When size matters: the benefits of a large population for the Chinese diaper market

Perhaps, the single most attractive factor for every company wanting to secure a share of the diaper market in China is the country’s population. In fact, despite the effects of the recently abrogated “One child policy”, China still claims the title of the country with the most new-born babies in the world. With its 15.2 million new-born babies in 2018,  China is matched only by India. In addition, the constant increase of the average household purchasing power has been followed by an increase of the number of families looking for higher quality products

The transformation of Chinese parentting habits

According to the latest statistics, in 2019 the total market revenue of the diaper segment in China reached the whopping figure of $8.2 billion, whereas the average revenue per capita, which is the result of the total revenue divided by the total population, was $5.7. Despite the impressive trends of the Chinese diaper market, China has not always been a profitable market for diaper brands. Pampers, which today is among the industry leaders in China, had to go through a series of failures before finding the right strategy that would penetrate the Chinese diaper market. In an interview to Bruce Brown, who was in charge of the company’s $2 billion R&D investment team tasked to find a product that would appease Chinese customers, it was revealed that the Asian giant has always been a tough market to penetrate. The researcher explained that the first time P&G tried to launch its Pampers diaper in China in 1998, the result was outright disappointing. In fact, instead of developing a unique product for the Chinese market, P&G proposed a lower-quality version of the diapers it sold in the U.S and Europe. The company wrongly assumed that Chinese parents were looking for cheap products. The very limited sales simply reminded the company that it could not be more wrong with its market strategy.

The strategy that raised the revenue of the market in China

Industry players from around the world

International diaper brands in China: Pampers

In 2017, diaper manufacturers in China produced more than 31 billion diapers. The global market size of diaper brands was valued at over $54 billion, with its leading consumer markets in North America, Western Europe and Asia. Asia alone, though, now holds more than half of the consumption of diaper globally, and this thanks to rapidly expanding Chinese market. The penetration rate is over 85% in Western Europe, Japan, and North America while on the other hand, diaper manufacturing companies in China have still significant room for improvement with a penetration rate below 55%. In addition, the diaper market in China is forcasted to maintain a two-digit annual growth rate over the next five years, especially thanks to the significant increase in disposable per capita income and the relaxing family planning policies.

US manufacturers: Pampers

Today, Pampers is among the most recognizable diaper brands in China. The company promotes its products in various ways, including billboards and television commercials. In addition to diaper and baby-wipe, Pampers offers a training pants line called “Easy Ups” and a line of disposable swimwear sold under the brand name Splashers (or Sunnies in Europe). Moreover, Pampers produces bed wetting products named Underjams for children weighing up to 85 pounds (about 39 kilograms). However, in order to reach this level of market penetration and take the lead of the diaper brands in China, Pamper had to go through multiple failed attempts, which helped the company better understand Chinese consumers.

The challenges for Pampers diapers in China

The first diaper that Pampers proposed to Chinese customers it was plastic and largely perceived as  irritating, so it failed to convince customers. In 2006, a new product—the Pampers Cloth Like & Dry—despite being softer than the previous one still registered sluggish sales. In fact, after more thorough research, it was found that Pampers diapers in China were not faring well because Chinese consumers were not primarily looking for dryness or convenience. As late as 2006, the majority of the Chinese parents, when asked whether they would abandon traditional cloth diapers or split-pants, would reply stating that they simply could not see a good enough reason to start buying diapers instead of using split-pants or cloth diapers. To solve the issue, Pampers decided to adopt a more scientific approach for its market strategy. The company commissioned a study to the Beijing Children’s Hospital’s Sleep Research Center that revealed that babies wearing Pampers fell asleep 30% faster, slept an extra 30 minutes every night, and had 50% less disruption throughout the night. After the publication of these results, sales went up by 55% and, more importantly, Pampers diaper finally took off in China. Since 2006, Pampers established itself as a leading diaper brand in China.

Experts’ analysis of the success of Pampers diapers in China

In an interview on Pamper’s diaper experience in China, Karl Gerth, an Oxford professor whose main field of research is the spread of consumerism in China, pointed out that Pampers’ marketing strategies stroke the right tone. “You don’t want to come off as paternalistic,” said Gerth, who authored the book “China Made: Consumer Culture and the Creation of the Nation.” He continued stating that “The idea that Pampers brings a scientific backing and gives children an edge in their environment—that’s a brilliant way to stand out from the competition.”.

Big companies expand their market in China

After the pathbreaking campaign of Pampers, various brands found the courage to start investing in the diaper market in China. In 2013, Kimberly-Clark, a Texan company, announced the construction of a new diaper manufacturing plant in Jiangning’s Development Zone. According to China Sourcing News. The company planned to invest more than $100 million in this new manufacturing plant and product development center, with aim of integrating product manufacturing, quality control, product innovation, engineering project management and logistics management. Meanwhile, Procter & Gamble, the parent firm of Pampers and Luvs diapers, started the first stage of a three-stage investment operation in Luogang, Gaungzhou (广州) the goal of becoming one of the largest manufacturing sites in Asia. The first stage of the plan was to produce various consumer goods, including Pampers diaper for China. The initiative was part of the company’s goal of investing as much as $1 billion in China by 2015.

Japanese diaper brands

Unicharm

Beyond American companies, also Japanese companies are featured among the leading diaper brands in China.  In fact, the “Made in Japan” is perceived as a reference selling point to Chinese customers, who still distrust domestic companies. In particular, the Japanese Unicharm realized this in 2016—when it changed its strategy to penetrate the diaper market in China—and began exporting from Japan instead of selling its products manufactured locally. In addition, in the first years of its activity, Unicharm operated five factories in China because the management was convinced that it would better serve the Chinese diaper market. However, the strategy did not pan out in that business was wavering. The company revealed that one fatal miscalculation was that of underestimating the customers’ preference for high quality and more expensive products. In fact, the company chose the affordable MamyPoko diapers for its main product placement strategy instead of the premium Moony brand. Moreover, the company chose large supermarkets and similar retail points as sales channels. The result war rather disappointing because after a while a large portion of the consumers turned to the on-line market to find higher-quality products.

