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.

Founded in 1946 by French designer Christian Dior, Dior is one of most famous fashion luxury brands in the world. Since its founding at Avenue Montaigne in Paris, Dior has always been synonymous with magnificence and elegance. The first womenswear collection by Christian Dior in 1947 caused a global sensation while leading the “New look” revolution. Until now, whether in fashion, cosmetics or other, Christian Dior has always been at the top of the fashion luxury industry. As China makes up 40% of the global luxury market, Dior also considers China as a major market. At the same time, Dior in China approaches Chinese luxury customers from both product side and creative side.

Source: Dior.com – The new look of Christian Dior

The fragrance, makeup and skincare products are under Parfums Christian Dior division has more than 300 points of sales at the moment in China.

Parfums Christian Dior

From year 1973 on, Dior has had its own R&D center. Over 200 specialists, biologists, pharmacologists and researchers cooperate with over 20 R&D centers in the world’s top universities and science institutes to develop the best products. Dior has always put tactile impression of products as an important factor. All its products bring a perfect combination of technology and joy.

The beauty division (Parfums Christian Dior division) of Christian Dior maintained strong growth, driven by the success of its classic perfume, makeup and high-end skincare lines. Perfume such as J ‘Adore, Miss Dior and Sauvage are big success in the market. Cosmetics, including Rouge Dior and Ultra Lipstick collection lead a trend among customers. Also, the high-end skincare products are growing well, especially in the Asian market. Dior is the #2 luxury brand in China’s perfume market.

Dior Pink City: Dior in China plays with pop-up stores

Source: Sohu.com – Dior Pink City is coming to Shanghai. A beautiful Pop-Up store in a fashion-savvy Chinese city.

After launching the Dior Pink City pop-up store in Macau, the pop-up store came to Shanghai in July 2019. As the first station in Mainland China, Dior made five themed rooms in the pink city, including Dior pink flower shop, Dior pink library, Dior pink urban spa, Dior pink music hall and Dior pink café.

In the Dior Pink City pop-up store, consumers had the chance to experience personalized fragrance trial services, get bouquets of elegant flowers, and relax and get massages in the spa area, experience High-end skincare Dior Prestige, print exclusive photos and finally get small surprises crafted by Dior.

Dior in China entered E-commerce on Tmall

Tmall, owned by Alibaba group, now offers more than 3,000 beauty brands and the proportion of well-known brands the platform to launch their online stores. The big name brands which have official stores on Tmall rose from 555 in 2015 to 84% in 2018. According to Alibaba, Over 3 million women buy at least five tubes of lipstick on Tmall each year. Additionally, affected by the COVID-19 epidemic, COVID-19 pandemic, luxury and fashion brands are paying more attention to Chinese e-commerce platforms.  Just after launching the brand-new Bobby handbag collection, Dior in China had new, strategic moves.

On June 2020, Dior launched its own official Tmall store, right before the Chinese online shopping carnival 6.18. However, only products of skincare, cosmetics and perfumes were available on the Tmall store. So far, Dior has already gained 335k fans within one month.

Dior collaborated with Liu Yuxin

Source: qianlong.com -celebrity live broadcast on Ju Huasuan came to next level

During the Covid-19 quarantine, the Chinese TV show ‘Youth with you II’ has been extremely popular among Chinese, especially among young Chinese consumers. The TV show aimed to select 9 girls to form a girl music band. Liu Yuxin won the first prize for her impressive performance and high popularity. Dior announced collaboration with Liu Yuxin on skincare collection ‘Capture Totale’. The live broadcast on Ju Huasuan (a group buying website) with Jing Tian (Chinese actress, also official ambassador of Capture Totale) helped Dior in China received more than 3k orders and over 2.5 million RMB revenue.

THE9, the girl music group that Liu Yuxin belongs to, was invited to collaborate with Dior for its Bobby bag.

Source: twoeggz.com – Dior invited the new group THE9 to promote BOBBY

Christian Dior Couture

Besides maintaining the brand’s unique style and elegant brand image, Dior fashion division (Christian Dior Couture division) also has launched its official account on popular Chinese social media platforms.

Dior has introduced limited edition Lady Dior bag for Chinese valentine’s day

Luxury brands, such as Burberry, started to use WeChat Mini programs to plug into digital China. For Chinese Valentine’s Day in 2016 (Qixi Festival), Dior launched a WeChat mini program for selling its limited edition Lady Dior China valentine bag. For this bag, Chinese luxury customers choose the decorative embroidery pattern on the strap. The bag was sold out within a few hours on the first day of the WeChat Mini program marketing campaign.

Dior in China made a great effort on doing local Chinese social media campaign and marketing campaign to reach a wider range of customers.

Source: luxexpose.com – Lady Dior Small China Valentine Bag Sold Out Within Few Hours Via WeChat

Dior became the first luxury brand to enter Tiktok and Bilibili

In the past few years, Dior launched its official accounts on popular Chinese social media, such as Weibo, Wechat and Red. On August 2018, Dior launched its official account on Tiktok (known as Douyin in China), making it the first luxury brand to use the platform. So far, Dior has more than 491.1k fans and 3.6m likes with 628 posted videos.

For luxury brands, Bilibili represents a chance to capture young Chinese customers, Gen Z consumers in China and familiarize them with their products and brand ethos. Generation Z accounts for 81% of the platform’s user base according to QuestMobile. The advantages are clear: although they may not have significant buying power now, this generation is expected to account for 55% of total luxury spending by 2025. Dior launched official account on Bilibili on June 2020 with totally more than 7k fans, 22 videos and 132k plays within a month. At the same time, Dior is also the first luxury brand to use Bilibili.

Dior will launch an exhibition in Shanghai

Chanel’s Mademoiselle Privé exhibition in Shanghai in 2019 attracted a large number of Chinese visitors. Dior launched its Miss Dior exhibition after, and invited many of Chinese celebrities. This year, Dior will launch its exhibition in Shanghai ‘Christian Dior Designer of dreams’. Different from Chanel, the exhibition of Dior will showcase more than 70 years of the brand’s artistic creation to Chinese luxury consumers from an unprecedented Chinese perspective.

Source: Dior official WeChat account – The exhibition “Christian Dior, Designer of Dreams”

The exhibition will last about three months. Together with 8 well-known Chinese artists, this exhibition will open a new chapter in the history of Dior in China. A host of masterpieces, including 275 couture gowns, manuscripts and works by artists, are ready in the museum. Next the brand is inviting Chinese luxury consumers to explore Dior’s elegant world and spirit of the pursuit of dreams.

At the same time, the opening ceremony of the exhibition will be broadcast simultaneously on several Chinese social media, including Dior’s official Weibo account, official WeChat mini program and official Tmall flagship store. Additionally, Tencent video and Huawei video will also broadcast the activity.

Author: Qing Zheng

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Data source: askCI.com- Market size of telemedicine in China from 2015-2019

Telemedicine consumer penetration

Given the COVID-19 situation in the beginning of 2020, it is no surprise that the penetration rate jumped up by 2% YOY. By April 2019, the number of users of online telemedicine services in China had reached 45 million, with industry penetration reaching 6.6%. The penetration rate continued to rise from 2018 to 2019 and will likely maintain its growth momentum in the future. It is expected to exceed 8% in 2020 and the scale of users will continue to expand.

Telemedicine apps and websites are no longer just patients from 1^st-tier cities, but people in 2^nd and 3^rd-tier cities are beginning to use telemedicine platforms. People under 35 years old are the main users, however, the middle-aged & elderly groups’ needs have not yet been explored. Telemedicine companies should pay more attention to the convenience and operability of online consultation to seize this part of consumers.

The characteristics of telemedicine industry in China

5G technology

Source: Sohu.com – Construction of 5G base stations is accelerating and 5G networks are expected to cover prefecture-level cities nationwide by the end of the year

In 2020, 5G technology helped telemedicine enter a new stage of development and explore new scenarios for application. Telemedicine in China started relatively late. In 1988, the PLA General Hospital conducted a remote case discussion of neurosurgery with a German hospital via satellite, which was the first telemedicine activity in the modern sense in China. China’s telemedicine industry has developed rapidly later on, owing to the development of computer technology, communication technology, digital medical equipment technology, hospital information management technology and a series of core technologies in telemedicine.

In early 2020, during the COVID-19 outbreak, China’s telemedicine was more widely applied and developed with the support of 5G technology. Zte and Sichuan Telecom assisted West China Hospital of Sichuan University and Chengdu Public Health Clinical Medical Center to realize 5G remote consultation of two COVID-19 cases for the first time.

5G telemedicine trolley has been launched in Wuhan Huoshenshan Hospital. In some places, China Mobile has launched the application of “5G infrared thermal imaging temperature measurement” to realize the simultaneous scanning and temperature measurement of many people.

Driven by 5G technology, the application scenarios of telemedicine have been expanded, such as remote ultrasound, remote surgery, mobile ward rounds, remote monitoring, remote consultation and remote first aid.

The uneven distribution of medical resources

In China, the distribution of superior medical resources is extremely uneven. More than 70% of the third-level grade-A hospitals are located in the eastern region, making the potential demand for telemedicine in the central and western regions huge.

