Matthieu David: Hello everyone, today we are going to look into the beauty sector in China, and the report we published a few days ago, maybe two weeks ago about how Covid-19 impacted the beauty sector in China. How it impacted during the epidemic and after the epidemic. I’m here to talk about the report with Allison Malmsten who has worked on the report and we will like to share today with the audience a few conclusions we had on the report, especially Alison you mentioned, an overview of the beauty sector before Covid-19 and some of the trends which came out of this and which were a change in the sector. What kind of changes and differences did you see before Covid-19 and just after Covid-19 in China.

Allison Malmsten: Right, hi – so I am Allison, one of the marketing managers at Daxue Consulting. So, first, China’s beauty market is by no means small, it’s the second-largest in the world at over 300 billion renminbi in annual revenue. Skincare taken 54% of the beauty sector in China and some trends that we saw before Covid-19 were – 1] the high-end segment was growing proportionately faster, so high-end brand segment was growing at 18% year on year while the mass brands were only growing at 5% year on year. 2] Second is that social commerce is blossoming, this is Xiaohongshu and also WeChat has its own platform called 有赞 (youzan) and what we saw is on these platforms, especially for the beauty sector in China the conversion rate is pretty high, and so this is kind of a new way of shopping and the year on year growth for Xiaohongshu was double in 2019. Lastly, there’s a rising preference for a domestic brand. Looking at the top 20 beauty brands in China, in 2012 only 7.6% of them were Chinese while in 2018 14% of the top 20 beauty brands in China were domestic Chinese brands, so this growth is pretty significant.

Matthieu David: Very interesting, it seems that the Covid-19 accelerated some trends which were already happening before such as social commerce, Xiaohongshu being one example, that’s what existed before, and the epidemic was let’s say a time where people had more time to spend online and to do social commerce. Do you have the same analysis at the trend that is not necessarily new, whether they have been accelerated with Covid-19?

Allison Malmsten: Right so out of the three trends I mentioned, yes, the social commerce is definitely even more significant now because obviously during the pandemic people were less willing to go to offline stores and they were doing more live stream shopping and more shopping on Xiaohongshu and KOL marketing is definitely very important during this time. There is one trend that might take a turn and that is the high-end segment was growing very fast before and we might see the slowdown as people will be preferred – they’ll be looking more at ingredients and less at brand names, so this could give a chance to any brands that focus on natural ingredients and focus on skin health and skin repair.

Matthieu David: Very interesting to see indeed, in the report we mentioned that Chinese consumers online were looking at the ingredients and at the quality of the beauty product they were buying, more than before and I think within the report we found out that not all the categories went up and for instance make up went down if my memory is correct and specifically some beauty products and financing on natural ingredients grew faster.

Allison Malmsten: Yeah so, cosmetics were hit the hardest. A McKinsey survey showed that 44% of respondents purchased less make up, while 31% purchased less skincare but then also 25% of people purchased more skin care so it’s kind of balanced out but yeah and then within makeup, obviously lipstick pretty much because everybody is wearing a mask, so there’s a beauty style now called the ko [inaudible 05:00] its makeup for wearing masks, so the focus is really on the eyes and also the skin and so the skin care sector, it did take a bit of a hit but it’s also doing pretty okay and a lot of the focus when people are at home – our social listening showed that a lot of people are talking about its time to be at home and they’re wearing less makeup so they see that their skin is getting healthier so they’re very excited about those results and it inspires them to purchase more skincare products, while at the same time wearing a mask for a long time can be very damaging to the skin, so a lot of people are searching for products that have skincare repair functions and also skin sensitivity is a big keyword now. A lot of people are finding that they have sensitive skin and they’re looking for skincare products that can help repair their skin damage from wearing a mask including anything like natural ingredients are really popular right now.

Matthieu David: And some of the comments we found online through social listening were saying that people were switching from makeup to skincare instead of putting makeup to take more care about their skin with specific products, I would say more natural products. I’d like to go back on the Chinese brands – you mentioned that Chinese brands took off during the Covid-19 lockdown and after the Covid-19. Do you see here long-term trend or it’s just short term and was during the epidemic, or do you see a substantial change which is going to stay?

Allison Malmsten: I think that this is going to – the preference for domestic brands, I think this is going to be a long-term trend. I think this is a trend that was accelerated from Covid-19 and the reasons are 1] because patriotism is a very high right now in general, 2] because also domestic brands really understand Chinese consumers and they understand how to reach them. They’re usually very proactive about social commerce and also, they are familiar with like some Chinese herbal ingredients that are very in right now and so they include those in their ingredient list and yeah, I think that a lot of Chinese brands are gaining momentum right now.

Matthieu David: And we looked into a very specific brand called Perfect Diary in the past and it’s a very, very Chinese company which is doing very well. In a topic, we’d actually like to talk about which is product traffic and Perfect Diary has been an example of being very good at product traffic. Product traffic being something very specific to china where e-commerce started with marketplaces like Taobao and then Tmall and then JingDong and many other marketplaces where having your own website and selling through your own website was not mainstream and now its becoming more the case – not selling through your own website, but your website, your WeChat groups, your WeChat channels and your live streaming. So, using a marketing platform to convert on your own asset, your own digital asset, and not through a marketplace. What did you see in terms of digital changes during the pandemic and after?

Allison Malmsten: So, I saw some digital changes, one like you mentioned private traffic and then two is also live streaming. Live stream obviously ballooned under lockdown, while everybody was at home they spent more time on their phone and inevitably they spent a lot of time shopping on their phone or looking at products and so some statistic for that was that as of February 18th, the monthly number of live streaming events on Taobao ballooned by a 110% year on year. Also, Douyin, also experienced around 70 to 100% growth during the lockdown period, so a lot of brands are using live streaming now. And then also one case, in particular, is [inaudible 09:10] which is an Australian beauty brand, during the coronavirus they directed its offline stores to all sell on WeChat, so that is over a 1000 stores that would normally have offline sales, offline staff, they all went online during that period and they actually had sales of 6.3 million renminbi during a live stream event that happened during the coronavirus lockdown in china.

Matthieu David: I believe that the next step is to see those trends now continuing or if it was just a short-term trend during and after the pandemic.

Allison Malmsten: Right, yes that will be very interesting to see because once stores open up, I’m sure people are very eager to go out shopping again but at the same time they might be a little bit more cautious to hit the stores.

Matthieu David: Thank you, everyone, for listening and we will continue with new reports, we will go through together online.

Find the full beauty sector in China Report 

This article Market Tidbits transcript #1: Major changes in the beauty sector in China after COVID-19 is the first one to appear on Daxue Consulting - Market Research China.

China has been the world’s largest automotive market for years. That is why carmakers around the world are fighting to sell their cars to Chinese consumers. However, in a market mainly dominated by Chinese brands (42%), what are the trends and growth drivers that international carmakers can follow?

The automotive sector is one of the top pillar industries for China’s economy and a major employer. In 2019, for example, the automotive sector contributed 9.6% of the total retail sales of consumer goods. The sector also accounted for around 10% of total employment in China.

COVID-19 impact on the automotive industry in China: decline in sales

COVID-19 placed significant burdens on the automotive industry in China. Hubei Province where the outbreak started, accounting for about 9% of the country’s auto production. Wuhan, Hubei, as one of the key development cities of the country’s six major automobile industrial clusters, not only gathers many vehicle manufacturers, but also has more than 500 automobile parts enterprises.

The auto industry is especially facing major challenges both on supply and demand side—new passenger car sales in the Chinese market slumped by over 80 percent in February 2020. Forecast shows that China’s automotive market will decline 15.5% in 2020.

Data Source: Statista, PwC, China’s auto market size

China’s first quarter vehicle sales saw the biggest impact. According to the China Association of Automobile Manufacturers, sales of passenger cars declined 42.4% year over year during that period. SAIC, one of China’s largest manufacturers, reported a 44.9% percent drop year to date in April. Its SAIC-Volkswagen and SAIC-General Motors joint ventures, dropped 50.4% and 47.7% year over year in retail sales from January to April respectively.

Government policies to help the automotive industry in China

To stimulate the automotive market, government launched some policies. 10 cities released incentive schemes. For instance, Guangzhou announced a subsidy of 10,000 RMB for New Energy Vehicles sold between March and December. Additionally, a State-level subsidy to New Energy Vehicles was extended until 2022.

Epidemic highlighted imbalance of car brands in the Chinese market

The epidemic has exacerbated the imbalance between the various car brands. From January to March 2020, the total sales volume of the top ten enterprise groups was 3.295 million units. It had a year-on-year decrease of 41.7%, which was 0.7 percentage points lower than the industry decline. It accounts for 89.7% of total car sales, which is 1.1 percentage points higher than the same period last year. This shows that under the impact of the epidemic, the market share of small brands has shrunk even more.

A phenomenon worth noting is that compared with last month, the sales of major foreign brands also showed a rapid growth, of which the growth rate of Korean brands is particularly significant.

COVID-19 boosted electric cars market

China’s reaction to the crisis shows a commitment to new technologies, signaling how the crisis could build resiliencies moving forward. The real opportunity after COVID-19 lies in the shift from internal combustion engines to cleaner, electric vehicles in China. China is set to keep its long-term strategic goals for automobile electrification and meet climate change goals set by the Paris Agreement.

In March 2020, the production and sales of electric vehicles were also significantly better than that of the previous month. The growth rate was rapid and the year-on-year decline was narrower than that in February. For example, electric car maker Wei Lai released the delivery data for March 2020. The delivery volume reached 1533 units, an increase of 11.7% year-on-year and an increase of 116.8% month-on-month.

The auto industry in China slowly rebounds back

On February 2020, due to China’s recovery from the coronavirus outbreak, car companies ushered in the first wave of resumption of work. They include Geely Automobile, Great Wall Motor, Changan Automobile, Xiaopeng Automobile, Weilai Automobile, Tesla Shanghai Super Factory and so on. The outbreak of the epidemic has also made car companies pay more attention to the online car sales model. Many brands have launched online car purchase activities during the epidemic, thereby stimulating consumers’ desire to consume.

In March 2020, as the industry’s orderly resumption of production, the monthly production and sales volume rebounded significantly, but still did not reach sales level of 2019.

Data Source: China Association of Automobile Manufacturers (CAAM), China car sales 2019/2020

Retail sales of light passenger vehicles also surged ahead in March, as reported by the China Passenger Car Association. Year over year, March 2020 sales were still below 2019 levels, but 26%, not the 80% drop seen in February. Sales in April 2020 have begun to catch up with just a 2% drop year over year.

Automotive brands show signs of recovery

From the perspective of different brands, Changan Automobile sales reached 119,000 in April 2020, an increase of 32% year-on-year, ranking first. In April, the company achieved sales of 105,400 units, an increase of 44% month-on-month and 2% year-on-year. Great Wall Motor sold a total of 81,000 new cars in April, an increase of 35% month-on-month.

Chery Automobile increased by 15% month-on-month in April 2020, but continued to show negative growth year-on-year. 

Volkswagen’s China terminal sales in April 2020 were 16.57 units, an increase of 9.9% year-on-year and an increase of 41% month-on-month.

Weilai (also known as NIO) delivered 1,533 vehicles in March 2020, an increase of 117% QoQ.

Data Source: China Automobile Association, Weilai sales January-March 2020

Therefore, key automotive brands show the signs of recovery, however this process will take time.

In 2020, mainstream automakers supposed to have many new models launched on the market. However, due to the impact of the coronavirus epidemic, it is difficult to carry out offline listing activities such as test drive, auto show, and press conference.

Data Source: China Automobile Center, Summary of originally planned models to be launched in the first quarter of 2020

Chinese auto industry still has big potential

Despite the significant impact of COVID-19 on China’s automotive industry, the market potential is still quite huge. China is still expected to become the largest vehicle market with around 260 million units in operation. At 173 units per person now, there is room in China for more light passenger vehicle purchases.

However, after COVID-19, the market will definitely not simply snap back to where it was before the pandemic. According to a forecast from IHS Markit , light vehicle sales will decline 15.5% in China for 2020.

Why 2018 was a turning point for car manufacturers in China?

For the first time in twenty years, sales in the automotive industry in China are declining

In 2018, for the first time in 20 years, China saw its new car sales decline by 2.8%. In 2017, 28.88 million cars were sold in China compared to only 28.08 million in 2018.

Sales in most provinces of the China declined in 2018 except Guangdong, which saw an increase of 5.3% compared to last year, which can easily be explained by the rapid development of the local economy (Guangdong has had the highest GDP for 29 years in China).

Despite this decline, China remains the world’s largest automotive market, accounting for about 30% of total global car sales in 2018. Compared to the 28 million cars sold in China in 2018, only 5.2 million cars were sold in Japan, 16.5 million in Europe and 17 million in the United States in 2018.