Pigeon Co.

Another Japanese name among the leading diaper brands in China is Pigeon Corporation, which has been investing in the Chinese diaper market since 2011. The company started its operation in the Chinese market with the Changzhou-based production line, which was completed in late 2011. According to a report released by the company. In 2013, this plant produced breast pads, baby wipes and other baby items, but with a series of additional investments, the company expanded its production with the objective of producing close to 85 million diapers per year for the Chinese market. After this series of expansions, Pigeon also opened a manufacturing plant in Shanghai.

Summing up the general trend

In conclusion, we could say that China has not always been an easy market for leading diaper brands. After an initial phase of strategy assessment, though, China proved to be an extremely lucrative market. In particular, the increasing awareness of Chinese customers over quality standards and safety hazards proved to be an important factor that domestic and international leading brands have to take in consideration. For example, the 2008 baby milk scandal sparked concerns over product safety, and as a result parents were steered towards premium foreign-produced diapers. Imported premium products from the US like Pampers; and  Japan like Kao’s Merries and Unicharm’s Moony diapers have gained popularity in the world’s most populous country. According to the Shanghai International Nonwovens Exibition, the rapidly increasing demand for imported diaper in China convinced many leading diaper brands at the international level to expand their production lines in China. Below it is a list of the leading diaper manufacturers in China and their location

Top 10 diaper manufacturers in China

Out of the top ten diaper manufacturers in China, seven have their headquarters in Fujian province.

• Diaborn is a leading diaper manufacturers in China and one of the top domestic diaper brands. This diaper company was founded in 2006 with the headquarter in Fujain, China. The company’s current estimated revenue is over $5 million. 
• BBG Sanitary Commodity Limited was set up in 2004, and since then has emerged as a leading diaper manufacturer in China. This company is has some of the most advanced production machines, which enable diaper manufacturing companies in China to guarantee quick delivery on client’s orders while maintaining high product’s quality. 
• InSoft is a leading diaper manufacturer in China, which was established in 2010 and headquartered in Fujian, China. This top disposable diaper brand employs over 500 persons and has an estimated annual revenue of $100 million.
• Chiaus is among the largest diaper manufacturers in China. This diaper company was established in 2006 and is headquartered in Quanzhou, China. The company has invested in an innovative R&D center to offer products that meet international quality standards for disposable diaper brands.
• Baron China Co Ltd is a top diaper manufacturer in China and is regularly featured among the best diaper brands. This leading diaper manufacturing company in China was founded in 2005 in Fujian, China and has an annual turnover of over $67 million.
• Yamaza is one of the larges diaper manufacturers in China and was established in 2005 in Guangzhou, China. This company is a major  household name for diaper manufacturing companies in China.
• AAB China Co Ltd is another key diaper manufacturer in China with 32 production lines and a production unit covering more 80,000 square meters. This company was established in 2001 and its headquarters are located in Fujian, China. The company registers an annual revenue of $167 million.
• V Care Baby is headquartered in Quanzhou, China. This company was founded in 2007 and is a trusted diaper brand. The company has a factory covering an area of over 66,000 square meters and employs over 300 workers.
• Sun Baby Diapers differs from the other companies on the list, in that it is headquartered in Shanghai, China. The company has consistently delivered high quality disposable diaper brands in the market for diaper manufacturers in China.
• Hanhe Diaper was established in 2011 and is located at Fujian, China. It is a well-established diaper manufacturer in China, with an annual turnover of between $15 to $20 million.

Author: Abebe Gasparini

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Often referred to as the seniors’ Market, the Silver Economy in China covers all products and services intended for people aged 60 and older. As stated in its name, the Silver Economy is not only a ”market”  but also functions as an “economy”.

Senior citizens in China usually have stable lives and incomes with around 90% owning endowment insurance and property. Thus, elderly in China have a less stressful daily life. However, they grew up during a time with less security, having to experience events like the Cultural Revolution, resulting in more frugal consumption habits.

In urban areas, many Chinese senior citizens have only one child. Unlike the urban areas, Chinese senior citizens in rural areas have children who often move to cities for work. Seniors are emotionally dependent on their children, but the younger generation has less time to spend with their aging parents, so they are often lonely. Therefore, they have a strong demand for social entertainment and accompanying services.

The Silver economy in China is rapidly growing. With this growth, the Chinese senior citizens’ consumption is diversifying, while opinions from family can easily influence their consumption behaviors. International brands also benefit from the aging population, there is increasing awareness of health, fashion, and beauty, and e-commerce platforms are paving the way to make imported goods easily accessible for China’s elderly and caretakers. There is also room to develop in many segments.

China’s elderly population growth

China’s elderly population is increasing. By the end of 2018, China had nearly 250 million people aged 60 and above, accounting for 17.9% of the total population. Every year, 8-10 million Chinese people turn 60 years old. By the end of 2025, there will be around 300 million Chinese senior citizens, accounting for one-fifth of the total population.

The senior population is mainly concentrated in the eastern and southern parts of China. These provinces usually have more developed economies and larger populations. This indicates that local economic development affects the aging degree of the region. In 2017, Shandong province had the largest senior population in China, mainly due to its high level of economic development and large population (the region ranked third in GDP and second in population in 2017).

Income level of China’s seniors

In 2017, there were more than 110 million senior citizens with a monthly household income of more than 4000 RMB, of who 20 million had a monthly income of more than 10000 RMB. Individuals with middle and high-income levels accounts for 78% of the senior population. In contrast to younger people, they have less busy lives, meaning they can spend more time and money on higher-level and hedonistic consumption such as leisure activities, tourism, and artwork.

Over the last decade, the average growth rate of pensions for Chinese senior citizens exceeded the GDP growth rate, while pensions for the elderly maintained rapid growth. From 2009 to 2018, there has been immense growth in the income of China’s elderly, especially those who used to work in remote areas. Based on government policy, their pensions usually grow faster than average. With China’s pension system, senior citizens who paid accumulatively social endowment insurance for at least 15 years can get a pension every month in China after retirement. The amount of pensions that the elderly can receive monthly depends on qualifying years of personal social insurance contribution, social insurance contribution base, and social average wage.

