When localizing a brand name, companies need to pay attention to many factors, including phonetics, semantics, characters, tones, and local dialects. Daxue consulting has a proven four-step method for choosing a brand name in Chinese, which you can learn about here.

Different approaches to Chinese brand names in the pharmaceutical industry

There are several ways to choose Chinese brand names for foreign pharmaceutical brands. Just as when translating foreign names, companies can translate the name either according to its semantic meaning, or according to its phonetic sound. In some cases, it is possible to combine both methods into one translation.  

This case study includes the analysis of 10 companies in China’s pharmaceutical industry. Namely: GlaxoSmithKline Plc, Sanofi, Merck & Co Inc, F Hoffmann-La Roche Ltd, Johnson & Johnson, Bayer AG, AbbVie Inc, AbbVie Inc, Pfizer Inc and Eli Lilly and Co. It includes the analysis of how they choose a Chinese brand name, as well as the names of their products in the Chinese market.

Phonetic translations

Phonetic translation is the easiest way for translation and the most common localization method. A common slip up is when companies simply transliterate their name without thinking about the meaning and sound of the characters. As a result, the character choices, while having a good sound, may have unfit meanings or tones that do not roll of the tongue easily. However, when giving Chinese brand names in the pharmaceutical industry, companies often use this method, combined with choosing the right characters, as it is a very specific market.

GlaxoSmithKline Plc

Source: GSK, GSK website page in Chinese

Original name of this English company is GlaxoSmithKline Plc. In Chinese the brand has the name “葛兰素史克” (“Gelansushike”) / GSK.

Its antiviral medicine Viread in Chinese has the name: “韦瑞德” (“Weiruide”), which sounds similar to the original name.

Such as in this case, the original foreign name has sounds that do not exist in Mandarin, such as the V sound. However, “V” sounds in brand or product names are often transcribed to “W” in Mandarin.

Sanofi

Source: Sanofi, Sanofi website page in Chinese

The French company Sanofi in Chinese has a name “赛诺菲” (“Sainuofei”).

Its antiepileptic medicine Depakine in Chinese is “德巴金” (“Debajin”). “De” might give an impression of “Germany”. However, the French flag is on the packaging, conveying a message that the product made in France.  

Source: Taobao, Depakine in the Chinese market

Merck & Co Inc

Source: Merck, Merck website page in Chinese

The Chinese name of the American company Merck & Co Inc is “默克” (“Moke”). Their popular product Vigantol does not have a Chinese name. Some overseas flagship stores sell this product and it receives hot discussion on social media. 

Source: Taobao, Vigantol in the Chinese market

F Hoffmann-La Roche Ltd

Source: La Roche, La Roche website page in Chinese

A company La Roche from Switzerland has its Chinese name “罗氏” (“Luo Shi”). Some of their products also have names based on phonetic approach. For example, the product Rocaltrol which contains vitamin D metabolites, in Chinese has a name “罗盖全” (“Youjiale”). It uses same character “Luo” as ”Luo” in the company name. Another La Roche product Madopar in Chinese is named “美多芭” (“Meiduoba”).

Johnson & Johnson

American company Johnson & Johnson does not use phonetic approach for its brand naming in China. However, it applies this approach to some of its products. For example, Band-aid in Chinese sounds like  “邦迪” (“Bangdi”). Another product which original name is Motrin has “美林” （ “Meilin”) as a Chinese name.

Source: Taobao, Band Aid and Motrin in the Chinese market

Bayer AG

Source: Bayer AG, Bayer website page in Chinese

German pharmaceutical company Bayer in Chinese sounds like “拜耳” (“Bai Er”). Besides, some of Bayer China’s products also named based on the phonetic approach. For example, Bayaspirin has its Chinese name “拜阿司匹灵” (“Baiasipiling”). It uses same character “Bai” as ”Bai” in the company name. Its product Canesten also has a Chinese name  “凯妮汀”（ “Kainiting”), which sounds similar to the original.

AbbVie Inc

Source: AbbVie, AbbVie website page in Chinese

American company AbbVie in Chinese has a name   “艾伯维” (“Aibowei”). However, most of its products name represent “phonetic + evocative” approach.

Novartis

Novartis which based in Switzerland does not use phonetic approach to its brand name in China. However, its products Diovan has Chinese name “代文”(“Dai Wen”), which sounds close to original.  Same for Trileptal with the Chinese name: “曲莱” (“Qu Lai”).

Source: Baozhilin, Diovan and Trileptal in the Chinese market

Phonetic approach for prescription drugs

All drugs mentioned previously are  over-the-counter drugs, meaning they are aimed at ordinary consumers and their names are casual-sounding, to be clearer for customers. However, for comparison, we also looked at prescription drugs, where the marketing is not just directed to consumers, but also medical professionals. What is interesting thing is that some companies adapt their names of prescription drugs for the Chinese market in not-professional-sounding, rather casual-sounding way.

AbbVie Inc

AbbVie’s medicine Zemplar, which helps to treat secondary hyperparathyroidism in people with chronic kidney failure, has a Chinese name “胜普乐” (“Shengpule”). “Sheng” means “victory”, “Pu” means “common” and “Le” means “happiness”. As we can see, it has no connection with the effect which this drug has or with ingredients it contains.

Another drug Humira, which used to treat arthritis, Crohn’s disease and psoriasis, in the Chinese market has a name “修美乐” (“Xiumeile”). It sounds close to original and has positive meaning: “Mei” and “Le” mean “happy” and “beautiful”.

Source: Taobao, Humira in the Chinese market

Sevofrane’s name in Chinese is “喜保福宁” (“Xibaofuning”) “Xi”, “Bao”, “Fu”, “Ning” are all positive words standing for happiness, safe and good health. It is a volatile liquid anesthetic, used during serious operations. The name sounds surprisingly casual and light-hearted considering the seriousness of the product.

Eli Lilly and Co

This company produces Olumiant, which helps to reduce pain and stiffness in Chinese sounds like “艾乐明” (“Aileming”).  “Le” means “happy” and “Ming” means “bright”. The name conveys a positive message.

Pfizer Inc

Calcium channel blocker Norvasc in Chinese sounds like “络活喜” (“Luohuoxi”). “Luo” means “Merridian”, “Huo” means “alive” and “Xi” means “happiness”. “Luohuoxi” conveys a positive message and might be reliable in curing heart diseases and unblock blood vessels. It also has casual-sound name, although being a serious drug, which requires prescription.  

Source: Taobao, Norvasc in the Chinese market

Phonetic and evocative names

In case of “phonetic + evocative” method, translation covers not only the name itself, but also the signal that the product or service carries. Adaptation taking into account the meaning and sound is the most difficult and successful option, when the creators manage to preserve the pronunciation. Besides, they put the original meaning into the translation and avoid negative perception of images.

Sanofi

Sanofi also uses this approach. For example, its product Aprovel has a Chinese name “安博维” (“Anbowei”), where “an” means “safe”. 

Source: Taobao, Aprovel in the Chinese market

Merck & Co Inc

Merch also has some product names which combine phonetics and meaning. For instance, Glucophage has a Chinese name: “格华止” (“Gehuazhi”). “Zhi” means “stop”. Since the main function of the medicine is to deal with diabetes, “Zhi” means that the product can stop the disease and keep balance of body.

Another product Euthyrox has its Chinese name “优甲乐” (“Youjiale”). “You” and “Le” means great and happy. “Jia” is the same character with “Jia” in “Jiazhuangxian” (thyroid). It conveys a message that the product can do good to thyroid diseases.

Source: Taobao, Glucophage and Euthyrox in the Chinese market

F Hoffmann-La Roche Ltd

The product of this company Xeloda in Chinese sounds like “希罗达” (“Xiluoda”). It uses same character “Luo” as ”Luo” in the company name. “Xi” represents “hope”.