Data source: chyxx.com – The proportion of third-level grade-A hospitals in the three regions in 2018

Telemedicine in China’s ageing society

China’s huge population base has already put medical resources to a severe test. On top of this, China has encountered the problems of relatively unbalanced economic development and unevenly medical resources distribution. At the same time, China’s population is aging, and immense pressure is put on the younger generations to care for the elderly.

The United Nations issued a standard: as 65 years old people account for more than 7% of the total population, the country is considered an aging society. According to data released by Chinese National Bureau of Statistics (NBS), the proportion of the population over 65 years old has reached 11.9% in 2018.

Data source: chyxx.com – The proportion of people aged 65 and over in China from 2000 to 2018

As the elderly have entered a period of decline, they are much more likely to be infected with various diseases than their younger counterparts, which greatly increases the market demand for medical resources. Telemedicine can solve the imbalance of medical services in different regions to a large extent as well as integrate and utilize medical resources through the Internet, which will be conducive to the stability of our society and the protection of people’s healthcare.

Telemedicine platforms in China under the influence of COVID-19

Accelerate the construction of telemedicine platforms in China from hospitals

Due to the COVID-19 outbreak, the urgent need for epidemic prevention and control has promoted the construction of telemedicine platforms in China from hospitals, which reached a new peak in February 2020, with 65 telemedicine platforms from hospitals built in a single month. During the epidemic, in addition to online outpatient services and pneumonia consultation services provided by existing telemedicine platforms, traditional public hospitals and other medical institutions also launched online telemedicine platforms on an emergency basis.

Previously, most of the public hospital informatization construction remained in the “digital hospital” level, such as “intelligent outpatient service”. The degree of informatization is mainly reflected in basic services such as hospital registration, consultation, settlement and medical record management. The epidemic has accelerated the construction of remote online consultation in hospitals and the real patient-oriented Internet diagnosis as well as treatment services which have begun to develop.

Data source: Xinhua.com – Number of Chinese hospitals with own telemedicine platforms from 2019-2020

Take one of the leading platforms – PingAn Good Doctor as an example

PingAn Good Doctor is the wholly-owned subsidiary of PingAn Group and leader in telemedicine services in China.

It covers four major business segments: online medical consultation, consumption medical care, health malls, health management and interaction. The number of users reached 5.67 million on February 5th, with an increase of 8.4% before the 2020 Lunar new year.

In terms of city distribution, the proportion of customers from new first-tier cities is the largest while the proportion of customers from first-tier cities is the smallest.

In terms of age distribution, consumers aged 24 to 30 account for the largest proportion.

Data source: qianfan.analysys.cn, Ping’an Good Doctor users are disproportionately in first tier-cities.

Data source: qianfan.analysys.cn, Ping’An Good Doctor users are usually young, although elderly are more likely to experience health problems

Monthly active users of PingAn Good Doctor app increased rapidly since January, 2020 (COVID-19 outbreak).

Data Source: qianfan.analysys.cn, monthly active users of Ping’an Good Doctor

Limitations and Opportunities

With the deepening of “Internet Plus”, Internet economy has become an important factor in China’s economic development. “Internet + medical treatment” has been constantly applied and developed.

The coverage rate of 4G network has reached more than 95% and 5G network has been officially commercialized. Software services, cloud computing, big data and other industries are developing rapidly, laying a good technical foundation for telemedicine. With the use of automated and intelligent technologies, telemedicine is gaining more and more recognition from patients. Therefore, it can drive the increase of huge demands and the potential space of telemedicine market will be huge.

Since 2009, a series of established policies have demonstrated the government’s strong determination to develop telemedicine. With the intensive introduction of policies, the policy environment of the telemedicine industry in China is clear and the industry will usher in rapid development.

However, the telemedicine industry in China has not yet developed a mature business mode, remaining some problems like vague pricing policies, uneven payment systems and wide variations in health care from place to place. Additionally, an obvious concern with telemedicine is that it is easy to ignore symptoms that can only be diagnosed in a “face-to-face” setting, leaving health-care providers vulnerable to negligence claims and insurance coverage. At the same time, patients are also prone to misdiagnosis or missed diagnosis.

Social habits and careful regulation hinder the application of telemedicine. For many people around the world including Chinese, the COVID-19 outbreak is already forcing a change in social habits that is likely to have a permanent positive impact on telemedicine.

Author: Qing Zheng

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This article Telemedicine in China: Healthcare reaches a new status quo during the COVID-19 pandemic is the first one to appear on Daxue Consulting - Market Research China.

Delayed retirement in China is to be expected in the coming years

Current official scheme of retirement in China

Currently, all men retire at age 60, while blue-collar women at 50 and white-collar women at 55. Workers in health-harming professions such as underground, high-altitude, labor-intensive jobs enjoy a 5-year reduction. So do men and women who can prove their illness or disability.

This has been the case since the founding years of People’s Republic of China in the 1950s, regardless of the fact that the life expectancy rose from 57 to 77 years old in the past 60 years. Globally, as societies age, most developed countries set the retirement age around 65, and treat men and women equally. This gap reveals a delicate yet imperative task for China to make retirement reforms before it can no longer afford to.

Considerations for reforming retirement in China

The modification of official retirement scheme requires comprehensive understanding of the 5 following issues, according to Gongcheng Zheng, professor at Renmin University of China.

1. Life expectancy: an extension of life expectancy naturally entails to an extension of working years.
2. Labor market: if the labor supply surpasses the demand, then keeping the elderly in the workforce would hamper the career progression of the young; inversely, if there is not enough labor supply, the elderly has to be withheld.
3. Education: the more educated the worker is, the more human capital goes to waste if the worker is let go too early.
4. Societal aging: as the population ages, the average age of the general workforce also has to rise, respecting intergenerational equality and sustainability. Otherwise, the Chinese elderly might overburden the working adults.
5. Gender equality: if the female workforce quit the labor market sooner than the male counterparts, then the nation essentially deprives women of their rights and voices in the active participation of the society.

Currently in China, all five of these issues check out. According to National Bureau of Statistics, life expectancy and the level of education keep rising over the years. Urgently, the labor supply shrinks at a rate of millions every year and is expected to continue. Jian Su, the director of China Center of Economic Research pointed out to Tencent news that the 410 million second-wave baby boomers born from 1962 to 1978 will exit the labor market, further reducing the domestic labor supply for another 20 years. What’s more, the aging trend is irreversible, and feminist groups have louder and louder voice. No matter much how people debate over the years, the delayed retirement is coming in China, recently confirmed by Ministry of Human Resources and Social Security (MOHRSS for short).

Data source: National Bureau of Statistics, the China’s workforce keeps shrinking

A possible reform rollout plan

There has not yet been an official announcement of reform rollout plan, but the clock is ticking. According to the Outline of the 13^th Five-year Plan of the Ministry of Human Resources and Social Security (MOHRSS), a reform of retirement in China needs to see the day by 2020.

Source: daxue consulting analysis, possible retirement reform rollout plan

Considering the delicacy and severity of such task, the then-Minister of MOHRSS Weimin Yin emphasized the importance of baby steps and flexibility. After the announcement, the society will be given another 5 years to adjust to the new reality. In addition, individuals should have some discretion over the exact exit age in a set range, depending on their profession, location and health condition. Furthermore, provincial differences should be taken into account, as the 5 issues discussed above don’t score the same across regions.

Life after retirement marks a new search for meaning

The psychology of retirement

It is widely acknowledged that retirement is a process, not a simple action. Before the set retirement date, the retiree-to-be would already start daydreaming about their retired life. Then comes the honeymoon phase where they rediscover the joy of freedom and novelty. However, soon they would taste frustration as the rhythm slows down and lack of meaning seeps in. In this stage, many would feel lost, upset or even depressed for the loss of goals or feedback loops. After self-readjustment and assistance from the family and society at large, most of them would recover and find a new direction in fit with their retired life. Finally, and ideally, they will again be at peace and ease with their new expectations and limitations, effective in their objectives and content with their self-value.

According to the 4^th National survey on China’s elderly in 2015, watching TV and volunteering are among the top choices of activities for retirees. Traveling for Chinese seniors, on the other hand, is getting popular too.

Data source: Ministry of Civil Affairs, Top activities for Chinese retirees

According to the Report on the Living Conditions of China’s elderly initiated by China Research Center on Aging, the newly retired seniors in China represents a new driver for internet growth. As mobile consumption spreads to the older generation, more and more of the retired people turn to internet for recreation. 

Data source: China Research Center on Aging, Top online activities by Chinese retirees

Reinsertion to society is a rising demand to revitalize the newly retired

According to the Report on the Living Conditions of China’s elderly, a total of 17% of male and 10% of female retirees still exercise a profession. Out of the working retirees, 86% of them are in the agriculture industry, 7% in construction industry and very few in social or service sectors. It’s safe to say that a staggering majority of Chinese working retirees live and work in rural areas.  