But then what explains this decline in car sales in China?

Alternatives to cars are increasingly successful in China

One of the main reasons for the decline in car sales in China in 2018 is that there are many relevant alternatives. Chinese car shoppers are increasingly value minded and open to the alternatives to buying new cars. Moreover, the younger generation of Chinese is increasingly sensitive to environmental issues and tend to consider more environmentally friendly options.

In recent years, car-hailing apps have been gaining popularity in China. By the end of 2018, there were more than 100 car-hailing platforms in China, and the total number of car-hailing app users has exceeded 330 million.

This is the success of car sharing apps such as Didi Chuxing or bicycle sharing apps such as Mobike, which have seen their number of users increase in recent years:

Didi Chuxing

Didi is now one of the main alternatives to owning cars in China.

The business model of this Chinese transportation network company can be compared to Uber’s model. The cost of fares is very low and the simplicity of the service, easily ordering a fare on the app, make China gradually becoming the largest ride-hailing market in the world, with a value of US$30 billion.

In 2018, Didi held more than 80% of China’s ridesharing market.

Mobike

Mobike, a fully station-less bicycle sharing company in China, also offers a great alternative to private cars in China, especially in big cities.

Bikes are often used to connect to buses and subway stations, what we can call intermodality. For example, in Shanghai, approximately 1 in 5 users take bikes to make subway and bus connections (Mobike, 2018).

Thus China has now become the leading country both in terms of ride sharing and bike sharing in 2018, and this can be bad news for car manufacturers in China.

Second-hand car market shows growth in China

The Chinese craze for used cars is also an essential reason for the decline in car sales in China in 2018.

In 2018, second-hand car sales in China rise with a growth of 11.5%. Sales are even expected to reach over 20 million in 2019.

As consumers prioritize value for money, they become more price conscious and lose confidence with spending. Online marketplaces for second-hand cars, like Renrenche (人人车), Uxin (优信) or Guazi (瓜子), are also developing fast and allow customers to find the best price quickly without having to visit multiple brick and mortar shops.

Despite this, consumers continue to buy private cars in China, whether for practical reasons or for pleasure. According to the graph below, 58% of them buy a car to travel comfortably on holidays. Driving has been a very popular way of travel (average 300km) in China. In Tier-3 and Tier-4 cities, the school bus hasn’t been very popular, so many parents also need safe and convenient transportation for their children.

New-energy vehicles in China have become very trendy

Electric cars sales are increasing

Electric or hybrid cars have been very successful in recent years in China, thanks in particular to the support of the Chinese government but also because buying an electric vehicle avoids the cost of purchasing a license plate, which is a considerable saving.

In 2018, the sales of new energy vehicles in China consistently grew reaching 1,25 million units sold.

Buyers of new energy cars in China are mostly urban and young: 40% of China’s electric car sales in 2018 came from 6 large Chinese cities which are Beijing, Shanghai, Shenzhen, Tianjin, Hangzhou, and Guangzhou because of the awareness of the pollution problems inherent to combustion vehicles and the gasoline-car restrictions that have been implemented in these cities. Most of them are also the first person in their family ever to own a car.

China’s biggest electric carmaker: BYD

BYD Company Limited was China’s top-selling electronic car manufacturer in China in 2018. Created in Shenzen in 2003, the brand launched its first electric car model, the E6, in 2011.

In 2018 BYD sold a total of 520,687 cars in China including 247,811 electric vehicles, achieving a year-on-year jump of 25%.

The best-selling BYD model in China in 2018 is the Song, 91,426 units sold, for an average price of $28,000.

BYD’s marketing strategy in China is to develop a flexible and segmented offer to reach a wider audience: BYD then decided to go on all-in on hybrid rather than pure electric with one of its model, ‘Qin.’ It is a more flexible option for consumers, who can drive it as an electric car for their daily commute and reach much farther distance without having to worry about charging.

Thanks to its various plants in China the company also has a competitive advantage to integrate all of the key components in-house. And with the help of subsidies, BYD has been able to build economies of scale, pushing down their cost per unit and allowing them to spend more on research and development.

High-connectivity: Cars in China have to be mobile-first

Connected vehicles in China have to be mobile-first

A connected car is a vehicle connected to the Internet through its communication system. It allows the driver to connect his smartphone to the car, but also the car itself to connect to the surrounding cars and infrastructure.

Since China is a mobile-centric nation with mobile commerce representing a quarter of the country’s overall retail market ($1.5 trillion in sales in 2019), it is normal to find this requirement in the 2018 car trends in China.

Thus the global connected-car market in China is expected to grow 270% by 2022 and 41 million people will make use of in-car connectivity by 2021.

According to a 2017 Kantar TNS study, 79% of Chinese respondents plan to buy a connected car in the future, compared to about 50% for Americans and Europeans.

According to Jack Ma, Alibaba’s chairman, there is no doubt that the future of cars in China is high-connectivity:

‘’Today, 80% of your smartphone’s functions are not relevant to making phone calls or conversation. I believe that in the future, a car will have 80% of its functions not related to just transportation.’’

But Chinese consumers are more and more difficult to please in terms of connectivity services; they are seeking innovative in-car services and are even ready to pay subscriptions for content.

Which is why automakers and tech giants are all racing peers to new tech horizons!

Integration of Alibaba’s Tmall Genie in BMW vehicles

The partnership between BMW and Alibaba is an excellent example: Alibaba Group’s smart assistant, Tmall Genie, will launch in select vehicles from the BMW Group in China by the end of the year.

Tmall Genie will be fully integrated into BMW vehicles, offering drivers several entertainment and shopping options in the car. Drivers will be able to use Tmall Genie to buy online, watch movies, listen to music, check the weather or make appointments appointments in BMW.

Top innovative car brands in China

Volkswagen in China has delivered its 30 millionth car to Chinese customers

For the company which connection with China started in 1978, 2018 was a real milestone. They achieve sales record with 4.21 million vehicles delivered to customers in China including 196,300 imported cars, which corresponds to a + 0.5 % evolution compared to 2017.

The best-selling Volkswagen model in China is the Lavida with 504 000 units sold in 2018, a 4-door sedan which has been sold exclusively in China since 2008. Depending on the generation, its price is between 110,000 RMB and 160,000 RMB.

Because Volkswagen was the first foreign car manufacturer in China, it can now compete directly with Chinese competitors. And the brand’s communication strategy is really to emphasize this authenticity and improves its reliable brand image.

To do that, SAIC Shanghai Volkswagen wants to show how close to Chinese consumers it is.  At the end of 2018, a campaign announcing the launch of new models then revealed a desire to align the brand’s image with China’s powerful economic growth:

The timing of the publication, that was the 40th anniversary of the policy of openness and reform, was ideal.

To attract the growing target group of young, middle-class customers, Volkswagen also decided to launch JETTA as a brand in February 2019 (it was only a Volkswagen model before). The idea is to target first-time buyers, who account for 81% of the customers in the entry segment, by offering high quality, safety, stable value, and fresh design. In 2018, the brand also announced the launch of the SOL brand in partnership with the Chinese auto manufacturer Anhui Jianghuai Automobile, whose first model is an electric SUV.

Geely in China: ‘’Making Refined Cars for Everyone’’

Geely enters the automotive industry in China in 1997 and is now among the 500 largest companies in China. In 2010 Geely group bought the Swedish carmaker Volvo.

In 2018 Geely sold 1,500,838 units in China, an increase of 20.3% from 2017 and had a 6.9% market share.

The brand has a very young customer base with 51% of customers born in the 1990sor later, it’s a new generation of young innovative consumers who have a global vision and a global mindset. Thus, Geely communicates on high connectivity and ultra-modern design to directly target this audience. They often highlight their design teams and the famous designer Peter Horbury they work with to show their modernism.

The best-selling Geely model is the Bo Yue, a compact crossover SUV with 255 695 cars sold in China in 2018.

Geely is now trying to expand internationally by developing its battery manufacturing business with CATL Geely Power Battery Co. Ltd and acquiring new foreign brands like Proton’s Norwich-based subsidiary Lotus or Daimler recently. The brand also invests heavily in new energies cars with its ambitious project Blue Geely, wanting 90% of its sales to be consist of Evs in 2020.

Landrover in China: designing ‘’China SUV of the Year’’

Jaguar Land Rover entered the Chinese automobile market in 2010 and has witnessed exponential growth each year until 2018. A total of 492,388 Jaguar Land Rover units were sold in China in 2018.

Land Rover’s strategy in China is to demonstrate a commitment to the Chinese market by offering unique designs and models that meet consumer requirements and preferences. That is why in 2012, JLR entered a joint venture with Chery Automobile Company to manufacture Range Rovers to build vehicles designed specifically for the Chinese market (Jaguar XFL and XEL are good examples). Thanks to this, Land Rover in China has won numerous awards that allow it to raise brand awareness:  recipient of the 2018 ‘China Reputation Award’ for the second time, Range Rover Velar wins ‘China SUV of the Year’ and ‘China Car Design of the Year.’

How do carmakers promote their cars in China?

Offline promotion: How to keep a substantial brick and mortar presence for car manufacturers in China

Offline promotion remains very important in the automotive industry in China today. Indeed, despite the development of the massive development of e-commerce and m-commerce in China, nearly 90% of car purchases were made at 4S stores in 2018. This means that Chinese consumers still appreciate contact with sellers and want to be able to go to offline stores to get information and buy a car.

• 4S stores in China

4S stores are today the most popular distribution channels for the vehicle brands in China. There are more than 28,000 4S stores in China. They have dominated the offline purchase channels in tier-1, tier-2, and tier-3 cities; now they are expanding to tier-4, tier-5 cities and rural areas.

Consumers choose 4S stores as they provide all in one service: ‘‘4S’’ means Sale,  Spare part, Service and Survey. So, they cover all business related to vehicles such as sales (new cars and second-hand cars), maintenance, car wash, auto finance, car rental, etc.

It is also interesting to note that the competition among 4S stores is increasing, trying to fight on price, discount activities, test-drive services and insurance.

• Exhibitions, events, and shows: the entertainment marketing strategy

There are more and more events and exhibitions in China that attract millions of people each year. For instance, Auto Shanghai, the Shanghai Motor Show which has made its mark among international shows, host every two years more than 900,000 visitors from 18 countries. The 2019 edition is currently being held (April 23-28).

Automotive shows are an excellent way to stand out from the competition and showcase its best models to demonstrate the brand’s research and development capabilities.

Despite their international scope, the domestic players are most active at these shows with more than 70% of new products produced by Chinese carmakers.

• Showrooms, storefronts and flagship stores

Car manufacturers in China are now investing more and more in showrooms in major cities to impress consumers: stores are no longer just places to buy cars but luxury spaces to live a real experience.

In 2018 NIO invested CNY80 million (USD11.7 million) in a store in the iconic Shanghai tower and paid more than CNY100 million annual rent.

The brand also pays a yearly rent of about CNY80 million for a shop in Beijing’s Oriental Plaza mall.

Online promotion: Using KOLS and social media to boost your sales in China

In China, websites and social media are dominating the promotion channels for vehicle brands in 2018.

With a perfect online service layout, automotive E-commerce platforms have real marketing advantages. Automotive E-commerce represented by Youxin, Emao, and Taobao makes full use of the business sector (new cars, used cars and auto finance). They are user-centric, E-commerce data-based, product and service innovation-oriented, aiming at creating a  full life cycle Eco-marketing platform. It is a good source of information before buying a car in China.

Also, almost half of consumers obtain information about cars from automotive websites, since those websites usually have comprehensive knowledge about car brands and models.

On social media, young auto enthusiasts (post-90s and younger) have a stronger willingness to share content about vehicles with others. Half of the auto enthusiasts spend 5-15 minutes on every online post (website and social media) about vehicles.

Social networks have therefore become strategic for car promotion in China. This is why many brands now use KOLs (Key Opinion Leaders) to convey messages in a more subtle way. Indeed, more than 70% of vehicle consumers follow at least three KOLs, their purchasing behaviors are highly influenced by KOLs’ opinions and experience.

New retail: How the Alibaba strategy applies to the Chinese automotive market

New retail in the automotive market in China is more consumer-centric.  This is a trend that has been widely followed by car manufacturers since the success of Alibaba’s New Retail strategy launched in 2016.

By collecting consumers’ data (such as interests, price and design preferences), vehicle brands are able to provide cars, auto-configuration and services based on consumers’ requests. Thus, the consumer’s journey is shorter because the touch points are blended: for example, Wechat content is now a touch point for each step of the car buyer journey in China.

This is the strategy that Ford decided to implement in partnership with Alibaba: they launched the Super Test-Drive Center in Guangzhou to allow people to buy a car from a staff-less machine in under 10 minutes.