Source: Taobao, Xeloda in the Chinese market

Johnson & Johnson

Source: Johnson&Johnson, Johnson&Johnson website page in Chinese

Johnson & Johnson uses “phonetic + evocative” approach for its brand name in China. In Chinese it is “强生” (“Qiang Sheng”). “Qiang” means “strong” and “sheng” means “life”. “Qiangsheng” conveys a message of “make life stronger”. 

Same approach is for some products. For example, Acuvue’s Chinese name is “安视优” (“Anshiyou”).

“Anshiyou” stands for  “having stable and better eyesight”.

Bayer AG

Bayer uses this approach for Redoxon product. Chinese name is “力度伸” (“Lidushen”). “Lidu” means “strength and power”. “Shen” means “strengthen”. The name conveys a message that people can gain more power after eating the vitamin tablets.

Source: Taobao, Redoxon in the Chinese market

Novartis

Source: Novartis, Novartis website page in Chinese

The Chinese brand name of Novartis is “诺华” (“Nuo Hua”). “Nuo” means “promise” and “Hua” means “China”. Nuo Hua would like to make a promise to China, keep providing innovative products and contribute to the improvement of health and living quality of Chinese people.

Its product Lucentis’s Chinese name is “诺适得” (“Nuoshide”). “Nuoshide” adopt phonetic and evocative strategy by using the same character “Nuo” as the company name “Nuo Hua”.  “Shi” and “De” represent for “comportable”. 

Pfizer Inc

Pfizer has some products named according to “phonetic + evocative” approach. For instance, Diflucan’s Chinese name is “大扶康” (“Dafukang”). “Da” means “big”, “Fu” means “help” and “Kang” represents “a good health”. Another product Lipitor – “立普妥” (“Liputuo”) in Chinese. “Li” and “Tuo” stands for “a high speed”. “Liputuo” means that the problem can be solved in a short time.

Eli Lilly and Co

Source: Eli Lilly, Eli Lilly in the Chinese market

American brand Eli Lilly and Co is another example of combining semantics and meaning. Its Chinese name is  “礼来” (“Li Lai”).  “Li” means “courtesy and politeness” in Chinese and it is an important virtue in Chinese society.  “Lai” means “come”. “Li Lai” conveys a message that the company is gentle and is willing to do good to the Chinese society. This brand is also very special, because of its visual identity. Typography and name totally stand out from the competition in the Chinese market.  Their name is something that you would expect seeing in the hospitality industry for instance (“courtesy/politeness is coming”). Same for their typography, hand-written, as it relates to tailor-made/crafted/personalized products.

Source: JD, Ceclor in the Chinese market

Its products Ceclor’s Chinese name is “希刻劳”(“Xikelao”). “Xi” means “hope”. Zyprexa’s Chinese name is “再普乐” (“Zaipule”). “Zai” means “again” and “Le” means “happiness”. The name conveys a positive message. 

Phonetic and descriptive names

This approach to the Chinese brand names in the pharmaceutical industry means that the name gives a hint of the effect of the product. At the same time, there is a certain parallel in the phonetics of the word with the original name.

GlaxoSmithKline Plc

This company uses this approach to the Requip, which helps to treat Parkinson disease. The Chinese name is “力备” (“Li Bei”). “Li Bei” means to have the power, which can reflect the function to release Parkinson symptoms.

Source: Taobao, Requip in the Chinese market

AbbVie Inc

Its product Calcijex has a Chinese name: “溉纯” (“Gai Chun”). “Chun” stands for “pure”. Since the product is a liquid used for injection, it gives people a sense of pureness.

Descriptive

This approach to the Chinese brand names in the pharmaceutical industry adapts the brand name so that Chinese consumers understand what effect the product has. It doesn’t have to sound similar to the original name.

GlaxoSmithKline Plc

The example of this approach is company’s product Avamys. In Chinese it is “鼻眼适”(“Biyanshi”). “Biyanshi” means make both nose and eyes comfortable, which can represent the core function of the product.

Source: Taobao, Avamys in the Chinese market

Key Takeaways of pharmaceutical brand naming in Chinese

• Most of the Chinese brand names in the pharmaceutical industry apply phonetic approach. It could be explained by the fact that it is simpler and does not require spending time finding the characters that convey the essence of the product.
• Some companies in the pharmaceutical industry in China use “phonetic + evocative” approach. It helps Chinese customers to better understand what effect product has. However, it is harder to come up with the brand name which sounds similar in Chinese language and has a clear meaning.
• The descriptive approach helps Chinese customers to better understand the product, but it has little correlation with the original brand name.

Vitamin and health supplements market report by daxue consulting from Daxue Consulting

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This article Chinese brand naming case studies in the pharmaceutical industry is the first one to appear on Daxue Consulting - Market Research China.

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

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

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

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

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

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

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

Government policies to help the automotive industry in China

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

Epidemic highlighted imbalance of car brands in the Chinese market

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

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

COVID-19 boosted electric cars market

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

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

The auto industry in China slowly rebounds back

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

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

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

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

Automotive brands show signs of recovery

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

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

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

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

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

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

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

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

Chinese auto industry still has big potential

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

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

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

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

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

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

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

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

Alternatives to cars are increasingly successful in China

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

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

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

Didi Chuxing

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

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

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

Mobike

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

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

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

Second-hand car market shows growth in China

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

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

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

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

New-energy vehicles in China have become very trendy

Electric cars sales are increasing

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

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

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

China’s biggest electric carmaker: BYD

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

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

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

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

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

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

Connected vehicles in China have to be mobile-first

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

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

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

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

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

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

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

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

Integration of Alibaba’s Tmall Genie in BMW vehicles

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

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

Top innovative car brands in China

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How do carmakers promote their cars in China?

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

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

• 4S stores in China

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

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

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

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

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

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

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

• Showrooms, storefronts and flagship stores

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Target a young audience

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

Do not neglect offline communication channels

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

Keep a close eye on your online reputation

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

Rely on well-made design

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

Leverage to e-commerce and new retail

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

Author: Steffi Noël

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

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

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

Bayer’s current state in China

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

Bayer is deeply rooted in the Chinese market

Source: Quanjing, China’s pharmaceutical industry

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

Bayer cuts price largely to win contracts with the Chinese government

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

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

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

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

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

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

Boosting innovation and advance digitalization

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

Bayer strengthened R&D and innovation

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

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

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

Bayer China embraces digital transformation

Source: creamandpartners.com, Bayer cooperates with VeChain

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

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

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

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

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

Bayer’s China Vision & Mission

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

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

Learn about China’s vitamin and health supplement market

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

Listen to China Paradigm on Apple Podcast

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

Learn how COVID-19 impacted China’s beauty sector by downloading our full report.

The beauty sector in China before the COVID-19 outbreak

China’s beauty market developed steadily before COVID-19

In the past five years, the beauty sector in China had shown a steady increase. China had become the world’s second-largest beauty market in 2019, and the size of China’s beauty market reached 425.6 billion yuan in the same year. China’s beauty market becomes one of the fastest-growing and most promising fields of business in the near future.

Source: 360 make-up, Total retail sales of the beauty sector in China

Three key trends in China’s beauty market before COVID-19

The high-end segment grew faster

Source: Euromonitor, data.iimedia.cn, Beauty market segment in China

As China’s resident disposable income rises, people are more willing to consume, and there will be higher requirements in terms of the quality of life. According to data, in 2013-2018, the growth rate of the domestic high-end cosmetics market is accelerating, especially in 2017 and 2018, the growth rate reached 25% and 28.1% respectively. In China’s beauty market, although mass brands still play a major part in the market, the high-end segment was estimated to grow fastest in the next few years. It is predicted that the CAGR (Compound Annual Growth Rate) of the high-end brands, mid-high-end brands and mass brands from 2018 to 2023 will be 18%, 14% and 5%, respectively.

