Moreover, Marseille has a significant soft power among Chinese people, which is especially apparent in football, film, literature, and beauty. Famous brands and products from Marseille such as Marseille soap and wine and brands like L’Occitane, Compagnie de Provence and Le Petit Marseillais have a glowing reputation in China. Meanwhile, businesses like Airbus Helicopter and CMA CGM are flocking to China, strengthening Marseille’s metropolis position.

Data source: Statista, arrivals of tourists from China (including Hong Kong) in tourist accommodation in France from 2012 to 2018

The Chinese perception of Marseille

Why are Chinese so enthusiastic about this Mediterranean city?

As a port-hub originally founded by the Greeks, many Chinese associate Marseille with the Mediterranean, beautiful landscapes and French fashion. But beyond these superficial perceptions, Marseille and China have deeper connections.

Since 1987, Shanghai and Marseille have become sister cities. Moreover, the 2018 Belt and Road Initiative conference was held in Marseille, boosting Marseille and China business investment.

Politically, the establishment of Chinese consulate-general’s branch office in Marseille demonstrated this city’s political significance for both countries. In terms of education, Aix-Marseille University has opened a joint institute with the Wuhan University of Technology in China, and the kedge Business School shares executive partnerships with Shanghai Jiao Tong University. Relying on its innovation dynamics, Marseille is upgrading its image and becoming more familiar to Chinese people.

Qualitative analysis of Chinese perceptions of Marseille

Source: Baidu index of Marseille 马赛 Chinese perceptions of Marseille

Chinese people’s discussion scope about Marseille centers on its popular tourist spots, cultural activities and products. Besides Marseille, Chinese tourists also show great interests in other cities in South France like Nice, Gannes and Provence. As for cultural activities, Marseille’s football matches are absolutely a sensation in China. Chinese netizens also frequently search for Marseille’s brands and products like Marseille soap, L’Occitane and Compagnie de Provence.

Source: Zhihu & Weibo, Chinese people’s various concerns about the security in Marseille.

However, Chinese tourists consider Marseille to be poorly policed. This is due to frequent demonstrations, thefts and robberies. Plus, Chinese tourists’ inclination for showing off wealth makes them more susceptible to pickpocketing. “Is it really safe there?”, “Are there many thieves?”, “Are manifestations of the yellow vest movement over yet?” such queries are often present in Marseille related posts on China’s social media. In fact, the security of France has been negatively reported by media in recent years, not just Marseille.

Footprints of Chinese KOLs in Marseille

Source: Red, Online social gathering with Chinese KOLs in Marseille

Recommendations and sharing of KOLs about Marseille largely direct Chinese people’s perception of this city. By focusing on Chinese social media like Red, Weibo and WeChat, Chinese KOLs have great interests in seeking excitement in Marseille. They like experiencing new situations and unique trips. Thus, exploring niche and wild landscapes like Verdon Gorge Grand Canyon, Calanques national park and seaside villages are their fondness. Because they can give their voice of loving life and chasing uninhibitedness by conquering desolate places. Just like a popular traveling blogger on Red shared, “I love the feeling of freedom and unfettered.”

Chinese KOLs also have a craze of sharing their liked local delicacy and shopping. “Traveling isn’t just about taking in beautiful scenery, it’s also important to enjoy local cuisines”, a Chinese traveling and food blogger commented on Red. Besides, it is indispensable for Chinese KOLs to take photos to record impressive dining experiences. And they will caption it “attendance (打卡) in an internet-famous restaurant”. If they find any adorable products and brands, they will also share them on social media. For example, Marseille soap, Le Petit Marseillais and Compagnie de Provence is harvesting more Chinese consumers through KOLs’ recommendations.

Marseille’s cultural output towards China

China has one million Olympique of Marseille fans

If you ask a Chinese football fan about their impression of Marseille, the answer will definitely be this city’s team, the Olympique of Marseille. Through leveraging China’s social media, this football club has attracted nearly a million followers on Weibo.

Besides, Marseille’s legendary player, Zidane also opened his personal account on Weibo in November 2018 and has more than 212,000 followers. Beyond its digital strategy in China, the Olympique of Marseille is also active in offline promotions. In 2018, it created a fan club in Shanghai. The president of the club Jacques Henri Eyraud attended the ceremony and said: “The establishment of this Shanghai fan club is the first step of entering the Chinese market, and we hope to have more comprehensive and in-depth cooperation with Chinese fans in the future.”

Source: Weibo, Chinese poster of the Olympique of Marseille

Marseille films rank highly in China, which in turn, puts the city in the map in modern Chinese literature

Marseille’s cultural output towards China goes far beyond sports. Marseille’s films, music and literature are also influential to Chinese, partly thanks to French filmmaker Luc Besson favoring Marseille as a location for film shooting. The symptoms of this city’s intense renovations in the 1990s were indicated in the action film series Taxi, which were highly appreciated by Chinese audiences. Douban, China’s authoritative film rating site, gave the Taxi series a 7.8 / 10 rating, same as the contemporaneous French film Jeux d’enfants (2003). In literature, French writer Alexandre Dumas’s magnum opuses, like the Count of Monte Cristo, the Three Musketeers and the Man in the Iron Mask, inspired many Chinese readers and draw them to visit Marseille. Additionally, there are also many depictions in Chinese novels about this city. For example, Chinese popular scientific fiction the Three Body Problem mentioned Marseille as a large-scale science research base.

Source: Douban, Chinese poster of Taxi 5

Chinese tourism in Marseille

Chinese tourists’ top destinations in Marseille

Ctrip lists the top three attractions of Marseille for Chinese tourists by three categories: popular landscapes, must-see museums and historical discovery. Known as the most beautiful canyon in Europe, Verdon Gorge is considered by Chinese visitors the most beautiful local place. Boating on the Sainte-Croix lake is a must-play activity for them. Another popular destination for the Chinese is the Château d’If. In center city, Chinese tourists like to take pictures in the old port and soak up the atmosphere of its fish market. Besides, the Notre-Dame-de-la-Garde basilica, the Panier district and numerous museums are preferred by Chinese tourists as for picturesque facades and historical value.

Source: Ctrip, ranking of landscapes and tourist sites in Marseille

Chinese tourists’ eating, living and shopping in Marseille

Restaurants serving local food, like Panisse, Madeleines and Moules Marinière, are popular with Chinese customers. O’Bidul, a seafood restaurant with authentic recipes and heart-warming service, is appraised by Ctrip as the most popular restaurant.

China’s wealth inflation allowed Chinese tourists to splurge on luxury hotels in Marseille. The hottest hotel in Marseille for Chinese tourists is InterContinental Marseille Hotel-Dieu, of which the cheapest room charges at least 30,000¥ for one night. In addition, Chinese tourists increasingly adopt Airbnb is as a cost-effective accommodation.

In terms of shopping, there are many super malls like Galerie Lafayette, Les Terrasses Du Port and Centre Commercial Bourse, which can satisfy Chinese customers’ various fashion demands. Also, many Chinese tourist make bulk purchases at local pharmacies and boutiques.

Source: Ctrip, ranking of hotels, restaurants and shopping malls in Marseille

Chinese interest in Provence, France was sparked by a soap opera

Lured by clusters of mauve flowers, Chinese tourists are conquering Provence in the form of sightseeing. Every July and August, groups of buses carrying thousands of Chinese visitors crowds the country lanes. Many French medias has reported Chinese people’s obsession with Provence, and are surprised they don’t go to Paris, but yearn for this remote landscape.

In fact, this Chinese craze stemmed from the Chinese drama shot in Provence, Dreams Link (一帘幽梦), which was on screen between 2007 and 2008. The lavender and sunflower fields, the French castles and the pure sky had root in the memory of the Chinese the frame of a France more romantic than ever.

Source: Xiaohongshu & Weibo, Chinese tourists are conquering this purple land

There is no doubt that the Chinese boosted local economic development. They are bigger spenders than other foreign tourists. In Provence, the average daily expenditure, excluding hotels and meals, of the French is about 60 euros, for Americans it is 97 euros, however, for Chinese it is an amazing 170 to 300 euros. Hence, local tourism beneficiaries adopted various strategies to cater for Chinese tourists, like making everything in lavender purple, adding Chinese instructions in billboards, and promoting special souvenirs. Additionally, Provence has become the Garden of Eden for Chinese couples. In recent years, the trend of holding wedding or spending honeymoon in Provence is soaring for Chinese people. Because the Chinese translation of Provence includes the character Wàng (旺) which means ‘prosperity’.

What you should know about Chinese tourism in Marseille

Along with the boom in traveling abroad, China’s tourism is undergoing a consumption renewal towards niche destinations and customized tourism. Under this circumstance, knowing how to effectively reach these increasingly sophisticated travelers is a strategic advantage for Chinese tourism stakeholders. Digital marketing is an effective channel, and there are so many platforms to choose from. In combination with a KOL marketing strategy, niche and lesser-known destinations can put themselves on the radar for Chinese travelers. As demonstrated by the success of the Olympique of Marseille, Weibo is useful to accumulate consumer awareness in China.

