Data source: ASKCI, An analysis of the growth of China’s wool import volume and amount from January to July 2018

Among the different types of wool, Australia Merino wool is the most well-known and prestigious. Australian Merino wool is much better than traditional types of wool because it is comfortable on the skin and can regulate the body temperature. Furthermore, it has a natural antibacterial protein that keeps the hair from accumulating odors. All these qualities make Australia Merino wool stand out from other types of wool materials.

Future developments in China’s merino wool market

According to the free trade policy, China increased the free-tax quota of Australia imported wool. In 2019, the total CTRQ is 36,936 tons of New Zealand wool, 665 tons of New Zealand wool, and 34,729 tons of Australian wool. Due to the currency uncertainty and trade friction between China and the US, the wool market in China could experience a slowdown.

The 10^th Global Wool Summit in China delivered two messages to the wool market in China, especially for Merino retailers. First, the Merino fine wool (美利奴细支毛) price increased sharply in 2018 and will continue to increase due to the market demand and quality. Second, innovative design is the key to push the development of the wool market. For instance, wool is also now used in sportwear. Sportswear requirements differ from fashion apparel and fibers are often blended to utilize the combined effect of two or three fibers, a typical example will be wool, polyester and elastomeric fibres.

Making wool available for sportswear and underwear

AClink International Pty Ltd

Creative design and technology make wool a trendy material for sportswear. Two brands in particular that produce these kinds of wool athletic clothing have become popular in China. AClink International Pty Ltd holds the largest wool products factory in Australia. It has established a mature supply chain that includes importing, wool cleaning, carding, dyeing, spinning and weaving. The Auzwool Family, a subsidiary of AClink, produces a series of wool-made products that used innovative technology that allows them to produce wool T-shirt.

According to the interview, the founder Kim Tang says the standard wool products can keep the body warm however the fine wool can adjust the body temperature and make the wool feel light and breathable. This series also contains sportswear, socks and scarves. In terms of design, Auzwool chooses to corporate with famous designer Amy Jones. Moreover, Auzwool very focuses on innovation. It uses different kinds of fibres, such as Possum and Alpaca to blend with Merino wool to diversify the product. As of 2020, Auzwool has a 50% market share of China’s Australian wool products market.

Particle Fever

Particle Fever is a Chinese designer sportswear brand. Collaborating with The Woolmark Company, the exclusive Merino wool athleisure collections are designed to be worn during a workout as well as outside the gym. Under the theme of Fitness x Fashion, the Helen Lee and Particle fever collections are available exclusively in Lane Crawford stores across China and Hong Kong and the campaign also features Chinese supermodel and fitness enthusiast He Sui.

Source: Sohu.com, Particle Fever’s athletic clothing in China

Merino wool sportswear e-commerce marketing

Decathlon and Smartwool were ranked the first and the second in the research results for ‘Merino wool sportswear’ on Tmall.

Source: Decathlon Tmall shop

The keywords are breathable, soft touch, anti-ordor. Smartwool, an outdoor American brand, also frequently mentioned about the idea of breathable fibre and anti-ordor characteristics of merino wool.

Source: Smartwool Tmall shop

Other than product description and perks of Merino wool, Naturehike and Handragon both include diagram explaining what it is, while other brands seem to generally promote where it is from, the design, why Merino wool is good (dry, anti-odorl, warming, anti-UV). Naturehike and Handragon also has more than 50% Merino wool in that specific product.

Challenges and opportunities of Merino wool market in China

There are several reasons China’s merino wool market relies heavily on imports from other countries. First, China has a limited amount of sheep. The price of the Merino sheep is usually very high, and the output of wool is less than other sheep breeds. The second reason is the lack of technological support. Chinese farms have less knowledge and experience in the wool industry than Australian. As a result, with less professional farmers to organize the breeding areas, the yield is lower quality. On the other hand, this is good news for Australian wool producers who want to enter China’s merino wool market. However, the quality and output of merino wool are influenced by the weather, market price, and stock.

Top 5 merino wool exporting countries had a significant decrease in output in 2018 and 2019. Producers from Australia say the drought has a very negative impact on the output of wool, and many farmers need extra funds to deal with the drought. The wool price was push higher than other competitors such as Uruguay. The output of Australian wool in 2018-2019 was the lowest in 90 years.

In contrast, Uruguay increased its wool output in the last two years given the stable weather condition. Wool farms in Uruguay also have improved their technology that enables buyer to trace back the origins of the products. This not only guarantees the quality but also increases the competitiveness of Uruguay wool worldwide as it is traceable and certified.

Additionally, environment policy sometimes contradicts with wool production. For instance, “one billion trees” is a political slogan by New Zealand government in 2019. This programme aims to be achieved by 2028. One billion trees programme may hinder wool production as ranches convert to forests.

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China: an artistic civilization

Art culture in China is an ancient tradition

According to the French historian Jacques Gernet, The Song dynasty (960-1279) opened a tradition of high education upon Chinese elites which would continue during the future dynasties. This social trend led to increase the importance of art. For instance, it is the beginning of landscape painting, the “山水” (Shanshui) with famous artists like Fan Kuan or Ma Yuan. During this dynasty, the Chinese nobility even started to create private collections. Holding Chinese art became prestigious. The song dynasty opened a new era in the Chinese culture, an era of interest in art. It was one of the first appearances of private collectors in the country.

[Source: National museum of Taipei – A typical Shan Shui painting by Guo Xi during the Sond Dynasty]

Communist China questioned the place of art in Chinese society

The 1^st October 1949 opened a new chapter in the Chinese history. Mao became the communist leader of mainland China. Maoists fought against the dynastic China legacy during the Cultural Revolution (1966-1976). They tried to erase the ancient and elitist art culture. According to them, Chinese art should be linked with the values of the communist Party. The dynastic heritage must remain in the past. It was forbidden to collect cultural relics and many were destroyed during this decade.

When Deng Xiaoping became the leader of the country in 1978, the government opinion about ancient art changed. The Cultural Relics Protection Law became effective in 1982. The state started protecting cultural relics and accepted the legacy of tradition, which is no longer seen as an enemy.

The 1990’s: The rise of the Chinese art market

This decade changed a lot China for two main reasons. First, a new economic elite appeared. With them, there was an increase in demand for luxury goods, such as art. Second, China became, at this time, way more interesting for foreign countries, which started to really change their mind with the booming economic development. This was a significant period for the art market.

In 1991, Brian Wallace founded the first private contemporary gallery in China, the Red Gate Gallery. The same year the first private art museum was created called the Yan Huang Art Museum. It is dedicated to promotes traditional art. In 1992, First auction House “Duo Yunwan” in Shanghai. The next year the China guardian auction house was founded. All of these constructions highlight a turning point in the vision of Chinese art but also in their value. Still it remains the beginning of the new Chinese art market.

The Chinese art market today: a new shape

Reconnecting with the artistic tradition and embracing the future.

Elements underline how the Chinese art market became powerful since the 1990s. Since 90’s, more and more museums opened in China. In 2013, there were 3,589 museums in the country and 5,354 five years later in 2018. The Tank Shanghai and a branch of the Pompidou Center were established in 2019. Thus, China is reconnecting with ancient Chinese art and explores contemporary art. Chinese contemporary art is becoming prestigious.