From 2012 to 2018, the monthly pension of retirees over the age of 60 nearly doubled, and the disposable income of the Chinese aging population increased. The average monthly pensions in China for retired workers exceeded 3000RMB in 2018. Retirees in China’s eastern coastal provinces have a high pension income. These provinces tend to have a higher level of economic development due to the early reform and opening, as well as the advantageous regional geographical location. These regions have many more senior citizens than other provinces. Western provinces where ethnic minorities live in compact communities also have relatively high pension levels. Tibet has the highest pension in the country. State subsidiaries and fewer retirees are the main reasons for higher pension levels.

Behind the silver economy in China’s market growth

The market size of the Silver economy in China has been rising for several years. Along with the development of the elder service industry, it will sustain rapid growth for a few years.

According to Baidu Index, the four major trends related to the silver economy: products for elderly, pension services, nursing homes, and elderly insurance.

Products for the elderly

The number of searches of products for the elderly remained high from May to November, with the biggest consumption day being Double 11, China’s most popular online shopping carnival, in 2018. When people search for products for the elderly on Baidu, they usually browse different types of products and e-commerce sites for senior citizens.

The most related keywords to “products for senior citizens” are “health care products for the elderly,” “specialized shops for senior citizens” and “health and fitness”.

              Pension services

The number of searches of pension services peaked on April 17, 2019, when the government released news about pushing forward the construction of pension service infrastructure. When people search for China’s pension services on Baidu, they usually browse the latest pension policies and websites providing pension services.

The most related keywords to “pension” are “increasing”, “pension calculation method”, and “latest news on pension increases”.

Nursing homes

The number of searches for nursing homes fluctuated around the average index, and the search number reached the highest point at the beginning of the Chinese New Year. Baidu searches with the keyword ‘nursing homes’ are usually related to the prices for nursing homes and how to run a nursing home.

Related searches to “nursing homes” are “price,” “is it profitable to run a private nursing home,” and “how much is the nursing home per month.”

Elderly insurance

The number of searches of elderly insurance fluctuated greatly, reaching its peak in December of 2018 because December is the deadline for payment of pension insurance for urban and rural residents. When people search elderly insurance on Baidu, they usually browse insurance products and websites of insurance companies.

Senior citizens’ consumption

The consumption concept of China’s senior citizens is defined by the importance of health, family members’ opinions, practicality and frugality, and preference of in-store experience

Importance of health

For senior citizens, health is the major criteria of purchasing decisions, especially for daily-use products.

Accepting family members’ opinions

Senior citizens’ purchase decisions are easily influenced by the opinions of their family, especially by sons and daughters.

Practical and frugal

Senior citizens care about products’ practicality and price since they are more frugal than younger generations.

Preference of in-store experience

Many prefer offline shops because they can see and try the products/services.

Chinese senior citizens’ consumption can be segmented in many ways: by tier cities, income levels, and gender.

Different tier-cities

Senior citizens living in tier-1 cities showed a strong willingness to spend money on social lives and leisure. In contrast, senior citizens in tier-2 and tier-3 cities are more interested in goods related to health.

Different income levels

High-income senior citizens consume more healthcare and entertainment products/services. Low-income senior citizens’ daily expenses focus on daily-use and medical products.

Gender     

Senior women spend more money than men do. Chinese women have a stronger demand of consumption entertainment, fashion, and beauty. Additionally, their spending on daily-use goods is also higher than men’s.

Products and services in the silver economy

The Silver economy in China generally covers daily use products, healthcare products, fashion, housekeeping services, nursing care services, exercise, etc. consumed by the Chinese aging population, particularly those aged 60 or older.

Shift in consumption

With a rising disposable income, China’s elderly’s consumption is shifting from traditional frugality to enjoyment. They are willing to spend money in four areas, leisure and exercise, fashion and beauty, healthcare products, care services/goods.

The silver economy’s consumer preferences

The Chinese aging populations’ preferences differ depending on the cities in which they live. In many major cities, there are specific goods and services that are their favorites. For example, Shanghai’s aging population likes buying clothes. Beijing’s aging population likes buying cosmetics. Shenzhen’s aging population likes buying cameras. Hangzhou’s aging population likes medical cosmetology. Chengdu’s aging population likes buying sports equipment. Suzhou’s aging population likes buying digital products. These favorite goods show that China’s elderly consumption habit has shifted to spending more on things for enjoyment.

Tourism

Leisure and exercise is one of the four areas where the aging population is willing to spend money. In this area, tourism is one of the most popular leisure activities. Seniors make up more than 20% of China’s tourists every year. In the next few years, senior citizens in China’s consumption on travel will keep rising along with the consumption upgrade.

Most seniors like vacation packages and short-distance tours. The most popular destinations are Beijing, Guilin, Xiamen, Guiyang, and Urumqi. The most popular overseas destinations are Thailand, Japan, and Malaysia. When traveling, senior citizens demand beautiful landscapes, high-quality local goods, and safety.

Medical Tourism

China’s growing elderly population provides huge potential for the developing medical tourism market. From 2014 to 2018, there was a rapid increase in China’s outbound medical tourism. The market size reached 118.6 billion RMB in 2018, with more than 30.5% GAGR. Participating in China’s medical tourism market are three main types of companies, which include online medical companies, overseas medical institutions, and online travel agencies. There is a complementary relationship among the three types of participants of China’s medical tourism, and they work together to provide services for medical tourism.

East and South Asia are the top destinations for Chinese medical tourism. The United States and Western Europe are popular destinations as well. Distance and medical technology become important factors for Chinese medical tourists to choose destinations. The top 10 overseas medical tourism destinations for Chinese tourists rank as follows:

Exercise

The main forms of exercise for China’s elderly people are walking and jogging, Tai Chi, and dance. Among them, square dancing is the most popular activity for the elderly. Walking and jogging are both common exercises among seniors for its low intensity. Tai Chi is a traditional Chinese martial art and generally needs professional training. Dancing in public squares and parks is very popular among China’s seniors. More than half of the aging population exercises at least five times per week, usually in the morning and at night.

