focused Content 

  • The main use of the app is to discover and discuss niche sportswear content, with a focus on identifying genuine products. 
  • Through owned profiles, brands can disseminate product information, launches, offers and interactive campaigns.
  • KOLs provide the biggest source of content, building communities around their valued opinions, including product reviews, unboxing and competition-led campaigns.

Purchase 

  • While ecommerce isn’t directly available on the platform yet, the app is set up to facilitate conversion on external sites with reduced friction 
  • Links are embedded within both brand and KOL content, driving users to authentic and verified ecommerce sites. 
  • Users are thereby protected against counterfeit purchases, in turn driving relatively high conversion rates 

Post-Purchase - UCG reviews

  • App engagement is also very high, largely driven by product reviews 
  • Users provide another layer of product authenticity through reviews of the products, delivery, unboxing and customer service to advocate or critique recently purchase experiences.

 

How can brands leverage the platform?

Brands have an opportunity to curate a community of vocal brand advocates amongst users who are actively searching to make purchases. Aside from pushing out owned content, there are two main advertising opportunities for brands. 

In-app Media Buy

  • ShiHuo offers a range of different media buy placements that can drive users to their Brand Profile, or direct to their website or ecommerce site.
  • These include ads on the user's launch screen, within the newsfeed and trending content. 

KOL Collaboration 

  • A great opportunity for brands is to collaborate with KOLs and access their evangelized networks.
  • Creating innovative content with KOLs is key to cutting through the noise, leveraging interactive campaigns and giveaways to unlock engagement. 

 

Case Study - Roseonly

What we loved about Roseonly’s ShiHuo collaboration is the innovative approach to connecting with their target audience. As an online high-end flower shop, Roseonly was not necessarily a natural collaborator for digital campaigns on ShiHuo. However they noticed that a large portion of the platform’s consumers were males purchasing for their partners. 

Launching on ShiHuo allowed Roseonly to tap into a male-dominated community. They tied in to May 20 (I Love You Day) celebrations to challenge couples to share the most stylish matching outfits. To enter, couples needed to take a photo of their outfits, share and tag the brand on ShiHuo. Leveraging an existing network of KOCs (key opinion consumers) and their partners, this thread skyrocketed on the app. The result: nearly 1,000 total entries, 120,000 million impressions and a total of 150,000 votes. 

 

Case Study - Nike

Nike often faces counterfeit challenges in China, so the brand saw ShiHuo as an inevitable match to help their fans guarantee authenticity. We are impressed with the creativity of the campaigns, tapping into the Chinese passion for basketball. Ahead of the FIBA championships, Nike built an interactive H5 that integrated with ShiHuo. Users were asked to vote for the winning teams before matches, with the chance to win a pair of trainers. Continuous discussion of the upcoming matches drove engagement for Nike’s account, with the trainers also taking centre stage.

Over 575,000 users interacted with the account, amassing 1,301 user generated posts and more than 100 million impressions over the entire campaign. Of course the real win for Nike is the half million interactions from consumers that then had access to purchase the trainers, with the campaign directing them through to their authorised ecommerce site. 

While many brands are drawn to the huge user numbers of core platforms in China such as WeChat, Weibo and Tmall, Hot Pot regularly advocated backing these up with a more niche approach. Reaching a smaller - yet still significant - community of highly targeted users through platforms like Shihuo pays dividends in terms of engagement and conversion rates as well as ATV.

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Looking to expand your brand within a male-targeted community or looking to learn more about niche platforms in China and how they could work for your brand? 

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


4 Trends Shaping China’s Luxury Market Amid Covid-19

4 Trends Shaping China’s Luxury Market Amid Covid-19

8 minute read

By Adam Sandzer, Hot Pot Strategy Director

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While the Chinese consumer is relatively confident and ready to spend, how will weeks of lockdown and global uncertainty affect their mindset and impact their behaviour? 

Rather than new trends emerging, we have observed an acceleration of existing trends that have gained momentum due to the Covid-19 impact. 

Here are 4 key trends that global brands must watch going forward.

 

(1) Life as the ultimate luxury

Lockdown at home has allowed consumers to reconnect with traditional pastimes, revisit hobbies, and explore new interests. It has allowed people to reflect on what is important and what gives them purpose and meaning.