In 2006, Sotheby’s New York held an auction entirely dedicated to Asian contemporary art. Some of the Chinese artists are becoming as world-famous as Yue Minjin. On the economic side, Chinese art market is also doing well. In 2017, there were 525 auction houses in the country. Buying art started becoming an investment. This is also the boom of the interior design market in China. Even if during the 1990’s some Chinese art auctions were for foreigners. Now, there is an important increasing of private Chinese collectors who purchase Western artworks.

Chinese art market and digitalization

Digital changed the way of consuming in China. It impacts the art market because of companies inside or outside of its market. First, Luxury brands increased their role on the Chinese art market with the use of KOLs (Key opinion leaders) targeting millenials. These Chinese influencers working for brands highlights the products of luxury brands and makes trends. Luxury brands present collection with Chinese artists. Thus, luxury brands help promote Chinese art.

For instance, the watch brand Hublot (here for an analysis of the Chinese luxury watch market) developed a watch with Yue Minjun. Thus, Chinese art are displayed by some luxury brands to improve their brand image upon Chinse luxury consumers. It is both profit for brands and the Chinese art market. Moreover, online auction websites try to implement on Chinese social medias to increase their presence on this market. Artnet, one of the biggest online auction website, now tries to be present on Wechat. The aim is clear, expand on this market. Digitalization transforms the Chinese art market. Its presence online had increased. It is closer to millennials, now called art-lennials, the new key-consumers in China.

Talking with an artist from Shanghai: @ChrisQ

Chris is an artist from Shanghai. He studied contemporary and ancient art in the University of Shanghai. Now, he works as an independent and sometimes for luxury companies. Recently, he was a part of Vogue Global Conversations trying to figure out what is the future of creativity. We discussed the art market in China with him to learn more.

[Source: ChrisQ, interview with a Chinese artist]

What are the specificities of the new wave of Chinese art?

The new artist wave was mainly born in the 1980’s. These artists have grown up in a communist culture, but they are really influenced by Western art. Lots of famous Chinese artists studied art abroad.

How Chinese artists interact with social media?

Social Media like Weibo or TikTok are important for Chinese artists nowadays. It is a way to connect with people and to present art. Many artists just want to focus on their creations without having to present it. It links people with artists even the ones who are shy.

Who are the main art buyers in China?

Regarding the profile of Chinese art buyers: It is mostly rich people, government officials, doctors, lawyers, businessmen. Some of them buy art to enhance their home’s interior or because they like art. Whereas, some just see it as an investment. This affect the contemporary artistic creation because if you want to make a living of art. You must create appealing things. The border between art and business is blurred.

Today, the Chinese art market is the final step of a long tradition of art in the country. Even if the Cultural Revolution forbidden the collection of ancient art and destroyed some cultural relics. The market started to grow in the 1990s with the creation of galleries and auction house in China. Today, China is the third art market in the world. Digitalization and millennials force to rethink the approach of art. It is becoming closer with luxury.

Author: Enzio Cacciotto

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The rise of interior design in China

China has a long and profound history of home décor, and the modern home décor market in China is a fusion of traditional Chinese furniture with ancient roots and simple modern décor and furniture. The craft of interior design in China encompasses various prototypes of; lighting, statues, wall-décor, furniture, flooring and flowers using attractive colours such as red and gold which portray status and power. The home décor market in China can be traced back to the Eastern Zhou period (770B.C. – 221B.C.) where Chinese developed long, narrow tables to hold musical instruments or to display items of wealth and beauty such as jade, porcelain or flower arrangements.

Ancient roots of interior design in China

The architecture of interior design in China began with lanterns and furniture demonstrating the power and status of Chinese elite, since the Han Dynasty (25–220 AD) and Tang Dynasty (618-907 AD). Furniture height rose according to the “elevated to a position” of one’s status in society. The furniture makers of the Tang Dynasty began using high round and yoke back chairs for the wealthy elite. Lanterns are widely known to most of the Chinese people as the symbols of festival, worship and peace. They can be made from wood, bamboo, wood, rattan, created with silk or paper and being decorated with Chinese calligraphy, embroidery, painting and cut paper.

The era of modern interior design in China

In recent years, China became a fast growing economy with GDP of $14.22 trillion with the population of almost 1.4 billion and average growth rate of 9.5 as well as high level of urbanisation. With this, people become more fascinated with luxury and fashion. In 2018, the interior design market in China was estimated at $740 billion (RMB 5 trillion), according to a study by Yicai 2018, and that market keeps rising and evolving both online and physical stores. Home décor market in China seems to be one of the fastest growing businesses in the region with a high consumption power. Both domestic and international companies are now establishing more offices and showrooms in the cities such as Beijing, Hong Kong, Shanghai, Shenzhen and Guangzhou.

China’s interior design industry has incredible variety to fit the tastes of types of consumers. This not only includes different economic class of people, but also includes office design projects in business districts across China. Customers can be small companies, which seek to minimize their spending on office interior design thus not requiring high quality expensive furniture or lighting, while multinational corporations, for whom office design is crucial for meeting clients and partners, may ask for luxury European furniture with high quality lighting. Interior design companies in China can be divided into lighting, flooring, doors, furniture and wall murals companies.

Chinese interior design: global recognition

The interior design market in China is booming due to the rapid growth of the national economy as well as the industrial development and governmental policies. The interior design market in China is now witnessing an inconsistent demand, which extensively provides a remarkable opportunity for home décor market in China. In 2015, China occupied 34.64% of the revenue market. It is followed by Europe and North America, which respectively have around 27.52% and 17.08% of the global total industry. Other countries have a small amount of revenue. Despite the fact that the global interior design market is saturated, Chinese interior design is playing a pivotal role with an outstanding market share which has to do more or less with Chinese consumption power. Below are some interior design companies in China that are seems to be the main players in the market; China State Construction Engineering Corporation, Gold Mantis Construction Decoration, Shenzhen Grandland Decoration Group, Shenzhen Hongtao Decoration and Zhejiang Yasha Decoration, which enjoy only 1.6% of market revenue of which Gold Mantis accounted for 0.7% in 2013

Market segmentation in the home décor market in China

The furniture market in China

Furniture is an important part of the Chinese interior design market and culture. According to Mr. Xu Xiangnan, Chairman of China National Furniture Association

“The furniture industry is not just a traditional industry but also an evergreen industry. It is closely related to people’s wellbeing and socio-economic stability”.

In 2018, there were 6,300 scaled furniture companies in China, with a total market size of 701 billion rmb.

In recent years, the furniture market in China is persistently growing to become the largest in the world with a value of US$ 114 billion, accounting for 61% of the total Asian and Pacific market. Furniture market in China shows a strong potential for further growth.

Office furniture has played a vital role in the interior design market in China, and now the country is the leading office furniture manufacturer and exporter at a global level, with production exceeds US$ 16 billion in 2018, increasing by 10% on average in the last decade and representing 30% of the world office furniture output. For office furniture, the interior design market in China has increased drastically from 24% in 2009 to 36% in 2018 (USD 4.0 billion) of the global exports is the main supplier for the United States, Japan, France, the United Kingdom and Japan among others. The United States alone which seems to be the main customer, represent $1.3 billion about 33% of the whole Chinese office exports.