Additionally, Xiaohongshu can also be leveraged to promote destinations including stores, restaurants, and hotels. WeChat is also not to be overlooked, not only running a WeChat account for promotion, but also local vendors can set up WeChat pay for Chinese tourists in Marseille.

Source: Zhihu, digital tourism marketing channels in China

The economic links between Marseille and China

Beyond its tourists, China’s businesses are flocking to Marseille.

Marseille’s economy is surging under the cooperation with Chinese companies. Many international groups having long traditions of working in China such as Airbus Helicopters and CMA CGM shipping. Chinese magnates such as Weichai Power, PetroChina, Watchdata Technologies and Tinno Mobile have all invested in Provence. In March 2019, Marseille-Fos gained a 105 million euros investment from Quechen Silicon Chemical to build its European silica factory. This expensive contract is one of the largest Chinese greenfield investments in France.

Now, many Marseille-China direct sea and air routes are planned.

Along with Marseille’s transportation connections being expanded, more investments from China will be boosted. “With its unique geographical location and abundant resources, Marseille can play an active role.” Fei Zhaohui, president of the Paris branch of China’s Export-Import Bank, said at the 2018 Belt and Road conference in Marseille. In the future, Marseille-China trade will advance as Marseille can act as a bridge between China, south Europe and North Africa.

The popular industries, brands and companies of Marseille in China

Competitive advantages of brands and products from Marseille in China’s market

Skin care products

Soap produced in Marseille is a well-known traditional craft for Chinese. It boasts a high reputation in China by means of its beauty benefits and scents of olive oil or lavender. Now, Marseille soap is more than a must-buy cosmetic for Chinese tourists, as it is a symbol of the city.

Le Petit Marseillais and Compagnie de Provence, niche skin care brands in China, are extensively shared by Chinese beauty bloggers on social media. These two brands’ shower gels have attracted many loyal Chinese customers because of their various and innovative fragrances. Many second-time purchasing customers commented that they love their attractive aroma. However, without accessing China’s market, the main purchasing channel of these two brands for Chinese customers is through Daigou or Haitao.

Source: L’Occitane, L’Occitane’s KOLs strategy in China.

If Marseille’s skin care products are the crown, L’Occitane is definitely the pearl on top. Now, China has become L’Occitane’s third biggest market in the world with 197 million euros sales revenue in fiscal year 2020, behind America and Japan. Its success is attributed to its digital and KOL marketing strategies in China. Vigorously participating in China’s various e-commerce promotions, L’Occitane focuses more on online selling. In Chinese ‘6.18’ online shopping carnival, relying on its high customer reputation and imported brand property, L’Occitane’s turnover increased by 170% compared to 2019. Meanwhile, it leverages Chinese celebrity influence to acquire more customers. Among 100 comments of its popular hand cream, 54 purchasers spoke bluntly that Zhu Yilong, the brand ambassador of L’Occitane, was their buying stimulus. This Chinese male star has acted in several popular Chinese TV series and films, and he has 25 million fans on Weibo.

Data source: Digitaling, L’Occitane’s relative comments and activity on China’s social media.

Alcohol        

Chinese wine drinking habits are changing at a quick pace. However, China’s national wine production has plummeted, and the demand of imported wine has soared. Under this circumstance, the unique geographical advantage makes wines from Provence highly appreciated by Chinese consumers. From January to June 2019, France is China’s second largest wine exporter with 351 million dollars total annual in exports.

Hence, as one of France’s prominent wine production zones, Marseille has great potential in China’s wine market. French wines & spirits giant Pernod Ricard is penetrating China’s alcohol market. China accounts for 9% of Pernod Ricard’s net sales, becoming its third largest market in the world. Additionally, its turnover in China increased 21% in fiscal year 2019, while Chinese baijiu and whisky showed robust momentum. Additionally, targeting China’s strongly evolving spirits market, this alcoholic drink tycoon has accelerated its layout in China. Pernod Ricard’s whisky distillery in Sichuan, as China’s first spirits factory with foreign investments, started the construction in 2019, and the production is scheduled to start in 2021.

Source: Pernod Ricard, Pernod Ricard’s business in China

Logistics

CMA CGM China (达飞轮船), a subsidiary of Marseille’s CMA CGM Group, has served 28 years in China. With 51 offices nearly covering all major port cities across China, CMA CGM China has evolved into an industrial leader. It implements “Customer Centricity” strategy to provide high-quality, customized and cost-effective shipping solutions for Chinese customers. Beyond an industrial giant, CMA CGM China is committed to environment protection and marine biodiversity preservation by reducing carbon discharge. Besides, in order to facilitate customer serving process, CMA CGM China has opened its official account on WeChat, which allows customers to discover more about them and submit LOI documents remotely.

Source: CMA CGM, key figures of CMA CGM China

During the COVID-19 outbreak, CMA CGM Group proved its resilience and team’s expertise. Due to Chinese government’s strict measures to restrain the epidemic, CMA CGM China’s business suffered an obvious decline. Shanghai Yangshan Port, China’s busiest port, saw a 17% plunge in cargo volume under the impact of COVID-19. However, CMA CGM effectively controlled its cost and limited the volume shrinkage at optimistic 4.6%. Moreover, its operating margin surprisingly increased to 13.5% and realized positive net result of USD 48 million in the first quarter of 2020. Besides, CMA CGM Group has donated 50,000 FFP2 (EU N95 standard) masks to China to help Chinese government in controlling the pandemic, which reflecting its close bond with China and a great sense of social responsibility.

Source: CMA CGM, CMA CGM Macro Polo’s call in Chiwan (China)

Future prospects for Marseille and China

Marseille is the fastest growing interconnection hub in Europe, and it is striding towards a metropolis leading the world having close contacting with China. Yet Marseille has showed its significance in the diplomacy, and it will be strengthened with Belt and Road policy’s further implementation. As for tourism, Marseille is one of Chinese tourists’ top destinations, aiding local economic advancement. Meanwhile, relying on its geographic advantages and abundant resources, this port city will be more attractive as a goldmine for Chinese companies to invest there. Contrary, although the organization and HR of Marseille’s famous brands and companies in China were impacted by the epidemic, they will certainly be more competitive in China’s market following the country’s economic recovery. If you want to know more information about China’s market, please send e-mail to dx@daxueconsulting.com

Learn how to reach Chinese travelers abroad with our Chinese Duty Free Consumption report

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

Listen to China Paradigm on Apple Podcast

This article Marseille and China: A cross-sea bridge connecting France to the middle kingdom 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.

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.

Burberry’s China market entry strategy

In September 2010, Burberry bought out its first Chinese franchise partner in a £70 million deal, giving it greater control over its presence in the country. As of now, Burberry has over 57 stores in 31 cities in mainland China, including eight in Beijing, nine in Shanghai and three in Hangzhou. As China’s share of the global luxury market expands further, from 33% in 2018（when Chinese luxury consumers spent about $122 billion on high-end goods） to 41% in 2025 (when Chinese luxury consumers will spend between $173 billion and $181 billion), giving Burberry more market growth potential in China. Burberry’s strategy to enter China’s luxury market is mainly as follows.

Franchising

As a medium-cost method with rapid expansion, franchising is regarded as an increasingly critical method, which helped Burberry to enter the China’s luxury market with professional, local management. Franchising gives retailers the opportunity to build a global business in a short time. At the same time, franchising does not bring huge financial pressure on the domestic retail business.

However, the main drawback of franchising is the lack of control over the brand. Thus, it is crucial to find a right partner to eliminate possible control difficulties.

Flagship stores

Opening a flagship store is a method to enter China’s luxury market with the highest level of control and involvement, emphasizing branding rather than generating profit. Two years after seven openings of flagship globally in 2012, the “Dreams of London” was introduced in Burberry’s China flagship store in Shanghai. In the flagship store, products equipped with high-tech chips trigger multimedia content in the mirror, which displays the in the brand showroom.

Inspired by the global flagship store at 121 Regent Street in London, the space combines the best of British craftsmanship and materials. Burberry’s flagship store in China showcases the extraordinary performance of the brand, helping Chinese luxury consumers feel the multi-sensory image of the brand, aiming to increase brand awareness and achieve brand resonance.

Source: luxuo.com, Burberry Opens Flagship Store in Shanghai

At the beginning of expansion of Burberry in China, as the market knowledge and management experience acquired in the western countries may not be appropriate, Burberry tended to conduct marketing through low-control intervention, such as wholesale, franchising, concession, etc., to test the market reaction. After a few years, when the retailer had accumulated enough local experience and knowledge, it decided to accelerate its organic growth through the use of franchises and bring operations in-house. This has allowed Burberry to tighten its grip on brand identity at different times. Thus, maintaining the global exclusivity of the brand image.