In cities however, many retirees find it hard to be reemployed, due to high legal risks posed on the employer and a reduced number of suitable opportunities. As a consequence, only 7% of the urban retirees are back to working life, compared to 40% in rural areas. Most retirees who successfully re-enter the urban society  are those with transferable expertise, such as accounting or medicine. Compared to Japan and Korea whose government issue policies to support retiree reinsertion, China is lacking.

Fortunately, the private sector is actively finding solutions, such as an online labor market dedicated to the retirees. With endorsement from China National Committee on Aging, the precious human capital resided in healthy retirees will hopefully be re-empowered after their retirement in China.

Increased income is also a main motivation to improve life after retirement in China

It is great news that the financial situation of the elderly in China improved drastically over the years. According to the 4^th National survey on China’s elderly in 2015, the urban retirees annual income per capital reached 23,930 RMB in 2014, while that of rural retirees was 7,621 RMB. It implied a 5.9% and 9.1% of CAGR from the year 2000 for the urban and rural retirees respectively. Furthermore, the income gap between the urban and rural areas got reduced. While the guaranteed income dropped from 90% to 80% of total income for the urban retirees from 2000 to 2014, that of the rural retirees increased from 14% to 36%.

Younger retirees could use more income

A deeper look at the source of income shows that labor income cannot be neglected for the younger retirees. In fact, income from work outweighs pension, family provisions or minimum guaranteed income until the age of 68, based on a paper published by Peng Du, professor of gerontology in Renmen University of China. After 68, family provisions take the lead, while pensions fluctuate around 20% of the total income.

This explains why, the younger bracket of the retirees (aged 60-69) actively looks for opportunities to put their energy and expertise to use. As loving parents, they generally don’t want to be a financial burden to their middle-aged children. Working after the official retirement age gives them more income to lead an easier life in the future.

In summary, the in the future, Chinese will retire later but better. And once they retire, many would search for new forms of meaning and income. Even though there is still a lot to develop in the silver economy in China, the rising life expectancy presents new challenges and opportunities for the elderly industry in China as well as for the retirees themselves.

Author: Della Wang

Learn more about the consumption of Chinese retirees, check out our silver economy report

This article Retirement in China: Preparing for 410 million second-wave baby boomers to exit the labor market is the first one to appear on Daxue Consulting - Market Research China.

The number of students going abroad is mounting every year as increasing numbers of Chinese students are looking for an experience overseas. Between 2008 and 2016, the number of students studying abroad had increased from 179,800 to 544,500 showing overwhelming growth. In 2017 alone, 608,400 students left China for overseas study. This fast growth has been developing since 2010 and has been growing year on year. Today, China is the largest source of international students and is expected to grow. Yu Minhong, the founder and CEO of the New Oriental Education and Technology Group as well as a member of the Chinese People’s Political Consultative Conference’s National Committee, estimates that the number of students studying abroad will peak at 700,000 to 800,000 each year. However, the coronavirus outbreak has caused Chinese students to re-evaluate their study abroad plans, gradually initiating a shift in destination preferences and post-grad decisions.

Why is China’s study abroad rate increasing?

The price of student exchanges has also become increasingly more affordable as the booming economy has allowed more parents and students to meet these heavy costs. This has allowed more Chinese students the opportunity to go overseas in order to increase their chances of employment after graduation. This is especially important as 2010 brought a higher percentage of unemployed graduate students causing students to look for ways to differentiate themselves in the job market. Many students, however, despite the abroad experience often return home with the compound annual growth rate (CAGR) being 14.9% for returnees and 11.7% for students going abroad. This is as many students intend to go back after studying or find the job market overseas too difficult with them often having lower revenues. The government also offers incentives to returnees in China with them having better opportunities in larger cities which they would not have been able to access without foreign education.

Chinese students studying abroad: Destination preferences

Due to China’s massive population, it sends more students abroad than any other country and this number is still rising. This is seen with growth in the number of returning Chinese students overtaking the number of students studying abroad in 2016. The United States (US), however, has been the preferred destination for many Chinese students with it remaining the top destination year on year.  The quality of a US education is reputable and many Chinese students study in the US may hope to stay and live there after graduation in order to enjoy the lifestyle of a developed country. Further, many Chinese international students prefer to study in English speaking countries with the US, Australia and the UK making up approximately 60% of outbound students. China is also the largest source of international students in many countries with Chinese students accounting for 30% of students in America, Canada, Australia and New Zealand.

However, what may have been a popular destination could be fading due to the pandemic and various political clashes (such as trade war).

According to a report on the economic impacts of the pandemic published in April by the US-China Economic and Security Review Commission, a host of issues can reduce Chinese demand for higher education in the US in the following academic year. These include delays or cancellations of US entrance exams in China, travel restrictions, and the perpetuating uncertainty of when US college classes will be in-person. The economic impacts could be severe as nearly a third of all tuition payments to US public universities stem from international students. Also, cancelled university recruitment events in China and inability to work with local recruitment agencies could further contribute to the decrease in enrolment (learn more on how the coronavirus has impacted Chinese students’ study abroad decisions).

Prior to the coronavirus outbreak, there has already been a decline in enrolments from Chinese students in US schools, most of which are part of the larger picture of rising Sino-US political tensions. For instance, visa refusals have been a common problem facing Chinese students. As such, the development and job opportunities back home prove to be attractive reasons for the drop in Chinese students seeking to settle overseas after graduation, which was 85.4% in 2013 but 79.4% in 2016.

Other countries are also increasing their awareness in China as they gain market share slowly and Chinese students are ready to assess new destinations. It is clear, however, that English speaking countries have an added advantage to attract Chinese students who want to better their English speaking skills. Some regions have become more popular with East Asia and the Pacific taking a significant portion of Chinese students with the convenience of location. This is with Japan as the 4^th most popular country and South Korea as the 6^th most popular country in 2016.  This is also with Chinese students accounting for 57.3% of international students in Japan and 49.3% of students in South Korea. Many students also studied in Hong Kong due to its proximity.

Why do Chinese students study overseas?

Chinese students abroad: Social, personal and professional benefits

When surveyed it was found that 82.5% of companies and employers give returnee employees privileged treatment. A CCG survey found that almost half of the Chinese students surveyed who studied abroad believed that they were more competitive than their peers who studied at domestic universities. This is proven true with 20% of companies promoting returnees faster and 17.5% preferring returnees for core positions and 50% of state-owned enterprises claiming that they welcome returnees into core positions. These figures alone show the importance employers place on abroad studies with these high percentages indicative of the professional benefits provided to those with an overseas degree.

Another benefit this provides for Chinese citizens the influence abroad education has on Hukou. Hukou is strict and complicated household registration system which also doubles as a domestic passport that regulates the Chinese population both socially and geographically. It determines factors such as where a person can live and work, where their children can go to school particularly so if they belong to a rural area and the social welfare benefits they can receive. Returnees from abroad studies get a more flexible Hukou transfer policy which helps them settle down in tier 1 cities and gives them more opportunities in terms of experience and salary. Further, preferential policies are also provided by the government to get returnees to start a business by providing grants and incentives such as free or discounted offices or tax-free cars. This is in order to attract Chinese talents back to China.

Besides the social and professional benefits provided by organizations and the government, there are personal benefits for Chinese students who go on exchange. This is evident as 64% of Chinese international students pursue abroad education in order to enrich their personal experience. This includes improvement of their English skills, the knowledge they gain of a different culture, overseas life experience and an international network. These benefits can be gained by any student studying overseas but English based exchanges are particularly beneficial for Chinese students who have been studying English throughout a school. This is as it gives students a chance to gain practical experience in a different environment that makes them more employable in the long run. Other than Chinese and Spanish, English is one of the most widespread languages in the world. It has gained increasing importance with English being an official language in at least quarter of the world, with 400 million people speaking English as their first language and 1 in 5 people being able to speak or understand some English. The role of English in China cannot be understated especially as it is integral for professionals to compete within the business environment. This is illustrated with parents understanding this importance as they start English education early in order for their children to start off more competitively, thereby spiking the demand for English teachers in China.

Another major benefit is also the waiving of the Gaokao entrance exam. Gaokao is the test undertaken by high school students in order to study at university and it is known worldwide for being an extremely difficult and stressful exam. The test has been said to determine the course of a student’s life and is the only way to enter university. The supply of university spots is also known for not meeting demand- making the pressure on high school students enormous. Those who previously did not anticipate abroad studies and those determined to study overseas do not need to pass Gaokao which takes a significant amount of stress off of students.

Chinese studying overseas: Criteria for students picking universities

As studying abroad is very important for students and parents a lot of thought goes into picking the university and country they will be studying at. A big determining factor to consider is the country itself. This requires evaluating the country itself by its size, population, economy and development degree. Chinese people prefer countries which are bigger and have a larger population, higher economic power and the development degree which makes the US the most popular country to go to. Some students are also concerned about the culture of the country itself.

Further, the school awareness in China that is the school’s brand reputation is very important. This is evident with 61% of students in a survey conducted by WSE choosing school reputation as the top consideration of school selection, with the success rate following at 48%, school location at 40% and expected income level after graduation being at 39%. This is as about 80% of international Chinese students go back to China after graduation which makes the school’s awareness and reputation important when considering job prospects in the future.