The following companies are the major key players in that market making it highly saturated and competitive; Lizhiyanghang, Paiger, UE Furniture, Wosen, Victory, Henglin Chairs, CR Logic, Saosen, Diou, Green Link, Sunon, Lamex, Jinwei, Mingli, Xinnou and Shengao with Sunon and Lamex. However, home décor market in China is significantly growing due to high luxury demand from Chinese customers, the presence of Furniture store market is growing fast in China with leading European and Chinese brands such as IKEA Group, Jinan Fangzhen Furniture Co. Ltd, Kinhom Group, Shenzhen Hoba Home Furnishings Chain, Yuexing Group. These four companies share most of the market.

Lighting market in China

Lighting has a long traditional and cultural background in home décor market in China since during Han Dynasty (25–220 AD), lighting market in China was famous to the rest of wold. Currently, China’s lighting industry has been developing rapidly and the country has become a world-leading lighting producer and consumer. Lighting market in China can be grouped into; Light emitting diodes (LEDs) with the output value of RMB636.8 billion in 2017, up 21% from 2016, and is expected to show an annual growth rate of about 18% in 2018-2020 and is set to break the RMB 1 trillion by 2020. compact fluorescent lamps (CFLs), electrodeless discharge lamps (EDLs) and organic light emitting diodes (OLEDs) are major products in the mainland lighting market with rapid market grew from USD530 million in 2011 to USD6.23 billion in 2016, representing an annual growth rate of 63.8%, and is expected to reach USD65 billion by 2023. Lighting market in China consists of a lot of manufacturing and selling companies including AD Lighting, Beghelli, Civilight, Cooper, Cree, CX Lighting, Crestron, Dahom,Davinci,Dongsheng, DZ-YC, Eglo, Elec-Tech, ESN Lighting, ET Lighting, Fagerhult,Feelux, FSL,Greeble, Huari, Huati, , Huayi Group, HuaYu Lighting, Ikea, JK Lighting, Jiufo, Kingsun, Koizumi, Meses, Nanker, Neo-Neon, Neonlite-Megaman, NVC, Okes, Olympia, Opple, Pak Electrical, Philips, Plusrite, Tao Light, TCL Light, TCPShanghai, Top Century, Top Lighting, Topstar, TopTech lighting, Toshiba, Tospo, Touve-Gangfeng, Unilumin, Violet Lighting, Yajiang, Yaming, Yankon, Youyao, Zhongfa, Zhongyu, Zhongzhen, Zumtobel. However, leading players in the market, which control considerable part of lighting industry, are Neo-Neon Group, NVC Lighting Technology Corporation, Opple Lighting Co. Ltd, Penglei Energy Saving Component Factory, Zhejiang Yankon Group Co. Ltd, with some companies being international while others being domestic.

Art market in China and the door market in Chinese interior design

Rapid Urbanization and home renovation seems to be the leading factor that influences the Chinese art market. It’s predicted that by the year 2030, China will add 310 million urban residents and the urbanization level will reach 70%. In 2017, the demand for doors in China rose to 8.5% amounted for RMB194.5 billion. Due to the huge demand for interior design market in China, wood doors have dominated the market for Chinese interior design with RMB 150billion sales in a 2017. Non-residential has the highest demand than residential. Also, due to the robust increases in construction activity, spurred by rapid progress in industrialization and subsequent rising personal incomes, the north western region has the highest demand for home décor market in China.

Flooring market in China

With increase in urbanisation and rising in personal incomes of the customers, the interior design market in China is growing rapidly with the high demand for floor coverings which is forecast to rise to 4% per year to 5.2 billion sq m in 2020. Ceramic tile is used for interior design in China more frequent than any other flooring material, Non-resilient flooring was the most popular floor covering of interior design in China which has 85% demand. Carpets and rugs represented 8% of floor covering demand in China in 2015, with resilient flooring accounting for the remaining 7%. The, Power Dekor, Nature, Anxin (ARK), Vohringer, Shiyou (Sunyard), Der, Sino-Maple, Krono and Rhineshine are some major key players in flooring industry.

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Smart homes seem to occupy modern Chinese households more than ever. Lots of manufacturers are seizing flow to develop all sorts of new science and smart home products in China for the smart home market. According to Statista, the revenue of smart home in China ranks second in the global market, with a market volume of $13 billion US in 2019.

With the changing retail environment, smart home manufacturers are experimenting with new ways of retailing, such as strategic partnerships with offline home furnishing stores. This article will focus on the offline smart home experience stores in China and experiential retail in China.

Smart home technology in the Chinese market creates for efficient chores

With the accelerating pace of life, people have little free time, and as a result, the value of free time as a resource increases. With the help of smart home appliances, Chinese households can reduce time spent on daily chores. Therefore, smart home technology in the Chinese market has infiltrated the lives of many people.

The era of the experience economy: Smart home experiential store in China

Consumers’ awareness of smart home products in China is far from its potential. Therefore, the sellers of intelligent home technologies educate buyers through smart home experiential stores in China. The smart home experience center in China contains the whole smart home system and present in a complete interior decoration. It provides customers immersive experiences with interactive set ups.  

This direct-to-customer tactic is within the concept of experience economy: to engage customers to perceive products, valuing experience in the process of consumption. As stated in the Harvard Business Review, “A company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that create a memorable event.”

Key to success for the smart home experiential stores in China

Resonance with images during the in-store experiences in China  is the main objective of the smart home experience store in China.

“No empathy, no deal.”.”

For example, in a study room, in the smart home experience center in China, lights can automatically adjust the brightness according to different scenes to create various lighting atmosphere. “Working mode” will adjust enough light and the proper height of the working desk and chair. “Relaxing mode” will play pre-set relaxation playlist, close down the curtains and create a comfortable atmosphere. What the smart home experiential store in China needs to pursue is to show customers, what benefits can the smart home products in China bring to them and how those devices can improve the quality of life in every detail.

Successful marketing promotes a brand through emotional resonance. Emotional communication in the smart home experiential store in China is one of the most important aspects of the emotional marketing strategy. The application of emotional connection in experiential retail in China can impress the consumers’ inner feelings, therefore improve their satisfaction and loyalty. This is the key for the smart home experiential store in China to win in the experience economy era and enhance the competitiveness of the store.

Experiential retail in China as a trendy concept in the smart home industry

The smart home technologies in the Chinese market use such advanced technologies such as the Internet of Things (IoT) and wireless communication to gather together home-related facilities and provide home appliance control, such as lighting management, security protection, environmental monitoring, and entertainment. However, there are still a lot of questions coming from consumers on what the smart home system in China really is. It is no longer effective for companies to simply explain these concepts to customers online.

Smart home technology in the Chinese market: The transformation of the smart home business model

In reality, it has been a long time that online retailing has relied on the rapid development of the Internet, and which has made traditional retail sales “falling into the water.” However, the current online retail traffic dividend has already encountered the ceiling, and it is difficult to expand the space further upwards. The retail channel seems to have a bottleneck in the period.

At this point, the development of AI, Big Data, and Smart Connect technology provide opportunities for new reatil to help customers create shopping interactivity. The new retail model combines online and traditional retail and effectively use the strengths of both. Experiential retail in China, which is used in offline shops makes it easier to give consumers an intuitive feeling and enhance customer stickiness.

How to do experiential retail in China? – 6 dimensions of the retail experience

The main difference between these retailers is where and how they place these devices within their store’s layout and how well they help their customers understand the value proposition of a smart device. 

According to JLL Retail, there are “Six Dimensions of Retail Experience,” which define how well retailers are meeting shoppers’ expectations. How can these six dimensions apply to the smart home experiential retail in China?

Firstly, it must be intuitive. Customers can easily locate what they want after finishing the tour in the experiential store. Young people in China mostly prefer a simple style of layout.