For many, there has been a moment of realisation that life itself is the ultimate luxury, with a need to grow both personally and collectively, savouring the big and the small moments. In particular, there has been a heightened appreciation for the value of time, as well as physical and mental health.

All brands are now expected to contribute to society and public good. They are expected to help individuals improve. We expect trends like sustainability and wellness to become increasingly important

We have seen an explosion of self-improvement videos on channels like Douyin and Bilibili, ranging from Photoshop, Excel and video editing, to learning languages and cooking tips. This trend has continued post-lockdown.

Consumers are also taking much better care of what they eat and how they treat their bodies. In line with their purpose and the trend, Nike successfully delivered training videos and content to help people stay fit during the lockdown via WeChat livestreams.

Similarly, luxury hotel, Shangri La, provided online cooking lessons.

We also see early signs of upgraded consumption, with over 70% of consumers booking 4- or 5-star hotels for the upcoming Labour Day (1 May) holiday for better standards and hygiene.

We expect Chinese consumers to value everyday and smaller moments in life even more. Luxury brands should focus on an everyday luxury proposition that connects with consumers beyond special moments or big occasions. 

 

(2) The Great Digital Migration

China was already streets ahead in terms of digitalisation of marketing and ecommerce. The pandemic and lockdown have further accelerated the advancement of and dependence on digital infrastructure. We find that the strongest digital brands will be the ones to emerge successfully from this crisis.

Screen time increased 26% during CNY this year, compared with CNY 2019. China now represents 54.7% of the global eCommerce market -- double US, UK, Japan, South Korea and Germany combined. Chinese consumers now get more information from smartphones than from real-world experiences!

Chinese consumers were able to attend events online, such as Shanghai Fashion Week. Virtual access to all areas has quickly become the norm and consumers almost expect a front row seat to brand activities, wherever they are in the world.

Live-streaming has been widely discussed, but has now exploded in popularity with the “see-now, buy-now” model. Short video consumption on Douyin, Bililibili and Kuaishou has become commonplace and continues to prove very effective for keeping attention and driving engagement. 

Amid all of this, the key trend is blurring of the lines between content and commerce. The integration of interactive experiences with shopping is irreversible and very powerful. 

The average luxury shopper in China is 15-20 years younger than Europeans or Americans. While offline will continue to play a role, online engagement through content and purchase through eCommerce is their luxury experience, and luxury brands are quickly noticing this.

By the end of 2019, over 90% of luxury brands with a presence in China had established WeChat Mini-Programs and continue to use them for online selling, brand services and VIP customer management. 

Over 150 luxury brands are now available on Tmall Luxury Pavillion with Prada finally taking the plunge and gaining 54,000 followers in the first month. 

Louis Vuitton and Lanvin have also recently dabbled with livestreaming on platforms like Little Red Book.

However, consumer feedback consistently suggests that while playing in the right areas, luxury brands are failing to truly hit the mark in terms of presenting a premium and aspirational proposition online and are lagging behind their beauty, fashion and even sporting counterparts.

Local beauty brand Perfect Diary launched their colorful eye shadow collection in collaboration with The Discovery Channel. Chinese beauty brands are capturing the attention of Chinese consumers with increasingly sophisticated and aspirational propositions and a growing sense of patriotism.

In sports, Chelsea Football Club’s live-streaming of archived footage featured a studio setting and KOLs. It is a great example of the standard being set to attract attention and gain influence in China. 

Luxury brands must invest in order to meet and exceed the level of content, KOL collaborations, promotions, and online-to-offline integrations that is expected by today’s modern luxury consumers. Brands must focus on localised assets, innovative content, and tech developments to remain top of mind.

 

(3) 'China Proud'

In 2019, approximately 70% of luxury sales to Chinese consumers happened outside mainland China. Given the current travel restrictions and uncertain timeframes, we expect this to dramatically shift to domestic consumption. The Economist predicts this pattern will continue until at least Q1 2021.

Recent surveys by Trip.com and Oliver Wyman have concluded that an overwhelming majority of respondents will prefer to travel domestically for the foreseeable future. While we do not believe that a reluctance to travel will persist longer term, we see this as an opportunity for brands to up their game on home turf and ultimately tip the balance.

The government is also actively looking to stimulate domestic consumption with reduction in tax rates, distribution of coupons and even a shift to 2.5 day weekends in some provinces.