As the most popular physical activity for the Chinese elderly (especially women), dancing already showed a large market potential in recent years, In the evenings and mornings, seniors gather in parks and public squares to dance. In 2017, there were 100 million participants in China. On average, they spent 300-500 RMB per month on dance clothes and shoes. On Taobao/Tmall, the highest sales of dance apparel were in June and July. After that, the sales continually declined before March 2019. This means that summer is the most popular time for dancing.

Fashion and beauty

On Taobao/Tmall, around 60% of Chinese senior women buy cosmetics six times per year. In 2018, the average Chinese senior spent 1500RMB on new clothes. China senior citizens’ spending on medical cosmetics increased 4.4 times from 2017 to 2018.

Healthcare products

The healthcare products market in China is steadily growing, almost half of the market share comes from seniors. This means that aging people are the most important consumers of China’s healthcare market.

Despite more than half of seniors spending less than

1000RMB on healthcare goods in 2018, almost 20% of them were willing to pay more than 5000RMB a year on healthcare products. Offline shops are still the main purchasing channels for elderly people, as many of them have a lack of trust in the healthcare products from the internet.

Consumption of elderly care products

Reading glasses are the most popular goods since they are essential in senior citizens’ daily lives. However, many of them are cheap and lack high-quality brands. The average price of reading glasses is less than 20 RMB.

Online shopping

China has had more than 30 million middle-aged and elderly individuals (above 50 years old) who shop online. Senior citizens show a huge market potential as online consumers. More and more senior citizens in China are starting to use mobile apps for their online shopping.

By June 2018, China had more than 50 million internet users over the age of 60, which mean one of five senior citizens are netizens. In 2018, the registered users on Tmall.com among senior citizens exceeded 7.5 million. On JD.com, the main products purchased by senior citizens were fashion products, healthcare goods, home appliances, cosmetics and personal care, and food.

Most aging individuals are willing to use mobile payment methods with personal information disclosure being the main issue for them. Compared to 2017, the number of senior citizens who used mobile payment doubled in 2018. Senior citizens who used face scan and fingerprints payment increased 20% and senior citizens who used QR code payment increased 2.5 fold in 2018.

Elderly care service market in China

The market size of elderly care service is booming due to the dramatically aging population in China. In 2018, more than 20 million senior citizens lived alone, some of them were disabled. Many of them are in need of professional care. The most important services for the urban elderly are housekeeping and nursing care. The market of housekeeping services for senior citizens has been rising for several years, since the increase in the number of empty nesters in China.

In China, there are three different methods of elderly care services, in-home care, community care, and nursing homes. Nursing homes are becoming more important since it offers knowledgeable and professional nurses and medical care.

Chinese consumer perceptions of nursing homes

When it comes to nursing homes, consumers’ most common questions and posts on Zhihu include:

• Why are Chinese people unwilling to send their parents to a nursing home?
• Is there and premium nursing homes that offer high-quality services?
• What the elderly should know when choosing a nursing home?

On WeChat and Weibo, consumers display positive perceptions:

• Availability of professional medical services in the nursing home.
• The nursing home has companionship and nursing care for the elderly.
• Nursing homes usually have a clean and healthy environment.

Chinese consumer concerns about nursing homes include:

• Some violent incidents in nursing homes reduced people’s trust.
• The lifeless ambiance in some nursing homes.
• Some staff lack professional training about taking care of senior citizens.

The nursing home market is growing very fast in China with the increasing demand for eldercare. The Chinese government is leading to the development of nursing homes. However, the government encourages more private enterprises and investors to enter the market.

China has a huge demand for nursing homes, yet the demand exceeds the supply. In 2018, the aging population exceeded 249 million in China. Many of whom need nursing services. Among those senior citizens, about 10% of them are willing to live in the nursing home, increasing the demand to about 25 million. However, the total number of nursing homes’ beds cannot meet the demand. There is more than a 9 million supply gap.

Drivers for the nursing home market in China include safety and service guarantee and the lack of ability and time to care for elderly parents. It is affirming for family members to know that nursing home has a safety system, which includes the facilities and staff. In addition, the nursing home can offer professional care that a family cannot. Younger generations are moving away from their hometowns for opportunities, therefore they have less time to take care of their elderly parents. Thus, the nursing home is a good option.

Obstacles to China’s nursing home market include traditional culture and negative perceptions. The nursing home goes against Chinese tradition. It is difficult for both the elderly and family members to accept the elderly living in the nursing home, as their children believe it is their responsibility to take care of their parents. Some family members generally have negative perceptions of nursing homes, such as the smell of medicine, no privacy, etc. therefore, they prefer their elderly family members to stay at home.

Market trend analysis

The silver economy in China follows the national consumption upgrade trend with diversifying channels of consumption, and rapid development in elderly nursing and healthcare. Except for cheap daily-use products, middle and high-income Chinese senior citizens consume more on leisure, fashion, and beauty, such as tourism and cosmetics. Senior citizens are slowly embracing mobile payment and are using online shopping apps. Due to the Chinese aging population, there are many market opportunities in nursing home and healthcare industries. Nursing homes are increasingly accepted by Chinese families.

Author: Shayaiah Mitchell

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Source: E-COMMERCE REPORT 2018 – FASHION

The Chinese Accessories Market is Being Pushed to a Higher-end Domain

With their rising purchasing power, Chinese consumers are not only willing to buy more fashion accessories, but they can now afford more expensive ones. On the other hand, the Chinese government has issued many environment-protection requirements, along with the rising labor costs in China, Chinese fashion accessory processing enterprises have been pushed to be upgraded. While the low-end fashion accessories manufacturing is shifting more and more to India and other South Asia countries, many Chinese enterprises are focusing more on the high-end market domain.

Chinese Millenials Want More International and Individualized Accessories

Chinese millennials desire to be acquainted with new fashion trends around the world. They purchase fashion accessories to present their unique personal style as well as their fashion taste. For example: in the last recent years, traditional Chinese jewelry brands have experienced a general sales decline while many western brands have achieved a great success on the Chinese market, for example, the brand Pandora. Since Pandora is a Danish brand which emphasizes DIY and individuation, it is a perfect match for Chinese Millennials who strive to be unique and show their own personalities.