The strong human element is vital. Friendly and knowledgeable staff is really important to shoppers. Be careful to work with different shoppers, some don’t like ‘noisy’ staff, and some need plenty of guidance to the smart home products in China.

In addition, socially-conscious customers tend to have a meaningful purchase experience. Stores can attract customers by emphasizing their social responsibility initiatives.

As mentioned earlier, the smart home experiential store in China need to be immersive. Customers are willing to experience something unique and visually stimulating. Especially in China, smart home experiential stores are mostly concentrated in one shopping mall, which requires each store to show something special to avoid the aesthetic fatigue of shoppers.

Next, the smart home devices and payment method should be accessible. Make sure to have enough payment methods and give customers seamless in-store experiences in China. Do not let customers feel a gap between the offline experiential stores and online shops.

Lastly, customers require personalized during their purchase experience. Personalization is not just about products, and it’s also about service. In terms of the smart home system in China, which is private to every family, stores need to treat each shopper as a special guest.

In-store experiences in China

Moorgen smart home

Germany’s Moorgen smart home is the world’s leading smart home manufacturer. With its own research and development of bus control and cloud technology, the company has developed more than 180 smart home products that realize local and remote visual control. The localized industrial design inherits the user experience of simplicity, comfort, and humanity.     

The Moorgen smart home experience store in Shanghai has an area of around 1000m² with dominate tone of white. The white color presents various themes with the change of lighting.

The whole tour in the experience center is about half an hour, and the staff carefully explains every corner.

Based on the smart home system in China, the Moorgen experience store displays the perfect combination of technology and function to restore the ideal state of home. Its comprehensive smart home technology effect maximizes the engagement of customers in their in-store experiences in China. The entire experience center is designed as a real home, and there are control panels that adjust the modes of ‘leaving home’ and ‘returning home’ at the store’s entrance.

The Moorgen smart home experience store combines Chinese and western elements and attaches great importance to the family values of Chinese consumers. Its home theater showroom has both Chinese and Western decoration themes, and a small film is provided for customers to experience the screening effect.

Lighting is the key element in the Morgan experience center, and the store values the experience and effect brought by different lights to customers. The changes in color temperature, direction, and intensity of lights can present disparate effects. For example, there is a tiny Buddhist temple in the experience center for some wealthy Chinese families. The Buddha statue can change facial expressions according to the different angles of the light source.

Morgan has opened lots of smart home experience centers in China, and it has become a place for many young people to ‘punch in’ due to the high-end design. It allows customers to take photos in its stores and share their in-store experiences in China. Besides, because of the beautiful background and lighting, many customers actively share pictures to their social platforms such as WeChat moments and Xiaohongshu. This may be one of the best marketing tactics for the smart home experience center in China.

Opportunities for foreign smart home companies in China

In conclusion, there are several suggestions that international companies entering the Chinese smart home market have to take into account. Firstly, convenient retail channels are essential. Combining online and offline retail to make smart home products more accessible to customers. Additionally, design a humanized, functional, and one-stop offline experience store providing an immersive experience for customers and let them feel for the details, such as lighting and temperature. Finally, remember to promote the smart home experience center through customer communication or social networking.

Author: Rita Fan

Our report on smart home devices in China:

This article Smart home experience stores in China: Experiential retail gaining popularity | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Matthieu David: Hello everyone. I am Matthieu David, the founder of Daxue consulting and its podcast China marketing podcast, China Paradigm and today I am with Kevin Yu. I have to say I am so excited to have you on the show because I am very impressed by what you did. When I went through your LinkedIn profile, just to name a few elements, named ‘Best Apps of 2017 by Google Play’ and ‘Best Recipe Software for IOS and Android by CNet,’ and I am talking about the cooking app in China and the US you founded, which is SideChef. So, based in San Francisco and in Shanghai, you have founded the company in January 2013. You are in between the two countries as far as I understand, currently I think you are in Shanghai and this app I downloaded, I experienced it as well, is offering recipes for people to cook at home and also to order the ingredients from the app as far as I understand. Thank you very much, Kevin, for being with us.

Kevin Yu: Thank you for having me here. I am really excited about what you guys are doing and also your audience as well too. So happy to be here, happy to be sharing experiences.

Matthieu David: Can you tell us about the size of your current business, some ideas about, could be revenues, could be a number of users, could be the size of the team, any number that gives us an idea where you are in your app development in China and the US?

Kevin Yu: Of course. We recently, about six months ago, did series A round of funding. We have roughly around 40 people employed full time, split between the US in San Francisco office, and also in the Shanghai office. That’s kind of where we are in terms of company size, and you know looking to really start scaling our growth, a lot of the growth that we found so far with the product market fit, with apps both as a B2B platform solution, and also a B2C consumer experience, for helping people cook, helping them get their ingredients, being able to find recipes that they can interact with throughout the cooking process and also being able to connect into smart kitchen technology in the US and China.

Matthieu David: I see. We found on the Internet that your revenue – I never know if all those sources can be accurate or not – were $9 million, are you close to this number?

Kevin Yu: Not quite there, but we are on our way to grind the company quite a bit. Yes.

Matthieu David: Okay, it’s a bit of a study that you do have 9 million. So, you are based in two countries could you tell us how you split the two resources, and why are you on in between US and China?

Kevin Yu: Yes absolutely. Most of our development team is actually based in Shanghai. Shanghai is our headquarters where it was founded. We opened up our SF office afterward where we do all lot of frontend, client facing, growth, marketing, legal so forth, to help us really with the US market. The US market is actually our North America market, our primary market. When we first started back in 2013, 14, 15, I think once we got in about 2016, we started turning the business also to have a B2B angle, which we offered software to a lot of global smart kitchen technology in the US.  At that point, it became much larger and so we do, even though we have a US office, we do have an office also focused on a lot of global business development as well.

Matthieu David: I see. Could you tell us more about the business model? I used your app, and I had nothing to pay. I was asking myself what your app marketing strategy in China and the US is? I got an idea that you could make money out of the ordering of the ingredients, but I didn’t feel that I was pushed to pay anything or to buy anything. 

Kevin Yu: Yes, the grocery delivery experience is still relatively early. I think the adoption for it is early, so we are doing a lot of testing with our partners both here in China with JD and also in the US with Amazon Fresh, Walmart. But primarily our model to date from 2016-18 was pretty a lot of emphasis on the B2B aspect, so we do take our software and content and give licenses out to kitchen brands, and from there we were able to build a profitable app marketing strategy in China and the US and then do series A round of funding. So that has been very exciting for us, and it’s allowed us to keep a lot of the features and the stuff that we have free for the consumer side. In 2019 and 2020, we are re-listing and putting a lot more emphasis on the content in the consumer experience, in addition to of course going deeper on the B2B side.

Matthieu David: I am not sure I am very clear on the B2B side. Who are your clients exactly? I am not very clear.