Moreover, the ranking itself is very important with many different versions of school rankings applying in China to help students and parents make decisions. This includes the QS World University Rankings and the Academic Ranking of World Universities and ranking in the top 100 is very beneficial to students wishing to return to China.

Additionally, the curriculum offered by the school itself is vital. This is with weight in decision making relating to the design of the curriculum, the composition of it, the availability of course choice, the quality and exclusivity of each course and even the internship opportunities that the school supports.

Lastly, whilst all of the above is extremely important, the cost is often a major determining factor. This includes the cost of tuition, living expenses and scholarships available. As such, many students go to Hong Kong for further study due to the lower expense and some European countries provide free public education for the same reason. This is evident with 45% of students being concerned about the cost of studying abroad, compared to only 27% of parents. Cost is especially important as 89% of students traveling abroad self-finance their study so they are very receptive to scholarships or less expensive locations.

International education: How do Chinese people look for information to choose the right university?

Chinese study abroad agencies and specialized education companies are important in helping students to pick countries and universities to study abroad at. They offer a broad range of services to students and help foreign universities and programs get more visibility among students. Due to the services offered, student’s families are willing to a pay a large amount of money for these services which include counseling services on programs, assistance in preparation, application and admission processes, test preparation, English classes as well as international study tours. The Beijing overseas service association also can help abroad institutions to select good partners among agencies to promote institutions in China.

Further, as stated, online information is very important with Chinese students spending a significant amount of time looking at the best destination, university ranking and application process. As such, a good online presence is essential for an overseas university- especially if it is not a top ranking one. Particularly, 31% of students depend on social media when researching for their study destination. They also look to the alumni network for recommendations and feedback as students trust advice from those who have attended the school itself. As such, it is important for universities to have good ambassadors as Chinese students want to hear about the university in a more personal and informal way.

Trends in types of study undertaken by Chinese students

The types of study undertaken by Chinese students themselves vary with the type of study they undertake. This is with Master and Bachelor degrees at the forefront of reasons for going overseas for study, with other avenues collectively making up the remaining 31%. There is, however, a preference for longer study programs over shorter ones. This is with slower growth for shorter study options in comparison to the faster growth experienced by Bachelor and Masters degrees. This is as shorter exchanges are not as popular with Chinese students who prefer to spend the duration of their program overseas with four or two years being favored over a few months.

There are also trends evident in the degrees undertaken by Chinese students. This is with both engineering and business management as the most popular degrees chosen by students. However, in 2016 subjects shifted as more students paid attention to their own preferences over parental preferences and what is expected of them. This was evident as the Center for China & Globalization reported a decline in 2016 with students studying engineering, computer science and IT, math and statistics and social sciences, whilst the number of students who chose to study business management, foreign language and literature and education increased. Further, it was mentioned that subjects relating to business management, trade and corporate management and finance have increased as development in China has created more demand for professionals in these fields.

Market difficulty in China for student exchanges in lesser-known countries

Consulting agencies specializing in overseas programs still promote the US and other popular speaking countries such as the UK, Canada and Australia. As such, standing out from those countries can be quite challenging for smaller countries. This is as knowledge of the country studied at and a school’s ranking is very important for students. This is due to the implications it has for the employability of students, especially those wishing to return to China. Further, social recognition and prestige also play a role beyond professional necessity which can also be a determining factor for parents and students, especially from tier 1 cities.

Study abroad: The Belt and Road Initiative and its effect on Chinese international students

According to Forbes, the Belt and Road Initiative will affect 60% of the world’s population with the participation of 76 countries from Asia, Africa and Europe. The trade and infrastructure undertaking is thought to be one of the most ambitious undertakings in human history and is viewed as ‘a sort of 21st-century silk road’. Along with connecting through trade, Beijing currently offers 10,000 places each year for students who come from countries within the Belt and Road Initiative with China attracting more than 200,000 students from 64 of 68 Belt and Road countries in 2016. Further, since 2013 when the launch of the Belt and Road initiative took place, Chinese students have also flocked to Belt and Road countries with 24 educational agreements being signed between some of these countries since April 2017. This initiative opens up substantial and wide opportunities to educational bodies of countries within the initiative, with the Chinese government wanting to strengthen both educational and trade bonds between countries.

Opportunities for brands wanting to enter the Chinese market

Chinese students prefer English speaking countries in order to improve their English as it is a must-have skill in the work environment with 60% of Chinese students currently going abroad to the US, Australia and the UK. As a result, this increasing need for English helps leverage English speaking countries for exchanges as a whole – not just the top destinations sought by students. This is seen as Chinese students are now exploring new countries for overseas studies. There is, however, due to the Road and Belt Initiative, an opportunity for growth for many more educational organizations and countries to attract Chinese students using the initiative as leverage to strengthen the appeal for Chinese students. This is especially where educational organizations are not within the top 100 or are as well known to Chinese students. This awareness in China is particularly important as going abroad is meant to enhance employability and employment opportunities which cannot be achieved without businesses being aware of the educational organization. Further, an emphasis on the social and personal benefits students are looking for, along with strengthening programs in the more popular university courses, will help make organizations stand out to students. Most importantly, recognition by the Chinese Ministry of Education of the degree and the university itself is necessary for recognition and desirability among the Chinese.

Moreover, there are opportunities for educational organizations that are located in less expensive countries or areas should highlight their desirability and more expensive schools should offer scholarships in order to appeal to students who are self-financing their abroad study. However, it is also important to note that the urban middle classes are also estimated to increase; a McKinsey survey in 2015 found that there were 10 million affluent households with more than 300,000 RMB, and it is estimated to be 18 million by 2020. These households were mostly found in tier 1 to 3 cities but tier 4 to 5 cities were found to be steadily increasing their income. This growth in disposable income and wealth among cities is likely to have a positive effect is on expanding the number of students studying abroad and providing opportunities for more countries than in the past. Although there have been recent declines in Chinese students studying in the US as well as more returnees upon graduation, studying abroad is still a reflection of social mobility and status. The UK sits behind the US as a top destination, with pursuing a master’s degree as an attractive choice with its one-year program considering costs and study requirements. In the coming years, we may see a larger shift in the preference of university destinations among Chinese students in light of the recent events.

See how COVID-19 has impacted Chinese students’ aspirations to study and work abroad.

Author: Jessica Farrell 

Daxue Consulting has conducted a series of surveys on Competitive Benchmarking in China and developed a specific framework to analyze the key insights related to your competition in China.

Competitive analysis is defined as identifying your competitors and evaluating their strategies to determine their strengths and weaknesses about those of your product or service. Daxue provides you with the tools needed to win in a market full of players.

This article Education elsewhere: China seeks out exchanges in other countries is the first one to appear on Daxue Consulting - Market Research China.

The incredible success of bubble tea in China since 1996

The story behind the success of bubble tea in China

Bubble tea is a drink made from tea (usually black tea), milk, syrup, and a special ingredient that captivates the hearts of Chinese people: tapioca pearls. Bubble tea is also known as 珍珠奶茶 (Zhen Zhu Nai Cha) directly translates to pearl milk tea, but is also known as boba tea in parts of the world. Far from healthy, the drink contains a lot of caffeine and sugar, especially due to syrup sweetener. 

What is captivating about this drink is that it is both drank and eaten at the same time. Tapioca pearls, which can be different sizes, offer a unique chewy texture and a sweet taste.

Where does such a successful drink in China’s beverage market come from?

Bubble tea originates from Taiwan, in the city of Taichung. It was reportedly created in the 1980s in a tea shop called Chen Shui Tang where the owner, Liu Han-Chieh, was selling oolong tea. With the innovative idea of changing the way Chinese people consumed tea, and a bit of influence from the Japanese way of drinking cold drinks, mixed tea, milk, and ice in a cocktail shaker. Following the popularity of his cold drinks, he experimented with pouring tapioca pearls into the milk tea. This marks the birth of the world-famous Bubble tea beverage in China.

The rest of the story is well known: bubble tea has been a great success, spreading throughout Asia and even gaining popularity throughout North America. Today, bubble tea is an integral part of Taiwanese and Chinese culture.

More and more brands on China’s beverage market

Source: iiMedia – Number of milk tea shops in China

China’s bubble tea market seems almost saturated: at the end of 2018 iiMedia counted 450,000 milk tea shops offering bubble teas in China. The number of milk tea shops in 2018 increased by 74% from 2017. Bubble tea is the best-seller in almost every milk tea shop. There are dozens and dozens of players in the milk tea market in China. Equal Ocean ranked the 19 most powerful brands in this sector earlier this year listed below:

Bubble tea brands in China can be divided into two types: traditional and new style, embodied by the famous Heytea brand. The differences are mainly in price and design. The new ones attract younger consumers who see them as a way to show a cool and international lifestyle.

Among these bubble tea brands in China, some will catch your attention, either by the pertinence of their marketing strategy or by their product innovation or even their financial power.

Top bubble tea brands in China

• Yi Dian Dian is one of the three most powerful bubble tea brands in China, coming directly from Taiwan. It is considered a classic brand, serving traditional bubble tea milk. Yi Dian Dian has more than 600 stores in China and is now conquering Europe and other Asian countries such as Japan. Yi Dian Dian keeps their prices lower than most bubble tea stores.

