2020 Predictions: Brands Must Try Harder to Win Over Chinese Consumers

Hot Pot China Predicts That You Need to Try Harder in 2020

7 minute read

By the Hot Pot China Strategy Team

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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:

  • Understand their regional and demographically diverse audiences more deeply
  • Focus efforts towards emerging platforms to supplement core channel activity
  • Redefine "content" to deliver digital experiences that bring real cut through
  • Deliver a solid, localised brand proposition to validate ongoing full price sales
  • Work with data to deliver personalised experiences across marketing, product and delivery

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


NARS Orgasm Collection: Shanghai O2O Case Study

NARS Celebrates Its 25th Anniversary in Shanghai

On 10th September 2019, the Shiseido subsidiary cosmetic brand NARS launched its 25th-anniversary celebration in Expo Park, Shanghai in collaboration with Tmall Little Black Box (天猫小黑盒).  

Little Black Box is an official channel for launching new products on Tmall whereby brands gain exposure for their products in return for running an offline event to cross-promote. The NARS event marked the official release of four limited edition products from the NARS “Orgasm” collection in China.

The Global CEO and Chief Growth Officer from Shiseido, Mr Marc REY, attended the event and unveiled the four limited edition products. Chinese singer Liangying Zhang, Actress Bridgette Qiao, Jinna Fu from Rocket Girls 101 as well as major beauty KOLs and Chinese media representatives were invited to share the launch moment with NARS.

The exhibition was shaped by six immersive, interactive beauty spaces - brand, makeup, highlighter, blusher, couture plate and lipstick - and attracted continuous footfall to the site throughout the launch day. Importantly, prior registration and time slots were booked via a WeChat mini-program with attendees required to provide their name, city, phone number and time slot before being given a unique QR code to be presented for entry. 

Upon entry attendees received a special card that enabled them to collect stickers from each of the interactive spaces. As a reward for collecting all six they were able to redeem a NARS exclusive package at the end of the exhibition. To drive offline interaction there was also a claw crane arcade machine for participants to try and win exclusive NARS prizes. Lastly the exhibition featured a Tmall-integrated vending machine where attendees could scan a NARS Tmall QR code to place online orders and then collect the products immediately on-site.

In addition to the continuous footfall to the site, the event generated significant engagement across Chinese social media platforms.

  • The campaign launch post about the event (featuring KOL UNINE) had 22,665 shares and 7,121 comments
  • The brand-owned hashtags #NARS25# and the more risqué #愉悦蔓延美到颤抖# ("spreading beauty to make you quiver") drew over 1.2 million discussion comments respectively

Overall The NARS 25th Anniversary campaign and exhibition is a prime example of how innovative global brands are thinking holistically by providing stand-out experiences offline with the goal of reach and capturing high-value target audiences online.

Key Considerations from Hot Pot:

  1. NARS have created a truly immersive campaign to commemorate a key milestone in the brand’s history in China. Omni-channel integration and consistency of messaging across channels is fundamental to reaching and engaging target audiences in the short and long-term
  2. The digital sign-up function is significant from a data-capture and retention perspective. The value of a follower that has opted-in and experienced the brand first-hand far outstrips the more casual social browser (e.g. acquired through paid ads only). These high-value audiences can be leveraged as early-adopters, driving organic messaging for future campaigns.
  3. Physical, offline initiatives remain hugely important to the consumer's user journey, even as they evolve to be more experiential, creative, and holistically integrated with online. Global brands headquartered outside of China may feel that they can manage a single-channel eCommerce presence from arm’s length, but they miss a key opportunity to delight their audience. Even if brand advocates cannot attend in person, they can relive offline experiences through other's social media posts. Brands may face questions of authenticity in China if their competitors have a greater or more meaningful offline presence than they do.
  4. Chinese consumers are increasingly craving a wider array of specialised products within the beauty category and are eager to build a depth of knowledge around the brands and products that they adopt. This deeper affinity was facilitated via the six immersive and interactive spaces presented at the NARS exhibition and is a key to driving loyalty and repeat purchase.

 

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.


What Next for Little Red Book?

What Next for Little Red Book?

Little Red Book, one of China's foremost UGC (user-generated content) platforms, recently made a return to the Android store after been taken down from major app stores in China in August.