Kevin Yu: No, that’s a good question. Just recently at CES this year, we did demos, live demos with our partners being Google, LG, GE, Sharp and Bosch, so there are five other partners that we demoed with live in their booths, in terms of showing off how SideChef connects with their devices and is able to enable that smart kitchen technology in the US and China through recipes. For instance, imagine if you’re in step one, it says to preheat the oven and you press ok. You press check and it sends the command automatically to the oven and it starts preheating. Then you go to the next step, you are doing step two, chopping the onions, mincing the garlic and so forth. All the ingredients are now prepped. They want you to put it into the oven, which now is preheated and the app knows this as well. You press check and put this into the oven. We know exactly what’s going into the oven in terms of the ingredients, we can also change the cooking algorithms to match that as well too, so we are able to control the whole entire kitchen experience from the recipe-guided experience itself. So that’s step-by-step cooking. All you have to do is focus on the step by step, you don’t need to worry about anything else and everything is orchestrated from the recipe itself. So, we have been offering this service to now multiple kitchen manufactures. The partners that I just mentioned were some of the ones that we have demoed live with and we have not announced all the partners, but generally, we are working with a majority smart kitchen technology in the US and around the world, providing again the software cooking experience. We didn’t do a demo with them at the CES because they don’t usually demo at CES, but Amazon is also one of our largest partners as well too. The Amazon Echo shows you can actually ask the recipe as a needed experience, meaning Alexa finds me a Lasagna recipe and it will actually show you SideChef recipes by default. So, they are also a huge partner with us as well, which we use that to be able to connect into the open cooking ecosystem too.

Matthieu David: Is the revenue coming from the users of the smart speakers? I am not sure I understand.

Kevin Yu: We do license of our smart kitchen technology in the US and our content as license deals to the kitchen brands. Sometimes we also do custom projects, such as GE appliances announced a project called the ‘Kitchen Hub’ at CES, I think, two years ago now. That product, will be going out to market this year, is a product that we built with them, and we really kind of built that out in terms of the software product. We do the custom implementation of SideChef smart technology in the US and the content, or we license our technology and content to them, in which they can build display within their experience. Those two are two core parts of our business. We also do have revenue coming in from the consumer side, so those are all B2B and consumer side through grocery, delivery. We get revenue shares from the grocers, and we also do premium content that is able to be sold, and every so often we do certain types of targeted advertising, more focused on testing different advertising inventories to see what could be really useful to engage with users without it feeling like a banner ad. So those are all, that’s more elements that we are testing in 2019 this year.

Matthieu David: I see. Actually, it’s much more complex than what I was thinking. I thought your business model was only grocery and delivery. So, you have also the business model of licensing your content and smart kitchen technology in the US, because coupled with technology is a content created on the cooking app in China and US as a different step of a cooking recipe, isn’t it?

Kevin Yu: In many ways, I usually explain to investors. Our business is very much content plus tech, where the really special part of SideChef is compared to other contemplators. There are other websites like Allrecipes who has millions of recipes, but we have this smart kitchen technology in the US that allows our recipes to connect to the whole entire ecosystem of partners, of verticals, and really goes down to the smart recipe format itself. It’s not only guided cooking with step-by-step photos and videos. It’s able to be mapped on to, again, Amazon Fresh’s database, tons and millions of kitchen appliances and devices and be able to control them. These are all that makes that content partly special and makes us very different from the content that is out there. We have a tech to beat out the current content players, but there are also other tech players that do connectivity for IoT. We do that connectivity but we also provide the content. It’s not just we’re building a connection that is a remote control, turning on your oven, or turning on your cooktop. It actually tells the oven or your cooktop what to do in relation to a recipe. Again, it’s not a remote control, like I can turn on the oven from my living room, of course, we can do that too, but that’s pretty boring. How do you actually orchestrate it together or have multiple devices talking to each other work together? So, we have content that commands and controls that experience. This is where you might have Allrecipes, a million plus recipes, but you are not able to communicate to your ecosystem with that. You are not able to get all your groceries, you are not able to do one of the things that are in beta for us right now, called multi-recipe cooking. Choose any number of recipes within our 15000-recipe database right now and we will tell you when to start what, so they will all come out warm at the same time. We’ll mix the prep steps together, so if you are prepping all the garlic together, prepping all the tomatoes together, and then be able to split it out for multiple different meals if you are using these similar ingredients. 

Matthieu David: I see. In order to connect with the devices, is it that you sell specific access to an API, or you go further into eyeing the end app development in China and the US with different companies?

Kevin Yu: Because this smart home market is still relatively new and there are a lot of partners that have different types of requirements of smart kitchen technology in the US and China. We do offer API but, many times, we actually do help the custom implementation of such an experience. Think of it like SAP, often times the companies will use SAP out of the box, or they will hire the consultants from SAP or other third-party agencies to be able to implement it or even customize SAP to be able to have the function the best for them. So, we have to have an out-of-the-box experience that we can work with any small smart kitchen technology in the US and China as well too and be able to control them and have our recipes be compatible, but we also do custom projects that can show off what the smart kitchen technology in the US and China could look like in the future. Because this is so new, I think there are a lot of opportunities for companies to take leadership in this area. And as I mentioned before, we demoed at a CES with GE, their Kitchen Hub product, which is basically a ventilation hood that goes over your cooktop and has a huge screen on it, kind of like a Tesla, an LCD screen that allows for the whole entire cooking experience to be presented right there. So that’s a new product in the market enabled by a lot of the smart kitchen IoT and the content that is able to interact with users.

Matthieu David: Okay, I understand. Actually, your capability could come from licensing, because I believe your invoicing by the number of devices which are using your smart kitchen technology in the US and China, isn’t it? 

Kevin Yu: We do have license deals where they are scaled to the number of devices that go out to market. We also do work with, on the content in the grocery side, where a lot of users end up using these services, and that’s our B2C scaling.

Matthieu David: I see. Very interesting. What differences do you see between China and the US, in terms of B2B side, working with the manufacturers, the brand, the tech company you mentioned Amazon, Google, should we mention Tencent, Xiaomi, all those smart speakers?

Kevin Yu: Yes, I think one of the largest differences between the smart kitchen technology in the US and China is in the US, they mostly focus on the kitchen itself and I think there is a lot of disruption being happening there. They have focused on the kitchen for over 100 years or since the very beginning. A lot of brands in China and also in Asia in general, what they are looking at Midea or Haier or the Korean brands like LG or Samsung, they are just electronics companies in general, and they have kitchen divisions. Some of them have started from the kitchen even in China with the Midea or Haier, but have expanded out into just being electronics in general. So, I think the market size or field of products is larger in Asia. A lot of these companies are, I would say, are comparably more tech-savvy in that sense, or having that core expertise internal. Yes, I think the way they look at technology is a little bit different.

Matthieu David: Are you working with them? Are you working with Tencent, Baidu, Xiaomi, Alibaba?

Kevin Yu: We have a few of the large partners in the smart kitchen technology in the US and China. We have not announced yet, and we are working with them now, but of course, if there is any other opportunity in China, feel free to reach out to me.

Matthieu David: The kitchen business, I mean whatever the model is, seems to be hotter and hotter recently the now ex-CEO of Uber said he would invest primarily in a shared kitchen in China. Could you tell us about what’s your vision of the smart kitchen technology in the US and China of the future? Could it be shared? Could it be private? Could it be with smart speakers, with every device connected? Could you share what will it look like? Will we have still a kitchen in the future in ten years at home?