• Coco or Coco Fresh is also one of the 3 brands mentioned above, with more than 2,000 stores worldwide and 20 years of experience.Coco offers a wide variety of toppings and the adjustment of all recipes, and have entered the coffee market in China.

• Heytea, whose success has made a lot of headlines in Chinese media, the Starbucks of Bubble Tea, is one of these new styles brands and has easily competed with Coco and Yi Dian Dian. Attracting mainly Chinese millennials, they are an example of innovation in a standardized sector and successful brand launch. With their first boutique opened in Shanghai in 2017, they are now also present in Singapore and Hong Kong, and with higher prices, hey are positioned towards the premium end of the bubble tea market in China.

• The Alley is probably the brand that has focused the most on the aesthetic side of beverages. Known for its brown sugar tapioca pearls, and layered matcha and black tea drink, its drinks are also among the most caloric bubble teas in China. The brand has succeeded in its commitment to be present throughout the world, on all continents.

• With its first boutique opened in Shanghai in 2006, Happy Lemon is also an interesting bubble tea brand in China because its identity differs slightly from that of its main competitors with design and values more focused on freshness and fruits.

In search of innovation for tea beverages in China: format is constantly evolving

Although most tea shops offer two main options (milk teas and fruit-flavored teas), harsh competition boosted the number of innovations. Non-fruit flavors such as avocado, ginger, mango green tea, taro or mocha are very often available and toppings such as tropical fruits, lychee, coco cubes, aloe jelly, coffee jelly, coconut jelly, pudding or chia seeds can be chosen as well.

The segment of cheese teas, also known as milk cap, is also new: Heytea is very well known for adding salty, creamy cheese to its beverages. The idea is to add creamy cheese to the tea. This helps to compensate for the bitterness of tea, which is less popular with younger generations of Chinese people. This salty cheese balances the sweet taste of the tea and fruits that are added to the drink. Surprisingly, cheese tea seems to appeal to people who care about their health thanks to the low-fat options available.

Happy Lemon has also developed Oreo Milk Tea which consists of adding oreo pieces to a milk-cap tea. But innovations do not stop at taste, design, and format. Shops try to offer the best customer experience. This is the case of Happy Lemon. They went viral on social media thanks to their robotic arm present in some of their shops, which embodies their desire to embrace the trend of new retail.

A report from Mintel recently showed that Chinese people prefer to buy their tea in physical stores. That is why many bubble tea brands in China try to innovate offline. The owner of the boutique explained that it was a pure marketing initiative, to attract consumers in a very competitive landscape.

Instant milk tea in China: different marketing, different codes

China’s tea market is by far the biggest in the world with a retail value of US$9.6 billion. Where it becomes particularly interesting is that 38% of its value comes from the instant tea category. One of the top segments of the instant beverage market in China is milk tea and bubble tea.

China’s instant teas imitate the flavors of bubble teas that can be bought in shops and sometimes even add real tapioca pearls to drinks. How does it work? In a cup, often made of plastic, you can find a sealed pouch of instant tea, a straw and another small pocket with tapioca pearls. Then add hot water, mix and in two minutes, bubble tea to take away is ready. Consumers’ favorite instant bubble tea brands in China are U-loveit and Xiangpiaopiao.

Packaging plays an important role in this market: on-the-go packaging is perfectly adapted to the fast-paced lifestyle of urban and overbooked Chinese millennials. Although more limited than what can be found in the shops, the choice remains quite wide: Xiangpiaopiao offers milk tea with green tea, chocolate, caramel, strawberry, sweet potato, etc.

The brand U-loveit has even worked with celebrities and KOLs in China to promote its bubble teas, collaborating with the world-renowned actor, singer-songwriter, Jay Chou.

The conclusions that can be drawn from the success of bubble tea in China

Drinking bubble tea is something you need to show on social media, that you share with your followers to show your very cool lifestyle, especially with the increasingly aesthetic drinks

On Chinese social media, the bubble tea trend is definitely huge and several pictures of milk teas are posted every single minute. Indeed, bubble tea is fashionable, fun and the most beautiful drink in China’s beverage market. The tapioca pearls and the colors of the tea mixed with milk make very shareable pictures. On Xiao hong shu or Weibo, there are thousands of photos of all brands. The Alley has particularly succeeded in making drinks beautiful enough for social media.

Social media is a showcase opportunity for Chinese consumers

This success of bubble tea in China shows us once again how much social networks are an integral part of Chinese life and that sharing with friends is the daily activity of millennials.

However, social media are also used by brands to advertise. Thirst marketing is thus leveraged by a large amount of bubble tea brands in China, such as Heytea which success relies heavily on its smart use of social media. The brand used the ‘network effect’ of social media and is mainly famous for the extremely long waiting time to get its products.

It uses a controversial technic: scarcity marketing. Heytea posted several pictures of lines in front of their stores explaining that waiting time could reach 6 hours! This went viral online and encouraged customers to share a picture when they finally got the precious beverage. Heytea’s famously long waiting time actually became a selling point.

China’s tea market, an invincible market

One of the first conclusions that can be drawn from the success of bubble tea in China is that the Chinese are still tea drinkers. It should be recalled that tea was discovered in 2737 BC by the Chinese Emperor Shen Nong. An emperor that became mythical precisely because he taught agriculture, medicine and the art of using plants to the population. Since the Tang dynasty, tea has become the main drink in China’s beverage market. Despite the growing success of coffee and the arrival of new coffee brands, tea remains a staple among Chinese. Moreover, the consumption of milk tea in China has exceeded the consumption of coffee. According to Ibzuo, Chinese people consume five times more milk tea than coffee.

Starbucks trend going to an end?

The success of bubble tea in China also leads us to question Starbucks’ supremacy in China. With existing 3,300 stores in over 90 Chinese cities and around 2,700 new stores expected to open by the end of the 2022, Starbucks’ success in China is undeniable. The American and international way of life promoted by these coffee chains has pleased Chinese people for years. Costa Coffee used the same sales argument, with nearly 350 stores in mainland China.

However, the atmosphere of these coffee shops and the values they convey still appeal to the Chinese.

What a tea entrepreneur says about the threat of coffee consumption

In an expert interview with tea entrepreneur Martin Papp, he shared his experience conducting market research in Starbucks in China.

 “China is still a tea-drinking country. I did some market research in 2014 when I was planning on starting this company. So I went to multiple Starbuck stores in China and surveyed customers in the store on whether they prefer drinking tea of coffee. I found that about 50% of Starbucks’ customers prefer tea over coffee. ”

Papp’s research suggests that people who prefer tea still went to Starbucks because tea shops did not offer the desired atmosphere in 2014. However, now things are changing, and milk tea chains have begun to adopt the same codes. People no longer have to go to Starbucks to find a hip place to socialize over a drink. Whether in the names of the drinks, the aesthetics of the drinks, the decoration of the shops and the values conveyed in the advertisements, everything reflects the enviable codes of Starbucks. Recently, HeyTea and Nayuki have even created tea rooms which are comfortable spaces for their customers to relax. So going to Heytea has become just as cool, even cooler given the long queues in front of the shops in Shanghai.

Healthy or unhealthy: a still difficult choice?

Finally, bubble tea drinks with a lot of sugar, raise the issue of healthy drinks in China’s beverage market. According to the Daxue Consulting report on healthy snacks in China, Chinese people, and especially women, have been paying attention to what they buy, the composition of products and the origins of ingredients.  Baidu Index demonstrates searches on healthy products has been stable throughout the past year, showing a real interest in better products. Although, searches for healthy products takes a dive during the spring festival when Chinese people tend to eat more sweet things and other family dishes.

Source: Baidu Index, Daxue Consulting report – The search frequency of “healthy snacks” in 2018 and 2019

How does bubble tea adapt to this trend?

A mix of milk and tea seems not caloric but because of the added sugar and tapioca pearls, bubble tea is a very caloric drink, heavy in carbohydrates. The typical glass contains more than 200 calories and 33 grams of carbohydrates.

According to Meituan, who delivered more than 210 million orders of milk tea last year, Chinese women are the largest consumers of milk tea and bubble tea, far ahead of men. 95% of women under 26 who use the Meituan app typically order milk tea every week. This means that bubble tea brands in China have had to adapt to new health concerns by offering more healthy alternatives and being more flexible on the amount of sugar. It is anyway a trend that is going to reshape the whole F&B industry in China.

Thus, in a highly competitive market, there is no shortage of innovations. Bubble tea brands in China are working hard to keep their current customers and attract new ones. Despite the growing trend of a healthy lifestyle, bubble teas in China still have a bright future ahead of them. The craze for bubble tea is so huge that we are even starting to find bubble sushis, bubble sandwiches, bubble noodles, and bubble pizzas…

Author: Steffi Noël

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[Data Source: Statista, size of the facemask market in China]

2021 estimations after COVID-19 show a slowdown of the trend, but the memory of the pandemic will still account for a significant part of the demand.