The Chinese Fashion Accessories Market Is Getting More Diversified

Chinese consumers are willing to purchase fashion accessories from well-known international brands since these products enable them to show off their financial capabilities. However, the Chinese fashion accessories market is not dominated by a few brands. More and more niche and young innovative brands are getting Chinese consumers’ attention. Along with rising disposable income, the quality of life is also elevating. Chinese millennials are followers of fashion and highly image-conscious. Most market segments of fashion accessories are still on an upward climb due to the escalation in the demand of diversification.

 Young Female Consumers Are the Main Buyers

According to Euromonitor International, millennials in China number over 400 million and account for almost 30% of the nation’s population. The increasing base of fashion-conscious Chinese millennials (post-1980s and post-1990s generation) are the “super consumers” within personal accessories and eyewear.

Source: White book of China’s new generation fashion consumption

Young consumers care about the comments regarding their dress and accessories, especially young female consumers. That makes them the main consumer group of fashion products on the Chinese fashion accessories market. According to Min Chun, project leader of Daxue consulting: “Female consumers are willing to spend more on their outfits than any other categories to enhance their appearances.”

Source: White book of China’s new generation fashion consumption

Online + Offline is Becoming the Main Purchasing Method

In 2017, offline stores were still the main distribution channel (slightly over 50%) of jewelry products on the Chinese market. A good offline-store-coverage is considered important since professional service is crucial in this sector. Nevertheless, a high internet and smartphone penetration in China along with the convenience of online shopping and the strong awareness of technology among Chinese consumers are boosting the development of internet retailing. A dedicated official website (with the Chinese language) and/or official online-shops on Chinese e-commerce platforms cannot be ignored. Besides the most popular platforms like Taobao and Jingdong (JD), there are many other less-known ones which international players can leverage.

“Chinese consumers have a very large choice of products, from domestic to international brands, so they are very concerned about the quality, design and small details.” Says Claire Gerard, the project manager of Daxue consulting. From international high-end fashion products to fine fashion accessories with very low prices, products for each category and price level have their own consumers.

Source: 2018 China jewelry market analysis report

Daxue Consulting: numbers of brands selling on Tmall and other relevant e-commerce platforms for each fashion accessories category

Social Media Platforms are an Impactful Way to Reach and Engage Consumers

“Chinese women are paying greater attention to fashion news and browsing fashion information is becoming an essential part of their daily life.” Says Min Chun, Project leader of Daxue consulting. The main source of fashion information for Chinese consumers is social media platforms. With strong digitalization in China, international fashion accessory enterprises are able to reach Chinese consumers directly and quickly through social media platforms. WeChat and Weibo are significant promotion channels for fashion accessories brands, followed by Instagram, which can also be considered as one of the most important promotion channels among all relevant mobile apps.

Source: Report of China fashion consumption survey

1.      WeChat Is the Number One Chinese Social Media Application and A Must-have for Market Entry

WeChat is a Chinese social media application and an absolute must-have for a market entry campaign in China. The app has over 1 billion monthly active users. As more and more young consumers in China are looking for unique and tasteful fashion accessories, not only well-known brands but also many international niche brands are being mentioned by many posts on Chinese social media. Women’s fashion accessories are the main topics of most related posts on WeChat. The Chinese fashion accessories market is not even close to saturation, there is still vast room for growth.

Below is an example of one article posted by a fashion and lifestyle KOL on WeChat: DC_FashionBook. This article is called 少女和她们的时髦配饰 (Girls and Their Fashionable Accessories, gained 9709 views by Oct. 17. 2018), in which several international niche brands have been introduced such as Alighieri (UK).

Screenshot of Wechat Post “少女和他们的时髦配饰” (Girls and Their Fashionable Accessories)

2.      Weibo Is the Chinese Most Successful Microblogging Site and Well Leveraged Platform for Marketing in China

Sina Weibo is a microblogging site with nearly 400 million monthly users and is a well-leveraged platform to perform marketing campaign on the Chinese Internet. Women’s products dominate the most posts about fashion accessories on Weibo. Jewelry is the most popular topic among all fashion accessories.

Here is an example of a post about how to become fashionable with so-called coin-necklace. This blogger is called “时尚辣妈Ann” (Hot Fashion Mum Ann), who owns 610,000 followers on Weibo.

Screenshot of a Weibo post from blogger 时尚辣妈Ann (Hot Fashion Mum Ann)

3.      Using Chinese Q&A Social Media Platform Zhihu to Reach Higher-Educated Consumers

Zhihu (知乎) is the first Chinese Q&A website and has transferred to a social media sharing platform with more than 100 million answers on various topics. The platform is especially relevant for reaching higher- and well-educated social classes. More than half of the questions about fashion accessories are brands recommendation based on prices, gender and seasons. International brands tend to be more popular than domestic brands among those answers.

“Are there any recommendation about accessories lower than 1,000 RMB (around 144 USD)?”
“TOUS is a cross-border jewelry brand from Spain. Tous Bear is the most classic image of this brand, it could be a cute present.”

“What are the basic must-have accessories for men?”
“Kiel James Patrick is a bracelet brand from the USA with American vintage style. An anchor is the main symbol of the brand. Jack Fitz and Peter Wence are the classics.”

Competition Analysis of Different Segments of Chinese Fashion Accessories Market

1.      Jewelry Brands on Chinese Market

Generally, international brands such as Cartier, Tiffany and Swarovski are priced higher while prices of domestic jewelry brands are more affordable. However, a few big Chinese jewelry enterprises such as Chow Tai Fook are also building a higher-end brand image.

Baidu Index – Semantic analysis for the keyword “Jewelry”
Baidu is the number one search engine in China. More than ¾ of the total search is made by Baidu. Baidu index collects and analyzes the statistical data of searching behavior, which reveals the market trend.