Kevin Yu: To be honest, I think there are going to be a ton of devices happening with this whole kind of IoT evolution, but our vision specifically is very focused on building a user experience where users have one single destination to go to, when they think of home cooking or when they want to cook at home. Everything else in the world will constantly change, but for us, similar to if you want to get a car, you will probably use Uber or in China maybe you will use Didi or Meituan. You have a one-stop solution. If you want to get movie entertainment or TV shows, maybe go to Netflix or iQiyi. These are single destinations. For music, you go to Spotify. You have a single place you go to that solves all the problems. Whereas right now when you think of home cooking, whether in China or the US or in Europe, where you find a recipe is most likely a different place, where you get your groceries, if you wanted to actually know how to cook, or even deciding what you’re going to cook for the week with your family or meal planning, if you guys do meal plan, let alone smart kitchen, precision cooking all this other stuff. The truth is you would just go to so many different sources to get this idea of home cooking done and it’s very complicated. So, we believe there will be a single destination that people can go to, to address the whole entire cooking journey. So that is what SideChef is really dedicated to be able to build and to offer to its users on a global level. Again, we will work with ecosystem smart kitchen technology in the US and China across all different verticals as we have, and that’s again part of the offering. In terms of predicting what the future will look like in this area, it’s been a very interesting adventure in learning all the different projects that the smart kitchen technology in the US and China they have a certain vision of what it will look like technologically and through hardware, working with Amazon, Google like seeing their kind of angle of it as well too, and then a lot of the content. People are just looking to be relevant to still do what they do best, which is showing off really good recipes for users. Our job is to bring in all the smart kitchen technology in the US and China into one cohesive experience, where is again seamless. So that’s our focus and I think again all of the ecosystem partners will change. I think there is a lot of change happening in how millennials cook compared to previous generations. The kitchen devices themselves are changing. I use the sous vide machine to cook, whereas my parents obviously they see a sous vide machine, it’s like totally foreign. So, the device will change but again, but I think the cooking, that journey is still very fragmented. That’s the part that we aim to build in order to make a future.

Matthieu David: Okay, so your vision is a bit like you may have a bike, a car, even buses and trains on the app, just making it possible to commute easily with different modalities. You say that your cooking app in China and the US will make it possible for you to cook in a chef kitchen, in your kitchen, a kitchen of the neighbor with this device if you need. If you don’t have this device at home, you may go to a chef kitchen. This is an accessory. The key is that you have the cooking app in China and the US where people would go to cook and to interact with these devices. That’s your vision?

Kevin Yu: Yes. Imagine Matthieu, you and I, we are to say we are going to cook tonight. I invite you over to my place right now, the cooking app in China and the US add your profile to mine, it will automatically know your personalization as well as my personalization, what would you like to eat. It will probably recommend dishes for the two of us, and then we can one-click order, get all the groceries from JD, and then we are off to be cooking.

Matthieu David: You are talking about building contact with Google and Amazon. This looks like a dream of many startups, of many small and medium business, to be in contact with the giants and open the door. How have you been able to meet with them? I read, Sophia who prepared the notes, wrote that you are born in Silicon Valley, in this environment. Is it because you are from this place where everything is happening intact and you had easier access? Is it because you were participating in a lot of events like TedX talk, we saw that you have been speaker so many times? How do you connect with those big giants? What app marketing strategy in China and the US did you use?

Kevin Yu: Again, we share the same kind of backgrounds as most startups in the app development in China and the US. We got a lot of no’s in the beginning. Eventually, there is one ‘no’ turns into a ‘yes’, and then we turned two into a yes, and then three into a yes as we build more momentum. Then people are more curious about what you are doing and then eventually more opportunities start knocking at your door. Even with Amazon, to be honest, we had our intern at the time, who is my head of business development now, she actually just called somebody at Amazon on LinkedIn. After a couple of different tries, we finally called somebody on LinkedIn and they accepted it. Then we used it to give a pitch and did a phone call. A phone call led to a meeting, and then the meeting led to a demo and then we started a working relationship with them. As you work with one department and then two. You announce something and then Google finds out about it, and then you are on the map. Getting a second meeting with Google now becomes possible. It’s just building the momentum, but it does start with a lot of no’s at first.

Matthieu David: I see. To be persistent basically, there is no easy way is what you say, even if you have some proximity and are close to them by being localized in the US, you still have to fight to get the contact. I’d like to understand better the user acquisition strategy in the US. I feel I didn’t understand initially your business model. I thought you would advertise a lot, do SEM, pay Google platforms and iOS to do the advertisement on their App Store. But I feel now that the more devices you equip, the more companies you partner with, the more users there will be. So how do you get users?

Kevin Yu: Yes, we do a lot of user acquisition right now through the B2B site, through our partners, especially SideChef is a new brand, it helps to be side by side with a larger name such as LG or GE or Amazon for that matter. That’s our primary kind of user growth as well as the pretty good press that we have got as well too. We have not actually spent large sums of money in user acquisition yet, this is where again 2019. In 2020, we are focused on the B2C side in a different way, but we are scaling this further. But in previous years, a lot of it, to be really honest, was about monetizing and building a sustainable business, which led us to convert into a B2B aspect and really build that out. Now we get a chance to go back and do the B2C side on a different scale.

Matthieu David: I see. I am on an app, the paid premium version. I went on your SideChef and I see that yours is also pretty good in terms of users. You are in the Top 1000 for food and drinks in the US and from time to time in China, not all the time but more and more in the recent weeks, you are in the sometimes 500, sometimes in the 700. So, this user acquisition is coming from the partners mainly, that’s what you are saying.

Kevin Yu: I mean all of it is organic yes.

Matthieu David: You made a Kickstarter campaign ‘Chip’. Could you tell us more about why making a Kickstarter campaign for an app, it’s usually more when you create a device or a product?

Kevin Yu: Yes. In terms of the Kickstarter, we had a really cool device called ‘CHiP.’ It was a smart cookie oven. We had this idea of a software piece, such as SideChef connecting into an oven that you didn’t have to program whatsoever. You can literally scan the QR code off of a chocolate chip cookie or something else that you bake and the oven knows exactly how to make it. It knows when you put it in and then it’s done in a small amount of time. It’s a smaller oven, therefore it heats faster and is able to make that cookie or bake a product much faster. We actually got into a prototype phase for it, but it didn’t actually go to market. We ended up refunding a lot of our Kickstarter backers, because to be honest, in many ways we struggled with the hardware production side of it, which is not our core expertise as the software. This was important to understand the timing of this, compared to where we were as a company. We had launched a successful cooking app in China and the US, but we had not gone into IoT. We actually reached out to several smart kitchen technologies in the US and we were like, wouldn’t it be cool if we created this experience where the cooking app in China and the US in the cooking process could control ovens and so forth. In many ways, CHiP was kind of our demos of that, because we actually didn’t have any partners at that time. We didn’t have any smart kitchen technology in the US that believed in us that we could actually build this product or the experience. But we are able to see what it looks like. CHiP, the smart oven actually was our first client, in terms of being able to build an IoT cooking product. From that, we also had a demo to be able to show a different type of partners, and then really quickly SideChef had a B2B side of the business. While I think the Kickstarter itself was unfortunately unsuccessful, we had to refund a lot of our backers, or all of our backers, it was an important evolution of the company to get to where it was. As I mentioned before, it’s not like we had a bunch of high-level connections that just gave us free deals with these large companies. We had to always prove ourselves, in terms of, it’s not just having a good pitch, it’s willing to go out there to show that you can build it, evolve it and even fail at it. But still to be able to make that step towards it, and I would argue that has led us at that time to jump into the IoT sector.

Matthieu David: Very interesting. Because I feel there is a lot of failures, which are actually leading to success or to creation. And myself experienced that with my first business, which was a failure but learned so many things and gave me the credibility to start the second business which I think is very similar to what you have experienced.