The popularity of social e-commerce on the rise

With the use of social media in the context of e-commerce is gaining popularity, increasing numbers of Chinese consumers are making their purchases through social media platforms such as Xiaohongshu and WeChat. It is a trend that social e-commerce is increasingly welcomed by both sellers and buyers in china. The social attributes and sharable characters make social e-commerce more friendly for beauty brands. For the beauty sector in China, the social attributes and shareable character make social e-commerce more friendly, and social e-commerce is set to become one of the mainstream sales channels in the future.

Source: Youzan, Beauty market segments in China

According to Youzan, a 3rd party WeChat e-commerce platform in China, the GMV growth rate and purchase convenience of social e-commerce are much higher than that of traditional e-commerce.

Rising preference for domestic brands

Source: China Association of Fragrance Flavor and Cosmetic, Cumulative share of domestic brands in Top 20 list in the beauty market

Thanks to the development of e-commerce, domestic beauty brands have risen strongly in recent years. Leveraging social media marketing and living marketing, some Chinese beauty brands, like Perfect Diary and Lin Qingxuan, have seen rapid growth. In 2018, the cumulative share of domestic brands in the Top 20 list in China’s beauty sector was 14.1%, increasing from 7.6% in 2012, and the percentage has been estimated to gain more market share in the future.

COVID-19 impact on China’s beauty sector

General impacts of COVID-19 on China’s beauty market

COVID-19 had a strong impact on the beauty market in the short-term

Source: iimedia research, Predicted impact of COVID-19 on China’s beauty market by product category

COVID-19 impact on China’s beauty sector was clearly negative in the short term. During the outbreak, retail sales of beauty products in China dropped from 299 billion RMB in December 2019 to 37 billion RMB in the first two months of 2020. High-end brands were more affected than mass brands. For different beauty sector segments, COVID-19 has varying degrees of impact on different categories in the beauty market. Also, the epidemic had a more negative impact on cosmetics than skincare products, while personal care products were gaining more popularity in this period. According to the Beauty Consumer Behavior Survey on 1,000 Chinese respondents, around 50% of the respondents stopped using cosmetics during the coronavirus.

Sales of beauty products decreased during COVID-19

Online commerce events were also affected during the coronavirus outbreak. The sales performance of beauty products on Tmall and Taobao decreased by around 40% in January 2020 compared with the same time in 2019. Normally, shopping festivals on Tmall and Taobao might help to boost sales. However, in 2020, offline promotion activities on Tmall on Chinese New Year and Valentine’s day were all cancelled. The COVID-19 impact on China’s beauty sector was even more severe due to the cancelling of two commercial highlights.

Source: iimedia research, Sales of beauty products on Taobao & Tmall by category

The beauty consumption after COVID-19 experienced a dramatic drop, and the sales of beauty device products and that of personal care products both had a nearly 50% year on year decrease in Jan 2020. Compared with others, the sale of hair care and the dying sector suffered the least.

COVID-19 impedes beauty consumption in China

Source: Qinyan information, Chinese beauty consumers’ behavior and perception during COVID-19

Also, the negative COVID-19 impact on China’s beauty sector reflected in the purchase intention. According to a Beauty Consumer Behavior Survey conducted by Qinyan information, purchasing demand on beauty products sharply decreased during the COVID-19 outbreak.  40% of respondents suggested that they didn’t have purchase intention, while 43% said they were unable to buy beauty products. Only 6% of consumers said that there was no impact on their purchasing experience in beauty products during the epidemic.

Major changes in the beauty sector in China

Skincare products are gaining popularity

One major change in beauty consumption after COVID-19 is that skincare products will be more welcomed compared to make-up. Cosmetics’ sales in China declined by 14.1% in the first two months of the year compared with the same period last year. During the outbreak, people consumed more and talked more about skincare products than cosmetics. Chinese netizens showed more passion for discussing and sharing their skincare experience at home. Also, due to the damage from wearing face masks for a long time, products with “skin repair”, “basic skincare” and “first-aid care” functions are increasingly needed during the coronavirus.

Health and safety have become keywords for beauty consumption after COVID-19

Source: Jumeili, What Chinese beauty consumers will care about after COVID-19

As society recovers from COVID-19, Chinese consumers are expected to pay more attention to the environment. This will be likely to inspire the beauty industry to focus more on products with natural and healthy concepts. For most beauty consumers, after COVID-19, they would only purchase necessities. Apart from the great concern of the cost-performance ratio, Chinese consumers also prefer beauty products with eco-friendly and natural ingredients.

Beauty brands are stepping into the disinfection sector

Source: Paidai, Sales growth of disinfection products on Tmall

Since Chinese consumers have an increased awareness of personal hygiene, disinfection products are expected to keep growing after the epidemic. The sales of disinfection products increased significantly during the 2020 Chinese New Year. Seeing business opportunities on disinfection products, many beauty brands stretched their category and started to produce hand sanitizers. For example, brands like CHANDO (自然堂), One Leaf (一叶子) and Geo skincare (纽西之谜) had started to produce and sell hand sanitizers.

DIY hairdressing is trending

Since most hair salons suspended service during the coronavirus outbreak, more people started to do hairdressing by themselves at home. In this case, hair dying products and related topics were gaining popularity. Specifically, Hairdressing products are mentioned more on social media platforms than before. Internet users in China showed great interest in learning how they can cut, dye and style their own hair. Some beauty brands adapted to this new trend fast, and promoted their hairdressing products. For example, L’ORÉAL collaborated with Tmall to promote their hair care products in early March 2020. In addition to meeting the rising demand for hairdressing at home, it also served as a women’s day promotion on Tmall.

Rising demand for doing SPA treatment and massages at home

Source: Robodata, Sales of massage chairs on Tmall and Taobao

As SPA and massage parlors suspended service during the pandemic, people showed great interest in trying to do massages by themselves at home. Topics about doing SPA treatments, like foot soaks and massages at home, are trending on social media platforms. Meanwhile, the sales of related products surged compared to that in last year. Taking the massage chairs as an example, the sales of massage chairs on Taobao and Tmall increased a lot during the coronavirus, especially in March.

Live streaming for beauty products is increasingly welcomed

Live streaming has become increasingly popular in China in the last few years as more consumers attach more importance to immersive experiences and personalized recommendations. The epidemic stimulated the dramatic growth of live streaming and made Chinese KOLs more important than ever. This trend can also be seen in the beauty sector.

Source: Taobao, ‘lipstick queen’ Li Jiaqi’s live streaming on Taobao

According to the data of one of the most famous influencers in China — Li Jiaqi, who first made his name selling lipstick on Taobao, his live streaming on Taobao attracted around 3.92 million views a day in March 2020, and the average daily sales volume approached 854 thousand RMB.

Beauty brands tend to attach more emphasis on private traffic

Due to the coronavirus outbreak, online marketing is blooming, which spots the light on private traffic. Realizing the trend of private traffic, beauty brands present a great passion for learning how to leverage private traffic. Some beauty brands in China transformed their business model quickly into the epidemic and started to put effort into private traffic marketing.

Jumeili initiated a social marketing online summit on April 28. The summit discussed how beauty brands in China could leverage private traffic and social marketing to gain traffic and increase conversion rates. The online summit had attracted more than 7,000 registers within 6 days.

Some brands take advantage of private traffic to boost sales during the epidemic. For instance, Cloris Land, an Australian brand that entered China in 2011, directed its offline stores to sell in the WeChat community and mini-program live streaming. From March 6 to 8^th, 1,057 stores joined in the live streaming sales event; the sales reached 6.3 million RMB.

Case Study: The impact of COVID-19 on Lin Qingxuan

Lin Qingxuan, a Chinese homegrown beauty brand, was severely affected by the coronavirus epidemic. In 2020 Chinese New Year, it had a year-over-year decline of 90% in sales, and lost over 10 million RMB as of January 31, 2020.

Source: Baidu Index; Pang Jing; Weibo, The impact of COVID-19 on Lin Qingxuan

Lin Qingxuan had made a quick response to the coronavirus crisis in early February, based on the changes in beauty consumption after COVID-19. Baidu index shows Lin Qingxuan has successfully improved its brand awareness by taking quick adaptation.