Customers just have to go to the Tmall app and choose the model they want to test-drive via the online catalog. To register, customers must take a picture of their face and once in the store, once the customer shows their face to facial recognition,the car chosen online arrives from the multistory structure. Then, the customer can test the car for a few days (3 days max) and order it online.

How could international carmakers improve their marketing strategy in the Chinese market?

Target a young audience

New cars buyers in China are young and connected consumers. As they gain purchasing power, they are the future of the Chinese automotive market.

Do not neglect offline communication channels

The paradox of the explosion of e-commerce in China is that buyers are still demanding physical presence or human contact. Thus, offline channels must be up to the task.

Keep a close eye on your online reputation

Control your reviews and comments and opt for an influence marketing strategy because brand reputation plays a vital role in the buying cycle of a car in China.

Rely on well-made design

Content and design provide an important first step in customer experience in China in 2019: work on a modern and sophisticated design for your website, your products, and your communication.

Leverage to e-commerce and new retail

For automakers, innovation linked to the e-commerce platforms and deepening relationships with end users will be key to benefit from the increasingly technology-enabled car market in China.

Author: Steffi Noël

Daxue Consulting offers further analysis of the automotive market in China with a forward-thinking approach to topics such as digitization, high-tech implementation, artificial intelligence, and many others. To know more about the evolution of the automotive industry in China, do not hesitate to contact our project managers at dx@daxueconsulting.com.

This article Automotive industry in China: How carmakers compete for first place is the first one to appear on Daxue Consulting - Market Research China.

Bayer AG is a global enterprise with core competencies in the life science fields of health care and agriculture. Bayer, headquartered in Leverkusen, Germany, is one of the most famous companies among the world’s top 500 enterprises. In 2019, the total number of Bayer’s employees was 103,824 and the annual sales were 43.5 billion euros. Bayer’s products cover high polymer material, medical and health products, chemical industry products, and agricultural products. Bayer puts a lot of emphasis on its research and development. Its capital expenditures amounted to 2.9 billion euros, R&D expenses to 5.3 billion euros in 2019.

Bayer’s current state in China

Bayer entered the Chinese market in 1982. Bayer has operated its business in Hong Kong, Taiwan, and mainland China. Currently, China has become one of the largest markets for Bayer globally and an important driver for the growth of Bayer’s business. In 2019, Bayer’s sales in Greater China reached 3.724 billion euros. As of December 2019, Bayer has more than 9,000 employees in Greater China.

Bayer is deeply rooted in the Chinese market

Source: Quanjing, China’s pharmaceutical industry

The Chinese market is a crucial driver of Bayer’s growth. Bayer complies with the policy and regulations of China, exploring its business in line with specific rules in China. Two examples that Bayer China firmly supports China’s regulations are as follows.

Bayer cuts price largely to win contracts with the Chinese government

In 2018, China’s government launched the centralized procurement program, in order to lower drug prices. A lot of drug companies are invited to place bids after the number of different kinds of drugs that will be needed in the public hospitals are determined by China’s health care security authorities. Under this centralized procurement program, the drug company which offers the lowest price will become the supplier of a certain drug. The Chinese government aims to reshuffle China’s pharmaceutical industry through the price war, and both foreign and domestic players have to come up with survival strategies to secure the market.

According to Chinese media, in January 2020, 77 pharmaceutical companies won contracts with the government by cutting drugs’ prices by 53% on average. Among them, Bayer made a big offer in the bidding. For example, it cut the price of its off-patent acarbose for diabetes (which affects a large part of the Chinese population) by almost 90%, and the new price is 78.5% lower than the price ceiling set by the Chinese government in December 2019.

By adopting an ultra-low-price strategy in the price war, Bayer hopes to expand its market share of some drugs like acarbose. In this way, it can secure its Chinese market and earn more profits in the future. For Bayer, the Chinese market is so important that it worth taking the large price cut to support the price war launched by the government.

Bayer fired an employee for breaking home quarantine rule during COVID-19

Bayer fired an Australian Chinese employee for breaking the coronavirus quarantine rule in China. In March 2020, a video of the woman gbreaking the home quarantine policy to go on a run went viral on the Chinese social network and drew widespread criticism from the public.

Bayer’s response reflects that it firmly follows laws and regulations in China, and supports the coronavirus rules of the Chinese government. This decision has been widely applauded by Chinese netizens and the company is considered as responsible and compliant. Hence, Bayer China has built a positive image through this crisis. 

Boosting innovation and advance digitalization

In 2016, China announced the Healthy China 2030 Blueprint. Currently, China is speeding up the initiative and improving patients’ access to medicines by increasing their affordability. “With the mission of helping China achieve health goals, Bayer China will make unremitting efforts to bring innovations faster to Chinese patients and provide more complete medical services.” Jiang Wei, executive vice president and managing director of Bayer China, said.

Bayer strengthened R&D and innovation

Under the Healthy China 2030 plan, China has promulgated policies from various aspects to increase support for the development of innovative drugs. Many pharmaceutical companies, including Bayer, are seizing opportunities and making full use of policy support to accelerate the approval of various new drugs in China.

Since 2017, Bayer has brought 14 innovative drugs to China. As an important part of the “China Innovation Strategy”, Bayer is continuously accelerating the introduction of more innovative products into China through the China R&D Center. The China R&D center, established by Bayer Health Consumer in Qidong, Jiangsu, is also actively carrying out category innovation, and enhancing the technical support and protection level of existing listed products.

At the same time, Bayer establishes long-term strategic cooperation with China’s top scientific research institutes including Tsinghua University and Peking University and strives to apply more cooperation results to the in clinical practice. Also, Bayer China is exploring cooperation opportunities with Chinese pharmaceutical companies and biological start-ups, leveraging the complementary advantages of both parties to fully develop innovative results. For example, Bayer and CStone Pharmaceuticals collaborate to evaluate D-L1 monoclonal antibody CS1001in combination with regorafenib as a treatment for multiple cancers.

Bayer China embraces digital transformation

Source: creamandpartners.com, Bayer cooperates with VeChain

Bayer has seen great potential to foster digitalization in China’s pharmaceutical industry, and has sped up its digitalization.

In 2017, Bayer teaeds up with Alibaba Health (AliHealth) to provide Chinese patients with healthcare services ‘at their fingertips’. At the same time, Bayer China can follow health trends of Chinese people and better satisfy their self-care demands by leveraging the big data advantages of the Alibaba platform.

Bayer re-started the ‘Bayer G4A China’ program in 2019, a global digital health startup partnership program to select Chinese startups that have digital potential. In 2019, Bayer China forms a co-operation agreement with Yaoshibang, a domestic online B2B pharma platform, to offer a new digitized medicine and health services solution in China. During this collaboration, the parties will exploit their advantages in the fields of medicine, health, and the internet.

In 2020, Bayer announced its partnership with VeChain, a pioneering public blockchain startup, to co-establish CSecure, a blockchain-based traceability platform for drugs. This new blockchain-powered solution will allow Bayer to track clinical drugs across the supply chain digitally.

Bayer considers digitalization as its vital strategy in China’s pharmaceutical industry. Digital transformation will enable Bayer to provide patients with new drugs and personalized treatment faster, improve the efficiency of healthcare service, and ultimately better serve patients. 

Bayer’s China Vision & Mission

Source: Bayer China’s Weibo, Bayer’s logo

With its strong marketing strategies, crisis management, and cooperation with the government, Bayer China devotes itself to provide better products and services for Chinese in the areas of health and nutrition. Bayer is a key player in helping China achieve the Healthy China 2030 plan, which makes the future outlook for the pharmaceutical brand’s development in China very promising.

Learn about China’s vitamin and health supplement market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Bayer in China: How the Pharma giant gained the strong approval of Chinese consumers is the first one to appear on Daxue Consulting - Market Research China.

How COVID-19 impacted China’s aircraft industry

The darkest period of China’s aircraft industry

The epidemic has frozen China’s aircraft industry. Chinese domestic residents were scared of the contamination during  travel. As for expatriates and Chinese students who study abroad, it was nearly impossible for them to fly back to China as Chinese authorities closed their borders and implemented the ‘Five One policy’. Hence, the sudden drop in passengers cut off China’s aircraft companies’ cash flow and exposed them to the risk of bankruptcy.

Source: daxue consulting, China’s five-one airline policy during the COVID-19 pandemic

During the Chinese New Year holiday, the occupation rate of flight seats was about 80%, which however decreased to under 60%, and even 40% after the outbreak . In February, China’s aircraft industry lost about 1.2 billion RMB in the domestic market and 300 million RMB in international market every day. If we have a look at the medium-term impact of COVID-19 on the sector, the escalating loss totaled more than 100 billion RMB until May. Thus, there is no doubt that the Coronavirus caused long-term impact on China’s economy and it will need three to five years for China’s aircraft industry to tide over this dark period.

Source: cannews, immediately following the announcement of COVID-19, the domestic flights on January 24^th to 28^th experienced a major gap in supply and demand.

The self-rescue plans of China’s aircraft companies

It was urgent for China’s aircraft companies to take measures to stop the bleeding of resources. Many companies called their jets to an emergency halt to reduce the cost of staff and fuels due to the poor occupancy rate and complicated isolation regulations. Thus, the risk of bankruptcy forced Chinese aircraft companies to implemented technical and organizational transformation. Many of them targeted live webcast to sell discounted tickets, headrests and some special products. It is surprising that the self-rescue plans worked, and they got money to compensate the loss and maintain normal operations.

The outbreak of COVID-19 boosted China’s online shopping market, and the live-streaming is the key to open the door towards Chinese netizens. Therefore, many China’s aircraft companies sold tickets by using Chinese KOLs or creating their own livestreaming rooms. For example, during China’s 6.18 shopping carnival, China eastern airlines promoted a new weekend ticket, which is valued 3,322 RMB and allows passengers to fly to any mainland city until 2021. This promotion piqued Chinese consumers’ traveling desire, and they sold more than 100,000 tickets in one single day! Through these successful self-rescue activities, China eastern airlines not only raised about 300 million RMB cash, but also increased the number of travelers. 

The private jet market has soared in China

After the epidemic has paralyzed China’s general aviation, more flexible and safer private jet has become the first or even the only option for many people, creating the busiest quarter in the history of China’s private jet market. Many wealthy Chinese students who were stuck abroad during COVID-19 chose private jets to come back to China and the price of private jet charter rose dramatically. For instance, the number of foreign private jets flying to China increased 227% during Q1 2020, compared with Q1 2019. Additionally, the price of chartering a private jet with 14 seats rocketed by 30% from 1.35 million RMB to 1.74 million RMB in March. Some student even paid an astonishing 180,000 RMB for a ticket home.

More and more Chinese wealthy choose private jet as their transport tool since it is more convenient and shows a sample of status at the same time. After the outbreak of COVID-19, private jet charter users increased by 300%, and 80% of them were newcomers. Apart from the soaring of private jet market, Chinese billionaires also squandered money on private jet purchasing. Among 466 business jets in greater China, there were 163 private jets owned by 113 Chinese billionaires, which increased by 34 from the year before. Therefore, the vice president of OHFLYER, Haiyang Wang, said that the demand of private jet in China will definitely be higher than before COVID-19.

The development of China’s aircraft manufacturing

The Chinese plane-makers’ fight back against western manufacturers’ grip on the sector

For the past decade China, has been developing its own planes to cast off western manufacturers’ cord on the sector. But the planes made by Commercial Aircraft Corporation of China (Comac), the ARJ21and the C919, have been plenty criticized. It is believed that Chinese-made jets will not rival those of Boeing and Airbus in the short-term. With only 90 seats, the ARJ21 has been rejected by the aircraft industry as inferior to planes from other aircraft manufacturers due to frequent delays and loud noise. On the other hand, the C919, Comac showed  bigger ambitions. Carrying up to 168 passengers, the C919 is designed as China’s first large aircraft to compete with Boeing’s 737 Max and Airbus’s A320neo. Furthermore, Comac is developing a third plane, the CR929, cooperating with Russia, and it is scheduled to be delivered in 2021. However, there still are some risks that Boeing and Airbus will also roll out their new high-performance planes when the CR929 entered the market.

Despite criticism, as a state-backed company, Comac is full in potential with high-tech aircraft manufacturing. It is not strategically correct to underestimate Chinese ability to penetrate the aircraft market. “The aircraft landscape is likely to shift from a European-Us manufacturing duopoly to accommodate a third part, and that’s probably the Chinese.” Shukor Yosof, founder of aviation advisory firm Endau Analytics originally told BBC.

Which markets are China’s plane-makers targeting?