We talked about the smart kitchen technology in the US and China and how you could be at the center of cooking, where you’re going to share the kitchen, with whatever the device. When I look a little bit in the future of the kitchen, some people say the key will be the rubbish bin, because the rubbish bin will know exactly what you have used in the kitchen, you’ll be able to track if you scan it, what you have used to reorder, to know what you have eaten, etc. What’s your view on this? Do you feel that’s the right vision?

Kevin Yu: Yes, so that’s actually the first time I have heard of that but I think it’s a very creative way to look at the kitchen in terms of what is being used, but it really depends. Your question is about what is the most important device or hub. I mean in my opinion, I think it is the device that most numbers of people have. When you are able to, like everybody has a TV, therefore you can have a very uniform smart TV experience on it. Again, every smart TV probably has Netflix. It’s because it’s so standard of the device. I think the kitchen itself also needs a standard device that everybody has, therefore you can build a uniform experience on it. That gives them all the bells and whistles, just like as everybody has a smartphone, therefore cooking app in China and the US can be really powerful. If smartphones were not so popular or super fragmented, you wouldn’t have the rise and importance of a lot these cooking apps in China and the US. Again, I think it’s making sure that the device is in the kitchen or needs standardizing in some affordable, economical way for a large range of people, not just the elite, but accessible to everybody, as is the same as with the smartphone, almost everybody in the world has a smartphone.

Matthieu David: You have written many times when we are looking about yourself, your experience that you are leading through a design, a vision-driven design thinking for the app in China. Could you tell us more about what it is and how it’s influencing your way of app development in China?

Kevin Yu: Yes. I think when we focus on design, design isn’t just UI UX. It’s a certain way of design thinking for app in China. For us at SideChef, it’s very much thinking in terms of systems. It’s not a particular product. For instance, as in many ways, I believe Steve Jobs had the design thinking for app in China and the US of wanting to make the technology very personal to you. Because of that design motivation, he then made the Macintosh, which was a personal computer. Because of that design thinking, he then made the iPod which made every person on a personal level has thousands of music songs in your hands. He wanted to make the computer closer to the user in an easier way, therefore the laptop and the iPad. These products as successes were not the focus itself. It was the outcome of design thinking and this is also what we look at. When you want to put out a product and make that successful, it still may or may not work, as Apple has had plenty of failures and success. SideChef has also made plenty of mistakes as well, but if you design a system which is not only one-part thinking, it’s also the team and the product. A team that has the process of trying things and how they learn, fail and “fail fast” in this. The team is able to keep trying, to move fast, to learn from it to either fail or succeed in it and then grow it. I am counting on each individual product or feature a lot less than on the team which knows how to navigate the uncertainty. So, we are trying to build a company of people that are so good at navigating the uncertainty and understanding the product fit in terms of what users are looking for, and they are just willing to keep trying or banking on the people in the design thinking for app in China and the US of what the user needs, rather than just each individual feature.

Matthieu David: I understand, I truly understand, but I think it’s easier to say than to execute. How does it translate into your company? Does it mean it’s very decentralized? Does it mean that each team member can allocate half the day of the week to work on an idea he has, but we know it’s happening at Google? How does it translate into daily management?

Kevin Yu: I think it comes down to the people that you hire in many ways, in which you are looking for a team that is not about just the skill sets that they have, it is about how they deal with challenges and failure. I think that is a key part. Just as I mentioned, our intern, in the beginning, is not my head of business development, which shows that we are willing to bring on people with lots of different levels of expertise, but they have grit or persistence that is able to supersede. That persistence is actually the word that you mentioned before. It is really the key to what we believe is success. It’s that ability to keep going. But persistence is a trait as an individual. How do you build that persistence that culture within a team? I can find the smartest person, a smartest engineer in the world, but they might not have some of these traits and be able to do this with the team. When things go wrong, you have people pointing fingers at each other or they get demoralized or blame other people or there is politics involved. Finding a team that is good to be able to go through these harder times, then I think you have something that’s successful. Each failure actually builds the team closer and then when you finally do succeed, the morale and team bond is very very high. And they then believe further what used to be impossible is now possible. When you can have an intern go and open up a deal with Amazon and be able to close it after having failed three, four, five, ten deals, before that, you can see how the team cohesion now becomes even stronger and believe in what is possible. A lot of it is multifaceted, it’s not just one thing that we do or one example, but the core I believe, is finding the right people that exemplify a core value that you have and then making sure that everybody you hire from there has that similar design thinking for app in China and the US. 

Matthieu David: Where did you learn or get inspired on this design thinking for the app in China and the US? Do you have some books to suggest some conferences to suggest?

Kevin Yu: I mean I don’t really know. I did give a TEDx Talk about this on my first TEDx Talk. It’s really random but I still probably credit my father. I think he did this may be directly or indirectly, but he was an engineer and when I grew up for some reason. Every question, you know kids have a lot of questions, I asked questions about things, he never gave me answers to any particular thing, like why is the sky blue, why is the doorknob shaped the way it is, or why is this wall in this particular color. Instead, he just asked me why do you think it is, for everything. As a kid, it was actually quite frustrating, but It does force you to start thinking of what the possibilities are, in terms of why the world is around the way it is. Once you start understanding that, you can reverse engineer it. When you understand why a doorknob is shaped the way it is, there are probably tens of thousands of different doorknobs, you realize some are for function, some are for vanity, for style, for design aesthetics, to match with certain types of things. Some are made of materials that are made of fitting for the times or the materials that were available in that area like there are so many different reasons for this. You just got to keep asking the whys. So, I think it’s one way to start understanding the world in a somewhat different way.

Matthieu David: Thank you very much for your time for sharing. Very interesting. I discovered a totally new business model that I didn’t expect, and it was a total surprise when discussing with you and very, very inspiring. Thank you very, very much, Kevin.

Kevin Yu: Thank you for having me with you. Thanks, everyone. 

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #29: Applying design thinking to app development in China is the first one to appear on Daxue Consulting - Market Research China.

• The unique business model of SideChef that is profitable while users don’t have to pay a dime
• How SideChef grew a partnership with a tech giant like Amazon starting from a Linkedin message
• The difference between smart kitchen partners in the US and China
• How a failed Kickstarter named Chip ended up serving as a demo for their smart kitchen idea
• How design thinking translates into team management

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article [Podcast] China Paradigm #29: How to apply design thinking to an APP in China is the first one to appear on Daxue Consulting - Market Research China.

Due to following occasion people will conduct purchases of refrigerators

1.First-time purchase in rural area

Low penetration rate of refrigerator in rural area will be raised due to present continuous growth of rural inhabitant income. The potential of the rural market is enormous.

2.Second-time purchase: upgrade and replacement of old refrigerator

51% families have owned their refrigerator since 1994. Based on refrigerator ‘s service life that is from 10 years to 15 years, these families now become the major consumers to conduct second time purchase to upgrade and replace refrigerators. Only 17.1% families have replaced refrigerators. In the future 5 years, 23 million refrigerators will be in need.

3.Newlywed and relocation demands

The prosperous real estate market and numerous newlyweds in China boost the growth of household appliances market. Brand new household appliances are necessary to those families.

4. Government policy: trade in old home appliance for a new one

In June 2009, China launched a home appliances and electronics trade-in implementation solution that people who have the registered residences in the pilot provinces and cities can gain a 10% subsidy when buying new home appliances products if they provide their old ones at the time of purchase.