Responses of Lin Qingxuan during the crisis

Several timely measures successfully saved the brand from the crisis. First, It met consumers’ demand for skin repair products as people paid more attention to skin care and skin repair during the coronavirus outbreak. Specifically, Lin Qingxuan made more an effort to promote its skincare, especially skin repair products like the camellia oil.

Second, since offline stores suspended service during the coronavirus, Lin Qingxuan transferred its offline business to online channels at the very beginning of the epidemic.

Last but not least, Lin Qingxuan expanded its private traffic marketing. The brand has begun to build its private traffic pool on WeChat in 2018. Due to the coronavirus, Lin Qingxuan started to expand its private traffic pool from WeChat to Taobao with the collaboration with DingTalk. This helped Lin Qingxuan transfer rich public traffic from Taobao into private traffic, where it can manage its own consumer traffic.

Learn how COVID-19 impacted Xiaohongshu on Daxue Talks

This article COVID-19 impact on China’s beauty sector | Report by daxue consulting is the first one to appear on Daxue Consulting - Market Research China.

Chinese KOLs and Western influencers earning potential

Top 5 highest paid influencers in the west

Influencers typically advertise products on Instagram, Twitter, YouTube and other platforms. Businesses pay a large amount of money to them with a lot of followers to promote their products. If the  followers appear to match the company’s target customers, it will pay more.

Here are the five highest paid Western influencers

1. Kylie Jenner: $1 million per sponsored Instagram post.
2. Ariana Grande: a little less than $1 million per sponsored Instagram post.
3. Cristiano Ronaldo: $ 975,000 per sponsored Instagram post.
4. Kim Kardashian-West: $ 910,000 per sponsored Instagram post.
5. Selena Gomez: $ 900,000 per sponsored Instagram post.

Influencer is becoming the fastest growing channel for brand marketing. Based on a Tomson study, western businesses earn $6.50 for each dollar spent on influencer with the top 13% earning more than $20, which is a significant return.

The two Chinese KOLs with the strongest sales power

Compared to the hundreds of thousand dollar instagram posts of western influencers, Chinese KOLs can make over a million RMB in sales revenue a minute during live-streams. On October 21^st 2018, Li Jiaqi averaged around 1.77 milllion RMB (around 250 thousand USD) sales revenue a minute during a six hour twelve minute live-stream. Coming in second, Weiya averaged 1.64 million RMB (around 234 thousand USD) revenue a minute on the same day.

Chinese KOLs are relatively more active on live broadcasts platforms, like Tiktok and Taobao live broadcast. Li Jiaqi（李佳琦） and Weiya（薇娅） are the most representative KOLs in China with strong sales power. Li Jiaqi is the “No.1 Lipstick sales ” who sold 15,000 lipsticks in 5 minutes; Weiya is the “the most powerful promoter” that made a record of over 267 million products in a single (2 hours) live broadcast.

On October 20th, on the eve of the Double 11 pre-sale, Li Jiaqi once surpassed Weiya on the hottest Chinese KOLs ranking list（巅峰榜）. In the end, Weiya ranked the top of the hottest ranking list with 550 million live broadcasts traffic.

Source: Baijiahao, the hottest Chinese KOL ranking list

Li Jiaqi Live Data on 21^st October 2018

Li Jiaqi started the live broadcast at 20:14 on October 20^th and finished at 01:36 on the 21^st. The name of the live broadcast room was “miss the start of 21^st, you will regret the whole year”. From start to finish, the cumulative number of viewers reached 31.78 million. Among them, Li Jiaqi sold a total of 39 types of products, sales volume of 1.527 million, sales revenue reached 660.7 million RMB.

Source: Zhigua Data, Li Jiaqi live data

Weiya Live Data on 21^st October 2018

Wei Ya started the live broadcast at 20:00 on 20^th, 14 minutes earlier than Li Jiaqi, and finished at 02:43 on the 21st. During this period, the cumulative number of viewers reached 38.11 million, a total of 242,000 new fans, a total of 57 types of products were sold, sales volume was 976,000, and sales revenue was 661.2 million RMB.

Source: Zhigua Data, Weiya live data

Their live broadcasts on the day of Double 11 in 2018 proved their incredible sales power. Wei Ya achieved more than 267 million volume sales a day. Li Jiaqi sold 15,000 orders in 5 minutes, which defeated the record created by Jack Ma, the founder of Alibaba.

Chinese KOLs like Li Jiaqi and Weiya can feed dozens of factories in China. As Wei Ya said, no matter how much money she made, she would never stop working. If she stopped her live broadcasts, many factories might be closed. Other than advertising income, they also have commission. Weiya can make 2,370,000 RMB income for one live broadcast, and Li Jiaqi can make 3,150,000 RMB for one live broadcast.

Comparison between top western influencers and Chinese KOLs

In contrast to Chinese KOLs livestreaming, western influencers them promote products by well-produced and creative videos posted on Youtube, Instagram and other social media platforms. The quality of those videos can compare with MTV in Hollywood and even comparable to the quality of film production.

Jeffree Star vs. Li Jiaqi

Jeffree Star is a male, born in 1986. His father died when he was 6 years old. His mother is a professional model and has a profound influence on his aesthetic and preferences in a subtle way. He started to wear makeup when he was 12 years old, tried women’s clothing after attending high school, and finally showed himself as a “female image”. Initially, Jeffree Star was active as a model and singer, and was favored by Lady Gaga’s mentor, Akon. Akon boasted that he would become Gaga No.2. However, it did not come true. Later, Jeffree Star was famous for his creative makeup display on YouTube.

Source: WWD, Jeffree Star cremation palette

Four of the five highest paid western influencers are celebrities. Jeffree Star can make a good comparison with the Chinese KOL, Li Jiaqi, as they both are just influencers not celebrities.

Both Chinese KOL, Li Jiaqi and Western KOL, Jeffree Star focus on makeup. KOLs in China have more restrictions than in western countries. Before Li Jiaqi, most of makeup promotors were female KOLs in China. Li Jiaqi always tries lipsticks directly on his lips to better show the real colors, which was very bold for a male KOL in China. However, this is nothing compared to what Jeffree Star has going on.

Annual Income: Li Jiaqi (140 million US ) vs. Jeffree Star (100 million US dollars)

The profit model between these two make-up enthusiasts is quite different. Li Jiaqi’s team earns 1 billion RMB advertising revenue per year. Jeffree owns his personal brand “Jeffree Star Cosmetics” and make 100 million US dollars per year. He is no longer just a KOL but also a famous brand entrepreneur. Based on the data, Li Jiaqi’s team create more revenue than Jeffree Star’s cosmetics company.

Source: Shangyexinzhi, Jeffree Star Cosmetics

Business Model: Li Jiaqi (marketing team) vs. Jeffree Star (vertical business line)

Vertical business line, vertical e-commerce brand is a profit model that many western KOLs are adopting. They start from becoming influencers, then accumulating fans, doing a lot of traffic, and finally forming an independent vertical brand. This is a very different business environment between the KOLs in United States and KOLs in China. Some Chinese KOLs are trying to adopt the same business model. However, many of them were facing quality problems and failed. Vertical business line can also make profits for KOLs in China but following the example of Li Jiaqi might be more suitable in the Chinese market. Li Jiaqi’s team plays a role of a marketer but not involved into production.

Learn more about KOL marketing in China

China Paradigms podcast on how to leverage Chinese KOLs in marketing

This article Chinese KOLs vs. Western Influencers: How does an instagram post compare to a minute of livestreaming? is the first one to appear on Daxue Consulting - Market Research China.

Steal the Spotlight

Their reality show ‘Keeping up with the Kardashians’ has already reached the 18^th season. It has built a powerful platform for the Kardashians to stay relevant in the public and communicate with the audiences.

