WeChat gets even bigger The role of WeChat as the ‘super app’ that does just about everything will expand even further in the Year of the Rooster. WeChat combines an online browser, messaging app, social media platform and payment function under one virtual roof, and has in excess of 700 million users who can access over 10 million internal apps (known as official accounts). Appy days – WeChat gets even bigger WeChat provides the ultimate gateway through which retailers can reach consumers. Retailers can use their WeChat account to do everything from sharing news and special offers to customer engagement, loyalty programs and payment. WeChat allows users to get product recommendations from their peers, then choose those products directly from the site and pay for them via WeChat wallet – without ever leaving the WeChat app. It’s a proven business model and one that overseas retailers should embrace as its influence increases. WeChat
With the rise of mobile, social and cloud technologies, customer expectations of the brands they engage with are constantly on the rise. The pursuit – and expectation – of unique and memorable retail interactions makes customer experience the new battlefield for brands. Those brands that deliver a winning experience will attract new customers and keep them. Cutting out the middleman When manufacturers sell through retail distributors, their ability to influence how their product is sold is often limited. They’re essentially at the mercy of the distributor to ensure that every shopper leaves the store – whether that’s online or offline – a happy customer. In 2017 we expect to see a stronger push from brands to cultivate direct relationships with their consumers. They’ll offer more focused brand experiences that build their brand story, and will be able to deliver more targeted messaging. By selling directly to consumers (DTC), brands can determine how the customer journey should be, and work to make that vision a reality. Going DTC provides not just a sales channel but can also give a huge boost to the lifetime value of consumers; brands can gather information about their customers and use it to provide personalized shopping experiences. Nike and Under Armour are leading the charge on DTC. This year, there’ll be more entrants in the race to deliver the best customer experience, directly.
I’m in catch up mode.
It’s been busy…no excuse so a lot of ground to cover. So let’s start with Chinese New Year.
A few months back. Here are a few thoughts on what is in store for retail in China during the year of the rooster. Here are 8 trends (one per day) in collaboration with a friend and colleague Mike Smollan that you should all be looking at if the “Year Of The Rooster” is to be a retail success for you. More of everything for the world of retail Every year in China, we predict a period of unprecedented change for the 12 months ahead, and all indications are that 2017 will be no exception. In the Year of the Rooster, we expect more of everything for the world of retail: bigger challenges, but also bigger rewards; heightened consumer expectations, and greater wins for the retailers and brands that meet them and even greater ones for those that exceed them. Change has become the only constant in the Chinese market, and that change is happening faster than ever. This makes retailing an enormous challenge. The retail sector is at the nexus of the biggest forces shaping people’s lives: digitization, brand building and a rebalancing of the Chinese economy away from manufacturing towards services and consumption.
To help you focus on what’s most important right now, we’ve distilled this vast ocean of change into 8 key retail trends in China for the Year of the Rooster. To learn more about Chinese New Year and how this national holiday unlocks year round opportunities for brands and retailers, download this informative and visual BrandZ™ study: . We hope this will help develop your insight into China, and help you better understand the ever-changing business of retail in this dynamic market. Here’s wishing you a very happy and successful Year of the Rooster. Gong xi fa cai.
Pooling resources One of the ways businesses in China will adjust to slowing economic growth is to focus on efficiency, delivering strong productivity while reducing costs. Crowd-sourcing labour is one way to achieve this, and we expect to see this help fuel agile brands and businesses in the year ahead.
The competitive nature of the in-store environment means brands have had little choice but to use traditional sales and promoter businesses; in a tougher economic climate, the need to connect with stores and consumers is just as important, but the pressure on costs means brands are looking for new ways to achieve this. Crowd-sourced labour – something we’ve seen succeed in many mature markets – is something we expect to see more of in China’s retail industry in the year ahead, particularly in lower-tier cities where there is a hunger for market information but not necessarily the budgets to gather it in the traditional way. Deploying people whose work is paid for in ‘slices’ of time can help give brands a presence in remote places at a very reasonable cost.