E-commerce in China

Internet sales help international retailer measure its international sales if it decides to open the physical store in a new foreign market. As a market entry method to enter China’s luxury market, internet is a form of export that enables retailers to promote their products beyond the country of origin through online platforms, mobile devices and social media and establishes a direct and mutual relationship between retailers and consumers.

Burberry in China has accumulated about 1.51 million followers on Weibo, a very popular Chinese social platform, and the number of followers on Tmall sales platform has now reached 2.16 million.

Burberry launched its Wechat Mini program on Wechat on Chinese valentine’s day (Qixi) in 2018, the mini-program campaign takes the form of a game. The campaign encourages fans to play the game with their partners. After completing the game, users will be able to get access to Burberry’s latest collection, including two Qixi bags sold exclusively in China.

Source: Jingdaily.com – Burberry Launches 2 Handbags Just for China on First WeChat Mini-Program

Late last year, Burberry and Chinese tech giant Tencent struck an exclusive partnership to develop social retailing in China. Burberry and Tencent will pioneer a concept that combines social media and retail to create digital and physical Spaces for participating communities to interact, share and shop.

Burberry’s first step will be to open a store backed by Tencent technology that offers a unique experience that connects the social and online lives of luxury customers to their physical environment. This will be a unique testing and learning space, serving as a laboratory for experimental innovation that can be extended to other parts of network of Burberry in China.

Source: Burberryplc.com – Burberry and Tencent enter into exclusive partnership to develop social retail in China

Current strategy in China

In the past, Burberry in China has tended to adopt a low involvement and control approach to enter China’s luxury market, such as franchising, licensing and concession, to maximize its market share and sales. Having accumulated a lot of resources and experience, Burberry has recently started to use overseas partnerships to further increase revenue and brand equity through stricter control of its flagship, self-owned and other wholly-owned stores.

Target customer in China

McKinsey estimates that China’s luxury spending will nearly double between 2020 and 2025.

From the perspective of age, the post-’80s (Generation Y) accounted for more than half of the consumption of luxury goods in China, making them the main force of luxury consumption in China. In addition, two-thirds of the post-’90s generation (Generation Z), who tend to be only children because of the one-child policy, said their parents (mapping as Generation X) approved of luxury purchases.

In addition to target Generation Y (the current luxury consumer main force), Burberry also sees the potential of younger consumers. From the perspective of Burberry’s entry strategy and marketing strategy in China, Burberry has been continuously entering into various popular social platforms in China and launching events with advanced technology on the social platforms for young Chinese generation, such as the events held on WeChat Mini Program, which are deeply favored by young Chinese generation.

China, the fastest-growing market for luxury goods, continues to be underpinned by a growing middle class and the latest sign that consumers remain confident.

Marketing strategy in China

Multi-channel marketing strategy in China

Burberry sells five product categories (accessories, Women’s, men’s, children’s and beauty) in three strategic regions, Asia, EMEA and the US, through both online and offline channels. Although the global revenue of Burberry in 2018 reached 2,733 billion dollars, decrease by 1% compared with last year, luxury sales in Mainland China increasing by 20% in 2018.

The revenue from offline channels is larger than that from online channels in China; however, it is a significant channel to create a seamless brand display. Burberry adopts a multi-channel marketing strategy in China combining online and offline.

Physical store

So far, Burberry has operated 57 stores in 31 different cities of China, including two pop-up stores and one flagship stores located in Shanghai. Physical stores are likely to bring about a number of functions that cannot be replaced by online channels. The purpose of in-store shopping lies not only in goods acquisition, but also in the shopping experience, the social activities, as well as the entertainment.

Burberry’s stores in China are designed to provide customers with superior customer service and experience. Also, offline stores still account for the majority of its revenue. However, for Chinese luxury consumers buying brands like Burberry, offline stores can also help solve the problem of counterfeiting.

Integration of online channels

Despite its crucial contribution, the influence of physical stores might be geographically limited. Thus, the integration of online channels helps to create a comprehensive channel to communicate products and enhance brand awareness (regardless of regional restrictions). For the Chinese market, Burberry is present on popular social platforms including Weibo, and WeChat with seamless commercial accessibility on the platforms.

The seamless integration enables Burberry to extend purchase opportunities beyond markets where it has a direct presence. For instance, Burberry partnered with social platforms to allow followers globally to experience the flagship opening event like “Dreams of London” in Shanghai.

Moreover, Burberry invited the followers on WeChat to watch the women’s wear show at London Fashion Week (AW14) on social platform. As described above, Burberry launched WeChat Mini program for fans to participate in the game and release the limited edition bags in China.

The integration of online channels expands the accessibility through the Internet, because it dilutes the exclusive brand image and value of Burberry and promotes the brand’s visibility and participation in China.

Collaborate with Chinese celebrities and KOLs

In China, choosing a popular and suitable spokesperson via celebrity endorsement is a key to success. In 2016, Burberry introduced Kris Wu (Chinese actor, singer), who is hugely popular with the young Chinese generation, as the first non-British spokesman. Burberry’s retail revenues went from declining to growing by more than 20% in two months. The following year, Burberry announced Dongyu Zhou (Chinese actress) as the brand’s first female ambassador in Asia. Zhou’s unique temperament and extraordinary acting skills have endeared her to the young Chinese generation.

Kris Wu and Dongyu Zhou were invited to Burberry’s Spring/Summer 2018 fashion show at London Fashion Week. Burberry wanted to leverage the popularity from two celebrities to appeal to China’s millennial luxury shoppers.

In 2019, Chinese actresses Wei Zhao and Dongyu Zhou have landed new roles as the faces of Burberry’s Chinese New Year campaign. As an actress, director and pop singer, Wei regards something of national treasure in China. Since she starred in a hit TV series in 1998, she has accumulated a lot of popularity in China. Unlike the new generation of stars Kris Wu and Dongyu Zhou, the Chinese customer that loves Wei is more concentrated in Generation X and Y.

Source: luxurysociety.com – Zhao Wei and Zhou Dongyu star in Burberry New Year ads as downturn fears emerge

Creating cartoon characters as brand endorsements

To celebrate the Chinese New Year in 2020, Burberry created its cartoon rat character called Ratberry. Named ‘Bobo Rat’ in Chinese, it represents the Year of the Rat, which is integrated with the Thomas Burberry Monogram for the brand’s Holiday Collection. Also, Dongyu Zhou posted Hashtag #Ratberry# on Weibo for several times, interacting with followers while receiving many likes and comments.

Source: Chinafilminsider.com – How Burberry Won Over Chinese Consumers With ‘Ratberry’ Campaign

Burberry in China collaborated with different celebrities to appeal to Chinese luxury consumers of different generations. In attracting the millennial luxury consumers, Burberry had also consolidated current main Chinese luxury consumers. From this perspective, Burberry has set up a good model for luxury brand in China.

Luxury brands are increasingly partnering with KOL on social platforms and Burberry in China is no exception. In addition to Weibo, Burberry also cooperates with many Chinese local Kols on Xiaohongshu (China’s foremost social shopping and UGC platform).

Author: Qing Zheng

Learn how brands maximize profit with a direct to consumer strategy in China

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

Listen to China Paradigm on Apple Podcast

This article Burberry in China: Sales increasing faster than any other region is the first one to appear on Daxue Consulting - Market Research China.

The television market in China entered a long ‘winter season’ around 4-5 years ago. A series of problems emerged, including the decline in TV sales, the endless price war, and the difficulty in product innovation.

In 2018, the retail volume of China’s color TV market was 47.74 million units, with a slight increase of 0.5% year-on-year, but retail sales value decreased by 8.6%. Come 2019, 47.72 million color TVs were sold, and the sales volume dropped 2.0% year-on-year. In the same year, the retail sales were 134 billion yuan, declining 11.2% year-on-year. The average price of TV’s in China is 2,809 yuan, which is the lowest number during the past decade.

Time spent on mobile surpassing TV

According to eMarketer, 2018 marks the first year where Chinese people spend more time with their digital devices than they do watching TV. As of 2018, the average Chinese adult spends more time on mobile devices (smartphones, tablets, etc.), about 2 hours, 39 minutes, than they do with TV. The average Chines adult spends 2 hours, 32 minutes watching TV this year, down 2% over 2017, which equates to a 7-minute difference. It is predicted that by 2020, adults in China will spend almost a third of their daily digital time watching videos.

“eMarketer’s forecasts are showing that in China, time spent watching TV will experience an accelerated decline, with TV viewership falling further in lower-tier cities,” said Shelleen Shum, forecasting director at eMarketer. Since the television era began, TV has been the primary source of entertainment, and the Chinese television market grew rapidly from the mid-1990s to 2014. However, the Chinese audience is losing their interest in watching TV yet with rising digital media consumption, which impedes the development of the television market in China.

China ranks first in color TV production

China’s color TV industry started in the mid-1970s and has experienced three periods: the growth period from the mid-1970s to the early 1990s, the maturity period from the mid-late 1990s to the end of the last century, and the second development period from the beginning of this century to now. After more than 40 years of development, China’s color TV industry has grown to become the world’s largest. In 2014, the production of color TVs in China was 155.42 million units, and in 2018 it exceeded 200 million units.