It is still early to understand the full long-term impact of these measures, but the reported sales increases that luxury brands are showing for March and April validate this trend.

That said, footfall to malls and department stores has remained relatively slow and it could be that much of the shift and growth will come from online, with physical stores acting like virtual showrooms and store staff becoming personal shopping assistants. Estée Lauder and Cle de Peau continue to use in-store staff for live-streaming products.

It is also interesting to note the shift towards ‘Made for China’ products and China-first product launches such as Dior’s Gem Clutch -- a bespoke hybrid between fine jewellery and fashion handbag - launched on WeChat and a VIP live stream event.

This is the time to double down on domestic consumption and invest in growing reach and driving traffic to commercial touch points to capture customer data and build personal, long-term relationships.

 

(4) Brand Values & Immersion

Chinese consumers do not want to just follow brands anymore; they want to truly immerse themselves in brand content and be inspired. As the luxury industry becomes more accessible and inclusive, luxury brands must continue to communicate and interact through values to form lasting and deep connections. Storytelling needs to be precise, specific and insight-driven.

During the lockdown, the most agile and adaptive brands focused on strengthening customer relationships. And customers had daily connections through direct communication with sales staff and product promotion via WeChat. This two-way interaction is highly personalised and this level of service must continue.

Nike’s ‘Back to the Beginning’ campaign targets aspirational Chinese sports women, by amplifying true stories of athletes who overcame limitations to become world-class. The campaign garnered 90 million comments on social media channels and saw a 55% increase in female audience engagement.

BMW’s short film entitled “A Letter to 2020” presented a timely and sensitive message of hope to commemorate China’s gradual recovery and return to somewhat normal life. The simple style and emotional script creates an aura of approachability.

We have also seen an uplift in collaborations between brands and local artists. These collaborations have increasing appeal for Chinese consumers seeking to upgrade their consumption habits with cultural references.

 

In Conclusion...

These 4 trends are not new, but they are accelerating as China reacts to Covid-19, meaning that they are increasingly urgent for global brands looking to build and maintain connections with Chinese consumers.

  • The pandemic has refocused priorities and firmly positions life as the ultimate luxury
  • China already led the world in digital migration, and their recovery is happening sooner because they can adapt faster
  • Chinese consumers will look to spend more and travel more within China
  • Brands that provide an immersive experience, connecting community, interactivity, and commerce, will win

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Get in touch with us to find out how savvy strategic planning, campaign management and in-market support can help you make the most of the enhanced China opportunity.


Brands Leading with Positivity in China

Brands Leading with Positivity in China

3 minute read

By Jonathan Smith, CEO & Founder

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As brands globally look to understand the “new normal” brought about by the Covid19 virus, we take a bitesize look at how brands in China adapted their messaging during the crisis.

Below are a few brands that have adapted their messaging in China so that it still reflects their core brand identity, while acknowledging the impact Covid-19 is having on consumers. This balance is critical as brands craft messages that are consistent yet still sensitive.

 

李宁 LiNing: China’s leading home-grown sports brand.

“Waiting for you…” A simple but powerful reflection on the target audience’s motivation for sports: striving, hard work and camaraderie will all return.

 

网易严选 Wangi Yanxuan: Netease's eCommerce platform

Netease replaced their intended large-scale OOH advertising with a clear and simple message of solidarity - asking people to stay at home and “wait for spring to arrive”. The move was widely praised online for its anti-consumerist nature at a time of hardship for the nation.

 

McDonald’s China

McDonald’s China quickly adapted imagery to be in line with consumers everyday reality - the wearing of masks. Here they lead with a message focused on the positives of lockdown, namely being together and making memories as a family.

 

LeLeCha乐乐茶: Makers of premium tea with soul

LeLeCha乐乐茶 staff adapted their logo cups to express messages of solidarity and fortitude in the fight against Covid-19

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Get in touch with us to find out how savvy strategic planning, campaign management and in-market support can help you make the most of the enhanced China opportunity.


New World Order: The Urgency of the China Opportunity

New World Order: The Urgency of the China Opportunity

5 minute read

By Jonathan Smith, CEO & Founder

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Much has been made by China commentators in recent weeks of the fact that the Chinese word for “crisis”(危机 weiji )contains within it components of the words for “danger” 危 and “opportunity” 机. As a natural born leader, JFK was a fan of this cultural pearl.