As of now, Comac has received about 815 commitments for the C919 from 28 Chinese airlines and domestic leasing firms. Besides, its main partners are China’s three major airlines, Air China, China Southern and China Eastern.

Right now, only China’s aviation regulator has certified its jets to fly. As for foreign market, its jets may also operate in parts of Asia, Africa and South America that recognize Chinese certification. Then the permission from the US Federal Aviation Administration (FAA) and the European Aviation Safety Agency (EASA) are necessary for it to expand beyond those markets. However, western countries’ green light is still far from certain. Hence, turning around from international market, Comac mainly targets the greater China and foreign zones certificated with fly permission.

Challenges encountered by China’s aircraft manufactures

The main challenges of China’s national aircraft manufacturing companies, like Comac, are technological problems and high cost of components. Taking the C919 as an example, the development of the plane stemmed from 2007, cooperated with more than 200 companies and involved more than 20,000 people. Yet the engine of the C919 is manufactured by French SNEMAC and American GE. Thus, the mismatch of high-cost and low-performance makes China’s plane-makers lack of competitiveness. At the same time, getting the green light of foreign aviation regulators is also a big puzzle, which takes a long time and is full of uncertain.

As for small and private aircraft manufacturing companies in China, their biggest challenge is not about aircraft-related technology, “but getting the license from Civil Aviation Administration of China (CAAC),” Deng Chunpeng, general manager of a private aircraft producing company says. It won’t take a long time for them to solve technical problems like airframe design, the development of engine and components packaging. But the licenses including Production Certificate (PC) and Type Certificate (TC) will take years to get.

The expansion of China’s airport infrastructure

The gap between China’s economic development and airport construction

The U.S, Australia, and Canada have 20,000, 2,000, 1,200 general aviation airports respectively, but there were only 235 in mainland China in 2018. As of 2020, China has programmed and built 244 airports, with a 3.7% annual growth rate. Obviously, the development of China’s general aviation industry is not keeping pace with its overall economic advancement. As for long-term prospects, until 2025, China is planning to strengthen the air transport hub effects of Beijing, Guangzhou and Shanghai airports, and connect 93.2% cities of China.

Source : chyxx.com, The development of China’s general aviation airports

The construction of Beijing Daxing International Airport is aimed to stuff the gap between China’s economic soaring and airport infrastructure. As China’s air transport pivot, Beijing Capital International Airport had become the second airport annually receiving more than 100 million tourists, behind the United States’Atlanta International Airport. However, this airport was built in 1958, which means obsolete facilities cannot support such enormous pedestrian flow anymore.

The Beijing Daxing airport

Occupying 1.4 square kilometers and invested 80 billion RMB, Beijing Daxing International Airport has been dubbed “the 7^th wonder of the world” by the Guardian. Owning such a laurel is not merely because of its immense terminal, but also advanced facilities and user-friendly designs. It is able to annually receive 100 million passengers with four runways for large aircrafts.

As for the interior, passengers just need 8 minutes to arrive at the furthest boarding gate after passing the security check. Besides, Daxing airport’s creative layout largely reduces travelers’ transfer time: 30 minutes for domestic transfer, 45 minutes for international transfer and 60 minutes for domestic-international transfer. So far new airport subway line has been in operation, commuting from south center city in 40 minutes. Therefore, the completion of Beijing Daxing International Airport has eased the air traffic pressure of Beijing, and symbolized China’s efforts on airport construction.

The distribution of China’s aviation network

Beijing-Tianjin-Hebei, Yangtze River Delta and Pearl River Delta are the hubs of China’s aviation network. In recent years, relying on Chinese government’s strategic supports and rapid economic development, Chengdu-Chongqing and Xian account for increasing proportions. In China’s airports passenger flow rank of 2019, the top 5 were Beijing Capital International Airport (100 million passengers), Shanghai Pudong International Airport (76.1 million), Guangzhou Baiyun International Airport (73.4 million), Chengdu Shuangliu International Airport (55.8 million), and Shenzhen Baoan International Airport (52.9 million).

Although the Chinese government suspended all flights to Beijing due to the second outbreak of COVID-19 in mid-June, China’s aviation network won’t change noticeably for the long-term.

Takeaways of China’s aircraft industry post COVID-19

The COVID-19 outbreak is the bust of the century for the global aircraft industry, and China, of course, cannot escape from the misfortune. The shock caused by the epidemic on the sector will need three to five years to adjust. On the positive side, the huge potential market will definitely boost China’s aircraft industry recovery. Besides, thanks to their successful self-rescue plans, many Chinese airlines maintained their cash flow’s normal operation and stimulated people’s traveling desire.

However, China’s aircraft manufacturing and airport infrastructure didn’t follow the pace of economic advancement. China’s plane-makers need to implement technological transformation to improve their aircrafts’ competitiveness, and Chinese government need to speed up the airport construction. If you want to get more information about China’s market, please email dx@daxueconsulting.com

Author: Olivier Liu

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article A look at China’s aircraft industry after COVID-19 is the first one to appear on Daxue Consulting - Market Research China.

China’s mattress market overview

The consumption of mattresses in China is relatively low compared to other countries. The brand concentration is also low, with international brands taking the premium spot and domestic brands taking most the market.

China’s mattress market is the largest in the world

Data Source: Qianzhan, total Consumption of mattresses in China from 2013 to 2018

With the consumption increasing fourteen-fold since 2002, the mattress market in China is now gradually entering a mature stage. With the CAGR of 17.77% for the last decade, China’s mattress market surpassed that of the United States in 2015, becoming the largest in the world.  

International mattress brands are premium players in China

Data Source: Qianzhan, Competitor Overview of the Chinese mattress market

In the Chinese market, consumers generally perceive the imported mattress as premium. Thus, the high-class competitors are represented by international brands. The leading competitors in the Chinese market are the middle-class competitors, which are the domestic brands. The low-class competitors consist of generic brands from local mattress manufacturers.

Data Source: Chyxx, Import of spring mattresses, bedding and similar supplies in 2017

The Chinese mattress industry  focuses on export instead, the trade surplus between the import and export of mattress reached 1.7 billion dollar in 2019. When it comes to imports,  China imported the most bed supplies from Thailand.

Data Source: Qianzhan, Market share of the mattress industry by brand in 2018

The market concentration is low in this market and there is no obvious leading brand. Based on China’s mattress market share in 2018, half of the top twelve brands, including the top four brands are domestic brands. Foreign brands that are outstanding in the market are from the United States, accounting for five out of the top twelve brands.

What do Chinese consumers look for in a mattress?

China’s economic development head lead consumers to reflect on the quality of regular household items, which is known as the consumption upgrade. Growing awareness on the improvement of living standards has prompted people to have specific requirements for their sleeping environment, mattress quality and appearance. The emergence of mattress production technology can meet the needs of a variety of people. To succeed in this market, it is crucial to understand Chinese consumers’ preferences, spot their needs and provide value adds-on service to win the consumers.

Key factors on mattress purchase decision

Data Source: Wenjuntech, Key factors that matter to consumers on purchasing mattresses

While purchasing mattresses, consumers mainly focus on the material and sustainability. In China, sustainability is not only an environmental issue, but there is a perception that it has less pollutants. After price, brand name and after sales service, comfort and softness are less important to Chinese consumers.

Data Source: Wenjuntech, Key factors that prevent consumers from purchasing mattresses

About 80% of the respondents stated that the negative review on the mattress brand would affect their purchase decision. This is what brands need to watch out for when it comes to Chinese negative reviews: 40% of the respondents identified ‘air impermeability’ as the main problem, which would lead to skin disease. ‘Low-quality spring’ and ‘formaldehyde’ are the following problem identified by the respondents, accounting 41% of the total responses.

After sales services are important to many Chinese mattress consumers

Data Source: Wenjuntech, Consumers’ favorable additional services on purchasing mattresses

Data Source: Wenjuntech, Consumers’ perception on cleaning mattresses

Products and services are indivisible. Home delivery, free installation, free return, free cleaning and removing mites are about equally distributed as preferred as additional services. Digging deeper, more than a half consumers value regular mite removal. However, the process is too complicated to consumers to do it by themselves. Regular cleaning services would be a powerful selling point in China’s mattress market.

Common mattress materials in China

Latex mattresses are the top selling mattress in China. Consumers appreciate that are porous and have high elasticity, they are highly sought after because of their ability to conform to the curves of the human body and improve sleep quality. In the first half of 2020, latex mattresses made 1.3 billion RMB in sales on Tmall and Taobao.

Palm mattresses are also very popular in China, making over .5 billion RMB in sales on Tmall and Taobao during the same time period. Palm fiber is woven with good flexibility and moderate hardness, but natural materials may have worms or mildew.

Spring mattresses also made around .5 billion RMB in Tmall and Taobao sales during the first half of 2020. However, negative reviews of spring mattresses suggest brands need to watch out for having springs collapse.

Future growth depends on how often consumers replace mattresses

Changing in consumer perception

The results of a study by Kingston University in England showed that a mattress have an average of at least 15,000 bed mites and dust mites. The number of bacteria on a double-bed mattress that has not been cleaned in three years could exceed 1 billion. And experts suggest changing mattresses every five years. It is the frequency of changing the mattress which will lift the market from maturing to mature. As of 2020, a majority of Chinese mattress consumers do not change their mattress as much as recommended as a research shows that 50% of Chinese consumers only change the mattress when it is broken. It is much lower than that of the United States. In the United States, 50% of consumers stated that they generally change mattress once three years and 30% of consumers stated that they won’t use the mattress for more than three years.

The China’s mattress market is dynamic as changes in consumer perception are constantly evolving. With the increasing awareness on living standard and sleeping quality, the frequency of mattress replacement is speeding up and will be a driver of market growth once market penetration is at the max.

Functional mattress: mattresses matter for high quality sleep

In light to the research in 2018, only 25% of post-90s Chinese have acceptable sleeping quality, above 75% respondents stated that they had poor sleeping quality. Around 20% of the respondents chose to change mattresses to improve the quality of sleep, and 27% of them showed interest in intelligent mattresses.

Following that, post-90s consumers are the main consumers in the mattress market in China, the concept of upgrading sleep quality is expected to trend and prompt the sales of mattress supplies. Functional mattresses working on improving sleeping quality would be able to catch this market opportunity.

Rental housing renovation trends

With the increase in home ownership costs and government policy support, the rental industry has entered a new era of development. Data show that the rental population in Chinese service rental market has maintained steady growth since 2017, with 210 million people in 2018, and 220 million people in 2019, 220 million in 2020, and 240 million in 2022.

Renovation of rental housing is trending in China, as demonstrated by frequent hot discussions on Weibo. Mattresses are seen as a key component of improving the living quality. Therefore, purchasing new mattresses for the rental houses is spurring. When a question raised in Zhihu about whether it is necessary to buy a new mattress for apartment rentals, the top answer stated that people should not settle for uncomfortable mattress and get a new mattress for quality sleep and quality life.

Data Source: Weibo: hot topics related to rental house renovation; Zhihu: Is it necessary to purchase a new mattress for the rental house?

Learning points

As the size of mattresses market is growing in China, and the trend for premiumization is beginning with after sale-services and sustainable material. The market is lacking an obvious leading brand, hence there is potential for an existing brand, or even a market entrant, to step up. Companies need to pay attention to the consumers’ needs and find the way to understand and satisfy them.

Author: Dongni He

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article China’s mattress market: springing up with new demand is the first one to appear on Daxue Consulting - Market Research China.

Data source: Zhiyan consulting, Size of China’s tableware market

Currently, China’s tableware market is mainly segmented into metal tableware, ceramic tableware, glass tableware, plastic tableware and wooden tableware. Metalware accounted for 53% of the market in 2017, followed by ceramicware (24.6%). Disposable tableware occupies 15.8% of the total market, and the primary product is disposable chopsticks.

Data source: Huajing Industrial Research Institute, China’s tableware market share

Segmentation tableware market in China

China’s main eating utensil – chopsticks

Worldly recognized as central to east Asian culture, Chopsticks are a necessary household item. Chinese chopsticks are normally made of unfinished wood or bamboo. Chinese were taught to use chopsticks long before spoons and forks were invented in Europe (the knife is older, not as an instrument for dining but as a weapon). Chopsticks were strongly advocated by the great Chinese philosopher Confucius (孔子) who believes a dining table should be free of sharp objects. Chinese people, under the cultivation of Confucianism, consider the knife and fork bearing sort of violence, like cold weapons. However, chopsticks reflect gentleness and benevolence, the main moral lesson of Confucianism. Chopsticks make a large part of China’s tableware market, and disproportionately represent the disposable tableware segment.