The related words of “jewelry” consist of relevant brands, such as LUKFOOK, Tesiro, Chow TaiSeng, etc. Most of those brands come from Hong Kong and Guangdong province.  The orange circle is for upgoing searching amount and green for declining amount. Besides brands names, official websites of several jewelry brands are closely related to the keyword “Jewelry”, which indicates that Chinese consumers are trying to find information about the products and even ready to purchase jewelries from these official websites.

For more facts and information about Chinese jewelry market, please check out another article of Daxue Consulting: How millennials and low-tier cities are shaping China’s jewelry market 

2.      Sunglasses Brands on Chinese Market

Most well-known sunglasses brands (both international and domestic) have built official stores/flagship stores on Chinese shopping platforms. The majority of them have built official social media accounts such as WeChat and Weibo.

Baidu Index – Semantic analysis for the keyword “Sunglasses”

The related searching terms of “sunglasses” consist of men and women’s sunglasses brands, ranking, pictures of sunglasses and how to pick sunglasses. All mentioned brands on Baidu Index are international (Police and Bolon). Sunglasses are relatively new to many Chinese consumers, they tend to consider sunglasses as a fashion statement which is worn by young and fashion-conscious individuals. However, as the quality of life rising and fashion information getting more accessible to Chinese consumers, an increasing number of consumers are ready to purchase fashion accessories like sunglasses. What kind of sunglasses look good on them and how to choose a suitable pair of sunglasses are big concerns of Chinese consumers.

3.       Watch Brands on Chinese Market

Most International brands come from a few countries: Switzerland, Japan and USA. Both domestic and international brands focus on mass as well as the high-end market.

Search traffic on Baidu for “Watch (手表)” from Jan. 2017 – Oct. 2018

The search traffic on Baidu for “watch” was significantly high in May 2017, because CASIO launched new products during this period.

4.       Wallet Brands on Chinese Market

Most international and domestic brands have built official stores/flagship stores on main shopping platforms. International brands mainly focused on high-end products while domestic brands working on both mass market and the middle to high-end markets.

5.       Handbag Brands on Chinese Market

The luxury handbag market is dominated by international brands while domestic brands primarily target the mass market. Most handbag brands have their official accounts on Chinese social media platforms, such as WeChat and Weibo.

The Chinese fashion consumption base is growing and prefers foreign products

With the rising of Chinese emerging middle class, Chinese fashion accessories market is no longer dominated by domestic and low-end brands. Chinese consumers are searching for fashion products with high-quality and distinctive design to present their financial capability as well as their taste. Over 60% of fashion consumers in China are under 28 and over 70% are female, this reveals the main consumption group of fashion accessories on the Chinese market. Chinese Millennials are highly fashion-conscious and are used to browsing fashion information on social media, this makes social media platforms such as Weibo and WeChat almost the must-haves to build brand image and promote products in China. As offline shops were still the main distribution channel, more and more Chinese consumers are turning to online shops purchasing fashion accessories. Both are non-negligible distribution channels for fashion accessories in China.

Daxue consulting can strategize your entry into China’s fashion accessories market

As a business intelligence authority in China, daxue consulting has a thorough understanding of China’s jewelry market and millennial spending habits and can help your company strategize your China market entry.

If you want to know more about China’s fashion accessories market, do not hesitate to contact us at dx@daxueconsulting.com

This article The Chinese Fashion Accessories Market Is Facing Unprecedented Growth is the first one to appear on Daxue Consulting - Market Research China.

There are some online shops on Taobao(淘宝) and Daigo(代购) for male products.

The latest report released in June 2018 by Vipshop.com(唯品会) and JD.com(京东) showed that Chinese skincare market has reached ten-billion-RMB. It is estimated that the total value in male skincare will reach RMB15.4 billion. The data collected on Vipshop.com found that 96% of males purchased cosmetics. Moreover, the sales volume of skincare product purchased by men almost doubles every year. In male cosmetics era, facial masks ranked first. BB creams, lips and eyebrow pencil also became the primary choice for most men.

As the graph shows, the male skincare market size in China expanded at a fast peace and experienced substantial increase. It can be found that the market experienced explosive stage and now would enter into maturity stage. At present, men’s products are divided according to sales scale. The first group is L’Oreal(欧莱雅), Nivea(妮维雅) and Mentholatum(曼秀雷敦), with a scale of more than 500 million. The second group army includes: Goff(高夫), Biotherm(碧欧泉), Garnier (卡尼尔) and Olay Men(欧莱雅男士).

As the champion of sales in overall cosmetics industry, L’Oreal stated that the increasing male sales in China consolidates and contributes to the status of L’Oreal.

The constantly increasing market size can be attributed to growing purchasing power in China, shifting traditional mind in new generation in China, the development of social media, a wider variety of products and the improvement of the way of shopping.

The shifted attitudes towards cosmetics in Chinese male

Nowadays, the main consumer force is the younger group who has the new thoughts, so the traditional opinions is updated and some traditional consumption boundaries are gradually disappearing. In VIP.com’s report, from 2015 to 2017, the sales volume of men’s beauty purchases by the 95s increased year by year, from 16.7% of the 2016 men’s beauty purchase rate in 2016 to 42.9% in 2017.

Baidu Index (百度指数) trend line for the keyword male skincare (男士护肤) between January 2011 and April 2018

According to Baidu index, the trend of male skincare is increasing, which means male pay more to their beauty in China.

Baidu Index (百度指数) trend line for the keyword male cosmetics (男士美容) between January 2011 and April 2018

Skincare is the fundamental products in male beauty sector, and cosmetics products for male can be evolved products. It is shown that the searching average increased dramatically from 2015. The traditional concept is shifted to the new one that male can make up so that more male are conscious about cosmetics.

Social media boosts male cosmetics

At present, there are many men’s makeup tutorials on Weibo, Tiktok, Yingke and other platforms. Moreover, “boyfriend makeup” has also become a new video category that a man with a plain appearance did some makeup to have the star face. In fact, as early as 2015, a male student named Zeng Xuening from Zhejiang Communication University began to make a video of male makeup in the simple environment of the dormitory. The number of Weibo fans has now up to 1.82 million; the number of visits per day to Weibo is over one million. The video he posted on Weibo is to teach the audience how to make a makeup that suits them.