While it is not entirely accurate linguistically speaking (the second character 机 ji is also part of words for “aeroplane” and “organic”), it is a useful metaphor for how China business has dealt with the current Covid-19 crisis.

Perhaps more relevant is the original Greek term krisis, simply meaning “turning point” or “decision” and does not imply positive or negative outcomes. When a situation reaches a turning point, it is up to each individual how they respond and whether the effect is positive or negative. 

By this rationale China has moved heaven and earth (literally in the case of Wuhan’s 10 day hospital construction) to minimise negative outcomes, embrace new modes of living, and ensure positive growth post-recovery.

Just a few short weeks ago, the talk was of delayed investments and uncertainty in China, yet the tides have now turned. The pandemic is starting to take its toll on global markets, while China is now well into recovery mode and many businesses are 3-4 weeks into implementing their recovery plans, formed in the peak of the crisis. 

How can global brands turn this to their own advantage?

 

The Outlook for Western Markets is Uncertain Long-Term

The unpredictable daily fluctuations of global stock markets are causing fear across Western markets.

Consumer sentiment is low, with expectations that spending will reduce dramatically on non-essential categories. Many consumer brands are reckoning with prolonged and severe dips in revenue. This is particularly true for brands where physical locations play a major role in their retail mix.

While China reacted rapidly on a national and local level to stem the spread of the virus, precautionary measures at a government level in Western markets have been much slower to take shape. The knock-on effect will not only mean that the virus is likely to be around longer, but that there will be a deep and prolonged deterioration in consumer sentiment and spending. 

Businesses from London to Milan to New York are yet to calculate the full impact of this uncertainty.

In the space of less than a month, China has become a safer bet for smart global brands to invest time, budget and resources in the face of a potential global recession. Indeed many are doubling down on their spend in the region.

What are the factors driving this redoubled focus on the Chinese consumer?

 

Reasons to Bet on China: (1) China is already in recovery mode

Key indicators of economic activity show that China is well through the worst of the crisis. HBR’s article makes for good reading on the underlying trends. 

Happily, a version of normal business life has also resumed on many fronts. Across a wide range of industries, hundreds of millions of employees returned to offices, factories and service hubs during the last 2 weeks (including Hot Pot China’s team in Shanghai).

 

(2) In China, eCommerce already dominates

Pre-crisis, China was already established as the world’s largest eCommerce market, representing just under 50% of the entire global ecommerce market by GMV. By 2023 this is predicted to be around 63%. Already, there are more than 60 billion m-commerce transactions made every year.

Interestingly, the catalyst for the movement towards eCommerce came during another crisis, the SARS outbreak of 2003. The months surrounding that crisis proved pivotal in Alibaba’s decision to launch Taobao as a C2C and B2C commerce platform. With the need for online ordering and home delivery being thrown into stark relief, Taobao and Alibaba initiated an explosive 15+ year run of building out eCommerce infrastructure.

Today, eCommerce and more prominently m-commerce are widely adopted across China and are supported by a fast, efficient and wide-reaching logistical infrastructure. 

For many consumers in lower-tier cities this infrastructure is a vital and established route to accessing global brands, few of which choose to establish flagship stores outside of the "known worlds" of Shanghai and Beijing.

When mapped against a health crisis that significantly reduces public activity, gatherings and therefore footfall to physical retail locations, China retail already has all it needs in place to mitigate risk.

Indeed aggregate uptake for B2C eCommerce in China actually increased for key brands during March across beauty and F&B sectors, with recovery predicted for apparel and leisure goods in the second half of March. Now that we talk of full recovery for Chinese society, we are reckoning with an absolute increase from an already impressive base performance in B2C eCommerce.

 

(3) In China, rapid adoption of new business models future-proofs revenue

In times of crisis, new ways of working and new business models are born. Often these are accelerations of pre-existing forms that are forced into prominence. 

Whenever this is the case, players that respond quickly have the most to gain. China businesses have time and again proven themselves to be first-movers, capable of turning on a sixpence to react to their macro environment.

One such case has been China’s ability to blur the line between online and offline sales methods. Livestreaming is not new for China, but it has come of age over the last 2 years with Tmall making live video sales a core part of the 11.11 singles day sales, as well as forming a standard tool in the playbook for brands on China eCommerce.

The most prominent extension of this development brought about by the crisis is the trend for brands to convert their physical retail and sales staff into live streamers and digital personal shoppers.