China’s stainless steel tableware market

Due to traditional eating habits, Chinese people tend to use wooden or plastic chopsticks and ceramic tableware, while western people use more stainless steel tableware. Following industrial and economic growth, revenue for global stainless steel tableware sales increased from 5.96 billion US dollars in 2012 to 10.38 billion US dollars in 2017. In China’s stainless steel tableware market, exports account for more than half of production volume with increasing growth in recent years. 

Data source: China Customs, Exports of China’s stainless steel tableware market

China’s ceramic tableware market

Ceramic tableware is a ceramic product close to people’s daily lives. Recent years have witnessed volatile growth in the size of the industry. According to statistics, the scale of the ceramic tableware market in China increased from 44.45 billion yuan in 2011 to 52.38 billion yuan in 2017, increasing by 17.84%.

The ceramic tableware industry is mainly driven by an increase in the number of households and a rise in the renovation of kitchens. Rapid growth in the food & beverage and home décor market in China is largely responsible for the growth of ceramic tableware consumption.

With increasing quality requirements of imported ceramic tableware products in overseas markets and the overall rising manufacturing cost of domestic manufacturing, ceramic tableware manufacturers that do not pay attention to product quality will face pressure.

China’s disposable tableware market

Data source: Huajing Industrial Research Institute, Size of China’s disposable tableware market

The booming of China’s food delivery market has been contributing to the rapid growth in the disposable tableware market in China. In 2016, the scale of China’s disposable tableware market  was 30.47 billion yuan, which increased to 33.59 billion yuan in 2017. According to analysis, one disposable lunch box is consumed for 15 yuan. China consumed 19.8 billion disposable food boxes in 2017, so the consumption of disposable food boxes in China exceeded 40 billion in 2019. It is predicted that this number will reach 45 billion in 2020. Considering the strong growth of  China’s food delivery market and takeout industry, the number of disposable tableware driven by the food delivery sector in the future will be huge.

Data source: China Business Research Institute, Size of the disposable food boxes market in China

Relevant eco-friendly policy inhibits the growth

With the tightening of China’s environmental protection policy, the prevention and control of plastic pollution will be further strengthened. In the near future, the raw materials of China’s disposable food box will be converting from non-degradable plastic materials to more environmentally friendly and degradable materials.

On January 19, 2020, the National Development and Reform Commission and the Ministry of Ecology and Environment announced the “Opinions on Further Strengthening the Control of Plastic Pollution“. The policy points out that the use of bio-based products that meet food safety requirements should be encouraged in the food and beverage delivery industry. By the end of 2020, the use of non-degradable disposable plastic straws will be prohibited in the catering industry nationwide. With the introduction of the environmental protection policy, many offline restaurants and online takeaway platforms have responded quickly, saying they would not actively provide disposable tableware.

The outlook of China’s disposable tableware market

Overall, with the growth of the food delivery and takeout sector, China’s disposable tableware market still maintains a steady growth trend, and the market prospects are still good. However, with the conversion of plastic materials to environmentally friendly materials, the cost of disposable tableware will rise. In the future, enterprises that have scale advantages of eco-friendly tableware and can effectively control costs will gain competitiveness in the industry. Small companies with poor quality disposable tableware will be gradually eliminated, and the market share of large enterprises will continue to increase.

Tableware brands in China

One of the top Chinese tableware brands: Supor (苏泊尔)

Supor (苏泊尔) is China’s biggest and the world’s second-biggest kitchenware research manufacture. There are five research bases located in Hangzhou (杭州), Yuhuan (玉环), Shaoxing (绍兴), Wuhan (武汉) and Vietnam, with more than 10,000 workers. The company sells its products in 41 countries and territories. ASD is also a Zhejiang (浙江) company, which was founded in 1978. It mainly produces kitchenware and kitchen appliance. It controls its own research, manufacturing and marketing for its products.

Western tableware brands in China: Zwilling (双立人)
ZWILLING J.A.HENCKELS, founded in 1731, is a knife manufacturer based in Solingen, Germany. Henckels is one of the largest and oldest manufacturers of kitchen knives, scissors, cookware and flatware. It has been a part of the Werhahn-Group since the year 1970. The company maintains several brands, including Zwilling J.A. Henckels, J.A. Henckels International and BSF. Currently, the brand with a long history is still thriving, seeing growth (including acquisitions) of about 8 percent per year since 1995. It earned sales of around €700 million in 2017. In addition, the company independently operates its retail shops, studios and partnerships both in Germany and internationally, with over 200 shop-in-shops in China. In April 2018, ZWILLING opened its world’s largest flagship store in Shanghai. The store includes a shop presenting the full ZWILLING range, a cooking school, a classic elegant bar and a restaurant called ‘The Twins’. 

Source: Zwilling’s Weibo account

ZWILLING attaches great importance to the Chinese market due to the growth of the Chinese middle class. “Today, China is the most important and the largest market for the Zwilling world, bigger than the USA and bigger than Germany,” Dr. Schiffers, Zwilling’s global CEO, said.

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article The tableware market in China: Is disposable tableware on its way out? is the first one to appear on Daxue Consulting - Market Research China.

China’s startup hype started from the central government

Entrepreneurship and innovation have always been on the mind of top decision makers

Since 2008, China’s central government has already extended a warm welcome (in the form of grants and other perks) to attract top talents back to China. Its goal is to promote high-level innovations and technological breakthroughs, which naturally contributes to employment and economy.

In 2014 in the Summer Davos Forum, the Prime Minister Li Keqiang first coined the term “Mass Entrepreneurship and Innovation”. In 2015, he kept advocating the entrepreneur spirit in the National People’s Congress and many other important occasions. Since then, the notion of starting up and being your own boss gained momentum.

Over the years, the Chinese government has focused on the youth as the main propeller of innovation

The plan called “Implementing Opinions on Deepening Innovation and Entrepreneurship Education Reform in Higher Education Institutions” issued by the State Council in 2015 further lowered the entry barriers for university graduates to start a business. All sorts of business plan competitions were put in place with generous grants to realize the winning proposals. For example, China College students’ Internet Plus Competitions are target local graduate students, while the Chunhui Cup targets overseas students. Also, startup experiences could be converted into school credits. What’s more, university entrepreneurs can extend their school years if they decide to pursue a business idea.

All those measures were established to reach the objective in 2020: a sound university entrepreneurship education system, significantly enhanced students’ innovative spirit and skills, and a significant increase in the number of students engaged in entrepreneurial practices.

Internet is transforming almost all the industries, representing great opportunity for mass innovation

The term “Internet Plus” was coined to inspire people with the prowess of information technology, and is regarded as a national-level strategy. All the aspiring entrepreneurs in China’s startup scene are thinking how to disrupt a traditional industry with the mighty internet.

Online to Offline (O2O) is a famous term born in this context. The logic is to combine the online and offline experience to facilitate life. Ride-hailing market leader Didi, food delivery platform Eleme, e-commerce giant Taobao, short-lived bike-sharing unicorn OFO are all examples of the O2O business model. The customer value chain has one part done online, usually product configuration and mobile payment, and another part delivered offline.

In addition to O2O business model, Internet Plus also gave birth to new business models in various industries. Coupled with media, it became new media, embodied by WeChat official accounts. Married with finance, it turned into FinTech, which made investing, money wiring, and short-term renting way more convenient. E-commerce is the best illustration of how internet switched the retail business online and scaled up its influence while cutting down fixed costs.

The benefit of internet spills over to non-for-profit areas too. For example, online education market leader Hujiang put forward a Corporate Social Responsibility program in 2015, with an aim to mitigate the education inequality in China. Ant Forest, a carbon-reduction program introduced by Alipay increased user stickiness by planting real trees on their behalf.

The mobilized public and the honorable badge of failure

The unwavering support from the government and the widespread of internet capabilities enabled the creative minds to unleash their potential.

According to National Bureau of Statistics, the improvement of general business environment in China has given rise to business registrations. Especially in the tertiary sector, where the legal entities registered with IT services has quadrupled from 2013 to 2018. Other booming industries include technological services, leasing and professional services, with a CAGR of 23%. Public administration and social organizations only grew 2% on an annual basis. Those figures clearly outline the confidence and concentration of digital services promoted in the entrepreneurial wave.

Data source: National Bureau of Statistics, Number of Chinese legal entities in 3 sectors

The increased ease of starting up and technological advancements propelled the establishment of enterprises. Compared to individual economic units, registered enterprises soared in 5 years, taking a whopping 75.6% of total legal entities.

Data source: National Bureau of Statistics, Number of Chinese enterprises registered has soared

Furthermore, the tide of Mass Entrepreneurship and Innovation translated into the numerous young enterprises. In 2013, SME (small and medium enterprises) represented 95.6% of the total registered companies. In 2018, they represented 98.5%, showing the liveliness of Chinese entrepreneurial energies.

Data source: National Bureau of Statistics, Young enterprises take the lead

There are many stories and lessons about startup failures, which is how 95% of startups end. But with the mainstream endorsement and regulatory privileges, failures are more and more seen as a badge of honor. For the new generation of Chinese entrepreneurs, many are driven by dreams and opportunities, some are forced to venture for lack of job prospects, yet others are blindly following suit. In 2011, only 1.7% of university graduates opted for starting up a business. This percentage peaked at 3% in 2016 then slightly dropped to 2.7% in 2018. This change implies that government promotion was effective, and that China’s startup scene is cooler headed than before.

On the one hand, it’s the government’s job to put all the necessary support in place to ensure new ideas come out alive after market selection. There are more and more incubators, governmental subsidies, and free startup resources and mentors. On the other hand, it’s entrepreneurs’ job to hone their entrepreneurial skills and think long and hard about their fundamental business logic.

The fallen unicorns made investors more cautious about the fundamental business logic

After the two roles played by the government and the entrepreneurs, the third player in China’s startup scene is the investors. Whether it’s business angels or venture capitalists or private equity firms, they are the guardians of solid business sense and financial resources.

The loudest failure in the recent history of China’s startup scene is the bike-sharing platforms. Began in 2014, OFO and Mobike had been the super stars to solve the last mile mobility issue. Even with around 8 billion RMB of investment across several rounds for each company, they had been controversial in their ability to generate profit, to respect public order, and to protect local environment. In the end, OFO filed for bankruptcy and Mobile got acquired by Meituan for merely 2.7 billion RMB.

This contrast of capital zeal and the market failure illustrate the short-term mindset of some investors. To claim the maximum market coverage, which seemed to be the key success factor in the sharing economy logic, the companies and the capital both prioritized buying bikes over risk control. The lack of a sustainable company culture and conflicts of interest at the top management level went unaddressed.

Source: Sina Finance, the mountain of abandoned sharing bikes

Such a vivid example will lead the investors to favor sound business models over those benefiting from over-evaluations of other investors. It’s good for the society because it creates less bubbles, but it also means tougher financing for the entrepreneurs. For any newcomer in China’s startup scene, there are several dangers that could be detrimental to its fundamental business logic.

Competition and acquisition from conglomerates like BATJ

It’s almost a common knowledge that once a startup is big enough, it will be bought by one of the tech giants in China. The famous Baidu, Alibaba, Tencent, JD and other rising giants like ByteDance, NetEase, Didi, Meituan won’t hesitate to make a bid to make their own ecosystems stronger.

But first of all, the startup has to survive the competition by those giants. A great dark-horse example is Pinduoduo, whose founder Colin Huang recently became the second richest person in China. The notion of Social + Ecommerce in the long tail market made this startup successful, in an era where everyone thought Alibaba and JD had occupied all the room of growth. In theory, the existing e-commerce giants could quickly take over Pinduoduo in its cradle. In practice, neither of them followed the startup to compete in lower-tier cities.

Tencent, being the social networking giant, strategically invested in both JD and Pinduoduo, to combat with Alibaba in the e-commerce arena. That’s the best outcome for the startup, with the owner taking 46.8% of the shares and 89.8% of the voting rights.

Other startups don’t have the same luck, many were bought to be dissembled into existing projects of the giant company. For example, ByteDance bought Zhaoxi Calendar, a niche time-management app, whose product team was integrated into Lark, another acquisition realized only 2 month before.

Copycats and price war

Even if a startup didn’t make enemies out of the tech giants, diligent copycats and the resulting price war could put an end to their cash inflow.

The Chinese market never lack duets. Didi and Uber China in ride-railing sector, Meituan and Eleme in food delivery online business, Mobike and OFO in bike sharing economy. When there is oligopolistic competition, the consumers are the happiest. Huge amounts of discounts are up for the taking, as long as they lead to market share. However, price wars are destructive to both competitors, as the customers attracted by low price are not necessarily loyal. Once the price incentives are out of the table, usually due to the serious drain on financial resources, the market share might shrink back.

One sure thing to note about China’s startup scene is that, there is no shortage of copycats. Demonstrating this, there are more than 20 startups which share the same shared-bike business model.