China exports a higher value than imports in the TV market

For the exports of televisions, China is a significant color TV exporter. According to statistics, China exported 74.05 million color TV sets in 2014, with an export value of USD 13.553 billion. In 2018, the export volume and value of color TV set both increased, and the export volume rose to 96.88 million units, with the export value approaching 15 billion US dollars. From January to May 2019, 37.56 million color TV sets were exported, an increase of 11.6% year-on-year. The export value was US $5.296 billion, a decrease of 1.1% year-on-year. Negatively affected by the US-China trade war, China’s color TV exports reached 94.74 million units in 2019, with a year-on-year decrease of 2.2%. The average export price is $ 0.1355 per unit.

China‘s color TV import value is far behind exports. China’s color TV imports value reached $17.055 million in 2018, with a decrease of 30%. Imports reached US 15.39 million in 2019, decreasing 9.8%. The average import price was the US $1.26 per unit, over nine times the average export price.

The smart TV market in China grows gradually 

Despite the slumping television market, the smart TV market in China has stable growth. Unlike traditional cable TVs, smart TVs offer internet connectivity and support for a range of apps, much like smartphones and smart home devices. Smart TV has become a new type of electronic equipment and has entered thousands of Chinese households through Internet extension.

In 2018, China’s smart TV sales exceeded 50 million units, increasing to 47.74 million units from 16.1 million units in 2012. Also, intelligent TV ownership has grown rapidly in recent years, rising from 120 million units in 2016 to 188 million units in 2018.

Learn from TCL’s strategy

[Source: TCL official website, “TCL’s smart televisions”]

About TCL Electronics Holdings Limited

Headquartered in Shenzhen, China, TCL Electronics Holdings Limited is one of the leading companies in the global TV industry engaging in the research and development, manufacturing and sales of consumer electronics products.

Despite the downward trend of the domestic TV market, TCL maintains growth under the COVID-19 pandemic. Around the Labor Festival, the online and offline retail sales of TCL TVs increased by 2.24% and 7.3%, respectively, and TCL’s market shares were 13.8% and 19.43%, respectively. The success of TCL attributes to two main strategies, which can be drawn on by other brands. According to Sigmaintell, the brand ranked second in the global TV market in terms of its market share in the first three quarters of 2019.

Technological upgrades to create growth

At the 2020 Spring Product Launch—”TCL Making Life Intelligent”, TCL launched several kinds of TVs marketed as “Large-screen Sound and Picture Experts that Understand You”. The new-introduced TV products are categorized in 3 series, including “C8 Zhizhen QLED TV”, “P9 Hollywood Theater TV” and “V8 full scene AI TV” equipped with further enhanced sound and picture technologies and new Artificial Intelligence (AI) function.  

“The biggest change in the COVID-19 epidemic is the change in our home lifestyles: People pay more attention to smart technology products and are more accustomed to the protection and convenience brought from these products to everyone’s life.” Wang Cheng, CEO of TCL Electronics Holdings Limited, said.

Considering the rapid development of the smart TV market in China, TCL focuses on “smart technologies + Internet” and “products + services”, introducing more high-tech smart TV sets. With technological advances in smart televisions, the company is striving to build a comprehensive ecosystem for smart TVs, which leads to a new and smart home lifestyle in China.

Live video streaming to boost sales

On April 13th, the world’s first TCLXESS rotating intelligent screen with “new ideas in all directions” was officially launched on the Jingdong platform. TCL Industrial Holdings CEO Wang Cheng, TCL global brand spokesperson Tang Jingmei and eight KOLswere live broadcasting to sell TCL’s products. According to statistics, 830,000 people were watching live online, and the number of likes is as high as 1.45 million. In just 1 minute, the sales volume of the entire network has broken 3,000 units, and within only 1 hour, the total sales online have broken 10,000 units.

During the Labor Festival period, TCL brand sales in the Gome platform achieved more than 60% year-on-year growth, with 55-inch and 65-inch smart 4K TV sales exceeding 30,000 units. Only on May 1st, within 3 hours of the live broadcast of the theme “To Fight for a Better Life” co-launched by CCTV News and Gome, the sales of TCL C66 series increased over 55% year-on-year.

The promotion strategy behind TCL’s live broadcasting is worth learning. Driving the traffic from public media platforms and online shopping platforms, TCL can build its own private traffic pools to reach customers easily and manage retention effectively. In this way, the brand successfully refines online sales in the Chinese television market.

Coronavirus impacts on the television market in China

Under the coronavirus outbreak, Chines people keep staying at home and tend to spend more time watching TV. According to a survey, the audience’s size and time spent watching TV have increased significantly during the epidemic, compared with the past six months. As shown in the survey, 54.9% of people watch TV every day, increasing by 16.6% over the past six years, and the average viewing time increased by 66.7%.

However, the COVID-19 epidemic has considerable adverse effects on consumption in the Chinese television market. According to “the Color TV Market Scale during Labor Day Holiday” published by Zhongyikang, the retail sales volume of the color TV market fell 6.3% year-on-year, while the retail sales dropped 16.4% year-on-year.

Overall, for the television market in China, coronavirus makes the bad situation even worse, and many brands are facing great challenges. However, it is worth noting that TCL outperforms during a particular period, and brands can learn from the product and promotion strategy of TCL. 

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

Listen to China Paradigm on Apple Podcast

This article Television market in China is the first one to appear on Daxue Consulting - Market Research China.

Industry overview of the home decor market in China

[Data source: qianzhan.com, “Size of home decor market in China”]

The home decor market in China shows a steady upward trend and is gradually entering  a more mature stage. The size of the Chinese home decor market has exceeded 2 trillion yuan. It is predicted that the market size will reach 2.59 trillion yuan by 2020, maintaining a compound annual growth rate of about 7%. Since the reform in 1998, the Chinese home decor market has experienced the stages of concept initiation, policy reform, and standard-setting. The State Council of China released “the Guiding Opinions on Actively Promoting the ‘Internet Plus’ Action Plan” in July 2015. The home decor industry vigorously responded to the policy on “Internet Plus” transform and upgrade. Currently, the home decor market in China is still mainly driven by new apartment owners. However, with the continuous development of China’s urbanization process, the demand for renovating old homes is increasing in recent years, especially in first-tier cities.

Consumer demographics of the Chinese home decor marketChinese home decor’s primary customers consist of men and women born in the 80s (33%) and 90s (27%). 87% of customers born in the 80s are married and have children, while 65% of customers born in the 90s are unmarried. According to a survey, customers born in the 70s and 80s prefer practical and eco-friendly decorated homes while the younger pay more attention to smart home and personalized trendy decorations. For all age distribution of customers, a simple, clean and practical home is at the top of the list.

Information customers care about while decorating their home

Budget, decoration style, experience from others, environmental indicators, furniture style and brand are the top 5 elements that people most concern in the process of home decoration. For overall style, around a quarter of customers like modern minimalist or ‘Nordic simplicity’ style, known as beiou fengge (北欧风格) in Chinese . At the same time, over 20% of people don’t have a specific pursuit of style. People lay great emphasis on healthy and eco-friendly home decor products, and this is reflected in that they will seek information about environmental indicators, considering the safety of decoration materials and ensuring the health and environmental protection during construction. In addition, more and more people pay attention to smart home and high-tech elements of electrical appliances. 

Customized home decoration products are increasingly welcomed

In a wave of consumption upgrade, customized home decoration products are more and more welcomed in the Chinese home decor market. As shown in a survey, over 70% of people will choose customized productions during the whole process of home decoration. 55% of researched consumers state that they want partially customized home furniture, while 17% of them choose a whole-house customized solution. Besides the advantage of saving time and cohesive style, a whole-house solution can make the home look more high-end and custom-made. Although still at an early stage of development, such a solution is more prevalent in people born in the 70s and people who lived in first-tier cities. 

Elements of choosing home decoration companies in China

Reputation, customer services, the quality of materials, and price-performance ratio are the core elements that consumers will take account of when selecting home decoration companies in China. Customers in the Chinese home decor market are more rational, and people will also consider the various aspects of home improvement companies like whether the products are eco-friendly, whether the designs are reasonable, etc.   However, there is a lot of negative feedback toward home decoration companies in China. According to a survey, consumers are unsatisfied or concern with the home improvement companies in the following contents: the quality of materials and work, extra charge, hidden contract traps, construction delay.  

The rise of the Chinese e-commerce home-decorating market

[Data Source: 2019 Tencent market research and industry analysis, “The type of decoration company used in the process of home decoration”]

Although the traditional home-decorating is still the mainstream, the Chinese e-commerce home-decorating market is booming. Among the total consumers surveyed, 77% of them choose the traditional home decoration, while 9% of them choose e-commerce home decoration, and the rest of them adopt two types of decoration more or less evenly. Nevertheless, it seems that e-commerce home decoration is more favored by people born in the 90s and people who live in first-tier cites.    Consumers list convenient purchasing experience, high price-performance ratio, many varieties, discounts and home delivery as top 5 advantages of Chinese e-commerce home-decorating. And the primary cons are poor information transparency, bad after-sale service and non-guaranteed quality of materials.