The story of the Kardashians started from a reality show

Basically, the reality show ‘Keeping up with the Kardashians’ made the Kardashians. Kim Kardashian, the most well-known sister, deserves the credit. Before the reality show, she ran into a PR mess when an intimate video of her and an ex-boyfriend spread across the internet like wildfire. Kim Kardashians saw her Despite the rapid success in the western world, the Kardashian’s fame was slow to catch on in China until recently.

Arousing viral discussion

The traffic economy is an economy based on digital platforms. Content creators and consumers realize the effective flow of information and generate economic benefits within the platform. In the digital era, traffic is not only driven by offline presence or advertising, but also in-time blooming information exchange online.

The Kardashian’s fame as officially hit China

Trending topics in the China are fast-changing. But the Kardashian are good at maintaining their presence by creating new dramas and the ‘magic’ of the Kardashians in China also worked. In the latest season of ‘Keeping up with the Kardashians’, the scene of the fight between the sisters went viral on Weibo. The topic climbed to the 2^nd of the Hot Search List in Weibo on March 28, with 200 million views and 27,000 discussions. Back to the last season, the dramatic break up between Khloe Kardashian and Tristan Thompson also raised a hot discussion, generating 130 million views and 12,000 discussions on Weibo.

Source: Weibo, Hot topics in terms of ‘Keeping up with the Kardashians’

How to mimic the Kardashian success in a Chinese way?

In China, vlog is a powerful tool

In fact, it is unrealistic and cost-inefficient for individuals or even brands to create a reality show to approach the public. To reach the Chinese market, Vlogs is a good alternative. Vlog is a video-blog, a casual, conversational video posted on social media, many Chinese KOLs use vlogs to reach their audience. According Bilibili, the most popular video platform for vlog in China, vlog has still seen a growing trend. One successful example of applying vlog to marketing could be the OPPO R17 campaign ‘Discover the beauty of the night’. The brand invited some famous vloggers to create short vlog with OPPO R17 about cities such as Tokyo, New York and Hong Kong and capture the beauty of night. The Weibo topic relating to that has already reached 620 million views.

Source: Biliob Index, the popular index of ‘vlog’

Stay Active in Social Media

Taking a picture and uploading it online may seem easy and mindless, but each of the Kardashian sisters gained a lot of reward that comes from a single post. With a mix of brand deals and sponsored ads, the Kardashians make money by just name dropping products and brands in their social media posts. It is estimated that Kim Kardashian makes about $500,000 per Instagram post, Kourtney and Khloe about $250,000 and the Jenners about $400,000 each, although some sources say Kylie Jenner earns up to $1 million per post.

From the reality show to social media, the Kardashians always find the best way to communicate with their audiences. The population targeted by a brand’s communication on social networks determines the content to publish. Moreover, interactive content and videos are particularly appreciated in the Chinese market. The Kardashians understand what their audience enjoys, and tailor their posts in such a way to maintain that connection. They share their lives as mothers and celebrities.

Additionally, they give their fans sneak previews of the new release of their brands. Through Instagram and Snapchat, followers are effectively given a ‘behind-the-scenes’ look at life in the spotlight. The constantly updated in social media. It feels like ‘Keeping Up with the Kardashians’ but in an unscripted, unedited, and intimate format. The result turns out well. Take Kylie Jenner for example, she is constantly active on her Instagram stories has more than 400 million daily active users. Moreover, they used social media to interact with the audiences. Kim Kardashian regularly engages with her followers and gives them insight into her world, like asking her followers for fashion advice in a tweet.

Presence of the Kardashians in China

Kim was the first one in her family spotted the value of the Chinese market and leveraged the social media trends in China. She joined several trending Chinese platforms and which at the end turned out impactful.  On October 27, Kim Kardashian opened her official account on Xiaohongshu (小红书, also known as Little Red Book or RED). Now she has more than 220,000 followers. On the social commerce platform, Kim balances the sales content with personal content her Chinese audiencescrave. The most engaging content of her Xiaohongshu account is about her family and her regular fashion. In Xiaohongshu, she interacted with her followers in the Chinese way. In her latest post about the launch of KKW fragrance, she said ‘Happy new year’ in Chinese.

Source: Xiaohongshu, the most engaging posts in Kim’s official account

However, Kim Kardashian’s traffic on Xiaohongshu is nothing compared to her Instagram following. So how can she start to gain momentum in China?

Kim collaborated with a Chinese influencer to expand her audience

To amplify the brand effect and present the product advantages in a more efficient way, Kim Kardashian leveraged the impactful e-commerce channel. In the Double 11 event of 2019, Kim joined the livestream collaborating with Viya (薇娅), a livestreaming expert in Taobao/Tmall. Even though the influence of Kim Kardashian is strong globally, her livestreaming index in Tmall didn’t tell the same story. The views of Viya’s livestream reached 10 million while the views of Kim’s livestream are less than 15,000. Nevertheless, the livestream worked in terms of boosting sales. At the end, 6,000 fragrances were sold within 30 seconds. Before the livestream, the total sales of the KKW fragrance were only 52. This livestream also raises a hot discussion in Weibo. To conclude, the collaboration enabled Kim Kardashian to win both sales and attention in the Chinese market.

Source: Taobao, Double 11 livestream of Kim Kardashian and Viya

What could be next – Short Video Platform

In order to be digitally active, accessing the vitality of the social media platform and keeping up with the trends in China is crucial. In the Chinese market, the structure of social media is changing fast. From 2017 to 2018, the usage of short video platforms soared by 6.2%. The trend remains upwards till now: the short video market in China soars on traffic growth especially that the Coronavirus crisis boosting the at-home economy. It is changing the monopolized BAT (Baidu, Alibaba, Tencent) structure in the market. There is no doubt that the short video platforming is leading the new social media trends in China.

Data Source: QuestMobile TRUTH, the proportion of usage duration of App, by platform

Construct favorable public image – the Chinese way

The Kardashians in China are controversial figures since it started with the PR mess of Kim Kardashian. However, Chinese customers respect her as fashion and beauty figures in general and the Kardashians brand gained endorsement among them.

How the Kardashians level up their public image?

In the US, the Kardashians have made philanthropic moves which impress the local audience. On one episode of ‘Keeping up with the Kardashians’, focused on Khloe Kardashian and Kim Kardashian’s mission to raise awareness about the issue of homelessness. The Kardashians influence did work. Kim Kardashian stated that the episode inspired over $1 million worth of donations to the Alexandria House, a shelter for women and single mothers in LA. They also leveraged their presence on other famous platform to do goods. Both Kylie and Kim completed the donation to specific issues on ‘The Ellen DeGeneres Show’. If philanthropy can turn someone’s image around in the US, what works in China?

Source: The Ellen DeGeneres Show, Kylie Jenner and Kim Kardashian donated

The Chinese audience is strict

Because of the unique and fragmented characters of the Chinese web, information and trends in China evolve at far higher speeds than anywhere else in the world either positively or negatively. Consequently, maintaining a favorable public image is crucial for your voice in this market. It applies for both celebrities and brands. In 2020, Chinese celebrities have tremendous pressure to maintain a clean, positive image. The tolerance of Chinese netizens is low. In the Chinese digital world, you might be admired by the public on minute, then suddenly be criticized by everyone the next.

The leading Chinese KOL Zhang Dayi (张大奕) was involved in a scandal. It went viral among the Chinese netzines. The topic #Zhang Dayi is a mistress# (#张大奕小三#) raised 780,000 discussion and gained 450 million views. Some of the netizens posted proposals to block Zhang Dayi. The company Ruhan, highly linked to Zhang Dayi, has been at stake due to the scandal. The stock price plummeted, with a maximum drop of 10% and the market value has evaporated by approximately $22 million (approximately RMB 150 million). The man involved in the mistress scandal is Jiang Fan, president of Taobao, Tmall, Alimama Business Group, was removed from the partners of Alibaba.