This approach has, until now, been mainly used by start-ups trying to minimize their cash burn; this year, we expect crowd-sourced labour to be deployed by more mainstream brands as they work to reduce costs.
The Chinese New Year, known in china as spring festival, is the country’s most important holiday. The Chinese New Year is based on a calendar established about 4,700 years ago. Various legends explain the origin of the Chinese New Year. One describes how people dreaded the New Year because a fearsome beast named Nian annually terrorised the population and devoured children. Then one year a child appeared dressed in red. The beast, frightened by the colour, fled and never returned. That’s why the Chinese New Year traditionally features red lanterns and noisy firecrackers to ward off evil spirits.
The Chinese New Year is based on a calendar that calculates time using both lunar and solar events. Time passes in 12- year cycles, with each year represented by an animal of the Chinese zodiac. Traditionally, people prepare special foods and hope for a future of good luck. They attend many family dinners, starting with a New Year’s Eve feast. Travel home for the family reunion produces a mass migration. The New Year period culminates in the lantern festival, a joyful celebration around the first new moon in the lunar New Year.
The decision by Beijing to end the decades-old One Child Policy means that from 2016, approximately 90 million couples will be allowed to have a second child. The implications of this change in policy are huge for the broader economy and for retailing specifically. There will, undoubtedly, be a surge in consumption of products and services for babies, young children and their parents.
Credit Suisse estimates there will be 1.2 million babies in total, born in China in 2016 alone. Given that the annual cost of raising an infant is 40,000 yuan, this will result in a 4.8 billion yuan boost to the economy. Parents are likely to reduce the amount of money they save in order to buy the things that their new arrivals need, and the market for baby formula milk is expected to grow by 6% in 2016.
We have already seen new brands of formula enter the market as a result; there is little consumer confidence in local infant formula, and the demand for international brands in this category is intense. The longer-term effects of the shift in policy will be seen in the amount of food each household consumes, the need for bigger housing, additional spending on clothing, medical care, higher utility bills and possibly even bigger cars.
All of this additional spend will give a welcome boost to China’s GDP, as well as helping address the need for a growing number of young people to help care for the country’s ageing population.
Shopper marketing has been an area that brands and, often, retailers in China have battled to understand. We believe that the Year of the Monkey will be the year that the value of the shopper – as a way to grow both brand preference and market share – comes into focus. Brands have traditionally sought to win over Chinese consumers using price as the main attraction. Online and offline, retailers and brands have for too long taken the easy option and pulled the price lever to boost sales.
The problem has been that, as a result, loyalty has been hard to achieve, and this lack of loyalty is becoming evident now, with slowing growth making it difficult for brands and retailers to keep cutting prices. We see forward-thinking brands now starting to focus on the shopper, and seeking out ways to win at the all-important point of purchase. A tremendous amount of decision-making happens in the so-called last mile, and the brands that understand shopper behavior stand to strengthen their position.
In a slowing marketplace, the brands that rely on price in order to win may succeed in the short term but will ultimately lose. This is the year in which those that have invested in brand equity will be in a stronger position. Brands and stores that understand the factors – beyond price – that trigger a sale at the point of purchase can now stand out, and that can mean the difference between life and death. Investment in improving the execution of cross-platform campaigns in the retail space will increase, as will spending on improving the presence of brands on the shelf. The bar for quality in shopper marketing will be raised this year, and those that execute poorly will lose crucial sales.
As China and the businesses that operate within it adjust to a slower pace of economic growth, the Year of the Monkey will be a crucial one; those with strong products and strong brands stand to do well. Others are likely to fall by the wayside. Legendary investor Warren Buffett says that when the tide goes out, you can see who’s been swimming naked. In China right now, there will be more than a few c-suites where managers are wishing they had a towel handy. This is a market that may be delivering sluggish growth in comparison to the rates we’ve grown accustomed to in China – but it is still growing.