High acceptance of advertisements for home decoration

Due to the demand for information, home improvement advertisements are generally accepted by Chinese consumers. In a survey question about the response of online ads for home improvement, around half of people who are in demand of decorating home state that they will read the ads and look through the introduction of products, while over 30% of them will click the link and favorite the ads page. For the online advertising channels, ads on digital social medial are most popular, and over 30% of people can accept ads in WeChat moments, WeChat public accounts, news APPs like Tencent News and Toutiao (TopBuzz) and short-video APPs like Tencent Video and Tiktok. So, in order to reach their target customers, merchants can take advantage of multiple channels to advertise.  

Promotion strategy of home decoration companies in China

With the trend that millennials are becoming the primary consumers, home decoration companies and suppliers should know and understand the needs of these customers to win the market. Tips for marketing to millennial home-owners First, based on consumer insight, build segmentation strategies targeted at different customer groups. Those with family may be more concerned about safety, while those in high-tier cities may be more concerned with appearance. Second, monitor and optimize the outcome of ad serving by leveraging the power of digital platforms.Third, integrate online and offline channels to promote effectively. Most millenials are avid users of social media platforms like WeChat.  Last, focus on new core demand like decoration style, eco-protection, smart home and price-performance ratio to satisfy the needs of different customer segmentation.

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

Listen to China Paradigm on Apple Podcast

This article The home decor market in China: catering to a new generation of home owners is the first one to appear on Daxue Consulting - Market Research China.

The total import of seafood in the first quarter of 2020 was 22.8 billion yuan. Import in the first quarter of 2020 fell by 27% from the fourth quarter of 2019. It is the lowest value of import volume since 2018.

    
[Data source: Statista, ‘China’s import of seafood’]

The COVID-19 outbreak in China came to public attention in January. It was announced during the Lunar New Year, which is also the traditional peak season for consumption. Before the outbreak, China’s seafood import had achieved consecutive growth during 11 quarters. However after the news broke, the seafood market in China experienced a decline in import. 

On the one hand, COVID-19 outbreak impacts the consumption of seafood in China. By the first quarter of 2020, consumption was almost stagnant. On the other hand, the import and transportation of Chinese seafood was blocked.

China also saw the decline in export of seafood products due to lockdown measures in other Asian countries.

[Data Source: General Administration of Customs of China, ‘Growth in exports of seafood from China’]

Fish industries are suffering from the COVID-19 outbreak

Producers of freshwater species are taking a big hit in the fallout from China’s coronavirus outbreak. They cannot harvest lot of fish and shrimp, but they still need to feed them. It erodes the financial wellbeing of producers.

Particularly hard hit was the crayfish industry. The peak season for crayfish consumption starts around May and lasts through the summer. The epicenter of the outbreak, Hubei province, is also the largest production area for crayfish in China.

Due to isolation, all key tilapia processing factories on Hainan Island faced ongoing labor shortages. Fish factories are operating at average of just 25 to 40 percent of normal output. 

The Seafood market in China after COVID-19

Although China’s seafood import slowed in 2020, consumption has a potential to grow.  

The coronavirus epidemic in 2020 will have a serious impact on the Chinese and global seafood supply chain. It will also have an impact on both supply and demand of seafood in countries. Entering the middle of the second quarter, there has been no obvious improvement in catering consumption. Therefore, there is a probability of China’s seafood import growth to decline this year.

However, the Chinese market has recovered from COVID-19 earlier than other countries. There is a hope that once the supply chain of seafood will get back to normal, the industry will function normally.

Short-term effect of COVID-19 outbreak on the seafood market in China:

The epidemic control measures interrupted logistics and seafood catering companies had to cancel a lot of orders. Seafood products processing company’s halted operations, and the market transaction volume was extremely low. This has led to serious backlogs for farmers and middle-level distributors. It directly affected the income of fish farmers and distributors at all levels. Many small market participants could not afford the losses caused by the epidemic and went bankrupt.

In terms of international trade, the epidemic has caused panic in the global seafood products industry. Due to concerns that the epidemic will affect China’s demand for import of seafood products, the prices of foreign seafood have fallen steeply. In terms of exports, many countries have introduced entry controls. Under the circumstances that China has not completely controlled the epidemic, short-term forecast of seafood export is also not optimistic.

Mid-term effect

After the epidemic is over, experts expect that the public will experience retaliatory consumption. After the news emerged that the source of the virus could be the seafood market in Wuhan, the Chinese became more suspicious of seafood. However, gradually the demand for seafood is returning to normal, as scientists have not yet figured out which animal the infection occurred from.

[Source: Baidu Index, search frequency for ‘seafood’]

In addition, 2020 is the ending year of China’s “Thirteenth Five-Year Plan”. According to this, China’s total output of target fishery products in 2020 should be 66 million tons. 

Long-term effect

With the improvement of people’s income level and the development of logistics, China’s seafood products consumer market will maintain long-term growth.

In addition, compared with wild terrestrial animals, wild seafood products are healthier. Since China has gradually issued policies and laws prohibiting wild animals trading, the demand for seafood products may increase. Experts claim that the market scale of aquaculture products in the future will be even broader.

The Chinese seafood market before COVID-19

In the big picture, the Chinese seafood market is booming. China has a long history of eating seafood, especially for coastal residents, seafood has always been an indispensable component of a complete dining-table. After China’s reform and opening-up, an active import of foreign seafood began. Back then, imported seafood was considered novel and luxury. However, seafood is now accessible to the Chinese mass market. With China’s economy growing and people’s quality of life elevating, the seafood market has expanded continuously, e.g. the sales quantity of processed seafood, including chilled, frozen and shelf-stable seafood, shows a steady growth since 2012.

The credit of Chinese seafood market’s growth can go to rising per capita disposable income in China and improved life quality, both in rural and urban areas. In 2017, the disposable income of national residents has achieved a 7.3% year-on-year growth. This means, more consumers are able to afford seafood, even in inland rural areas.

 

Chinese seafood consumers want it all: Health, Freshness and Taste

China has a rich catering culture and a long food-therapy history, Chinese people deeply believe in the relation of what they put in mouth and their health condition. In recent years, environmental pollution and food safety have been seen as crucial issues, imported seafood is often considered more nutritious and safer due to the water quality and stricter quality control. Consumers are becoming more and more aware of the health benefits of seafood, such as the high amount of unsaturated fatty acids.

“Besides pork and egg, seafood has become an important source of protein for Chinese consumers, which influences the consumption structure in China”, says Mike Vinkenborg, project leader of Daxue consulting.

Although the health factor plays an important role of Chinese dining table, taste cannot be compromised. As we can see from the comments on Chinese popular e-commerce platforms, positive feedback coming from seafood buyers mainly focuses on deliciousness and freshness, while negative feedback is usually about safety issues.

Brands capitalize on preference for freshness and flavor when naming their brand

Naming brands or products in China is a tricky, yet crucial part of a market-entry since Chinese people attach great importance to names. Not only the pronunciation but also the chosen characters have to be taken into consideration for brand naming. Looking at the Chinese seafood brands’ naming, most seafood vendors try to emphasize freshness by using Chinese words “鲜 (meaning fresh)” and/or “生 (meaning raw/living)”, as well as to imply deliciousness by using words like “味(taste)” and/or “香 (good smelling)”.

Source: daxue consulting, brand name’s on China’s seafood market

Chinese consumers are hungry for imported seafood

China has been one of the most important seafood markets in the world, its market demands of imported seafood have reached 7.6 million tons in 2017. In 2017, Russia is the largest exporter of seafood to the Chinese market. USA, Canada, New Zealand, and Norway are also important sources for importing seafood in China. Imported products mainly include shrimp, salmon, crab. Based on the information from e-commerce platforms, most popular imported seafood are frozen products. The top sellers’ prices are relatively low among all segments of imported seafood on JD. During important festivals, seafood has been one of the main products purchased online. For example, 38% of food sales on Fresh.jd.com came from seafood during Chinese New Year in 2018.

 

The most related keywords of “salmon” on Baidu Index mainly consist of “the way of making salmon”, “Norwegian salmon”, “price” and other saltwater fish like “trout” and “grouper”.

The most related keywords of “lobster” are “crayfish”, “Australian Lobster”, “lobster breeding”, “Australian” and “how to cook lobsters”.

Baidu is the number one search engine in China. More than ¾ of the total search is made by Baidu. Baidu index collects and analyzes the statistical data of searching behavior, which reveals the market trend.