As an example - iAPM mall in Shanghai understood the impact of dramatically reduced footfall on their sales and used their own WeChat account to connect its audience with sales representatives from each of its brand tenants. 

Fans of the mall simply long-press the QR code in the message to pick up directly with sales staff from Versace, Coach, The North Face, Under Armour and others. The consumer gets to “shop” the mall while on lockdown in their own apartment, the mall retains its follower base, and brands benefit from direct connection with paying consumers.

Smart brands are already viewing their physical store space as both a brand experience and sales showroom to be leveraged through online channels. While this model has become a necessity due to restraints on movement, Hot Pot’s prediction is that this will be fully ingrained as the new normal for forward-thinking brands in China.

 

To Conclude

Combined with a background of ever-shifting consumer needs, the architecture of China’s leading digital platforms has allowed China retail to ensure the crisis is indeed a “turning point” for the better. 

As Western markets don’t yet benefit from the same underlying structures, responsive brands are turning up the focus on China to realise revenue goals.

Takeaways:

  • The impact on China’s consumer sector has been far less than is currently predicted for global markets, and key indicators are already showing strong recovery
  • While the outlook for the global economy is uncertain, smart brands are doubling down on China efforts to offset loss of revenue in home markets
  • China already has the digital prowess and back end systems in place to facilitate new business models - brands must adapt and adopt in order to benefit.

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Get in touch with us to find out how savvy strategic planning, campaign management and in-market support can help you make the most of the enhanced China opportunity.


How Global Retailers Can Get 'China Ready'

How Retailers Can Get 'China Ready'

5 minute read

By the Hot Pot China Client Team

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There's nothing we love more than partnering with our clients to educate retailers . Thank you to Covent Garden for inviting us to share with their tenants on how to get 'China Ready' for Summer 2020.

Chinese tourism has been understandably slow so far in 2020 as a direct result of the coronavirus. While this has led to temporary setbacks, China has shown great resolve and solidarity in combatting the spread of the virus and there are encouraging signs progress is being made.

We expect both retail sales and global tourism will rebound in the second half of this year, particularly in time for the key travel season of Golden Week (Oct 1-7).

It is important that retailers use the current period to evaluate their China appeal and plan for effective campaigns and initiatives. There are more than 137 million affluent households in China. Collectively they spent £600m in the UK in 2018. Given that only 9% of Chinese have passports, the long-term potential for retailers in the UK cannot be ignored.

What is ‘China Ready’? 

Chinese consumers shop differently. Their digital ecosystem has almost no crossover with apps regularly used in the West, and they generally prefer to pay through social-payment platforms like WeChat & Alipay. Even the way in which Chinese tourists discover and engage with brands requires an entirely different marketing approach and user journey. Brands shouldn’t adopt a cookie-cutter approach based on their existing global markets, but adapt both their online and offline offerings to Chinese consumers' needs and preferences.

During Covent Garden’s event, we spoke with retailers about the quick wins to help them get ‘China Ready’ ahead of the summer and Golden Week in October.

Focus on What’s in Front of You  

For Chinese consumers, brand affinity is a more important purchase driver than price. In recent years, brands have turned to KOLs (Key Opinion Leaders) to build affinity and recommend their products. However, the sharp rise in KOLs means that Chinese consumers’ social feeds are now saturated with what is essentially paid advertisements. This has led to a growing mistrust for many KOLs.

As a result, we’re seeing the rise of KOCs (Key Opinion Consumers). These are not professional influencers, but rather consumers who influence. They are social-savvy digital users that leverage a modest but engaged social following. They are an authoritative voice with their immediate circles and therefore only align themselves with brands that match their persona. Their followers view their recommendations and reviews as authentic. In simple terms consider the actionable power of a recommendation from a friend versus an aspirational celebrity.

Encourage and reward the KOC audience through incentives, invite-only events and exclusive content. Not only will they evangelise brands to friends in the UK, but they will also share with friends and family at home in China. This allows UK retailers to influence a wide network of tourists before they arrive in the UK.

No Brand is an Island 

Collaborations are a huge trend in China right now. Typically we see brands working together to make new products and collections. One of our favourite edible collaborations is from White Rabbit & Godiva.

We also see collaborations in content too. Western brands are able to effectively and authentically localise their content by incorporating Chinese cultural references into marketing campaigns. This drives buzz without needing to rely on big media budgets.