Before the outbreak, the face mask market in China was much more driven by pollution concerns than disease. Pollution alerts often led to a surge in demand on the Chinese e-commerce marketplaces. Resulting from COVID-19, an unprecedented surge in national demand for face masks pushed thousands of new manufacturers to start producing face masks, with the support of local authorities. However, the rush for N95 masks with higher filtering capabilities has largely benefited the American brand 3M, which dominates the N95 face mask market in China.

China met global face mask demand with a production boom

Since the re-qualification of the outbreak as a global pandemic, China experienced a mask-making boom. In 2020, More than 38,000 new companies registered to make or trade face masks. China was already the main market for protective masks production in the world, making half of the global output in 2019. In February 2019, the country had already risen its capacity from 20 million to 110 million. Concerns about overcapacity in the offer on the Chinese market have quickly disappeared, with China’s face masks being in urgent demand from other countries.

In April 2020, foreign governments’ ‘wild feeding frenzy’ for Chinese protective face masks brought chaos to the landscape of manufacturers. A medical supplier during the pandemic told the South China Morning Post: “mask machines are like cash printers.” To meet global demand, many factories that were making completely different products like car parts, electronic parts, or plastic toys, therefore turned to mask production. With governments fighting for ramping up their stocks, quality controls at purchase were often completely avoided in favor of shipping speed.

New regulations to prevent face mask scams

The influx of new actors to the market has led to a dilution of the quality and a surge in scams, forcing the Chinese government to change the rules. Mid-April’s new regulations from China’s customs agency require companies manufacturing PPE (Protective Personal Equipment) for export to go through a government-led process. Mask exporters also need to prove that their products meet the relevant regulatory standards of the destination country.

This move comes after a global backlash in which foreign countries were supplied shoddy products, undermining China’s position as ‘the global savior.’

As long as the pandemic doesn’t end, the Chinese face mask market will stay warmly flooded with transactions. However, foreign countries are now ramping up their own productions to be less dependent on Chinese exportations.

Thus, if the pandemic is an instant boon for the Chinese face mask market, the gold rush will soon end, and many actors may be left aside.

National issues supporting the Face Mask Market in China

The face mask market in China is largely driven by external events like epidemics and pollution. Most recently, the Coronavirus outbreak has caused face masks to sell out all over China. Originating in Wuhan late December, the 2019 new Corona Virus (2019-nCoV), has infected over 28,000 people and killed about 570  in Chinese mainland as of February 7^th 2020. – The rapid spiral in the number of identified n-CoV cases forced the Chinese government to seal cities and public transport. The Spring Festival holidays had been extended by a week, hoping to curb the spread of the epidemic. Two months before the destructive outbreak, China’s National Health Commission had already called to effectively enhance prevention measures in anticipation of the upcoming flu season, looking for a more standardized process for diagnosis and treatment.

But the 2019-nCoV is by far neither the first nor the last to appear on Chinese soil. China has always been considered by the World Health Organization (WHO) a hot spot for new influenza viruses; there is indeed no other country on earth where so many people have close contact with wild animals. Thus, the n-CoV reminds of the lethal 2002-3 severe acute respiratory syndrome (SARS), but also less widely known avian influenza A(H7N9) virus, which killed 212 people in China according to a 2015 WHO report.

In the meantime, according to the Global Health Observatory, total health expenditure per capita in 2014 in the country reached 731 USD, which is much lower than the 2014 world average of 1041 USD. This report from the OECD shows that China counted 1.8 physicians per 1000 people in 2015, which is slightly more than the World average of 1.5, but almost twice less than the OECD countries.

Pollution drives the functional mask market in China

Flu prevention is not the only health problem that China is facing. Air pollution is another one, which has become one of the most intensely discussed livelihood issues that the Chinese government focused on the 12th National People’s Congress (NPC), held in Beijing on March 5, 2016. Chinese Premier Li Keqiang declared a “war on pollution” at the Communist-controlled NPC parliament in 2014.  Three years later, average particulate levels in Chinese cities still do not meet the World Health Organisation (WHO)’s standards, which considers anything over 10 PM2.5 as health hazard (maximum annual average PM 2.5 exposure). According to this infographic, in 2016, Beijing had  a yearly average of 7.3 times above the WHO’s recommended safe levels.

N95 masks in China: A shield in a war against the Coronavirus

In January 2020, Chinese President Xi Jinping declared “a people’s war against the [n-CoV] epidemic” over a governmental meeting, stressing that prevention and public awareness remain the most effective measures to fight a pandemic. Since the 2002-3 SARS, people rely on wearing surgical masks. Especially high-filtering specialized N95 masks, during illness as one of the main preventive barriers against propagation. Claimed as an effective way to protect oneself from the virus, face masks have been urgently brought to the fore as a daily necessity and a fast-moving consumer good in China, resulting in a massive gap between market demand and supply.  On January 3, 2020, just over a week after the new coronavirus outbreak, China “urgently needs” protective medical equipment while medical masks shortages were reported across the country.

 Face masks, also called ‘kouzhao’ (In Chinese口罩) usually cover the nose and mouth and include cotton masks with cute designs, surgical masks, and imported high-end filters. In 2014, officials in Shanghai considered distributing free protective masks to residents after the financial hub of China “suffered one of the worst spells of air pollution on record,” reported The Telegraph. At this time, PM2.5, fine ambient particles less than 2.5 micrometers in diameter causing cardiovascular diseases and lung cancers, rocketed to levels that were more than 20 times those deemed safe by the WHO.

Red alert in Northern China

In December 2016, northern China (including Beijing, Tianjin, and around 70 other northern Chinese cities) had been covered for weeks in thick toxic smog, composed of high concentrations of PM2.5. It is one of the worst episodes of air pollution the country has seen, affecting 460 million people.

The “red alert” was declared in 24 cities, prompting the closing of schools and airports, restricting traffic and asking citizens to stay indoors. In response, online shoppers splurged on filtration masks, and anti-pollution equipment , with e-commerce firms and brands reporting record demand, as explained by Reuters. In December 2016, Internet retailer JD.com Inc sold to domestic consumers about 15 million US-branded filtration masks through its online marketplaces. 

Face mask price inflation

The 2016 measures to counter air pollution strangely resemble the drastic measures of early 2020 to stem the spread of the new coronavirus, forcing dozens of Chinese cities to quarantine. As a result, 80 million masks were sold on Taobao over the two days of January 20 and 21. The BBC also reports that the price of a 20-mask box jumped to 1,100 yuan ($158) on Jan. 21, up from 178 yuan in November. Between December 30 and January 24, 3M, the most popular face mask brand in China, added $1.4 billion in market value. Honeywell, the American conglomerate that also sells face masks in China, added $500 million in market value, in the same frame time.

Overall, due to significant health crises, the protective face mask market in China, still dominated by Western brands that control more than half of the Chinese market, is heating up. Many budget manufacturers and low-cost producers from Japan and China are now trying to get a slice of it.

Rising demand for face masks in China

The demand volume of protective masks in China has grown continuously since 2012. State media estimate the protective face mask market in China was worth nearly 4 billion yuan ($600 million) in 2015. Along with the improvement of the living standard of people in urban areas and the rise of the middle-class, people’s awareness of pollution, germs and contaminants protection is increasing all the time, especially for young children, and will maintain rapid growth.

Protective face mask production in China

China’s protective face mask market enterprises are mainly distributed in the eastern region, and Bohai Rim, Yangtze River Delta Region, and Pearl River Delta Region are the major production areas. Shandong province serves as the center of the masks industry in China with another production hub, Dadian, dubbed the “mask village” for producing the cheapest pieces.

There are more than 300 mask processing and supporting enterprises in Dadian village, Jiaozhou City of Shandong with an annual production capacity of nearly 1 billion pieces. Realizing about CNY 1.1 billion ($160 million) of output value, it accounts for more than 80% of market shares nationwide (data based in 2017).

Currently, common protective masks widely available in every convenient store are priced at CNY less than 1 or 2 ($0.15 to 0.40) to CNY 30 or 40 ($4.5 to 5.8), and they are made from cotton yarn, activated carbon, and other materials. Along with the continuous increase of Chinese residents’ incomes and the improvement of people’s living standard, people have a stronger awareness about the environment and health. As a result, consumers are willing to pay more to protect themselves from health crises’ effects. They look for more comfortable and effective masks, such as Vogmask or Cambridge masks, which generally range in price from CNY 120 to 245 CNY ($19 to 37, based on 2019 Tmall/Taobao prices and currency exchange rates).  To meet growing demand in China, new market entrants like Airinum focus on the high-end market, with stylish design and high-quality replaceable filters.

Collectivism and Chinese consumer psychology 

“In China, people just pretend or assume that it is useful. It’s a mass behavior,” indicates Wong Chit Ming, a researcher at Hong Kong University’s school of public health. “You may feel a little better…but there’s no real evidence this might help.” This is collective consumer psychology among the Chinese who are entirely concerned about the threat of air pollution and germs during flu season. For him, Chinese people have the impression that this could resolve the problem of air quality and they should, therefore, do something to protect themselves from the harmful air, which will comfort them emotionally regardless the practical effect.