Qualities of the Chinese seafood market that brands should consider

The Chinese seafood market is highly seasonal and festival-dependent

As we can see on Baidu index, the search frequency of both “saltwater fish” and “saltwater shrimp” went significantly high during the periods of Chinese New Year (normally at the end of Jan. to the beginning of Feb.). And again, search frequency grew enormously every year in the fall season, which is considered by the Chinese as a good season to eat fresh fish/shrimps. Due to the Chinese national day, which is on the 1^st of October, the search frequency goes very high every time at the beginning of October. The whole country will have a 7-day-holiday at this period of time, and seafood producers may also prepare special gift boxes with living or frozen seafood inside so that the Chinese consumers can just grab it in an online or offline shop and bring as a present when visiting family or friends.

 

 

Chinese seafood is as peculiar as it is delicious

Many kinds of seafood which Chinese consumers love are not common in other countries and even considered as peculiar, like sea cucumber, fish balls, turtle and eel. However, even though consumers from other countries don’t purchase certain kinds of seafood, it is still an opportunity for international seafood exporters. For example, there are lots of dried sea cucumber from the U.S., Canada and New Zealand being sold at relatively high prices, China has a long history eating sea cucumbers and believe they have a lot of health benefits. Also, seafood snacks are quite common in China, e.g. processed dried squids or fish, which suit many Chinese consumers’ taste better and considered as a healthier option compared to other snack options like candy or chocolates.

Seafood has different presentation and distribution channels in China

As mentioned before, Chinese consumers attach great importance to the freshness of the seafood. That’s why purchasing living seafood on a Chinese traditional food market is still common, especially for the older generation. Meanwhile, many retailers and restaurants present their seafood in glass tanks or on the ice, no matter if it is fish, crabs or turtles, in order to show the freshness of their products.

By looking at the Chinese catering industry structure, we see hot pot contributing 22% of the total revenue of China’s catering industry, following by Buffet with 12% and barbecue as well as Japanese cuisine both with 5%. For all these types of Chinese cuisines, seafood plays a significant role, which provides huge opportunities for imported seafood. For example, a major proportion of imported salmon on Chinese seafood market are not consumed at home, but on the catering market. China has no long history of consuming salmon, however, in the last decades, Japanese cuisine has become very popular, especially among Chinese millennials. Sushi and Sashimi (Japanese raw fish) are being widely accepted, raw salmon is even on the menu of many traditional Chinese restaurants as an appetizer.

 

 

 

Despite traditional offline retail channels and catering market, Chines e-commerce platforms can also not be ignored. Besides well-known platforms like Taobao and JD, many fresh food platforms have been developed and are achieving great success, e.g. the sales value of seafood has entered the top 3 on FFresh.jd.com in2017. For domestics and international seafood brands, dedicated websites are also important distribution channels. “Most popular seafood brands on the Chinese Market are selling their products on main e-commerce platforms. Fish dominates the seafood consumption in China for its rich variety and affordable price”, says Vinkenborg.

 

On Tmall/Taobao, frozen shrimp is the most popular product among all categories of saltwater shrimp and abalone is the most popular products among all categories of shellfish. There are many imported abalones being sold from different areas like Australia, South Africa, and New Zealand. According to Vinkenborg: “Argentinian shrimp remains the most popular imported seafood in China, salmon and crab also perform well in terms of online sales.”

A new blended retail ecosystem offers opportunities for fresh seafood distribution

New-retail is a retail ecosystem that blends online and offline channels in a unified way. Due to the rise of e-commerce, traditional retail businesses have experienced downturns. A number of foreign retailers have encountered difficulties in China, including Korea’s Lotte Mart, the US’ Walmart, and France’s Carrefour. But the growth of online retail sales will slow down as physical retail still dominates consumption, especially in the seafood section. Although many seafood products can be bought online, Chinese consumers’ buying habits make them prefer fresh seafood which they can see in a tank or on ice. New-retail offers good opportunities for the distribution of seafood on the Chinese market.

The Chinese seafood market meets all requirements for new-retail thanks to its strong consumer base, increasing purchasing power, preference for novel and luxury shopping experiences, and the widespread use of mobile payment.

Pioneer example of the new-retail model while selling seafood in China: Hema Xiansheng

Hema Xiansheng (盒马鲜生) owned by Alibaba is a combination of a supermarket, restaurant, seafood market, and mobile application. According to Daniel Zhang, Alibaba Group CEO: “Hema supermarket is what you get when you imagine a seamless blend of the online and offline shopping experience.” Chinese consumers can order seafood on Hema mobile App, which will be delivered within 2 hours to wished address. Consumers can also go to Hema supermarket to purchase grocery and pick up fresh seafood, which can be prepared and served directly in the dining area of Hema supermarket.

Now is the ideal time for foreign brands to enter the Chinese seafood market

To sum up, the booming Chinese seafood market is offering huge opportunities for international seafood exporters. This is supported by the following chain of events: 1) the rising disposable income, the life quality of Chinese consumers has been significantly improved and can afford seafood as a protein source. 2) Because of the improving quality of life, Chinese consumers are pickier about the health, freshness, and taste of seafood. 3) Seafood from overseas is considered safer because of the higher water quality and stricter control standards.

Yet international seafood exporters should pay attention to and take advantage of the particularities of the Chinese seafood market. For example, the climaxes of the Chinese seafood market is dependent on seasons and festivals; the sales volume reaches the peak during Chinese New Year, followed by Chinese national day. There is also much peculiar seafood like sea cucumbers and eel which are not consumed in the west also offer opportunities for seafood exporters. Last but not least, the different distribution channels of Chinese seafood market should also be taken into consideration. For instance, the catering industry is a crucial distribution channel for China’s seafood market. Popular types of cuisines like Hotpot, buffet and Japanese food all contribute an enormous percentage of seafood consuming amount.

Authors: Chencen Zhu & Valeriia Mikhailova

Daxue Consulting can help with the analysis of any market in China, including the seafood industry

Daxue Consulting, as a market research company, provides the adapted data in one of the most challenging markets in the world, China.  We have a wide range of services to deliver competitive market research. To know more about the F&B market in general or a specific industry in China, do not hesitate to contact our project managers at dx@daxueconsulting.com.

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

Listen to China Paradigm on Apple Podcast

This article Outlook of the seafood market in China after COVID-19 is the first one to appear on Daxue Consulting - Market Research China.

[Data Source: Qianzhan “Annual Sales Revenue of the office furniture market in China”]

Main competitors in the office furniture market in China

After the reform and the opening up, numerous brands appeared in the office furniture market in China. Both domestic and foreign office furniture companies play an important part in China’s office furniture market.

The office furniture market in China shows regionalism

China is one of the largest production and consumption countries of office furniture. In 2018, the number of office furniture enterprises in China was over 1,100. Office furniture enterprises are mainly in five areas-Northeast district, Yangtze River Delta district, West district, Bohai Bay Rim district, and Pearl River Delta district. Northeast industrial district, Yangtze River Delta industrial district, and Pearl Delta industrial district are mainly on target to export. The other two industrial districts focus on the domestic market.

China Brand selected the Top 10 office furniture brands in China

[Source: China Brand “Top 10 Office Furniture Brands in China”]

High-end foreign office furniture brands are also popular in the office furniture market in China.

Foreign brands in the furniture industry pay more attention to the integration of the office environment. International brands always pursue freedom, privacy, and easy use. Thus, these brands are popular among large enterprises which desire to provide a comfortable work environment for their employees. Herman Miller, a famous American office furniture brand, created the “action office”, still widely adopted by many companies nowadays. The Embody Chair, one of its products, combines the body mechanics perfectly and even appeared in companies’ recruitment advertisement.

New vibrant trends in the office furniture market in China

In the past, Chinese office furniture was usually mahogany and archaistic. Even though such furniture has a high value for collection, it is not comfortable in the workplace. With the construction of smart buildings, there is more need for modern office furniture in China.

[Source: Pixabay and daxue consulting “Office Furniture Preference Change in China”]

Customized office furniture is becoming popular in China.

Currently, more companies choose customized office furniture, as it can adapt to the working environment. Customized office furniture usually combines physical mechanics and health management to make users comfortable. In April 2020, Luo Yonghao sold 5 million ergonomic chairs in one live-stream. Customized office furniture can also utilize space effectively. Meanwhile, companies are free to choose their preferred materials and style to show their companies’ unique features. Particularly, the 80’s and 90’s generation in China like to use special symbols to represent their uniqueness.

[Source: Weibo “5 million ergonomic chairs were sold out”]

Information systems and personalized production technology are important for customized office furniture as well. In recent years, China’s customized office furniture gradually reduced its dependence on overseas technology. In the past, German’s HOMAG used to monopolize the production of the equipment that produces customized office furniture in China. Now, domestic brands are leading the equipment production. Thus, more office furniture companies in China started to buy domestic equipment, triggering the boom of the customized office furniture in China.

Green office furniture is becoming the mainstream in China’s offices.

Following the trend of green consumption in China, consumers are becoming aware of potential environmental threats of office furniture. Office furniture with heavy metal and BTEX is not environmentally friendly and harmful to people’s health. Thus, consumers pay more attention to green office furniture. As a major office furniture exporter, China’s office furniture producers are closer to international standards. Meanwhile, China’s government issued policies to drive green production. Once companies are reported to disobey the laws, their brand reputation would be destroyed.