Source: Tencent news, Shu Ke Shi, 20 startups in bike sharing industry

Illegal activities that suck the margin into the shadow

Luckin coffee has made its fame by publicly stating financial fraud to SEC. Its business model was clearly unsustainable, as it had a loophole in its expansion strategy. It’s strength in marketing and storytelling did not compensate its unsatisfactory risk control department. And this Achilles’ heel has costed its healthy financial performance.

Basically, Luckin’s expansion strategy is based on customer referral. As a startup, the number of referrals is directly linked with GMV, KPI, and valuation of next financing round. It’s therefore understandable how much marketing and budgetary resources are pooled to facilitate leads conversion. However, instead of using elaborative verification methods to ensure the referred customer is a real person, Luckin only used a phone number to validate the referral. Once the referral is validated, both the referrer and the referee enjoy discounts. The result of a weak risk control is constant loss of profit due to a highly developed grey industry of fake phone numbers.

In the highly competitive battlefield as the China’s startup scene, nothing is too despicable to be true. Entrepreneurs owe it to their teams and investors to pay attention to not only the legal competitions, but also illegal activities.

In conclusion, China’s entrepreneurs keep pushing forward despite setbacks

China’s startup scene is quite lively thanks to the government’s Mass Entrepreneurship and Innovation guidelines, mobilized public and responsible investors. Even though system-level crises, industry-level fluctuations, and company-level setbacks keep striking one after another, the qualified entrepreneurs will seize the opportunity in the distressing time, fearless as always.

Author: Della Wang

Interested in starting a business in China?

Start with China Paradigm and learn about over 100 China entrepreneurship ventures

Listen to China Paradigm on Apple Podcast

One industry with many startups in China? Learn more about China’s AI industry.

This article China’s startup scene: Lively, relentless, and unmatched by anything else is the first one to appear on Daxue Consulting - Market Research China.

A pop-up store is a short-term, temporary retail space that brands occupy. Regardless of whether the brands previously adopt a physical presence or not, it can be used for sales promotion purposes or for simply building connection with their existing and potential customers. Pop-up stores are usually designed or decorated creatively with the intention to provide a unique, engaging and memorable experience that can generate buzz in the short-term. It is apparent that pop-up stores are an effective marketing method, but what does it take to run a successful pop-up store in China?

Pop-up stores in China: An innovative new retail format to penetrate the market

Pop-up stores are often considered as a form of guerilla marketing that can help a brand to achieve strong short-term growth in sales, engagement or awareness.

Luxury brands open pop-up stores in China to connect with consumers

Brick-and-mortar stores play a very important and essential role for luxury retail brands as it is where brand story and consumer experience meet. While a long-term physical store is able to achieve so, a temporary pop-up store will be able to generate more excitement and a more unique experience for customers.

Chanel successfully launched a pop-up store in Shanghai named ‘Coco Game Centre’ two years ago. The Chanel arcade clearly went viral as people waited for over 2 hours outside only to get a peek inside. The store featured a make-up bar for customers to try on new Chanel beauty products, a series of arcade games for customers to win gifts such as lipsticks, lotions etc., and a few picture-worthy spots for customers to take pictures and upload on social media.

Chanel seeks to establish a closer connection with its customers through a pop-up store interaction. It is a fun and creative approach for the brand to create a unique, immersive and personal experience to the customers. The big Chanel logos upon the wall, and the red, pink and black colors all comes together in the pop-up store to communicate and convey the brand’s story and its core value.

With digitalization incorporated in the store, customers can scan QR codes and pay online at ease. In this way, they are not forced to make purchase, but are invited to experience the brand and make conversion in a more natural setting. Moreover, Chanel can also generate buzz around product launch and receive feedbacks on its new products. Big brands like Chanel usually has clear and defined target customers, in which utilizing a pop-up store will help attract right customers to give right feedback.

Online brands seeking an offline presence through pop-up stores in China

The best way for online brands to bridge the gap between their online and offline presence is a pop-up store. Pop-up stores are not only much more cost-effective, being 80% cheaper than a long-term physical store, but also is a great marketing tool in China to increase visibility and direct publicity.

In 2018, one of China’s biggest E-Commerce platforms, JD.com, tried their own version of pop-up retail in China —— ‘JD Fashion Space’. Its main object is to mix and match fashion, high-tech and Art Space. Consumers are invited to interact with the brand via digital dressing machines, shopping machines, games, and a designated selfie area.

Although consumers are becoming more digitalized than ever before, online brands like JD.com still seeks to create a cohesive brand experience offline to gain customer loyalty by opening pop-up shops in China. Consumers expect more different and engaging high-techs like immersive VR to become entertained in a technology-centric era. JD.com cleverly offered an interactive offline experience to their consumers’ taste, utilizing its digital strength, from VR fitting rooms to digital shopping windows.

As pop-up stores can generate short-term buzz, online brands can constantly remind customers their existence via both online and offline channel. This will be a chance for these brands to gain more potential customers offline and remind existing customers their online presence.

Other brands open pop-up stores in China to increase awareness

Other brands, regardless small or big, open pop-up retails in China to generate popularity in the short term and top-of-mind awareness in the long-term.

Last September’s pop-up buzz was all about a milk tea brand ‘Machi Machi’ because of its feature in famous Chinese singer Jay Chou’s music video “Won’t Cry.” The store in Shanghai, which will only be around for a few months, generated hundreds of people lining outside. The resale price of a cup of bubble tea was 10 times more than its original price.

The store has a photo-worthy wall for people to take photos and upload on social media. Many smaller brands like that will especially decorate its interior to make it more Instagram-worthy and hence more sharable on internet. These brands wish to create as much buzz as possible to bring popularity and boost sales in the short term, and the best platform to spread buzz is of course social media platforms.

Given that Machi Machi is planning to open an official store in Shanghai in the near future, pop-up retails in China are no doubt a fast, efficient and cheap way for small brands to test- new products and examine the decision to enter or expand the market. Just a few days ago, on June 25, an official Machi Machi store was opened in Hefei, Anhui province in China. The brand has positioned itself as a high quality and high face value beverage brand that has become a hot topic on social media platforms such as Xiaohongshu and Weibo. Regardless of what intention these brands hold, achieving awareness through a temporary pop-up store will be the key to further success.

Pop-up stores in China emerging as a major marketing tool for brands

Attribute to the success of many pop-up stores in China, increasing number of brands are seeking to generate more awareness and engagement through implementing this type of marketing tool in China. Although harder to breakthrough clutter in the recent years due to fierce competition, nevertheless pop-up stores are becoming one of the main forms of new retail in China.

According to a survey from storefront, 80% of global retail companies have opened a successful pop-up store and 58% willing to reuse the tactic. Pop-up stores are indeed a great way to fulfil excitement in those highly demanding Chinese consumers. However, if not properly executed or implemented, they will easily fall short and even generate an adverse effect then intended to. Customer expectation can skyrocket due to wrong location, failure to communicate brand value, improper execution or implementation etc. Therefore, it is important to carefully plan every step in order to open a successful pop-up retail in China.

How to set up a successful pop-up store in China

Define the goal

Defining  a clear goal for a pop-up shop in China is always the hardest. Although goals like increasing awareness, popularity, buzz etc., are essential, the decision to focus on sales promotion or just for pure marketing purposes will be the key to success. This decision is especially important to foreign than local companies because they subject to more regulations. Therefore, they need to be well-informed about China’s legal rules regardless which decision made.

Those who aim for direct sales, but do not adopt a corporate existence in China, will require partnerships, agents or distributors in order to engage in actual sales activity. On the other hand, pure marketing pop-up retails in China are much more simple to run, ruled under much less regulation.

The decision to sell the products or to market the products should depend on many aspects of company such as market share in China, presence in China, awareness in China etc.

Know your target customers

Millennials and Generation Z are becoming the most powerful consumers that all brands seek to understand. They are also a group of consumers who prefer experience over anything, which has lead the market evolving into an experiential-centric one. Therefore, opening pop-up shops in China that can engage with Chinese Millennial and Generation Z is a key to success. Brands should tailor the pop-up store to offer these customers different and personalized experiences and create an event that is both surprising and exciting to show them that they are no longer Dad’s Oldsmobile.

Find the right venue

The right pop-up store location is extremely important despite that it is often overlooked. The location can be anywhere: on a vacant street, in malls, in another store or event spaces. Regardless of where pop-up stores are located, the venue should generate enough foot traffic and buzz at the right time.

However, regulations need to be considered before picking any location. Unfortunately, due to strict rules in Shanghai and many other cities, pop-up stores are often only allowed to open in malls rather than on vacant street as no business will be granted to open in front of stores of or on side of the roads. Although street will give pop-up stores more space to occupy, shipping malls can offer a competitive edge for the brands. Shopping malls attract high foot traffic and right demographic, which makes it easy especially for smaller brands to target specific customers as they wish. Shopping malls are embracing pop-up stores as a form of new retail in China to save their lost traffic in the recent years, and more than welcome this win-win situation. Therefore, most malls offer convenience set-up process that will save many effort and time of pop-up stores owners.

Nars opened a pop-up store in Beijing in 2018 utilizing the open entrance area of Taikoohui Shopping Mall. The boutique was fairly eye-catching, easily grabbing people’s attention as they walk pass by.

Establish effective brand communication

Pop-up stores must align with and communicate core brand values. A consistent brand story should be narrated regardless of a press interview, a launch party or just a pure experiential store.

PUMA launched a pop-up experience museum in downtown Shanghai earlier this year, allowing visitors to go on a blockbuster journey of experiencing the blurring borders of reality and illusion. The theme goes with their featured new product, the “Future Rider” shoe, and allows consumers to fully experience what the brand has to offer. Added to the thrilling journey, consumers can enter PUMA’s flagship store at the iAPM mall nearby to win more products online. The purpose of the pop-up is not to drive sales, but to spread brand awareness. PUMA is inviting its customers to become a part of its brand and to be on their journey.

Be present on Social Media

In an ever increasing digitalized world, it is especially essential for brands to be present on social media, and of course will be the same for brand pop-up stores. Pop-up store in China relies heavily on short-term traffic and attention. In order for it to go viral and gain success, brands must encourage consumers to take photos in the store and share location on different social media platforms. Collaborating with KOLs and celebrity endorsers will be a powerful marketing tool to build anticipation and generate buzz before store opening. Stores can further enhance the engagement effort and accelerate social media impact by adopting hashtags that relates to the pop-up store theme.

Apart from traditional forms of Social Media like WeChat and Weibo, companies should also consider the growing importance of Xiaohongshu. Millennial and Gen Z spend their leisure time activity on this platform daily, searching up interesting places to visit.

When searching for pop-up stores in Shanghai on Xiaohongshu, a countless number of posts appear. This means that this platform has indeed became an important platform and marketing tool in China, which brands should utilize to generate buzz and increase traffic among its target customers.

Be creative and be exclusive

The most successful pop-up shops in China create unique and interactive experience for its customers. In order for a pop-up to offer a higher level of interaction and engagement, getting creative and think beyond simply selling products will be the key to differentiate from traditional retail.

YSL Beauté launched a pop-up ‘hotel’ in Shanghai early 2019 to promote its new product. The hotel was located in an Art Museum featuring three floors of themed rooms. YSL creatively incorporated its sales effort in this pop-up store. Customers are encouraged to engage with the brand through make-up station, digital interactive activities, and many photo-worthy spots. They are also invited to redeem YSL Beauté.

products using activity points earned along the way. In the hotel, they can become fully immersed in the situation and receive a unique and exclusive experience.

Pop-up stores are an effective marketing tool in China

Overall, successful pop-up retail in China will allow you to create awareness from potential customers, connect with your existing customers, learn more about their needs and hence better tailor your service accordingly. Plan your steps and utilise this marketing tool in China to make further developments on your brand.

Author: Chenyi Lyu

Let China Paradigm have a positive economic impact on your business!

Listen to China Paradigm on iTunes

This article The guide to a successful pop-up store in China is the first one to appear on Daxue Consulting - Market Research China.

With a market size of 75.7 billion RMB in 2016, China is a rising market for music education. This can be attributed to government support, China’s booming economy, and the upgrading of citizens’ consumption. Another factor not to be overlooked is the importance of music certifications to Chinese families.

Western instruments account for more than half the musical instrument market in China

Musical instrument education is one of the major segments of the music education industry. Since the economic openness from the late 1990s, China has gradually been influenced by western culture, as a result, western musical instruments now account for more than 59% of the market in China. This also coincidences with the fact that three of the top four musical instruments in the music education market are western: piano, guitar and ukulele.