Thus, a proper brand position and a favorable brand image would be compulsory in order to enter the Chinese market.

Source: Baidu Index, Chinese Netizen search frequency of Zhang Dayi

Fan conversion

As famous figures or signs, their public image can be further exploited and converted properly into business. The Kardashians have become fashion and cultural icons and have infused their brand into everything they do. Each sister has taken their success and translated it into the means of businesses, lifestyle apps, brand deals and etc.

How the Kardashians achieve their success in business

Some of the Kardashian sisters have already found their own brands ranging from cosmetics to clothing. Their marketing strategies are highly consistent: using its own social media platform to promote products and inviting the big-name celebrity to post on social media. Among all the sisters, Kylie Jenner is most successful one in business: her brand ‘Kylie cosmetics’ is already worth $1.2 billion.

As fashion icon, the Kardashians also jump out of the industry to talk to their audiences. Take Kim Kardashian for example, she launched a video game ‘Kim Kardashian: Hollywood’ which is available on IOS and Android for free. It reached 1 million download and 5 million revenue by April 2020.

Can someone mimic the success of the Kardashians in China

While Kardashians’s following clearly shows some differences between western and Chinese consumers, it also highlights the power of influencer marketing in both cultures. Chinese consumers highly reward those who reach out using their culture and language. Kim Kardashian first used Weibo in English and got little traction, then she hopped on Xiaohongshu and used some Chinese, and got more traction. Then she did a livestream just for Chinese on 11.11 2019, and her fame in China hit a new high.

The global success of the Kardashians is not an accident. In the era of digitalization, colossal attention and traffic keep the money-spinning franchise running. However, attention and traffic would not maintain forever. It is crucial to find the right touchpoint to stay active online. The Kardashians successfully spot the growing social media trends in China and replicated their online impact to the Chinese market. Empirical evidences prove that favorable public image matters in China.

Negative image can destroy a public figure for a long-term period. Company in the Chinese market should be careful of building its image and stay consistent in the future. Famous figures like the Kardashians made a great amount of money by just posting pictures in the social media. The Chinese market also provides great opportunity of leverage the famous figures, which help companies exposed in the public and achieve success quickly. All in all, the Kardashians marketing tactics over the years are worthy of praise and provides useful guidelines even for marketing players in China.

Author: Dongni He

Partner with a Kardashian-like KOL in China

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This article Apply the Kardashians marketing tactics in China is the first one to appear on Daxue Consulting - Market Research China.

Market Entry and Development

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

Expansion Phase

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

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

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

Carrefour decline in China

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

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

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

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

Carrefour’s measures to cope with decline

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

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

Failure in terms of e-commerce

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

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

Corporate image and internal issues

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

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

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

Supply chain system problems

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

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

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

Carrefour’s competitors in China

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

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

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

Problem with city-based merchandise centers

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

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

Carrefour’s current state in China

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

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

The chronology of acquisition

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

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

Carrefour’s ties with Alibaba

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

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

Five long-term strategies of Carrefour in the Chinese market

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

COVID-19 impact on Carrefour in China

Carrefour in China saw significant profit during COVID-19 outbreak

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

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

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Find here Daxue Talks episode 66. Our guest Miro Li discusses what omnichannel marketing strategies brands could use in the renewed Chinese markets, such as private traffic, as well as how KOLs and brands are evolving to adapt to consumers’ needs during and after the COVID-19 outbreak.

Full transcript below:

How have KOL’s changed the way they interact with the audience during and after the outbreak?

I think KOL’s do more live streaming to talk to the audience directly. KOL’s like to show more sympathy in the content related to the COVID-19, and sometimes they will remind their followers to be cautious, to stay safe, to stay healthy. Show more sympathy let’s them to have a closer relationship with their followers.

They also share more products that are related to the current situation, for example products that you will need to use at home, like instant food or some DIY food or home electronics. So, they will share some products that are related to the current situation instead of products that you don’t need under this circumstance. At the end, they are trying to have a closer relationship with their followers.

Talking about your business, what were the main requests from clients during and after the outbreak?

Main requests are about how to digitalize. For example, we have some clients that are pure offline and are the retailers. During this time, how should they digitalize in a short time? They need to setup online shops and transform their sales persons to be the online sales who does the live streaming, and to set up the WeChat groups to manage the private traffic. I think this is the most request from the clients during this time.

Also when we are doing the marketing, the brands would ask you, how to combine the hot topics with the content? Definitely, we need to adjust the content direction during this time. So, how to show our sympathy as a brand, how to show our social responsibility, and what we need to do for content management? Also, how to plan an omni-channel strategy in the future in the long term and how to connect the online and offline are also what clients would always request during this outbreak.

What are your tips for brands on how to plan an omnichannel strategy working in the renewed Chinese market?

I think first you need to connect your online and your offline, so you have online shops, you have offline shops. For example, if you have a membership system, you need to combine your online and offline membership system into one system so that when customers shop online, they can get points and then when they go to the offline shops, they can also use these points to redeem any rewards. So, you have to connect it together and you have to have an integrated strategy. For example, you can use your online data, like online shops on TMall, to do a better offline promotion and then when customers come to offline shops, you can [redirect] these offline customers to online and let them become your private traffic. So for example you can add them to you WeChat group and can ask them to become a customer of your mini program so that they will become your private traffic. I think this will become the future of retail.

Also, you have to understand the different platforms for e-commerce and marketing in order to choose the right platform, the right channel. According to your brand positioning and also after the analysis of your competitors, learn each platforms’ algorithm and policy to follow the latest trends of each platform so that you can choose the best, the most suitable channel for your brand.

Before, many brands online have only had shops on Tmall, for example, but now they realize it’s not enough since TMall is popular traffic, and some brands want to start to manage their own private traffic. So, they start to set up WeChat shops and manage their WeChat group as well as doing a WeChat live streaming. So this is what I think: they are evolving, they are realizing that an omni-channel strategy is becoming more and more important. Many brands also start to realize that when you do this, you can’t really see results in the short term, because building word-of-mouth takes time, but it will definitely benefit you in long term. This is why brands need to be patient when doing this, and this is definitely the future of retail.

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an email – dx@daxueconsulting.com.

This article Daxue Talks transcript #66: Renewed Chinese markets — alternative strategies needed? is the first one to appear on Daxue Consulting - Market Research China.

The evolution of China’s luxury market

The 1990s, the beginning of Chinese luxury consumers

China has a long tradition of luxury craftmanship, such as painting or porcelain. An example of this is the art of painted landscapes called 山水 (shanshui,) which became popular during the Song dynasty. Since the Communist Era (1949), the economic elite went through difficult years due to opposition to the changes in ideology. However, Deng Xiaopping started liberalizing the economy in 1978 and in the 1990s, China therefore became one of the best place for foreign companies to relocate, causing a new economic elite to prosper. These wealthy communists have new needs, causing luxury demand to start to increase in the country. Up until now, the amount of Chinese luxury consumers continues to grow. Mr. Abtan, of the BCG, is convinced that the Chinese luxury market will continue to grow due to the “tsunami of the new middle class”.

The westernization of Chinese luxury consumption

The 1990s put China on the agenda of western luxury companies. They understood the potential of the Chinese luxury market. Many Western luxury brands opened their first Chinese store throughout the nineties, for instance Hermès in 1997, Cartier in 1992 and Chanel in 1999. Moreover, it is also during this decade that the private art market started to grow in China. The auction house “Duo Yunwan” was the first of the country in 1992 and some galleries also appeared around this time. The new economic elite had some demands which needed to be fulfilled but many luxury purchases were still made during trips in Europe. Thirty years later, there are many luxury shops and even flagship stores that symbolize the brand DNA.