Office furniture’s E-commerce era in China

E-commerce is growing rapidly in China. The office furniture market cannot avoid utilizing the internet to broaden their sale channels. According to Guanghuijiaju, Linshimuye’s sales revenue broke 110 million yuan in 2013’s double 11. Online stores can integrate with offline stores. On TMall, consumers can find over 24 thousand pieces of office furniture. Many office furniture pieces’ monthly sales can surpass a thousand pieces. Not only do online channels provide B2C services to complement retail, but it also benefits B2B office furniture sales. On Alibaba, there are more than 40 thousand pieces of office furniture selling for wholesalers.

[Source: TMall “Consumers can find numerous office furniture in TMall and many sell well”]

[Source: Alibaba “Wholesalers can find numerous office furniture in Alibaba”]

Issues in the office furniture market in China influence its development.

China’s office furniture market achieved great progress in the past decades. The profits and the number of the office furniture enterprises rose sharply. . However, there are still some issues that block the development of the office furniture market.

Homogenization is severe in the office furniture market in China

Many kinds of office furniture are available in the market. Some of them have similar designs, which make it hard to make decisions. When well-known brands spend much effort in designing one fine piece of office furniture, other brands copy it without breaking a sweat. In 2016 at the Guangzhou Furniture Exhibition, Tenglong Furniture was accused of copying Makorhome’s products, according to zhuangyi.com. It also causes designers to lose enthusiasm to innovate. Even though China’s government introduced laws to restrain such action, similar phenomena still occur. The problem of counterfeiting in China is widespread across industries, especially luxury.

The office furniture market in China is short of brand marketing

Although various brands exist in the office furniture market in China, the market does not build household names. Most of the top 10 office furniture brands are limited in certain regions and lack of awareness in the countrywide market. Few office furniture brands in China are able to come into the public. Meanwhile, some reports unveiled that their marketing strategies failed to highlight their products. They blindly imitated other companies’ behaviors. For example, one company invites a star to be the representative. Other brands may follow their methods while not considering the links between their products and stars.

The office furniture market in China has potential but is challenging.

The office furniture market in China gradually built into an industrial-scale business through several decades of evolution. Yet the market still contains many issues, the market is improving. In the long term, due to the booming need, the office furniture market in China still has potential.

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

Listen to China Paradigm on Apple Podcast

This article Office furniture market in China: Industry Report is the first one to appear on Daxue Consulting - Market Research China.

When choosing a product once called “an armor against pleasure, and a cobweb against infection,” people tend to go for trusted brands. That is why well-known condoms such as Durex and Okamoto have such huge market shares. Ever since it dntered the Chinese market in 1998, Durex China has become the top condom company. It occupies over 40% market share in the Chinese condom market now. On the other hand, the condom market and the adult toys market in China still have plenty of room for growth. According to the “2017-2022 China Sex Toys Industry Development Prospect Survey and Investment and Financing Strategy Research Report” released by the China Business Research Institute, China’s condom sales will increase from $ 1.9 billion in 2015 to $ 5.2 billion in 2024.

Durex and its products

Durex is the trademarked name for a range of condoms that used to be made by British company SSL International. This company was sold to Reckitt Benckiser in July 2010. The name, which the London Rubber Company trademarked in 1929, is a portmanteau of “Durability, Reliability, and Excellence”, though some people mistake it as being “Durable Latex”. Durex condoms represent around one-quarter of the global market for prophylactic sheaths, manufacturing around one billion units per year in 17 factories worldwide. Durex condoms are sold in more than 150 countries and are the most popular brand of condoms in over 40 countries. Durex’s range includes condoms, sex toys and lubricants, and focuses on reaching new consumers in innovative ways.

Digital marketing strategies of Durex in China

Durex succeeds in the Chinese condom market by leveraging Chinese social media. Relying on the awareness gained on social media, Durex in China has become the top 1 brand in the Chinese condom market since 2011. What can other brands learn from Durex China’s successful e-marketing strategies?

Durex’s legendary Weibo marketing

Online buzz marketing

Since Durex opened its official Weibo account in 2010, there has been a lot of successful Weibo marketing cases from Durex China. . Durex marketing team is good at creating unique images and copywriting, which combines Durex product and trending topics. For example, at the time of DIDI-Uber merger (DIDI, the Chinese ride-hailing giant, merged its rival Uber China after a bitter fight in 2018), Durex split and reorganized the English names of the two brands to create a new word “DUDU”. “DUDU” is an acronym for Didi and Uber and can also be regarded as the abbreviation of “DO YOU”, which is related to the hot topic and connected to the character of Durex’s products.

Durex often posts creative posts on Weibo for various festivals. For instance, Durex leveraged the shape of its condom product and that of Christmas stockings to design an impressive Christmas Eve poster. These creative, humorous and unusual posts of Durex in China often cause a sensation and attract millions of retweets on Weibo, which helps Durex reach its target customers, those youthful, open and modern Chinese demographic.

Interactive online marketing

[Source: Durex Weibo, “an interactive fan topic on Durex’s Weibo”]

One of the secrets of Durex’s successful Weibo marketing is the high level of fan interaction. For example, topic #杜绝胡说# is an interactive fan topic released by Durex China Weibo account at around 10 o’clock every night. It has a relatively fixed push time, a fixed label, and a description “Do you know Dudu? Do you want to know more about him/her? Come and talk to Dudu ~ ” to invite fans to share their opinions on some hot topics.

In addition, Durex always responds to the comments under its posts timely with its playful and entertaining tone of voice, which makes the brand get closer to its fans and encourage more their audience to engage. Also, Durex takes advantage of rewarded interaction to motivate the participation of their fans, like delivering its products as prizes to Weibo users who retweet Durex’s posts. This not only excites their fans and attracts more participators, but also promotes its products. Through high-quality interaction, Durex can connect with its users closely and gain more loyal followers.

Other digital marketing channels

[Source: Durex Weibo, “Durex version of Tetris”]

Apart from Weibo, Durex in China also leverages WeChat, a messaging and social media app with over 1 billion monthly users, and Tik Tok, a hot app for making and sharing short videos, to advertise and attract a larger customer base. On WeChat, Durex launched an HTML5 games  from time to time to attract users. For example, Durex designed a “Durex version of Tetris”, making the connection with the game and the brand by creating a graphs and game guide with sexual undertones. Some innovative H5 games created by Durex in China attract millions of WeChat users. On Tik Tok, Durex China creates several creative short videos, attracting 299.2 thousand followers and receiving 1.7 million likes within only ten months.   

Durex is known in China for creating innovative, humorous and innuendoes advertising by leveraging social media platforms. From the above examples, we know that all marketing campaigns of Durex in China are customers-centered, and this marketing strategy can be recognized as reverse marketing, which emphasizes servicing customers instead of just promoting and advertising the brand’s products. Durex China puts customers first, reversely creating the content that users like. It creatively links trending topics or hot issues and the Durex brand to produce specific content for target customers. This reverse marketing strategy enables Durex to generate awareness across various media platforms and reach a board customer base.

Under the spread of coronavirus: The development of local brands poses a threat to Durex China

The global spread of the coronavirus leads to the shortage of condoms because of the shutdown of large producers. On the other hand, people are emptying shelves to stock up condoms during the outbreak of coronavirus. The gap between demand and supply brings both challenges and opportunities for condom brands. For example, the domestic condom brand Jissbon outperforms in 2020, sharing a similar market share with Durex on the Tianmao platform, one of the biggest Chinese online shopping platforms. Currently, the sales of the top three domestic brands occupy 80% of the Chinese condom market in total, and the penetration rate is also close to that of developed countries.

As Chinese factories have resumed working since late February, domestic condom brands have seized the market opportunities and squeezed the market share of Durex China, posing a threat to Durex. The epidemic could have an impact on global production in the short term, thereby triggering changes in the Chinese condom market structure.

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

Listen to China Paradigm on Apple Podcast

This article Durex in China and its clever e-marketing is the first one to appear on Daxue Consulting - Market Research China.

History of Volkswagen in China

On March 28^th, 1937, ‘Gesellschaft zur Vorbereitung des Deutschen Volkswagens GmbH’ was founded in Germany. Later on Sep 16^th, 1938, it got a name ‘Volkswagenwerk GmbH’. It is now one of the world’s largest international automobile companies, which produces and sells automobiles throughout the world. Today, the German company owns several world-known car brands such as Audi, Skoda, Lamborghini, Bentley, Porsche, Bugatti, Seat, and Scania.

In 1978 Volkswagen (VW) became one of the first international automobile manufacturers to enter the Chinese market. At that time, the development of the Chinese automotive industry was still in its infancy. In October 1984, Volkswagen Automotive Co., Ltd. established as the first Volkswagen Group joint venture in China. Today, the Group has 16 representative companies in the country, undertaking parts delivery and service provision for both customers and industry in addition to vehicle production and import. The Chinese market is one of the main markets of the Volkswagen Group. Operations of Volkswagen in China include the production, sales and services of whole cars, parts and components, engines and transmission systems.