Now, however, that slower growth, coupled with volatility on the stock markets, means there is pressure on consumer confidence and spending, and that means only the strongest brands will now benefit from China’s growth. This year, we believe, will see a shake-out; for the businesses that have invested in their brand during times of fast growth, and which have built a relationship with consumers, this could well be beneficial, as competitors that have cluttered their category struggle and disappear. For those who have not yet earned a place in consumers’ hearts and minds, the coming year will be an enormous challenge.
In the battle between online and offline retailing, online has been making extraordinary gains in recent years, largely at the expense of physical retail. Yet sales volumes offline still vastly exceed those in ecommerce. Increasingly, retailers are discovering the value of linking the strengths of online and offline, and using them in combination. The Chinese government believes in a healthy retail market which includes both strong online and offline components, so we are expecting policy announcements which will stabilize the physical retail market.
We have seen significant investment by online shopping platforms in their offline capabilities, and this is driving growth in online-to-offline (or O2O) retailing. Alibaba’s $4.6 billion link-up with bricks and- mortar electronics chain Suning Commerce Group is just one of several high-profile investments in the fast developing O2O market in China, and more are likely to be on the way. Alibaba rival JD.com had been seen to have the edge when it came to customer service, and the O2O deal puts Alibaba back in the game. The idea of O2O is to give consumers the best of both worlds – the experience of shopping in person at a store, and the convenience and competitive pricing of online.
It makes business sense for offline retailers to move in this direction, too, as cash generated online can be invested in bricks and mortar, and online browsing can drive footfall in physical stores. In the overlap between ecommerce and physical shopping, large volumes of stock can be shifted with a click – and a high-value, personal and physical experience can be delivered in the real world.
With the continued rebalancing of the Chinese economy, 2016 could be characterised as another year of change for China. The Year of the Monkey, 2016, is also set to be another year of Chinese transformation, as China continues down the path of becoming more of a consumption rather than a manufacturing economy. The Chinese retail sector is at the intersection of much of this transformation and, with the rapid growth of e-commerce, Chinese retail is changing and adapting fast.
To help you focus on what is important, I have synthesized the multitude of change into 8 key retail trends in China for the Year of the Monkey that I think you should be thinking about and creating strategies to address.
So each day for thew next 8 I will be featuring another retail trend.
Here goes with Trend 1
Foreign Flavors – Trend 1
There has been an influx of international products and brands into China in the past year, and this will continue in the Year of the Monkey. Tmall Global, the international division of the huge eCommerce platform Taobao Tmall, has been instrumental in fuelling growth in sales of foreign brands, linking sellers with a ready market of Chinese consumers whose appetite for international goods is strong. Tmall Global’s promise – “100% foreign original authentic, 100% foreign merchants, 100% domestic return” – speaks directly to consumer sensitivity around food and product safety and the demand for reassurance on authenticity, as well as a desire for international fashion and the latest consumer durables.
Thanks to digital platforms and fairly straightforward customs regulations, many more international brands are finding the time is now right to dip a toe in the lucrative Chinese market. Cross-border sales – some official, some not – have long been a way for Chinese consumers to experience new brands, and we see digital sales platforms growing in appeal for international brands taking the plunge in this market. Electronics and apparel have for some time been strong cross-border sellers online in China, and we now see growing sales of international brands in FMCG products, particularly those relating to baby care, health and nutrition, given ongoing domestic concern about safety in these categories.
Those consumers who have had the means to travel internationally to buy foreign brands will continue to do so, but, by providing these goods through trusted online channels, brands have an opportunity to connect with many millions more people.
Apple’s ubiquitous products do not change one iota from market to market.
But they are starting to dabble in limited editions that tap key moments in specific countries consumers lives.
Announced today for Chinese New Year is one such initiative.
Two Apple Sports watches to celebrate Chinese New Year – the year of the monkey. These will be available in China, Hong Kong, Malaysia, Singapore and Taiwan.
Expect more of this type of activity by manufactures, especially in wearable tech, in the future.