Source: Behance – HERMES SHANGHAI By LEVI VAN VELUW

Millenials, the new cornerstone of luxury brands

Today, Millenials are the main Chinese luxury consumers. According to McKinsey insights, 43% of Chinese luxury consumers were born in the 1980s. This generation is accustomed to using social media platforms every day. Douyin or WeChat allows them to share content online. Also, the “generation Z”, born after the millennials is taking increasing parts. McKinsey shows that 28% of Chinese luxury buyers are born during the 1990s. They are used to going online to seek products and then to purchase the products in bricks and mortar stores. This is called ROPO: research online, purchase offline.  These new generations force luxury brands to shift themselves because of the importance of social media platforms.

The modern Chinese luxury market

Market segmentation

According to BCG, the Chinese luxury market grew by over 5% per year during the 2010s. It is currently the second biggest behind the US and is likely to become first in 2025.  In 2018, it exceeded 110 billion dollars, 33% of the global market. Ready to wear products, handbags and jewelry are the most popular luxury goods.

Source: BCG 2019 reports – Chinese luxury market distribution in 2018

According to Agility & Research 2016 reports, the top 10 favorite luxury brands in China are: Chanel is first, followed by Dior and Hermès in the top 3. Louis Vuitton, Burberry, Versace, Giorgio Armani, Prada, Gucci and Montblanc make up the rest of the top ten. These brands hold a strong brand image. Not a single Chinese luxury brand is ranked.

Source: Agility & Research 2016 reports – Top 10 luxury brands in China

European luxury brands come first

The prestigious reputation of European luxury brands stimulates a strong demand in among the status-oriented Chinese consumers. Companies with an important brand image, thanks to their history or famous stars wearing it, will be more popular in the country. Chinese luxury consumers wearing popular luxury brands will increase their social status. Still, some Chinese luxury brands try to become prestigious. For instance, Shang Xia was created in 2008 by Jiang Qiong Er and was bought by Hermès in 2010. The luxury brand is independent and focuses on the Chinese traditional style in its product. So far, Chinese buyers are not that interested in the brand because it is not well-known worldwide, but it takes time to create a solid brand image.

Recent shifts in the Chinese luxury market

Digitalization

This is the new cornerstone of every luxury brand in China. According to Bain Consulting, luxury companies doubled their digital marketing budget from 35% in 2015 to 70% in 2018. Chinese Millenials are the main luxury customers. Due to their use of smartphones, they shape how brands should address them. Now, Luxury brands work with key opinion leaders (“KOL”) as advertisers. These influencers have influence and can make a brand gain notoriety.  For instance, Cartier worked with the movie star Lu Han in 2016. They wanted to highlight men’s jewelry with the artist. KOLs are so popular that they can shift luxury trends in China. Moreover, luxury companies now present their new products online. During April 2020, Cartier showed its new watches on the online event: watches and wonders. Digitalization recently revolutionized the luxury industry and it can be an asset during unexpected crisis.

The challenge of selling alongside counterfeits

80% of counterfeit products come from China. According to European Union Intellectual Property Office, the luxury industry loses 60 billion euros annually. The impact is more than financial; brand image is also impacted. Also, it dwindles Chinese luxury trust in buying goods outside of official stores; online purchases are affected by this. In addition,  it wipes out the possibility of a second-hand market for luxury goods. Some brands like Louis Vuitton are investing massively to tackle fake products. The company invested around 40 million euros. Attacking counterfeits is an investment to protect brand image.

COVID-19 is jeopardizing the luxury golden decade

The virus affected luxury companies regarding both demand and supply. First, shops were closed so Chinese luxury consumers could not buy luxury goods. There is a phenomenon of revenge purchase were people buy after the quarantine like in Guangzhou but it is difficult to estimate if it is going to be enough. Second, supply was affected because companies were not able to produce goods. The European factories were shut down. Still, European luxury brands remain solid in China. Their brand image continues to provide a good protection during unexpected events. As Alexis Karklins-Marchay, partner at Ernst & Young, noted: “In the eyes of Chinese luxury consumers, Prada, Chanel or Hermès are much more desirable, they are brands that don’t lose their character,”.

China has a long tradition of luxury. The 1990s however is the beginning of the luxury in contemporary China. Since this decade, the Chinese luxury market has grown rapidly every year. The country is vital for some companies like Longines, which conducts more than 80% of its activities there. Digitalization forces luxury companies to rethink their strategies. Even if the coronavirus momentarily damages the luxury industry, the brand image of European luxury brands is strong enough to recover and to bypass it. Nevertheless, it is never a viable strategy to focus only on one country’s market.

Author: Enzio Cacciotto

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This article How the Chinese luxury market poised to become the largest in the world is the first one to appear on Daxue Consulting - Market Research China.

SARS has caused a significant impact regionally and globally. There were 8096 confirmed cases while 7429 of them were in China. The virus had caused 744 deaths, and 685 of them were in China. 26 countries, areas and territories were involved.

Impact on China’s economy during the SARS outbreak: service sector suffered the most  

Originating in China, SARS impact on the Chinese economy was profound, though not to the extent of COVID-19. All the industries in China experienced significant downturns in Quarter 2, 2003, especially the service sector was hit the hardest and GDP growth rate decreased by 1.8%. As for primary industry (mining, farming and fishing) and secondary industry (manufacturing), the GDP growth rate dropped by 1.1% and 0.9% respectively.

[Data source: Sina finance, ‘GDP Growth Rate per Quarter (2003)’]

[Data source: Sina finance, ‘GDP Growth Rate per Quarter by Sector (2003)’]

Nevertheless, in the third quarter, most industries had recovered and rebounded to the average level except for the service sector. Moreover, it took an extra three months (until the fourth quarter) to regain the previous growth rate.  

Alibaba’s crisis management strategy during SARS

The impact of SARS on Alibaba

Date through back to 2003, Alibaba was still a relatively small enterprise that specialized in B2B e-commerce. Additionally, it acted as an intermediary that connected export suppliers in China to international buyers.

[Photo source: the street.com, ‘Logo of Alibaba’]

Damaged reputation: Alibaba was blamed for sending employees to the Canton Fair in 2003

During the SARS outbreak, Alibaba born the bad reputation of spreading SARS in the city of their headquarters, Hangzhou, due to the employee’s business trip in Guangzhou.

Jack Ma sent an Alibaba employee to participate in the 92nd Canton Fair in Guangzhou. After the employee’s travel from Guangzhou, she was diagnosed with SARS and become the fourth SARS patient in Hangzhou. As a result, more than 500 Alibaba employees were forced to quarantine and work at home. People in Hangzhou suspected that the Alibaba employee carried and spread the virus in Hangzhou and Alibaba became notorious at that time.

Business obstacle:  loss of business opportunity

During the SARS outbreak, many business activities shut down temporarily, including exhibitions and order deliveries. Traditional business models came up against roadblocks. Owing to the out-of-control situation and employees’ quarantine, the world’s largest B2B website was under lockdown. Apart from Alibaba’s business, during the period of 92nd Canton Fair, Alibaba’s clients and other exhibitors were reluctant to attend the fair. Offline commerce was not an option during the outbreak.

Alibaba’s response to SARS

Agile adaptation: switching to working at home rapidly

Alibaba made a rapid decision, all employees were required to work at home after May 6th 2003. This would have been unheard of in 2003, a less digital-savvy era. However, Alibaba employees were ready to work from home almost immediately. The technical staff of the engineering department set up the necessary equipment for employees to work at home within 2 hours.  

[Photo source: Sohu, ‘Alibaba Employee working at home during SARS outbreak’]

Internal communication: extensively utilizing online communication channels and providing mental support 

Jack Ma, as the founder of Alibaba, enhanced internal communication with Alibaba employees after the announcement of quarantine. Firstly, Jack Ma sent an email to all employees to comfort them. He also encouraged the staff to look at the positive side and tackle the new challenge. Secondly, Jack Ma initiated the extensive use of email and instant message software to improve the efficiency of communication with employees. He believed this kind of internal communication was more efficient and straightforward. What is more, Alibaba organized online group chats and held online singing competitions as means of providing the emotional support.