Different style and functions for the Face Mask Market in China

China Textile Commercial Association officially released ‘the community standards of PM2.5 protective masks’. The standards were implemented on March 1, 2016. Before this date, China had no quality standards for face masks for personal use, and the majority masks available claiming to reduce particulate matter by 99% on the market were not protecting against PM2.5.

According to the FDA, “Face masks and N95 respirators protect the wearer from liquid and airborne particles contaminating the face. They are one part of an infection-control strategy.” While face masks like medical and surgical masks are meant to block large-particle droplets, splashes, sprays or splatter that may contain germs from reaching your mouth, they are more loose fitting than N95 masks which are meant to achieve very close facial fit. The ‘N95’ designation means that the mask blocks at least 95 percent of very small (0.3 micron) test particles. Properly fitted, N95 respirators’ filtering capabilities exceed those of face masks, making N95 masks the most popular choice in times of pollution and influenza season. Currently, the N95 mask market in China is dominated by the giant 3M, as it is the only brand to be N95 approved by the Center for Disease Control and Prevention (CDC).

[Source: South China Morning Post ‘3M N95 Masks in China’]

Choosing the most effective mask

At present, the variety of types of anti-dust and anti-contamination masks sold in online shops and outlets have contributed to the disorder of this market. Those most popular kinds of masks are always those masks which have a relatively simple wearing process. Still, the vast majority of Chinese residents use cheap cotton masks that offer little protection. Also, expensive specialized N95 masks aren’t made to fit Chinese faces well, according to a study from Wuhan researchers. Even those benefiting from China’s Kou Zhao boom admit that their masks can only do that much.

Except for the most common cotton masks, active carbon mask which can be recycled and praised for  its adsorption force becomes another hot choice in China market. As some researchers analyze, China’s functional mask market has not been arousing general consumption groups’ attention due to its late start. But now it has garnered significant attention.

Division of the Chinese Mask market

Simple market research shows that on Taobao/Tmall, the top-selling mask brands are replicas of each other. Top brands sold in Dec 2018 to Jan 2019 are listed in the graphic below:

Lack of diverse options in China’s mask market

These brands and their products are the same in almost all aspects including materials, designs, promotional strategies, pictures used online and textual description. It is very likely that these masks are produced by the same producer. However, there is no trace showing the actual manufacturer of the products, and thus unable to identify whether the domestic mask product is highly concentrated or not.

Based on Xinhua.net, the overall face mask market in China is mostly controlled by the international giants 3M, which occupies almost 90% of all the market share, followed by Honeywell and Ludun 绿盾 with less than 5% respectively. Other brands such as Uvex and Hakugen have a non-significant market segment of less than 1% respectively.

To be noted that, among all these brands, only Ludun 绿盾 is produced by Chinese domestic company Sinotextiles Corporation Limited, other brands are all international based.

Another market analysis renders different views on the masks industry in China. According to a market report, four major domestic mask producers own 7 major brands. The largest domestic mask manufacturer is Shanghai Dragon Corporation 上海龙头股份 (market share 6.52% with 2 brands) followed by Shanghai MNP Inc 上海美科 (market share 7.14% with 3 brands), Teda Tianjin 天津泰达 (market share 5.90% with 1 brand) and Dongguan Rongxin 东莞容鑫防静电技术 (market share 1.00% with 1 brand) in a descending order.

The future of the Face Mask Market in China

There is an increasing demand for both functional and comfortable masks, so much improvement has been achieved in protective measures, what’s more, these functional masks are equipped with high technological contents. Thus, the additional value increases correspondingly. For example, masks for controlling bacteria and protecting virus should carefully suit with people’s facial form. Obviously, such a malignant environment we are living in is difficult to be improved thoroughly in a short time. Therefore, self-protection measure appears to surge high unprecedentedly, bringing vigor to the protective face mask industry in China.

New market studies in late 2018 found that ‘smart’ masks are now more welcomed than traditional protective face masks. Now major mask buyers in China not only consider the function of filtering but want to buy smarter equipped masks. With some AI microchips implanted into masks, those new products can both monitor the filtering function and other rates affecting human body performances including heart rates, air pressure, humidity and other air-related live data. Some other products even developed a replaceable filter with AI function, and these products are more like sports equipment than simply anti-pollution masks. Their filters can be replaced to imitate different air pressure levels and add on training difficulties when people try to exercise under a thin-air condition and to improve cardio abilities. Most buyers of this new type of AI-based masks are female, and 53% of the buyers are less than 30.

Many investors have seen this opportunity; it is estimated that the production value of China’s functional mask market will grow up to CNY 10 billion in the next five years.

Author: Maxime Bennehard

The ultimate Coronavirus economic impact in China report

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With the increasingly intense competition in e-commerce in the Chinese B2C market, customer acquisition cost will be higher. So, marketers are exploring new cost-effective methods like private traffic. This article will help you learn about private traffic in China and how to establish your own private traffic pool.

The Recent Development of Private Traffic

Private traffic is frequently discussed in the context of social e-commerce platforms’ popularity. Monetizing of public traffic pools becomes difficult in the competitive e-commerce environment. So, many companies now dig more value from regular customers and target them using private traffic. Also, private traffic is valuable to consumers because it gives them intimacy with the brand.

The trend of Private traffic in China

[Source: daxue consulting, “Searches of private traffic in 2019”]

Based on searches of ‘Private Traffic’ on Baidu, we can see the trend took off in early summer 2019. Four times higher search index on Baidu shows that “private traffic” showed up more in Chinese marketers and consumers daily life. With several successful examples emerging in the market, more people want to learn how they can leverage private traffic.

Consumer willingness to join private traffic pools in China

[Data source: iiMedia, “Acceptance level and distribution of private traffic in China”]

Private traffic depends on consumer willingness to join private traffic pools and interact with brands. The data from iiMedia Research illustrates that 30.8% of the respondents indicate they support private traffic operations, 61.6% of the respondents are relatively neutral and only 7.6% of the respondents express their dislikes. Analysts reckon that the high acceptance of private traffic is due to online marketing in China becoming more common. On the one hand, it is difficult for netizens to avoid being marketed. On the other hand, content marketing solves the pain point of users’ information asymmetry and brings value to them.

Private traffic explained

Private traffic refers to the traffic which can be fully managed by the brand, without relying on any third party or paid channels. It is free from the algorithms of large ecommerce platforms like Tmall and JD, putting the brand in control of how consumers see their products.

Differences between public and private traffic

[Source: daxue consulting, “Differences between public and private traffic”]

Private traffic helps brands contact consumers directly and improve consumer retention rate. Brands can focus purely on target consumer groups while saving money on acquiring traffic.

In contrast, public traffic in China highly relies on platforms and external channels, so it normally requires high cost on getting traffic and makes brands have less control over the traffic. Despite these channels can help the brand reach a wide range of consumers, it’s still hard for brand to achieve customer retention.

[Source: daxue consulting, “Daxue consulting private traffic in China – Different logics of public and private traffic”]

In addition, compared with public traffic in China, private traffic allows brands to reach customers with good continuity. Shopping assistants and Key Opinion Consumers (KOCs) can provide one-on-one service for customers. By offering product-related expertise knowledge and useful information, it is easier for brands to build trust among consumers. After the trust continues to deepen, consumer shopping behavior will extend from individuals to families and friends. Hence, the private traffic will become fission marketing and generate a positive circulation. So, the conversion and repurchase rate on self-owned channels are naturally higher than that on Chinese B2C E-commerce platforms.

Why is Private Traffic So Attractive？

Establishing a private traffic pool can help a brand reach customers easier at a lower cost, as compared with Chinese B2C E-commerce platforms. There are mainly three advantages that a brand can take as below:

More cost-effective

Like owned traffic in the West, private traffic is a direct response to the rising costs of reaching fans and followers.

The customer acquisition cost of Taobao in 2013 was 30 yuan per person, and by 2017 it had risen to 250 RMB. During the 11.11 promotion, some brands ’public traffic procurement costs 20% -30% of total revenue. Merchants have to buy traffic during each event, but the distribution of traffic on the Chinese B2C E-commerce platforms is unbalanced according to the reported that 80% of Taobao’s traffic is given to the top 20 merchants.

[Data source: Analysys, “Customer acquisition cost of Tmall and JD”]

Based on data from Analysys, customer acquisition cost of Tmall increased by 60% from 2015 to 2017 while JD increased by 164% during the same period, both of them exceeded 250 RMB. However, customer acquisition cost of private traffic is much lower. For example, Perfect Diary can attract consumers enter its private traffic pool with only 2-3 yuan for each.

Improving brand image and conversion rate

In the public traffic pool, the brand can hardly rebuild connection with users, who once purchase its products. However, by having its private traffic pool, the brand can develop closer relationship with customers. Also, it can help to improve brand image through the word-of-mouth promotion from regular customers to new ones in customers’ community. This kind of behavior will have a superimposed effect, which is much more effective than common promotion method.

Getting closer to customers

Before introducing new products, companies need to do a wide range of market research to meet market demands. With the private traffic pool, companies can collect needs and feedback from consumers directly. Private traffic can effectively reduce churn rate, especially when the brand interacts with customers in a more human-like and personalized manner. By operating private traffic pool and establishing emotional interaction with users, the products recommendation will not be blocked as annoying advertisings, but accepted easily by consumers.

