What do you need to know about the Chinese consumer in 2019?
Every November, all eyes are on China’s Singles Day, the world’s biggest online shopping festival that was launched by the Alibaba e-commerce group some 10 years ago. Alibaba itself boasted another record-breaking year in 2018 with sales that reached £24.1.8 billion (up from £19.8 billion last year) followed by competitor JD.com (£18 billion) and many other Chinese and international e-retailers. Yet beyond the staggering numbers involved in this operation, it is interesting to look at Singles day in the light of what it reveals about the Chinese consumer and how their behavior is evolving over time:
The rise of the individualistic shopper
In China’s group oriented society, much of the buying used to be for others. Only a few years back, retail survey after retail survey revealed mostly women buying for their families and husbands, or men buying gifts for other men or for significant others. Yet Alibaba banked on an important consumer insight with its launch of the Single day shopping extravaganza: in China’s prosperous cities, much of the wealth is generated by millennials, a generation of only children who grew up rather materially spoiled and have developed their own habit of individual spending.
In fact, a 2017 report from the Hurun Group and Media Planning Agency (MEC) reveals that 67% of China’s high net worth individuals (and 74% of high net worth women) gave themselves gifts last year. Singles Day (which takes place symbolically on the 11- 11 every year) encourages this very un-Chinese habit of spoiling oneself and was positioned initially as an anti-Valentines day of sorts. While nowadays buying during singles day is no longer especially the predilection of singles, the insight attached to the shopping occasion is an important one: "Self-gifting", fits in with popular concepts such as "xiao que xing" ("little but certain happiness"), "a sense of ceremony", and "love and pamper myself". So rather than simply buying an item, brands can leverage this growing self treating/self rewarding mentality to build emotional connection with their customers. Jewellery brands have realised this trend for a number of years now, with brands from De Beers to local brand Chow Tai Fook launching “self-treating” campaigns aimed at Chinese women.
Quality, Practicality and Uniqueness replace price
Although Singles Day, much like black Friday in the West, focuses on price slashing, surveys reveal that price is no longer the leading factor in Chinese consumers buying criteria. A survey done by Alibaba after singles day indicates that the preference towards quality vs. price increased to 81%:17% vs. 78%:20% the previous year (the remaining percentile being “neutral“.) The impressive results reported this year by high-end e-commerce participants such as Secoo, Farfetch, Vipshop, Amazon China and Little Red Book, also indicate that the more expensive luxury brands are now successfully jumping into Singles Day action.
For Western products this is good news, as the West is recognised for offering higher quality products. However, Chinese consumers, especially those born from the ‘90s onwards, are recently also growing more attracted to Chinese made products. Hence, the quality promise proffered by Western brands must increasingly be backed up by actual quality perception on use as well as user endorsements.
In terms of gifting, the Hurun/ MEC report reveals a number of other criteria, alongside quality, that are regarded as being important. These include "practicality", "uniqueness" and "attractive packaging". Whilst prestige and branding still count greatly, practical considerations have seen items, such as electronics, explode in popularity as gifting items. Apple took the number one luxury gifting spot in China, ahead of Hermès in 2014, and has stayed firmly planted in its top position for the last 4 years. Yet it’s worth noting that domestic mobile brands Oppo, Huawei and Xiaomi now lead in sales nationwide, highlighting the important difference between buying for usage and for gifting.
Finally, feeding into the cultural Chinese motivations for gifting, both uniqueness and packaging are key as they are tightly related to imperatives like ‘giving face’ (mianzi) and ‘building network’ (guan-xi) that are part of what makes the wheels of Chinese society turn. Unique gifts are seen as a perfect way to distinguish oneself and show attention and care to the recipient. Jessica Zhang, marketing director of a Beijing luxury hotel, identifies a number of rising trends that fall into this category, such as customisation (for example Johnnie Walker bottles personalised with the recipient's name) and experiences (such as travel), instead of a physical gift. As to presentation, Zhang explains how good packaging is key. “The typical gift packaging, especially at the high end, should be made of solid quality material, and comprise of several boxes and external packaging, encasing and ‘sublimating’ the item contained in it, in order to honour the recipient.” She gives the example of The Beast, an online and brick and mortar flower shop based in Beijing, which shot up in popularity by selling roses in elaborate Lanvin-branded boxes.
As much as e-commerce has transformed the face of retail globally, the major role of social media as a sales channel is quite uniquely Chinese. Having been subjected to ubiquitous state propaganda on one hand, and exposed to product scams on the other, Chinese consumers are not great believers in mass advertising. Their trust follows the guanxi (or relationship) lines – hence the rapid rise of social media as an effective channel for recommending and building brands, and more recently, selling them via “mini shops” and “mini programmes”. The Chinese Generation Y and Generation Z specifically live and breathe social media, and make up to 70% of their purchases through this channel.
This year witnessed WeChat, China’s ‘Super App’ with more than 1 Billion active users, become a major channel for the Single’s Day sales. Amongst other top performers, a stand out was lifestyle e-commerce platform Yitiao, a 4 year old start up which recorded RMB 88.1 million in sales through its Wechat mini programmes, a 6 fold increase from 2017. Yet selling on Wechat means adapting to a medium that is very different from a typical online shop. Unlike e-commerce websites, it is not searchable by product, so notoriety has to be grown via interesting content and a viral spreading of the brand buzz.
Chinese young consumers love games as part of their online shopping experience. Asking consumers for their opinions, having them vote for options or staging mini contests are all good ways of engaging them. During the past Singles’ Day, e-commerce site Farfetch unveiled a sophisticated WeChat mobile game that lets readers test their knowledge of global luxury brands and gain “fashion points” which they could ultimately use to win a special Singles’ Day gift package: A Chloe Drew Bijou handbag, and a coupon worth £500 or £110.
The way Wechat works also explains the power of KOLs (Key Opinion Leaders) and Wanghongs (literally “hot on the internet“, China’s army of lesser influencers) in furthering sales. China’s most popular fashion blogger, Gogoboi, who has 7 Million followers, launched his own WeChat store in 2017 off the back of his popular fashion blog. Recruiting the right KOL for one’s brand is thus an important consideration for brands, and it certainly serves to be ahead on the curve in identifying “what and who works”. As such, French beauty brand Guerlain recently recruited actor Yang yang to be their brand ambassador for lipstick, recognizing a trend in China for “pretty” boys being attractive KOLs for women.
Single Day, China’s biggest yearly shopping event, is therefore a prime example of observable consumer behavior as well as a good place to follow shopping trends. As always, it is important to understand the unique combination of deep cultural attitudes and current technological and societal trends that make up the behavior of the Chinese consumer.
About our Consultant:
Felicia spent 13 years in China working for ad agencies Ogilvy and Dentsu. In addition to her work as a Consultant for Farnham Castle Intercultural Training, she has recently launched China Insight, providing in-depth, culture-anchored insights on Chinese consumers.