What’s hot and what’s not Mark Tanner of China Skinny looks at the top retail trends in a slowing Chinese economy
There’s been no shortage of coverage of China’s slowing GDP growth, the most recent being Q2’s 6.2 percent growth, the slowest pace since 1992. While no one should downplay the slowdown, it’s important to remember that China’s GDP is seven times larger than it was in 1989, and in absolute terms is expected to be over 60 percent higher than the last time growth was over 10 percent in 2010.
China remains an enormous market with opportunities aplenty, particularly in consumption, which accounts for around three-quarters of growth. Overall, retail sales grew 9.8 percent in June. The growth of fast-moving consumer goods (FMCGs) last year accelerated to 5.2 percent from 4.7 percent in 2017. There are industries such as auto which are contracting, and geopolitical tensions are shifting spending and preferences, such as student registrations to the UK which grew 35 percent last year, largely at the expense of the US. But, as a whole, many foreign brands continue to see strong growth across everything from sports attire to healthy food.
With each GDP growth announcement, it is important to note that Chinese consumers are becoming more discerning and sophisticated. Brands need to work harder than ever to break into the fiercely competitive marketplace and connect with consumers. Here are six trends to keep in mind to ensure your brand, product and service resonate with Chinese consumers.
1. Play to my tribe
The fastest-growing male fashion category online in China is lacy, transparent garb. This is mirrored by many male cosmetics categories growing well into triple digits. The effeminate male is part of a large and lucrative consumer sector who are shaking off traditional conformity and unashamedly buying products and services that reflect their personalities, their interests and their tribes. This is far from the homogenous segmentation of China that many brands employ. The best performing brands have segmented strategies by consumer and geographic profiles, ensuring that they connect through relevant and meaningful positioning, messaging, products, packaging, formats, promotions, partnerships and pricing.
The best performing brands have segmented strategies by consumer and geographic profiles
2. Do it for me
One of the biggest complaints we observed around Singles’ Day last year was how unmanageable the deluge of promotions had become. Consumers are simply overwhelmed. Businesses are accommodating this by providing everything from shopping list curation to tech giants helping consumers make decisions through AI-powered recommendations. British brands can tap into this by offering food, fashion or travel itinerary recommendations for specific occasions, particularly for those less-familiar foreign categories which require an element of education.
3. Make it convenient
There are countless Chinese businesses who have built their success on convenience. For example, Luckin Coffee delivers a single cup of coffee to a home or office. Just 17 months after opening its first coffee shop it IPOed on Nasdaq – the shortest duration in history from launching to listing. It now has 3,000 stores and aims to surpass Starbucks by the end of the year. Convenience has become an everyday part of Chinese lives, incorporating everything from seamless mobile payments, to the 10 billion+ meals delivered last year. Groceries and a host of other products can be delivered within 30 minutes. Brand’s customer journeys should be as convenient as possible and products should factor in convenient formats and packaging wherever possible.
4. Give me an experience
To stand out, brands need to do more than just sell something. They need to make the whole experience memorable and unique. In many cases, this involves combining products, services and marketing with interactive tech and creating meaningful experiences. The popularity of New Retail personifies this with consumers able to interact with their smartphones to try on lipstick, clothes and other gear on magic mirrors. In the tourism category, shopping used to account for the lion’s share of the budget, now most spending is on experiences. Marketing, product and channel strategies should always consider Chinese consumers expectations for an interesting, energising experience that could encompass anything from gamification to the physical retail experience.
5. Sell me better things
Super-premium products are the fastest growing – and often the largest segment – for almost every FMCG category. This is representative of the general trend of trading up. 26 percent of Chinese consumers traded up their purchases in 2018, versus 17 percent in the other top 10 other economies according to McKinsey. British brands will never compete with domestic brands on price, so should be targeting opportunities at the top end. Nevertheless, while Chinese consumers are demanding premium products, just being British isn’t enough, and brands need to justify the claims with relevant positioning, benefits and connections.
6. Help me improve
With more experience and discretionary income, Chinese consumers’ desire for richer and more fulfilling lives is ever increasing. This is alongside China’s hyper-competitive environment which is driving consumers to improve their skills to stand out from the masses professionally, physically and socially. Adult classes are one of the fastest-growing categories online. Between 2014 to 2017, running events increased 20-fold to 1,102. Any products and marketing that give consumers the impression that they will learn, get healthier, or become more attractive are likely to resonate well.
Ensuring that these trends are incorporated into your marketing plan will mean that you are well on the way to genuinely connecting with Chinese consumers and will maximise your chance of success in the lucrative Chinese market.
China Skinny is a marketing strategy, research and innovation agency based in Shanghai who has worked with almost 200 international brands to help them grow and prosper in the China market. More at chinaskinny.com