Obtaining certification is the key driver for music education

The key driver for Chinese parents to encourage their children to learn to play a musical instrument is passing the music certification tests. According to the industry report, more than 90% of the market output comes from the training for graded tests. Although most Chinese parents do not support their kids to apply for art colleges, they still wish their kids could learn some artistic skills, for example, music instruments. The grading test certification is proof of their kids’ success and a test of the teacher’s capability. Having high-level certification is also a stepping stone for entering better schools or universities. For junior/senior high schools, students with music instrument certification could get extra marks to compete. For the entrance examination for college (高考), universities provide a special channel for these students with high-level artistic skills. This is the reason why music instrument education is so popular and those instruments in the test list (the certification will only be available for those music instruments listed in the test system) are more favored by the market. For the long-term, people with the certification and the skill can find jobs in music education.

Consumption upgrading: Chinese households are willing to pay more for musical instruments

By looking at the urban households’ annual consumption by category, Chinese citizens are spending more on recreation and cultural services and equipment (including musical instruments). The amount has already reached 832 billion RMB in 2010 and is estimated to reach 3.54 trillion RMB in 2020. This indicates that people are more willing to pay for their music-related entertainment. Combining with the consumption upgrade, there is a trend that Chinese people would consume higher-end products.

Source: National Statistics Bureau

The future market potential is in tier-2 and tier-3 cities

Apart from the increase in expenditure of music-related products, the expansion of the middle class also shows new market development is in tier-2, 3 cities, and is moving from the coastal regions to inland China. This doesn’t mean that there is no potential in the most developed areas, but rather these markets are becoming saturated with high-level competition. For now, Beijing, Shanghai and Guangdong are the three key regions for sales of music instruments, the number of music instrument schools and their economic factors. However, for music education or instrument sales, the market has already shown the trend towards inland China. For example, in recent years, more kids from more remote provinces have participated in the Shanghai International Youth Piano Competition. And their performance is as good as the ones from developed provinces.

Source: McKinsey Quarterly

The four most popular musical instruments in China: piano, guzheng, guitar and ukulele

Piano, guzheng, guitar and ukulele are the four most popular musical instruments based off the frequency of searches on Baidu. The standardized test for piano started in 1993, and it is the western instrument with the longest history in China. There are currently more than 30 million children in China are learning to play piano, and with an annual growth rate of around 10%. In Chinese parents’ mind, playing the piano is a symbol of elegance and dignity. Guzheng, which is a type of zither, is the most popular traditional Chinese music instrument for education. The first reason is that guzheng is easier to learn than other traditional instruments, the other reason is that guzheng, with more than 2,000 years of history, is a typical representation of Chinese music culture. By 2018, there are more than 5 million people learning guzheng. As for guitar and ukulele, their targeting older students, mostly adults. The lack of a standardized certification is the main reason that fewer parents would pay for their kids’ guitar/ukulele class. However, because the guitar and ukulele are easy to learn and portable, these 2 instruments have an even larger market size than guzheng.

Guitar and ukulele are gaining more attention in recent years due to the popularity of music TV shows

Baidu index is a figure which shows the popularity of certain searches on Baidu. The graph below illustrates that generally, all four instruments are gaining more attention in the market. Although guzheng is the top Chinese traditional instrument, its index is the lowest compared to the other three western ones. China is getting more open to western culture and meanwhile is integrating the music culture. For example, Zhang Chao, a Chinese composer, has added Beijing opera element into a piano score. Or on the contrary, Wang Zhongshan, guzheng artist, has played pop music with guzheng. Among the 4 indexes, ukulele’s is the highest since 2015. Ukulele is a new instrument for the China market and has only been receiving the public’s attention for a few years. However, thanks to music TV shows like “the Voice of China”, people have become familiar with the ukulele.  The guitar is also gaining popularity due to the popularity of music TV shows and festivals.

Baidu index of keywords: piano, guitar, ukulele and guzheng

Piano market is mature: demand is for high-end brands

For the piano market, the best-selling brands online are YAMAHA, Bruno & Sons, Carod, Zhujiang (珠江) and KAWAI. All these brands are middle- or high-end, 4/5 are foreign brands. According to the sales data for the last 12 months, the average price of piano sold is around 12,000 RMB/unit, which shows that the piano market is already a mature market for high-end products. There is a sales peak in August because students start their summer vacation then and have more time for lessons. The sales volume is extremely high in October 2017, which is caused by a company called Yun Fei piano’s renting business. They have successfully rented around 6,500 pianos within one month. However, this renting business also met some difficulties. For example, some consumers refuse to return the piano, which has led to many lawsuits. This phenomenon demonstrates that there is a huge market for renting service while the relevant regulations are not settled to protect the benefits of leaseholders.

Source: taosj.com

From the summary of people who mentioned the keyword “piano” in Baidu searches, notable inland regions such as Henan, Hubei and Sichuan are highlighted on the map. Classic music is these people’s common interest, meaning the mainstream music style for piano playing is still classic music. “#piano score#” is the most popular topic among them, they are looking for and discussing scores. This implies a market potential for online music scores.

The most famous pianists in China: Lang Lang (朗朗), Li Yundi (李云迪)

Lang Lang and Li Yundi are the two most famous pianists in China. People like to compare the achievements of them. The most relevant topics people search on Baidu when searching “Lang Lang” are Li Yundi, piano, score and many video playing platforms. The last one might imply that video playing platform is one of the key information sources for people interested in piano. This could be considered as a marketing channel for music education or instrument sales.

Lang Lang, one of the most Chinese famous pianists, messager de la paix. He was also awarded Bernstein art achievement award in 2002.

Li Yundi, a talented pianist, has been awarded the golden prize in the International Chopin Piano Competition when he was 18 years old. Before then, it had been 15 years that no one got the prize. He is the “benchmark” or the “idol” for kids learning piano. Because of this, people are stricter about his mistakes, so many related topics in 2018 are still about his mistake in one concert in 2015.

Li Yundi, one of the most Chinese famous pianists. He was the champion of the 14th International Chopin Piano Competition in 2000.

Guzheng is a market solely for domestic brands, while foreign companies can export raw materials to these brands

For the guzheng market, like this a traditional Chinese instrument, all the vendors are domestic brands. Yangzhou is the base for guzheng manufacture. This would be a market difficult for foreign companies to enter. From the social listening of guzheng on Weibo, it can be concluded that TV dramas have a strong influence on people’s interests and preferences. Brands could sponsor or partner with some TV dramas with musical elements.

China Conservatory of music is one of the centers of guzheng culture, also is the center for other kinds of music studies. Normally, those music instruments stores and schools are located near these conservatories of music, where the key offline distribution locations are. For example, the famous music street, Fenyang Road (汾阳路), in Shanghai is on the street where Shanghai Conservatory of music is. There are 39 music instrument schools and around 30 stores.

Guzheng is listed separately from other traditional Chinese instruments in Chinese Golden Bell Award for Music, which shows its importance and a large base of learners. The Chinese government is also encouraging the development of traditional culture. This would influence the trend for future courses set up in schools. This might be a negative influence on western music education’s business in China. However, there are still other business opportunities. For example, exporting the steel wire of guzheng strings or the paint for those traditional instruments.

Famous guzheng artists in China

Wang Zhongshan (王中山), professor of China Conservatory of Music, president of guzheng association under Chinese Musician’s Association. He has created many new skills to play guzheng, contributing to the development of the modern guzheng playing system.	Yuan Sha (袁莎), professional guzheng supervisor of China Conservatory of Music, head of Zhong Zheng Art Troupe. She has traveled to more than 30 countries for culture exchange performance and has recorded a one-year-long guzheng educational lectures for CCTV.

Most guitars sold online are low-end, an opportunity for high-end brands is in offline distribution

For the guitar market, most of the guitars sold online are low-end. There are basically 2 reasons behind this. First, beginners would prefer to buy cheap guitars, and they usually do so online. Second, for those intermediate and expert players, they would like to collect limited edition on second-hand e-commerce platforms or in offline channels. Offline distribution is still the key for music instruments especially for high-end brands, although e-commerce is expanding fast these years in China. Meanwhile, domestic brands have already taken low- and part of the middle-end market in the guitar industry, the opportunity for foreign brands is not to compete with the price but the quality and user experience.

Based on social listening on Weibo, rock and heavy metal music are the main music styles for those people interested in guitar topics. Although classic guitar is listed in the grading test system, this is still not the mainstream for guitar culture, also because it’s difficult to learn. Besides those KOLs within the guitar industry, young idols who play guitar have a strong impact on a wider range of potential/existing learners. Sichuan province with the fourth largest population and fast developing economy is the inland province with the highest potential for music education. The starting point could be Chengdu, the capital city of Sichuan.

Famous guitarists in China

Liu Yijun, used to be the guitarist in the band “Tang Chao (唐朝)”, is recognized as the greatest guitarist in North China of his era. He is also the first Chinese guitar player who can press the keyboard from the back of the neck. Li Yanliang (guitarist of Chao Zai Dynasty Band), another famous guitarist in China, who has been awarded Best Music Arrangement Award in China original music award. People care a lot about their daily movements, their performance. Besides these guitarists and bands, there is another important KOL in the guitar industry, Jiang Wei. He is the CEO of GuitarChina, the largest BBS platform in the guitar market. Along with BBS, Guitar China also has its own online and offline distribution channels. They also have official accounts on all key social media platforms for marketing. GuitarChina has developed a partnership with most of the brands in the guitar industry and hundreds of music education schools in China. This company would be the touchpoint for marketing in this niche market.

Liu Yijun (刘义军), the first metal rock guitar player in China, the first Chinese guitar player who can press the keyboard from the back of the neck.	Li Yanliang (李延亮), has been playing guitar for more than 30 years, been awarded Best Music Arrangement Award in China original music award.

Besides music TV shows, music festivals are also the stimulator for guitar culture

As mentioned before, music festivals have brought popularity to guitar and pop music. The number of outdoor music festivals in China has dramatically increased from 24 in 2007 to 148 in 2014. And the number of audiences has doubled from 2011 to 2014. The most successful music festivals in China are Strawberry music festival (草莓音乐节) and Midi music festival (迷笛音乐节). This is where people are inspired by new trends in the music industry. Besides sponsoring, brands can also rent a booth in the inside bazar to display and sell products.

Source: Daxue Consulting

Ukulele is new to China, although with high popularity, still a market for low-end products

For the ukulele market, most of the products in China are low-end. This is because for China market, the ukulele is an instrument even younger than guitar, meaning a majority of the players are beginners. Besides, the ukulele is not regarded as a formal music instrument, firstly because that it is not in the grading test system, secondly, because that ukulele is more like “little guitar” for the Chinese market. Although ukulele is new to the China market, China is already the main producer of this instrument and is estimated to produce around 90% of ukuleles in 2022. Middle- and high-end brands have already entered China’s market, the next step is to educate consumers to accept higher-end products.

The screenshot shows the related topics people searching for then search the keyword “ukulele”. Half of the most related topics are learning material/skills for beginners, implying that most people tend to learn ukulele by themselves. Two reasons behind this: firstly, the ukulele is easy to learn, especially for those who already play the guitar; secondly, people play the ukulele more for music initiation or entertainment, they are not willing to invest heavily on this. The other popular topic is about the difference between ukulele and guitar. For the very beginning, it’s a marketing strategy to sell ukulele as “little guitar”, but for a long-term strategy, brands need to marketing ukulele as an independent product.

The existing market for ukulele is still the coastal region and people who are interested in ukulele don’t have a clear preference for the music style. The domestic brand, Tian Lai Cun (天籁村), has conducted the business model of “sales + education”, which is the common model for music instrument education in the current market. The ukulele summer camp organized by them is the most popular topic among those people. The “bundle sale” of musical instrument and education is an effective marketing strategy to increase consumer stickiness.

Famous ukulele players in China

Liu Zongli is one of the most famous ukulele artists in China. He is the spokesman of an aNueNue ukulele. This brand covers middle- to high-end products. They also provide educational classes on a live-streaming platform: Meipai (美拍).  Liu Zongli has also provided teaching material to CCTV, which assists the spread of ukulele culture. The actual boom of ukulele started from the rising of music TV shows like “the Voice of China”. Liu Weinan, a participant in this show, introduced ukulele to the public by playing “lemon tree”.

Liu Zongli (刘宗立), one of the most famous ukulele artists in China, spokesman of aNueNue Ukulele. He has more than 4,000 students and has provided teaching materials to CCTV.	Liu Weinan (刘伟男), has participated in the Voice of China Season 4. He was famous for his performance in this show by playing a ukulele. This also increases the exposure and recognition rate of ukulele in China.