On the Zhihu live, a male makeup artist launched the 20-minute “Getting Started with Boys” course. The price is RMB19, and 5678 people are involved. Moreover, the anchor in this live-streaming launched premium makeup videos and other types video about male beauty that attracts average 2,000 audiences to watch.

From the 1109 evaluations, it can be inferred that most audience are male and most male already knew some basic knowledge about makeup. The main purpose for these audiences is to learn makeup skills. A few people just watch it for fun.

Some famous e-sports stars spoke for the brand on Weibo, stating that they want to use the products to improve their appearance.

Celebrities as the spokespersons brands also play an important role in motivating the market potential. They not only play the role in advertisements but also make comments or recommendations on social media. The social media can easily influence consumers, so the spread will be faster and wider.

More products and more shopping ways

There are more male cosmetics products in the market because more brands launch male products. These brands can investigate and estimate the market size. As the statistics found in Taobao, the growth rate of male consumption is 30%, which is 3 times of female’s.

Although men’s skin care products still focus on cleansing, the trend of diversified products suiting to different appeals is gradually taking shape. For the majority of Chinese men who have just awakened their skin care awareness, skin care awareness is no longer at the stage of “washing their faces clean”. Chinese men’s awareness of cosmetics is constantly developing and improving, and the awareness of “facial care” is increasing. Therefore, the diversification of products is an important factor in the development of the men’s product market.

E-commerce channels have blown out and online shopping has become a new trend. Online and offline model increased sales. According to information released by L’Oreal, 16 brands are stationed in T-mall, and online sales in some business units account for more than 20%. Male may have more confidence in shopping online because they might feel freer and can choose what they want carefully.

Conclusion

Men’s cosmetics products have already appeared in the Chinese market as early as 2008. They have rapidly warmed up and experienced rapid development between 2008 and 2013. Since 2013, men’s cosmetics products are still in the growth stage of high-speed expansion and began to develop in a more mature and rational way. The Chinese men’s beauty market is still far from saturated. Although the double-digit growth has been guaranteed in the past few years, there will be a real outbreak in the future.

Daxue Consulting has thoroughly researched China’s cosmetics industry

Especially since the opening of the male beauty market, the cosmetics market in China is rapidly growing. Daxue Consutling’s qualified team of researchers is familiar with the rules and regulations behind China’s cosmetics industry, and is ready to assist your company break into the expanding market.

Contact one of our project managers who has worked on the cosmetics market in China by dropping an email to dx@daxueconsulting.com.

This article The booming male beauty market in China is the first one to appear on Daxue Consulting - Market Research China.

Baidu, Alibaba and Tencent leading O2O business

Baidu, Alibaba and Tencent (BAT) have been fighting for cyberspace domination in the Chinese market for years, creating a large but not necessarily loyal user groups with much overlap. Baidu.com is the fifth largest website in the world, Alibaba’s value is over one third of Apple’s (despite a fraction of the international reach) and Tencent is the world’s 4^th largest web company measured by market capitalisation. Baidu has been focusing on search and portals, Tencent tends to orient itself towards social media and gaming and Alibaba remains the dominant power in ecommerce despite fierce competition from other companies like JD.com. All three are deeply interconnected, especially in their frequent acquisitions of O2O business in China. On average, Chinese mobile users spend over 2 hours on their phones every day, 60% of which is spent on an app affiliated to Baidu, Tencent or Alibaba. This suggests that on average, each person spends 736 hours per year in an experience created and curated by those tech companies. The potential for O2O is therefore profound; in total, BAT have invested $15 billion into O2O business in China according to Credit Suisse estimations and results can already be noticed. For example, BAT reports have shown people in China are on average ordering takeaway food 3 times per month, and far more often than this in urban cities. Their results also show beauty & cosmetic products along with car-ordering services are most frequently ordered online while group purchases and cinema tickets benefit from the highest penetration percentage among mobile users.

Online revolution from smartphone O2O business in China

Baidu has identified a new segment, termed Super Platform Apps, highly successful multifunctional applications offering several services: Baidu’s Mobile Assistant, Tencent’s Wechat and Alibaba’s Taobao are just three examples. Unlike in the US, the O2O business in China is growing more via smartphones to the extent that Alibaba’s revenues are now mostly mobile. Alibaba’s mobile revenues in the last quarter accounted for 51% of the company’s total China commerce revenue. Users have spent $60 billion in terms of gross merchandise volume after having increased of 225% year-on-year.

By investing into mobile websites companies are now able to reach their customers with more specific messages or positioning, and the results can be tracked more accurately. Mobile phones have the significant advantage of being activated all day and used very frequently. In order to have higher engagements from their mobile app users in O2O business in China, Tencent is keeping users on their app by diversifying its function. It is now possible to purchase goods or play games without even exiting WeChat. The company also suggests a practical payment method with its WeChat Wallet. This paying system was brought to WeChat to broaden its service, allowing the ordering of movie tickets, booking taxis and making restaurant reservations. One of the reasons for Alibaba’s success comes from the understanding of its users. Alibaba suggests very appropriate products according to previous purchases and becomes addictive. Alibaba is shifting more and more towards becoming a comprehensive O2O business platform. The interdependence and near monopolisation of services is pushing companies to choose one of BAT’s service spheres to build their services into, but there are alternative SPAs growing. For example, JingDong.com is shifting towards an Alibaba sales style and searching for ways to integrate with Tencent’s WeChat to make sales on mobile phones.

O2O business in China: Are the BAT unbeatable?