[Photo source: Huashang Taolue, ‘Jack Ma and Alibaba Employees during the SARS outbreak’]

Crisis as a mission: exploring a business opportunity

The SARS crisis response of e-commerce companies like Alibaba pushed e-commerce development in China. Taobao officially went online on May 10th 2003 as a result of discovering the need for online shopping during the epidemic. Jack Ma established a small R&D team to compete with E-commerce giant eBay. Also, Alibaba provided support and service for SMEs to transfer to online businesses.

The result of Alibaba’s crisis management

Due to Alibaba’s quick action, service was not suspended one day. The SARS crisis witnessed Alibaba’s solution to overcoming significant challenges, which made Alibaba’s team more committed than ever. 17 years ago, Alibaba was a relatively small scale of the firm. Nowadays, it has become the most significant internet enterprise in China with a market value of 3.89 trillion RMB. Surprisingly, some of Alibaba’s critical business decisions that led to the company’s future success arose during their SARS crisis management.

Increased brand awareness and business volume: surging business volume and members

Alibaba broke its record by reaching the highest business volume. On May 7th, the first day of remote work, the company achieved 12,500 business leads in China’s market. During the SARS outbreak, the daily amount of business opportunities surged by 3-5 times in comparison with the same period of 2002. As a consequence, in March 2003, Alibaba accumulated 3,500 new members per day and increased by 50% from the previous quarter. Moreover, the amount of Alibaba’s membership had increased significantly. 42% of the total members (1.4 million members in total) claimed that they became Alibaba’s members during SARS.

The game-changer in China’s market: Taobao went public successfully and has changed Chinese consumer behavior

Since Alibaba’s SARS crisis management turned out to initiate their online shopping business, the company successfully fulfilled Chinese peoples’ new demands and turned them into online shoppers. More and more people knew about E-commerce and digital technology. As a result, Taobao went public successfully and has become one of the representative e-commerce retailers in China.  

Ctrip’s crisis management strategy during SARS

The impact of SARS on Ctrip

In 2003, Ctrip had become the largest hotel distributor and online travel agency in China. During the first quarter of 2003, because of its mature business and profitability, its listing was around the corner.

[Photo source: ChinaDaily, ‘Logo of Ctrip’]

Reduced business volume: plummeted business activities that had nearly led to bankruptcy

During the SARS outbreak, Ctrip’s business performance suffered. With decreased demand for travel, the business volume of Ctrip experienced a substantial decrease. One Ctrip employee recalled that the workload declined by 70% at that time. The epidemic had also ceased Crip’s collaboration with hotels and airlines. If it lasted several months longer, Ctrip would have gone bankrupt.

Plummeted turnover: Ctrip’s business performance was in danger

The SARS outbreak worsened Ctrip’s business operation. Its operating profit fell below the company’s benchmark profit and loss line, and revenue went down by 42%. The performance of the tourism industry in China suffered during the SARS outbreak, and China’s domestic tourism spend decreased by 11.2% in comparison with the year before.

Ctrip’s response to SARS

Quick strategy adaptation: flexible working schedule and alternatives

Ctrip adopted a rotation system for employees to deal with the decreasing staff workload. The company has also provided subsidies for rotating personnel to keep business operate regularly. Managers and some staff were required to work for half a day. Nevertheless, they would get 60% of their original salary.

Ctrip also developed alternatives to utilize its business resources efficiently. The company collaborated with China Merchants Bank and sold credit cards. Moreover, Ctrip also rented its call center out to China Merchants Bank.

Employee care policy 

Ctrip implemented employee care policy during the SARS outbreak. Liang Jianzhang, the CEO of Ctrip, sent several letters to encourage employees. The company also promised that they would not lay off any employee and even retained the employees whose contracts had already expired. 

Internal upgrade

Ctrip optimized its business process during the industry recession. What is more, the company provided training courses for employees and encouraged them to improve themselves during the SARS period. Customer service staff stepped up to recite various helpful business information such as call scripts, operation procedures and maps.

The result of Ctrip’s crisis management

Strong rebound after the epidemic

Ctrip capitalized on the expected business rebounded after the epidemic. The expected retaliatory consumption in China’s tourism industry came true. Owing to Ctrip’s policy of retaining employees and improving employees’ abilities during their SARS crisis management, Ctrip became the winner in the tourism market. In 2003 Q3, Ctrip’s turnover reached 66 million RMB and increased by 73% from Q1. Its outstanding performance had facilitated its IPO on the NASDAQ Stock Exchange.

[Data source: 36 Kr, ‘Ctrip’s Turnover’]

Successful IPO

Crip’s rapid growth after the epidemic made it famous in the capital market. On December 9th, 2003, Ctrip successfully listed on the NASDAQ Stock Exchange. On Ctrip’s first day of trading, it closed 88.5% higher than the initial offering. Such a prominent performance made Ctrip become the first company that doubled its share in one day since 2000.  

[Data source: Google Books, ‘Ctrip’s Highest Share Price in 2003 and 2004 (USD)’]

P&G’s SARS crisis management strategy

The impact of SARS on P&G

P&G entered China in 1988 and have become a thriving market player since 2003. China was P&G’s sixth-largest market, up from tenth just three years earlier.

[Photo source: ChinaDaily, ‘P&G in China’]

SARS impact uncertainty and market demand uncertainty

P&G assumed that the SARS outbreak caused market turbulence and changed consumer behavior. As a result, the situation matched with their assumption. From April to September 2003, the market demand for FMCG experienced wild fluctuations. For example, in April, the demand of anti-bacterial cleaning products increased drastically while plummeted in May due to consumers’ sufficient stock at home. From June to September, as summer closed in and people improved their cleaning habits, the demand for cleaning products increased again.

P&G’s response to SARS

Action before the crisis: market demand prediction

P&G made market demand prediction before the crisis to eliminate the loss caused from being unprepared for fluctuations. The company headquarters is in Guangzhou, the epicenter of the SARS outbreak. P&G China had already paid close attention to the issue. The company decided to make some business adaptations during the period of January-February 2003 when the impact of the epidemic was still unknown. P&G predicted that the demand for cleaning products would surge and the market would face a huge challenge. These had indicated that P&G China had been fully ready for the crisis.

Quick response to the crisis: the establishment of the emergency response system regarding capacity

P&G China also established an emergency response system to confront the situation. In March 2003, the outbreak in Hong Kong was severe, and the demand for Safeguard soap soared. This was a signal that demand for Safeguard was likely to soar in mainland China.

The P&G supply chain began to prepare an emergency response system. Once the demand for the Safeguard reached a target number, the system would be activated, and the production line of P&G could be produced at full capacity as planned.

At the height of the crisis, the government requested that Safeguard cannot be out of stock in Beijing. Therefore, P&G deployed the products from less affected areas to Beijing while increasing the output.

The result of P&G’s SARS crisis management: expected sales performance

In April 2003, the production of Safeguard set a record without selling out of stock. Moreover, the supply and inventory quantity of Safeguard in each city were entirely in line with headquarters requirements during SARS.

Sales of Safeguard during SARS soared by 40%. SARS had rapidly promoted the sales of Safeguard in China. It became an essential external factor in boosting Safeguard’s healthy development in China.

What can we learn from these three SARS crisis management strategies: Business adaptation, predictions, and employee care

“When facing crisis, we should not see it as opportunity. Instead, we should consider what trouble people encountered, how we can offer help.”

Jack Ma, founder of Alibaba

No matter the era, the country, and the crisis, the ability to adapt, make predictions, and care for employees is crucial in crisis management. Alibaba displays the power of adaptability by changing to remote work in only two hours, and again in catering to new consumer e-commerce demand. P&G showed us the power of forecasting supply and demand during a crisis. Ctrip reaped the benefits of retaining employees through tough times.  

Author: Amelia Han

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This article SARS crisis management: 3 inspiring cases that changed China’s business landscape is the first one to appear on Daxue Consulting - Market Research China.