How Private Traffic Work

Traffic flow in Private Traffic

[Source: daxue consulting, “Daxue consulting-private traffic in China – General logic of private traffic in China”]

Directing traffic to a private traffic pool is based on five steps: acquisition, activation, retention, revenue and referral.

A brand funnels traffic from public pools (like e-commerce marketplace platforms) to private pools through attractive content, QR codes, and consumer benefits. Then it operates its private traffic to awaken silent customers, improve customer stickiness, retention and repurchase rate.

Three models of operating private traffic in China

There are three main models of operating private traffic. First, the shopping assistant model is suitable for new brands. The professional model, or Topic Expert model, is focused on educating consumers. The private partner model is usually suitable for luxury goods or education and fitness industries

[Source: daxue consulting, “Daxue consulting – Models of private traffic in China”]

Model 1：Shopping assistant

The shopping assistant model is suitable for new brands. It is a one-to-many relationship which helps early users understand the brand. Brands leverage social media platforms to share products’ using experience and promotions with consumers in the private traffic pool. This model meets customers’ demands of acquiring rich information conveniently and special benefits. This model can be compared to a retail associate in a department store.

Similar to how Watsons’s shop assistants provide services for consumers in store, such as skin tests and makeup trials. In the shopping assistant private traffic model, customers can add shop assistant’s WeChat account, thus they can have after-sale services, personalized service and information of new arrivals.

Model 2：Topic expert

Topic expert is suitable for targeting consumer groups in the professional or lifestyle categories. A brand with core cohesion, such as Nike, gathers fans to establish an interest community, organizes offline activities like running, yoga and so on. It can attract individuals, who need sense of belonging and relevant knowledge and improve customer’s stickiness. In the case of Nike, the topic expert would be like your fitness-obsessed friend, who can tell you what shoes to buy for running vs. basketball, and what to bring to your first Yoga experience.

Model 3：Private partner

Private partner model is usually suitable for luxury goods or education and fitness industries, whose customers need valuable and personalized services. Many educational institutions adapt this model to manage users hierarchically by one-to-one services. They usually organize offline events instead of pulling customers to their community directly. The private partner is like the digital version of an advisor or consultant, who can provide personal guidance and exclusive advice.

How to establish private traffic ecosystem on WeChat?

[Source: daxue consulting, “WeChat ecosystem of private traffic in China”]

First, create a personal account on a platform like WeChat to interact with customers and provide personalized services. Second, share high quality content on WeChat moments to promote content and gather interest in your brand. Third, drive public traffic for brand-owned sales channels such as mini-program to effectively connect ecommerce and social media marketing. Finally, integrate and correlate the whole ecosystem through public account, which can provide entrance to its mini-program on its homepage and posts to complicate the traffic circulation.

If you want to learn more details from operating private traffic cases in China, you can read our case study about Perfect Diary, a Chinese cosmetics brand that has grown 50-fold through a private traffic strategy. Because platforms like Taobao and JD are becoming more expensive, now is the time for brand to gain independence from these platforms by establishing private traffic in China. If you want to know how to get brand independence in China, email our project team at dx@daxueconsulting.com to start your China market strategy project.

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Rolex, Omega, Patek Philippe, Cartier, Channel, Longines, Tissot, Rado, Blancpain and Piaget are the top ten luxury watch manufacturers ranked in the Chinese market in 2019. The luxury market in China has been soaring from 2017 to 2018 with a compound growth rate at 40%, which makes China a big potential market for luxury manufacturers to acquire and compete. The luxury watch market in China is estimated to be worth 19.4 billion RMB.

Men between the ages of 25 to 40 are the main consumers in the luxury watch market in ChinaLuxury watch consumers in China buy watches as to depict status and consider 5,000 RMB as an entry price for luxury watches. Consumers learn information online but tend to purchase luxury watches in physical stores. “Swiss Made” watches are the first choice for luxury watch consumers in China.

[Data source: Forward the iresearch ‘luxury watch consumers gender/age distribution in China (2019)’]

Celebrity Endorsement and Soft Marketing

According to the research result given by the market research company Synovate, wealthy Chinese people like to purchase luxury with distinct visual logos and high brand awareness. Therefore, brand awareness becomes a key factor of Chinese consumers’ purchasing decisions. As data provided by iresearch, the most efficient strategy to enter and occupy the luxury watch market in China is celebrity endorsement.

[Data source: Forward the iresearch ‘The marketing strategies of luxury watches in China that are popular among consumers (2019)’]

Chopard China marketing strategy

In May 2018, a Swiss luxury watch brand, Chopard in China declared Wang Yuan (Roy Wang), a pop star, as its ambassador. The declaration Weibo was reposted over one million times.

[Source: Weibo ‘Chopard declares Wang Yuan as its ambassador’]

However, the celebrity effect is not always long lasting. As of January 19^th, 2020, only 7 of Chopard’s Weibo that were related to Wang Yuan were reposted over 100,000 times. They were usually reposted  around 20,000 times. Chopard’s brand exposure grows when Wang Yuan has TV shows or films on and when Chopard in China has special campaigns with Wang Yuan, such as the Valentine’s Day event with Wang Yuan. If Chopard in China uses celebrity effect as its primary market strategy in the luxury watch market in China, it needs to adopt the most popular celebrity as its ambassadors and keep him active in the public eyes to maintain the brand exposure in luxury watch market in China.

Soft marketing of luxury watches

Some famous brands prefer to use soft marketing in the luxury watch market in China. Although they do not sign any celebrity to represent their brands specifically, they ask celebrities to be guests at their brand events, sponsor film festivals, or plant ads in films to enhance the brand publicity. In 2012’s Cannes Film Festival, two Chinese film stars Chen Kun and Qing Hao were wearing Dior wristwatches. What’s more, many other Chinese film stars were wearing luxury watches too: Zhou Xun with Channel, Gong Li with Louis Vuitton, and Liangchao Wei with Cartier. These are all parts of the soft marketing effort made by luxury watch brands. It is obvious to see soft marketing has become a sustainable marketing strategy widely used by luxury watch manufacturers to better compete in the luxury watch market in China.

Status and Rolex in China

Rolex watches are meant to represent the upper-class income group individuals who live a lavish life. Therefore, unlike Chopard, it uses undifferentiated niche strategy all over the world, including the luxury watch market in China.

Chinese netizens responses to the Zhihu question  ‘what was the experience after purchasing your first Rolex in your life’. The response with the most upvotes said he had looked for a Rolex Yacht-Master watch for three years in many different countries and finally got it in a small Rolex exclusive store in London. He felt purchasing a Rolex watch was a turning point in his life. Whenever he had the urge and pressure to make a decision, the Rolex reminded him to calm down because people who wear Rolex watches have to be sophisticated. When he noticed other people were staring at his Rolex, he felt proud and extraordinarily satisfied. Rolex was the first luxury watch brand that entered the luxury watch market in China after the Chinese economic reform. Rolex in China has a special place in the hearts of luxury watch consumers in China. They do not only treat Rolex as a symbol of luxury and prestige as other luxury watches in China, but also a timeless masterpiece. Although, some of the luxury watch consumers in China do not buy Rolex in mainland China because of the limited supplies and relatively higher price.

[Source: sina.com.cn ‘Rolex with Li Na’]

Brand awareness without social media

Rolex in China does not focus on short-term brand exposure or social media marketing since its brand awareness is high in China and its target segment is concentrated. Rolex’s marketing strategy focuses more on advertising artistic and athletic activities. Rolex has continued sponsoring tennis tournaments for many years and aligns with excellence in tennis. In 2011, Rolex signed an endorsement contract with Li Na, a trailblazer for tennis in Asia. Li Na referred Rolex as a booster for the tennis development in China. Rolex is driving the technological advancement, state of design and positive brand image to be ahead in the luxury watch market in China.

Luxury Watch market in China Faces counterfeiting

[Source: xw.qq.com ‘Guangzhou Customs seized counterfeit watches’]

Switzerland and Guangzhou Customs made an alliance against counterfeit watches. They destroyed a large number of counterfeit watches at the end of year 2019, which were worth around 350 million dollars. Experts said those counterfeit watches bore a remarkable resemblance to the authentic watches. The counterfeit watches caught in Guangzhou were not sold in China, but exported to Europe.

[Source: xw.qq.com ‘foreigners buy counterfeit watches’]

Many people buy counterfeit goods at Xiushui Street in Beijing, which is famous for its fake but good quality products. Counterfeit luxury watches from Xiushui Street are one of the most popular goods among foreign visitors.

Luxury watch brands should put more efforts on content marketing about the value of authentic watches and encourage consumers to buy watches at authorized stores. On the other hand, brands should also ally with government organization to seize counterfeit watches and strength punishments against counterfeiters, authorized dealers and counterfeit buyers.

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This article The Luxury Watch market in China: Status, sophistication and counterfeiting is the first one to appear on Daxue Consulting - Market Research China.

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This article How brand independence can maximize profits | workshop in Shanghai is the first one to appear on Daxue Consulting - Market Research China.