This strong technological block raises the question of the viability of stand-alone O2O business in China. Most competition has been falling into acquisitions by one of the BAT but this doesn’t mean the BAT dominance will continue indefinitely. The tech industry in China changes extremely fast, competition is high and quantities of money invested are huge, meaning the environment is still dynamic enough for competitors, with consumers ready to shift easily for better or cheaper services. Also, data centres are fragile to external event or hackers who could decrease confidence in a company’s services. Last week’s tragic Tianjin blast affected one of Tencent’s server rooms with repercussions on their service and sudden stock devaluation. Rewards of O2O business in China will have enormous returns but for now companies are fighting for cyberspace market share with important subsidies and discounts, artificially boosting demand. It is interesting to note that tech is easily imitated, so tech companies in China especially are bound to an extremely powerful need for innovation. The rising Chinese brand Xiaomi, often referred as an Apple rip-off has now has been copied in turn by another Chinese firm called Imitech. This Xiaomi imitation is experiencing good sales in Thailand.

The viability of independent O2O business in China remains possible as several companies are differentiating themselves. O2O business in China focusing on smaller groups and niche markets are seeing great results. Y1S is a car repair service, Zhaopin a job website and Kung Fu Bear a home massage service, and they are all installing themselves in comfortable niches and avoiding stepping on BAT’s toes while not sacrificing their own potential and viability.

Sources:

• Internal presentation: 20 facts – O2O business in China
• cnbc.com/2014/05/15/alibaba-vs-tencent-whos-winning-chinas-tech-war.html
• http://www.scmp.com/tech/social-gadgets/article/1846780/cloning-around-chinas-apple-xiaomi-gets-taste-own-medicine
• cnbc.com/2014/05/15/alibaba-vs-tencent-whos-winning-chinas-tech-war.html
• https://www.techinasia.com/chinas-tech-companies-affected-tianjin-blast/
• https://www.techinasia.com/jd-doubles-shoppers-year-shifts-alibabastyle-marketplace-model/?utm_source=Read+More&utm_medium=web&utm_campaign=readmore-posts
• http://kraneshares.com/resources/pdf
• http://www.dawn.com/news/1195277/whats-driving-chinas-latest-web-boom

Pictures:

• http://www.nipic.com/show/1/12/3289ed9e894ece9d.html
• http://www.nipic.com/show/1/11/3886615k430602a0.html

This article O2O business in China: Domestic Monopoly? is the first one to appear on Daxue Consulting - Market Research China.

Outdoor equipment retailers are generally promoting outdoor sports as the best way to “reduce pressure and release oneself”. This positioning is aligned with the general Chinese trend towards a healthier lifestyle and higher personal development or achievement. Outdoor equipment retail covers: sporting clothes, sporting shoes, sporting balls, sporting equipment, exercise equipment, protective sporting goods and other sporting goods. In 2014, outdoor equipment sales grew by 11.28%, and outdoor equipment worth $11 billion was shipped.

Outdoor equipment purchasing trends

Every year the sales of outdoor equipment increases on average of 47.33% in China. This trend has been going on for many years and has lead some cities to reach large amounts of outdoor equipment retail: Beijing has the largest amount of independent retailers in China. Surprisingly, Xi’an comes right after with close to 100 retail stores. Our Daxue Consulting reports shows that local outdoor equipment brands are increasing a lot faster than foreign brands. This is partly due to the large percentage of foreign outdoor equipment that is already produced in China. Amongst outdoor equipment, clothes and shoes are performing three quarters of the sales. As they are the first step towards getting equipped for outdoor sports. Then the Chinese acquire more knowledge concerning particular sports and buy more specific Sporting good equipment.

Local brands are seeing an impressive growth outdoor equipment sales growth and are betting on their own market. However, just like the Vitamins and dietary supplements market, foreign brands hold the large majority of the market. About 70% of China’s outdoor gear market are attributed to foreign brands. The two top players in China for the outdoor gear market are Colombia with 19.9% and The North Face with 14.0% of market share. Also, foreign outdoor equipment retailers mainly come from Europe benefiting from the image of professionalism and

Development of the outdoor equipment market in China

Today outdoor equipment tends to be bought in independent stores, people enjoy going to specialised stores and having real professionals discussing products characteristics. Decathlon is growing fast in China and is planning to expand even more with the Chinese market. Our report showed that 76.8% of outdoor equipment companies plan to invest more next year while only 16.4% of them plan to maintain the same amount of investment. This illustrates the imminence of the rising market, in addition to this the Chinese government is installing longer and more frequent Holidays that will increase time for hobbies and travelling. The government will soon be requiring over 110 days off every year. Currently Eastern China is accounting for 43% of the outdoor equipment retail which is coherent with the level of development of China.

Outdoor equipment retail is shifting fast towards online retails, there are 618 million Internet users in China and 90 per cent of them use social networks. To this amount, 193 million Chinese regularly shop online and their number is expected to reach 350 million this year. Websites used by the Chinese are the same as usual, Alibaba with Tmall and JD are seeing the largest sales and offer a specific reseach button for outdoor equipments.

Outdoor equipment retail new competition: Chinese manufacturers

In China local brands are growing a lot faster than foreign ones. A current trend in the Chinese market is local manufacturers are launching their own brands after having learnt from the large multinationals such as Adidas and Nike. At the end of 2013, there were close to 900 different outdoor brands in China, out of which 458 were Chinese local ones. Local brands such as Toread, Kolumb, Camel, Kroceus, Jihua Outdoors, Anemaqen and Shehe are becoming particularly popular and building larger market share these years. For example, Ozark was a manufacturing outdoor equipment for foreign brands for 15 years. Today the company decided to launch its own brand within the Chinese market as it suggests large growth opportunities. The largest local company specialised in outdoor gear is Toread, it is already ranked 3^rd in China outdoor equipment and its sales growth have been around 54% over the last 3 years. Camel and Kolumb also are expected to expand significantly in the coming years. Focusing on the Chinese market will be rewarding in the future since as as Ozark CEO said: “Outdoor sports are still very new in China so we have a growing market for many years to come.” and competition in less strong than in the US and Europe.

Sources:

http://economists-pick-research.hktdc.com/business-news/article/Research-Articles/Developing-an-Outdoor-Sports-Equipment-Brand-in-China-One-Guangdong-Company-s-Experience/rp/en/1/1X000000/1X09XXBY.htm

http://www.worldfinancialreview.com/?p=686

This article Outdoor Equipment Market in China – Speeding Up is the first one to appear on Daxue Consulting - Market Research China.