It is also important to promote stores at a hyperlocal level. There are often creative opportunities to reach Chinese consumers through your network. Many of these local partnerships won’t require a heavy fee or may even be open to resource exchange. There are local destination accounts (such as Covent Garden, Regent Street etc.), overseas travel partners, universities, and tourist boards that seek collaborations in exchange for incentives and content. Any of these partnerships at the local level can make a big impact with minimum investment.

Turning Footfall into Sales

Driving footfall in-store is only half the battle. There are plenty of barriers in-store that can block a sale at the last step. 80% of Chinese consumers are more likely to make a purchase abroad if they can pay with familiar payment methods such as WeChat & Alipay. Installing these payment methods may not trigger a purchase per se, but they will give more confidence in purchase process and we have seen this translate into higher ATVs.

Chinese signage and Mandarin FAQ’s are also quick wins. Chinese tourists tend to be efficient shoppers, often only spending a 24-48 hours in each city when visiting Europe. To ensure a more streamlined shopping experience, hero products should be easy to find for customers who may not be fully proficient in English. For brands that have a high volume of Chinese tourists, Chinese-speaking staff can further guide tourists, while also guiding them through the store, sharing the brand’s heritage, and providing recommendations on how to choose the perfect gifts to take back home.

Lastly, Chinese consumers are often used to a different retail experience in China than their Western counterparts. In China, many top retailers focus less on selling products, instead focusing on immersing their consumers in an offline, engaging brand experience. This focus generates social currency, and consumers reward the brand by sharing photos and reviews online with their peers. This experiential approach has a bigger impact on conversion as brands then leverage this to capture a larger digital audience through ecommerce.

The stakes have been raised. Chinese tourists now expect the same dynamic and interactive in-store experiences when shopping abroad. But this also provides substantial rewards for retailers. Social platforms, such as Little Red Book and Weibo, are the first place that Chinese tourists will research when finding places to visit in new cities. Generate the right buzz from an in-store experience and you’ve already taken the first step to marketing on Chinese social platforms.

In Conclusion…  

Becoming ‘China Ready’ doesn’t always necessitate a big budget, but it does require that corporate teams and store managers think about the Chinese consumer at all key touchpoints. Retailers must work to alleviate purchase barriers or risk unconverted footfall.

To lay the groundwork ahead of Summer 2020, retailers should:

  • Build & reward a network of Key Opinion Consumers close to home
  • Expand their network to build partnerships & collaborations based on resource exchange
  • Upgrade the in-store experience for the Chinese consumer by adding Chinese payment solutions, signage, and social sharing opportunities.

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


The Role of Offline in China's Digital-First Market

The Role of Offline in Digital-First China

6 minute read

By the Hot Pot China Client Team

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Hot Pot’s CEO and Founder, Jonathan Smith, recently spoke at the event Building Brand Value with China, alongside Kerry Lee, partner at Squire Patton Boggs and Richard Lim, CEO of Retail Economics. 

A Challenging Retail Environment

Richard Lim began the conversation by contextualising the current strains on the retail environment in the UK. He discussed a variety of factors that are increasingly putting pressure on profitability, including higher competition, idle yet expensive real estate, lower margins, and more consumer choice.

Jonathan Smith then contrasted the UK with the current retail environment in China. In China retailers are ahead of the curve and the retail landscape offers a view of how UK retail might look a few years ahead.

Key points are summarised below.

In China, online is booming. The market accounts for more than 60% of online sales globally and will eclipse $2 trillion in ecommerce sales by 2023. Compared with the previous year, online retail sales in China surged 17.8% in the first half of 2019.

Yet the route to success is less clear. It's for this reason that ‘cookie cutter’ approaches, where strategies and tactics are transplanted from Western markets to China, lead to failures that negatively impact brand perception as well as the bottom line.

Chinese consumers also shop differently. More than 1 billion consumers regularly access combined social media and ecommerce apps like WeChat or Xiaohongshu, and 80% of all ecommerce transactions now take place on mobile.

 

If digital in China is so great, why do offline at all?

Ecommerce in China accounts for 35% of total retail sales, signifying that more than half of the retail purchases in China are still made offline. For comparison, ecommerce in the UK accounts for 20% of total retail sales.