A new opportunity in the music education market: intelligent instruments

Intelligent music instruments are the trend in the industry. First, this follows the government’s guide of “Artificial Intelligence + education”, which encourages to the conversion of AI technology to the education industry to compensate for the limits of teachers in the current system. Secondly, intelligent musical instruments could ease the stress of high expenditure on instrument consumption and classes. For example, one high-end intelligent piano costs 7,000 RMB, which could teach you the entry-level knowledge about playing the piano. If you buy a middle-end traditional piano (5,000 RMB), attend training class (200 RMB/class) and have a personal tutor to monitor your practice (50 RMB/hour), in total that is more than 10,000 RMB. Thirdly, intelligent instruments could guarantee a systemic and standard training process. This avoids the problem brought by changing teachers. The final benefit of an intelligent instrument is that it could monitor your daily practice at any time, which saves the money for hiring a personal tutor.

Popular intelligent instruments in the market: piano, guitar, ukulele

There are three popular intelligent music instruments in the market already: piano, guitar, and ukulele, coincidently are the three top instruments in the education industry. The main principle of this kind of instruments is that the LED lights on it are linked to an APP on tablets and mobile phones. Students can follow the movement of those lights to play. The ONE is the most mature brand for intelligent piano, whose spokesman is Lang Lang. “Learning piano with your family” is also their selling point. Popular and Populele are designed by a technology company based in Beijing and were awarded the iF Industrie Forum Design in 2017. The target market for intelligent music instrument is still limited for entry-level education, while this is already a huge market for development.

The ONE intelligent piano Spokesman: Lang Lang	Populele by Popular Inc	Popular by Popular Inc

“Side-products” of music instrument education: instrument maintenance, second-hand sales, electric teaching material, personal tutor, music competition

There is also great potential for those “side-products” of music instrument education: product maintenance, second-hand sales, teaching material, personal tutor and music competition. Maintenance service is a long-term business for musical instrument sales and education. For example, for the guitar market, even the in-store staff is not professional about the maintenance knowledge of strings. As for the second-hand market, from the Baidu index, it can tell that this market has expanded dramatically since 2015. This indicates a huge market for imported second-hand pianos, especially for high-end ones. Along with the development of intelligent music instruments, electric teaching materials is also the trend in the education market. Tier-1 cities have already started programs for testing the performance of electric teaching material. For those kids who use traditional pianos, they would still hire personal tutors to monitor their daily practice if the budget allows. This market is at least twice larger than a formal teacher. For example, a kid will only attend piano class 1-2 times/week, but he/she needs to practice 3-4 times/week. The music competition is getting popular and paid more attention to the market in recent years, including local ones and national wide ones. This is a chance for kids/players to present their skills, to prove their talent or add experience on their CV. This is a marketing channel for more exposure rates and high-level reputation. Brands could sponsor the competitions financially and provide free products as gifts.

Daxue Consulting has done thorough research on instrument markets in China

Daxue Consulting is ready to help you understand the musical instrument market in China and give you all the data you need to be prepared to make critical decisions—regardless of whether it is the actual market entry or the potential success of your products on e-commerce websites. We are also able to get opinions from a large number of respondents so that you really know what the people are thinking and feeling. Sensory research, in particular, is one of our strengths.

We have already conducted research projects for our customers on very specific parts of the musical instrument market in China, involving the following points:

• An overview of the specific market segment, with market drivers and market trends as well as opportunities and challenges;
• Competition mapping, including five case studies focusing on similar companies in the industry;
• Online analyses using the Baidu Index and most popular e-commerce websites;
• Geographical areas analysis, highlighting good places to start a business, and;
• A detailed customer analysis.

We used various methods to collect data and reach our conclusions. In-depth interviews with brand managers and retailers as well as distributors were one important part. Focus groups with customers and online surveys proved useful too. Other methods included desk research, in-depth interviews with retail consultants, benchmarking, and a corporate financial reporting evaluation.

Contact our project manager who worked on the musical instrument market in China by dropping an email to dx@daxueconsulting.com.

This article The Chinese music education industry’s main driver: grades and certifications is the first one to appear on Daxue Consulting - Market Research China.

Market Entry and Development

Carrefour entered China in 1995 through a joint venture and opened the first large hypermarket – Beijing Chuangyi Store. Enjoying first-comer advantages, Carrefour in the Chinese market had remained the fastest-growing foreign retailer for about two decades. Problems began arising when digital technologies came to the Chinese market in 2010.

Expansion Phase

Carrefour expanded throughout China in just a few years, led by its China CEO Shi Lerong. Between 2003 and 2006, Carrefour in the Chinese market was the fastest expanding foreign retailer, with over 10 stores opening each year. During this time, Carrefour had established several flagship stores and procedures in China. In 2011, Carrefour set up a top-level food security lab in Beijing – the first of its kind in China. The lab links 42 smaller labs together to enhance food security, becoming an example of the provision of high-quality food.

From 2009 to 2014 the sales of Carrefour in China had stable growth, reaching 4.9 billion euros.

Data Source: Statista, Net sales of Carrefour in China 2009-2014

Carrefour decline in China

In 2009, Taiwan-based RT-Mart replaced Carrefour China as having the largest number of retail stores among foreign retail investors. In 2010, online retailing started to soar in China. By 2017, China’s e-commerce market became the largest in the world, accounting for 40% of worldwide e-commerce transaction. China’s online retail market has also become the world’s largest, with 38% annual growth rate (US$830 billion). To respond to the changing habits of Chinese consumers from in-store shopping to online shopping, Carrefour started to close some stores. The first store closure was Xiaozhai store in Xi’an. By the end of 2015, Carrefour had 228 stores. In the same year, it closed 18 stores, with only 210 outlets at the time of its exit in 2019.

Data Source: Statista, Number of Carrefour stores in China 2015-2019

In 2015 the sales of Carrefour in the Chinese market started to decline and reached a low of 3.6 billion euros in 2018.

Data Source: Statista, Net sales of Carrefour in China 2015-2018

Carrefour’s measures to cope with decline

To respond to Chinese consumers’ preferences for convenience, Carrefour opened its first convenience stores in China in 2014. Carrefour Easy and Carrefour Express convenience stores opened in residential areas in Shanghai, targeting middle-class residents. The fast growth of its convenience stores contributed to Carrefour’s store and sales growth rate in 2016.  According to data from China Chain Store and Franchise Association, Carrefour was 11th largest retailer by sales in 2016. Besides, it ranked 4th place among foreign retailers in China. In 2015, Carrefour introduced its online shopping tool to boost its market share.

In the same year, Carrefour opened its first shopping mall in Beijing. It rents out its store spaces to other retailers to attract customer flow and spread costs. It was also the first time that Carrefour purchased land to build and manage a mall.

Failure in terms of e-commerce

The rise of e-commerce has forced the transformation of traditional retailers’ businesses, but Carrefour has been too slow. The problem was a bad shopping experience. The Carrefour App ran slowly, product variety was limited and many regions did not support the distribution of fresh food.  

After traditional retailers such as RT-Mart and Walmart have tried the “catering + retail” format, Carrefour’s similar format was late to the game.  In 2018, Carrefour opened “Fisherman’s Kitchen” and “Extremely Fresh Workshop” in Shenyang and Wuhan. It only chose seafood products in China to try the new concept.

Corporate image and internal issues

On March 15, 2012, Chinese authorities reported that the Carrefour in Zhengzhou sold re-packaged expired food. On April 18, 2012, a Weibo user posted on her microblog that the codfish she bought for her baby at Carrefour turned out to be Ruvettus pretiosus, which is a poisonous variety of fish. On June 17, 2012 Carrefour was accused of price cheating in Wuhan.

In addition to food safety issues, product prices, rigid relationships with suppliers and insufficient supply made it difficult for Carrefour to survive in the Chinese market. In January 2020 Carrefour faced a fine of 2 million yuan for violation of China’s price law. Due to all these problems, the stock price of Carrefour declined during the period from 2015-2020.

Data Source: Yahoo Finance, Carrefour stock price 2015-2020

Supply chain system problems

Carrefour did not have its own distribution center until 2015. By then, suppliers delivered most of goods directly to stores. The previous system caused inefficiency for managing both costs and sustainable growth. The reason for this late development was the lack of emphasis on distribution centers and logistics management.

Neglect of construction of a supply chain system forced Carrefour to pay a painful price. The slow supply speed not only affected the shopping experience and product sales, but also caused challenges with competitiveness.

For example, Yonghui Superstores formed a strong regional supply chain across Chinese regions relatively early. RT-Mart completed the construction of logistics distribution centers in four major regions in 2012. Walmart in China adopted the model of delivery to national distribution centers.

Carrefour’s competitors in China

In terms of competition, in 2016 and 2018, Carrefour’s market share remained around 3%. It was lower than the industry’s TOP3 retailers: Sun Art Retail Group Limited (8.1% and 8.4%), RT-Mart (6.8% and 7.1%) and CR Vanguard Group (6.4% and 6.8%). 

Data Source: Kantar Consumer Index, ‘Market share of major retailers in China 2018

Carrefour also competes with other foreign supermarkets and hypermarkets in China. ALDI, a recent China entrant, has shown to be a new favorite in the grocery market. Costco, an even more recent entrant, is known for causing huge commotion of popularity during its opening week. Then there is Walmart, which takes 5% of the market share, and Sam’s Club, which is known for it’s strong digital strategy.

Problem with city-based merchandise centers

In early 2015, Carrefour reduced its 24 CCU (city-based merchandise centers) to 6. In doing so, Carrefour in China centralized its merchandise systems. After this new establishment, regional directors of these six big regions started to focus more on store operations. The CCUs contributed to the increased centralization of power from stores to each CCU, making profit more transparent.

However, each region needed to allocate purchasing power to an increasing number of employees who were responsible for supply. Carrefour shifted staff from stores to CCUs. Consequently, many experienced store managers left Carrefour.

Carrefour’s current state in China

Acquisition by e-commerce retailer Suning.com gives positive results

In 2019, Suning.com announced that it had completed the acquisition of Carrefour China. The company acquired 80% of stakes in Carrefour China for 4.8 billion yuan.  Jindong Zhang, the Chairman of Suning.com, said that Suning can transform Carrefour stores into fully integrated online-and-offline supermarkets.

The chronology of acquisition

• In early November 2019, Suning Finance successfully integrated Carrefour’s financial system, so customers can pay with their Suning Finance account.
• In mid-November 2019, Carrefour stores in Nanjing and Shanghai have built quick picking warehouses. Customers can place orders online through Suning’s Convenience Store app, Carrefour Mini WeChat program and third-party platforms. It delivers their package in 1 hour within 3 kilometers. During the Single’s Day period (Nov 1- Nov 11), Carrefour sales and orders broke historical records.
• At China International Import Expo, as a purchaser and exhibitor, Carrefour signed 150 million RMB in purchase contracts.
• On Black Friday in 2019, Carrefour’s online flagship store opened on Suning.com, focused on selling high value imports. Customers can place orders online and enjoy efficient delivery services through Suning Logistics.

Data Source: jiemian, Sales of Carrefour in China’, the sales grew after the acquisition by Suning

Carrefour’s ties with Alibaba

Suning has had close links to Alibaba. The Chinese e-commerce giant Alibaba owns a 20% stake in Suning courtesy of a $4.6 billion investment in 2015.  Suning, in turn, invested 14 billion yuan ($2 billion) in Alibaba — a deal that kickstarted Alibaba’s ‘new retail’ strategy.

Suning last year cashed out and cut its stake in Alibaba from an initial 1.1% to 0.51%. In other words, Alibaba has gone from an ally to Suning to a potential competitor in the omnichannel commerce space. The Carrefour deal can lead to a race between retailers as Carrefour China’s retail presence could boost Suning’s offline reach. 

Five long-term strategies of Carrefour in the Chinese market

In 2019 Suning announced five long-term strategies of Carrefour in the Chinese market. It included digitalizing Carrefour’s physical stores. Improving current store models and expanding to lower-tier cities with Suning’s Retail Cloud Franchise Store became key priorities. Integrating with Suning’s convenience store and opening new stores in the existing market are also strategies for Carrefour’s business development.

COVID-19 impact on Carrefour in China

Carrefour in China saw significant profit during COVID-19 outbreak

The implementation of the e-commerce strategy has come at the same time as the onset of the coronavirus in China. Carrefour launched flash delivery services that have been combined with Suning’s convenience stores to meet consumer demand. The average daily order has increased by 202 percent month-on-month, according to the company. In terms of digitalization, 210 existing stores nationwide have completed smart retail transformation to meet the one-hour delivery service within 3 km and the half-day service within 10 km of the same city.

Baidu Index: searching frequency for ‘Carrefour online store’ soared during the lock-down period in China

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Carrefour in China: 25 years of success ends with slow market exit is the first one to appear on Daxue Consulting - Market Research China.