The brand and product recommendation platform remains absent from the all-important Apple Store and it is believed that the app was removed due to inappropriate content. A Weibo topic/hashtag #小红书疑被各大安卓应用商店下架# (#Little Red Book removed from major Android stores#) subsequently received more than 300 Million page views and 19k comments. Little Red Book responded quickly by launching a comprehensive investigation to rectify the alleged content issues and made an official announcement on Weibo on 1st August.

According to NEXTTECH, there has been speculation that Little Red Book’s content issues might have started in 2018 as the platform started raising capital, driving an urgent need to demonstrate increasing engagement with a knock on effect on monetisation and potential revenue.

So often in China this pressure can lead to previously high-quality platforms diluting their loyal (and genuine) user base with poorer quality content, often driven by bots. As a reference, travel platform Mafengwo was recently taken to task over allegations that it fabricated up to 85% of its location-based reviews.

Little Red Book

 

In March 2019, Little Red Book had reached 220 million users (85 million monthly average users). Pressure from investors to start monetising the LRB engaged user base will have been exacerbated by revenue reports from other UGC platforms, such as Kuaishou 快手 and Douyin 抖音. 

Consequently, there appears to have been a shift in direction, from content to a more commercial focus. What effect has this had, and what does this mean for brands considering a presence on the platform?

Monitoring Content Authenticity

Little Red Book has developed authority as the go-to platform to research purchases via authentic product reviews, chiefly in fashion and beauty sectors. 

According to research by ZP Partners, 68% of premium shoppers learned about their newly-purchased fashion and beauty products via Little Red Book, compared with just 53% citing Taobao/Tmall/JD and 37% for Weibo as a source of influence.

Now however, this place of authority is under threat, as Chinese media have continuously reported on fake fans within the Little Red Book platform, as well as posts on restricted, forbidden, and fake products. Additionally, Hot Pot's own research has unearthed numerous third parties on QQ and Taobao offering pay-for-play review posts for Little Red Book.

To retain credibility and authenticity, Little Red Book has recently established an internal risk assessment and anti-fraud team to audit content, leveraging pattern recognition and machine learning technology. A 500-person strong team deletes an average of 4,285 fake posts per day, 18.6 counterfeit accounts per day, and 168 fake likes every 5 minutes. In total, 90,000 posts related to tobacco and other medical products have been removed. However, this doesn’t appear to have been enough to avoid the censors.

With its origins as an interactive content sharing community, Little Red Book now is facing a genuine challenge over the quality of its content and risks losing users’ trust.

The Struggle to Monetise

Global-to-China cross-border eCommerce started in earnest in 2014, the same year that Little Red Book -- only established one year earlier - launched its own cross-border eCommerce business. From a simple content seeding (种草) community, the platform started to build a seamless route for users to make purchases.

However, even with its significant user base, Little Red Book has perennially struggled to monetise its eCommerce business. With only 7.3% market share in cross-border in 2018, Little Red Book has been unable to break into the ranks of more dominant cross-border eCommerce giants, such as Kaola, Tmall HK and JD Worldwide, which have a combined market share of 64.3%, according to iResearch.

The majority of users currently search for and learn about products on Little Red Book before completing purchases on other platforms.

Based on the platform’s positioning and traditional user behaviour, it is widely believed that Little Red Book should focus its monetisation efforts on further developing its suite of brand marketing and advertising services, instead of pivoting to be an eCommerce platform. 

Key Considerations from the Hot Pot Team:

  • Little Red Book’s current challenges are not uncommon for Chinese platforms at this stage of development - the music app NetEase 网易云音乐, as well as popular video sharing platform BiliBili 哔哩哔哩 and short video social channel Kuaishou 快手 have all been taken down from app stores previously, only to remain fairly consistent in terms of user base
  • Challenges around content authenticity are down to the platform to solve, however when leveraged in the right way Little Red Book can prove particularly fertile ground for beauty and fashion brands to reach and engage target consumers with content, UGC and influencers linking out to external eCommerce conversion channels
  • As with all potential platform partnerships brands must dig beyond the vanity metrics to understand the end value delivered. Are you measuring activity based on falsely inflated impressions, or on quality traffic that truly reflects meaningful engagement with your target audience?
  • Little Red Book’s eCommerce offering (Red Mall) is as yet relatively unproven and among Hot Pot’s network few brands have seen meaningful returns on investment. The pressure to monetise has produced a model that currently lacks credibility and a suitable supporting infrastructure.

 

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.