A digital-first approach allows global brands faster speed to market, more agility when scaling, more data to test and learn, and more predictability in client acquisition costs. Yet brands that focus exclusively on online often start strong, but then face stagnant or declining sales, rising costs, and slowing innovation.

There are opportunities for brands to develop offline retail, but traditional strategies and metrics frequently lead to costs that don’t justify the return. Brand leaders must think differently about offline in China, in terms of how they account for the cost, how they plan and execute offline, and how offline activities integrate with their digital-first strategy.

There is commercial value in offline experiences. Integrating a well-planned and well-executed physical component with the digital user journey can further accelerate brand awareness and sales growth. It is precisely for this reason that Hot Pot advocates a digital-first, rather than a digital-only, approach.

The primary goals of any offline component should include:

  • An experiential element that brings the brand and its ethos to life;
  • A shareable element that creates cut-through in a crowded marketplace; and
  • A conversion element, either on site or in capturing data and inspiring action at a later point in time

 

How do brands make offline cost-effective, yet still impactful?

The retail paradox is that for many brands, high-traffic areas carry long-term burdensome levels of rent that eat into bottom lines, whereas more affordable real estate is plagued by reduced footfall. Yet offline has become less about a transactional purchase and is instead focused on experience, which encourages digital conversion at a later point.

With legacy real estate issues, UK retailers may struggle to re-purpose space to an experience-led model. However China represents blank canvas with willing and forward thinking landlords/developers, hence many businesses in China have been able to build experience into their retail presence from the outset.

Physically interacting with a brand drives affinity and loyalty, promotes conversation through social media and word of mouth, and encourages more frequent and higher-value purchases. As such, offline touchpoints are increasingly being viewed as media channels that form part of the client acquisition cost. They should also therefore be included in attribution calculations as a vital part of the purchase journey.

 

Experience is King

Zara is a household name in China, with more than 120 stores. To take on China’s homegrown competitors and outpace its global rivals, Zara has become a forerunner in O2O innovation. Their Shanghai store could easily be mistaken for a luxury-urban boutique. More art installation than traditional retail, the store features sparse, carefully curated items, rather than endless uninspiring racks.

The power of the experience is in the detail. Each product is equipped with a QR code tag that enables the customer to order their size to be delivered directly to a waiting changing room. Customers can then purchase items directly with WeChat Pay and either leave the store with their purchases in hand or have them shipped to their home within 24 hours.

Consumers no longer face long queues and can enjoy a hands-free shopping experience.  Zara has built a new age shopping experience that simultaneously captures data into their CRM, such as sizing and product preferences, to facilitate digital retargeting.

 

Collaboration

Shiseido recently partnered with WeWork Labs in Shanghai to open its first Innovation Hub in China. The Hub connects the company with local customers, and as such, is open to consumers as a community space.

Sheiseido invites customers to join them on a ‘个性化旅程’ (Personalization Journey). This multi-purpose space offers makeup tutorials, new product trials, and skin tests using Augmented Reality technology. Consumers can then make purchases directly from their WeChat official account.

Offline collaborations such as these offer brands the opportunity to generate direct engagement with a relevant and meaningful audience without a long-term commitment to ongoing offline costs.

 

Small Footprint, Big Impact

Brands must also view physical experiences not as permanent installations. Pop-ups, kiosks, events, and collaborations can make the same impact without the cost of always-open stores.

Kiehl’s recent launch of its avocado eye cream is an excellent demonstration of a brand getting this right. In the corner of Parkson Mall in Shanghai, Kiehl’s installed an automated product sample kiosk, making a big noise with a small retail footprint.

In exchange for following the Kiehl’s WeChat account and sharing their data with the company, customers receive a free product sample dispensed directly from the kiosk. With the sample in hand, they are immediately served information on their phone about product ingredients, benefits, how to use, where to buy, and how to share with friends.

 

In conclusion…

Brands’ strategies in China must be digital-first, but should also consider how to integrate meaningful offline experiences into their marketing mix.

  • There is concrete commercial value in investing in offline activity, so long as experiences are integrated into broader digital and CRM efforts
  • Offline can take many “lighter-touch” forms, such as pop-ups, kiosks, events, and collaborations.
  • Brands’ offline strategies must include experiential, shareable, and conversion-driven elements
  • Offline touchpoints should be treated like an additional media channel with related attribution metrics, laddering up into overall  ROI calculations

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