China is the new center of power

The Chinese auto market is a special one in several respects – not only for its size and rapid growth. Government incentives and regulations play a role in controlling sales. For example, in 2015 the Chinese authorities temporarily cut taxes on cars in half with displacements of up to to stimulate sales for this class of vehicle.

Among the German carmakers, the Volkswagen Group has been a pioneer on the Chinese market. China is the biggest single market for the Volkswagen Group. Volkswagen in China produces and sells Volkswagen (e.g. Polo, Touran, Passat) and ŠKODA (e.g. Fabia, Superb, Kodiaq among others) brand models. Additionally, there are vehicles purposefully designed for China such as the Teramont SUV and the Phideon luxury sedan.

[Data Source: Volkswagen Group report 2018, ‘VW volume in deliveries to customers’]

Volkswagen in China: Demand for SUVs continues to grow

China’s automobile market is undergoing a period of slow growth as China’s economic growth slows down slowly recovers from the COVID-19 pandemic. However, the high growth rate of the SUV (Sport Utility Vehicle) market has attracted the attention of many automakers. From 2013 to 2017, SUV sales grew rapidly in China, with the growth rate reaching 27%. The share of SUV in the Chinese market continues to grow.

[Data Source: Statista, ‘SUVs share in China’s passenger car sales from 2014-2018’]

Teramont and Phideon reflect the major trends on the Chinese car market. The Teramont answers the growing demand for SUV-class vehicles. Around four in ten newly registered cars in China are currently SUVs, and that figure is rising. The Volkswagen brand alone will have more than ten models on the SUV market by the end of 2020. The year 2018 saw the launch of the Tharu, Tayron, Touareg and T-Roc. In 2021 Volkswagen plans to invest more than $4.4 billion to add more SUVs to its lineup.

Volkswagen in the battle for China’s green vehicles market

China has an important role as the world’s trendsetter and largest market for e-mobility. It alone accounted for 60 percent of worldwide demand for electric cars and plug-in hybrids in 2018. In 2018 around one million passenger cars with electric drives found buyers in China. That figure rose by 50 percent in 2019.

[Data Source: Business insider, ‘Electric vehicle sales in China forecast’]

The government is giving much attention to the field of electric mobility in China. By 2020 the fleet average fuel consumption is supposed to lie at five liters per 100 kilometers. To further advance e-mobility, the Chinese government introduced an electric car quota. Manufacturers that sell more than 30,000 cars a year in China must ensure that 10% of them are electric. All cars in the quota category receive credit points.

Volkswagen plans to invest in EV in China

The Volkswagen Group wants to lead the EV trend with a model campaign. By 2020 Volkswagen in China seek to bring 30 new fully electric and hybrid vehicles. By 2025 sales of electric models should reach 1.5 million units. Volkswagen China plans to invest more than US$12 billion in building and developing new-energy vehicles. It is the latest sign that competition for green cars in the world’s largest auto market will escalate. In 2019 Volkswagen claimed that it will introduce a new-energy vehicle portfolio of 40 locally produced models in China by 2025. Volkswagen in China has also teamed up with Anhui Jianghuai Automobile Group for a third joint venture. The joint venture will help the company to reach its goal of setting up a portfolio of pure battery cars.

Volkswagen – auto market leader in China

According to Volkswagen financial report 2019, the total profit of Volkswagen in the Chinese market was EUR 3.33 billion. By 2018 the Volkswagen Group built seven new plants in China. By then, the annual production capacity rose from 2.6 million to over 4 million. Volkswagen has the largest market share in the Chinese market during many years. In 2019 it was 14.6%.

[Data Source: carsalesbase.com, ‘China’s auto market 2019’, VW has the largest market share in China’s auto market]

Volkswagen in Shanghai

Volkswagen entrance into China formally began in March 1985, when it established its first facility in Shanghai (上海). Shanghai Volkswagen is a jointly-owned enterprise, with China and Germany each holding half of the initial investment. It is now the biggest modern automobile production base in China. Under the two major brands, Volkswagen and Skoda, it is covering markets of A0, A, B and SUV.  Despite its success, it also faces competition from other foreign automobile manufacturers. For example, Santana Motor, a Spanish car manufacturer, has experienced country-wide success since it entered the country nearly 30 years ago in 1984.

Volkswagen in Changchun

With the success of Shanghai Volkswagen, the company turned its eyes to northern China and founded FAW-Volkswagen in Changchun (长春) in the Jilin(吉林) Province. By 2019, the company had more than 100,000 employees working there. After the establishment of its facility in Changchun (长春), the company created another two branches in China: one in Chengdu (成都) and one in Foshan (佛山). The Changchun plant of Volkswagen FAW Engine is an important powertrain production base for the Volkswagen Group. The annual production capacity is 300,000 units of the EA 888 engine.

Volkswagen in Tianjin

To keep up with demand for both SUVs and electric cars, Volkswagen in China opened three new factories in 2018: in Qingdao, Foshan and Tianjin. Tianjin plant produces electric vehicles based on the MQB platform. The factory in Tianjin also make high numbers of new models from FAW-Volkswagen, especially SUVs. Volkswagen Tianjin Plant will produce SUV models for both the Volkswagen brand and the Audi brand. The facility’s daily production capacity will be 1,200 units, with an annual production capacity of 300,000 units.

As a green factory, the new Tianjin plant will introduce a number of state-of-the-art sustainability measures. It includes world-leading volatile organic compounds (VOC) emissions control technologies and solar photovoltaic technologies. The facility will also focus on reusing water, with a reuse rate of 98%. By recycling and utilizing the waste water, the Tianjin plant will save up to 300,000 tons of water annually.

The location of the new plant near the Volkswagen Platform Tianjin Branch and Volkswagen Automatic Transmission Plant Tianjin will reduce delivery times, resulting in lower supply costs and CO2 emissions in the supply chain. 

[Source: Volkswagen Group, ‘Volkswagen group in China’]

Competition in the Chinese auto market

Tesla and Volkswagen: EV price competition

Manufacturers such as Tesla and Volkswagen are ramping up operations in China to nab a piece of growing EV market. Volkswagen is readying two Chinese factories to build electric cars in 2020. The Chinese plants will have a production capacity of 600,000 vehicles. This will enable Volkswagen to leapfrog Tesla and make China the key battleground.

Tesla in China is still trying to reach its goal of making more than 500,000 cars a year by building a factory in Shanghai. VW relies on an established workforce in two of its plants in Anting and Foshun to build zero-emission cars.

Tesla’s cars have a sophisticated software algorithm to control how much electricity goes to the electric motor, air conditioning, seat heaters. Volkswagen China  uses price and massive economies of scale to gain a competitive advantage.Volkswagen’s lower price comes from the car maker’s ability to place large orders.

[Data Source: Cleantechnica, ‘China Electric Vehicle Sales April 2019’, VW EV car sales surpass Tesla’s EV car sales in China’]

Battle between GM and VW

General Motors run of strong sales in China recorded its highest September sales result ever. In 2017, GM’s sales jumped 6.3% year over year as key rivals lost some ground. General Motors’ strongest non-Chinese competitor in the market is Volkswagen Group.  Despite posting a similarly strong with deliveries rising 7.5%, VW’s volume was just around 315,000 vehicles in 2017. The driving force for GM’s gains was SUV sales. From 2018 Volkswagen in China continues to outperform General Motors, as GM posted another double-digit decline in volume. 

[Data Source: Volkswagen Group, General Motors reports, ‘VW and GM annual sales 2017-2019’]

COVID-19 impact on Volkswagen in China

The COVID-19 outbreak has exposed several challenges for the automotive sector in China. 80 percent of automotive and related companies report that coronavirus will have a direct impact on their 2020 revenues. 78 percent of companies do not have enough staff to run a full production line. In February 2020 China’s car sales plunged by 18 percent. Automotive plants in China remained closed until mid-March 2020. 

[Data Source: Bloomberg, ‘Change in China’s auto sales’, Sales drop in the Chinese auto market due to COVID-19 impact’]

Volkswagen in the Chinese market saw dropped car sales by 23% in the January to March 2020 period. The decline in sales in April 2020 was between 15% and 20% from a year earlier, while the drop in March, at the height of the pandemic, had been 40%.

Volkswagen factory in Changsha resumed operations in March, putting all but one of VW Group’s 33 car and component plants in China back in business. Volkswagen claimed showroom traffic in the end of March had rebounded to year-earlier levels. However, in 2020, Volkswagen in the Chinese market expects a decline of 3-15%.

Author: Valeriia Mikhailova

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

Listen to China Paradigm on Apple Podcast

This article Volkswagen in China: Market analysis of the nation’s #1 car brand is the first one to appear on Daxue Consulting - Market Research China.