The home appliances trade-in policy is reportedly the sister policy of China’s rural home appliances subsidy program and it helped many Chinese manufacturers cover deficits and increase surpluses.

 Sales channels

Sales channels in the mainland kitchen and bathroom appliances market fall into two types: traditional channels and new channels.

Traditional channels:

In this channel you will find large, medium and small department stores as well as franchised stores.

New channels:

In this channel you will find:

1.Home appliance retailers：

国美 GuoMei  http://www.gome.com.cn/?cmpid=sem_baidu_pinpai_bt

苏宁 SuNing  http://www.suning.cn/

2.Building materials chain stores

HomeMart: http://www.homemart.com.cn/index.html

3.General merchandise stores (e.g. Carrefour, Wal-Mart)

4.E commerce:

(1) Individual e-commerce platform of each brand

海尔商城 Haier http://www.ehaier.com/

美菱 http://www.meiling.com/

统帅Leader http://www.tongshuai.com/

Hisense http://www.hisense.com/

容声http://www.ronshen.com.cn/

Samsung http://www.samsung.com

LG http://www.lg.com

Panasonic http://panasonic.cn/

Sharp http://www.sharp.cn/

(2) Taobao Tmall: a Chinese-language website for business-to-consumer (B2C) online retail, spun off from Taobao, operated in the People’s Republic of China by Alibaba Group. It is a platform for local Chinese and international businesses to sell quality, brand name goods to consumers in mainland China, Hong Kong, Macau and Taiwan.

http://www.tmall.com/

Taobao: a C2C platform www.taobao.com

(4) Individual e-commerce platform of home appliance retailer

国美 GuoMei  http://www.gome.com.cn/?cmpid=sem_baidu_pinpai_bt

苏宁 SuNing  http://www.suning.cn/

(3) Dangdang.com: Dangdang’s main product categories include household merchandise, cosmetics, digital, home appliances, books, audio, and dozens of clothing and maternal and child categories.  www.dangdang.com

(4) 库巴 Kuba: main product categories include household merchandise, cosmetics, digital, home appliances, books, audio, and dozens of clothing and maternal and child categories. http://www.coo8.com/

(5)  新七天XinQiTian  http://www.new7.com/

New 7’s main product categories include digital, home appliances

Where to buy refrigerator?

The new channel is growing and rapidly expanding. After several years of development, home appliance retail chain stores have become the major channel for people buying household appliances. It is estimated that specialized home appliance chain stores account for over 70% of the home appliance retail market in large and medium-sized cities, and they are extending to small cities.

Young consumers tend to conduct purchases of home appliance on E-commerce platform because the price is lower and the process is convenient. Taobao and Jingdong are their first choices.

But most people would like to see the real products instead of the picture on the website, and sometime to use the products by themselves. So many of them nowadays check out the products in store then conducting purchases on line.

http://wenku.baidu.com/view/7ee967dc28ea81c758f57872.html

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This article Market Research: refrigerator purchase in China is the first one to appear on Daxue Consulting - Market Research China.

Since Dior was established in the 1960s, countless pieces of charming and stunning design amazed several generations. Among those classic designs, Lady Dior is one of the legends and tells an unforgettable story about Princess Diana. In 1995, Mrs. Chirac offered Diana a small Dior black bag during the Cezanne exhibition opening ceremony in Paris. At that time, this particular bag was not given a specific name. After this great event, Dior immediately named this bag “Lady Dior” which has become the main force of sales for Dior’s basic bags. Because consumers associate this bag with Princess Diana, Lady Dior has swept the world.

Michelle Obama stuns in Jason Wu design

On the night of President Barack Obama’s first inauguration ceremony, Michelle Obama wore a tailored-made one-shoulder and floor-length white chiffon gown design by Jason Wu to attend that grand and historic event. In the years since, she has continued to select Jason Wu as the designer for many other international and domestic occasions. At that time, Michelle chose a magenta silk dress from Wu. In 2009, during the couple’s first official European trip, the first lady wore another coat from Wu to visit ]Queen Elizabeth II. When Barack Obama won the second term of president in 2013, she once again chose a Jason Wu dress made of ruby red velvet with a chiffon design and wore a Forevermark diamond bracelet at the 2013 Presidential Inaugural Balls.
In addition to Jason Wu, Michelle Obama also wears outfits made by designers Reed Krakoff and Tracy Reese.

Exception Refined Peng Liyuan & Made-in-China

Peng Liyuan, wife of the new Chinese president Xi Jinping, has become a fashion icon and idol because of her elegant attire during her first official visit to Russia. When the president and Peng disembarked from their private plane in Moscow, Peng wore a black double-breasted belted coat and carried an elegant hand bag which ended up being searched more than 8 million times online the day after news of her visit was released. The deep blue coat and black hand bag were custom-made exclusively for Peng by a Chinese fashion brand called Exception. This brand was founded in 1996 and aims to invoke originality and a contemporary style into their clothing. Today, Exception has already spread to 41 cities in China.

Consumers often associate products that are made in china with low price, low quality, and a lack of originality. However, Exception’s bag worn by the first lady during her first official visit increased the confidence and pride of Chinese clothing brands. According to the report from Renmin Daily, president Xi wore the clothes manufactured by another domestic brand called Trands which gave a sparkling and dazzling performance on the A-shares stock market. Furthermore, this prospering momentum also influenced other clothing manufacturers’ performances in the market.

Daxue China Consultants

Sources:

• Jason Wu
• USA Today: Exception
• Vogue: Dior

• Forbes

Picture source: Google Image & Sina Female

This article Market study: Fashion favored by first ladies is the first one to appear on Daxue Consulting - Market Research China.

Cappellini offer completes itself with limited edition products, to increase the value of image and the cultural solidity of its realizations, but also to preserve a pinch of healthy fun. Cappellini also dedicates its research to the objects and the complements creating in 1992 a collection of products for the house calm and measured, simple but of great design. Progetto Oggetto is the design of the normalcy and the synthesis; the lamps, the vases and the containers that compose the collection are as they should always be, pleasant and honest.

China Market Research for the New Millennium Cappellini

Cappellini enters the new millennium completely transformed in comparison to its origins, tied up indissolubly to the world of the image under every aspect and to the world of the experimentation and research. The Cappellini collections are convincing; they are well balanced, refined, simple and yet leans towards the experimental. There is no house style: the intention is to allow the user enough space for his individual interpretation, shown by China market research. All pieces have been designed to be used, contrary to the trend in recent years. Not only icons, many of which present in the most important museums of the world, from the MOMA in New York, to the Victoria & Albert Museum in London, to the Museum of Decorative Arts in Paris, but also flexible products of great design for the daily use: an interest that Cappellini pursues since the beginning with products able to last in the time and that have become true “classical contemporaries”.

Cappellini’s Main Competitors: Unifor, Flou, Zanotta

Cappellini faces biggest challenge directly from other brands of design and furniture, especially from Unifor, Flou and Zanotta, those who are also very popular companies of design and furniture in Italy. Cappellini has been striving to rival these competitors and enlarging its market share in the market, and China mystery shopping has been studying the corresponding effects.

1969. Molteni & C. expanded its field of activity to include furniture that was not only for the home, but also for work environments. That’s how Unifor was born, a division that develops and creates designs for the contemporary office space. Autonomous structure, that operates in an integrated manner with other companies in the group, with which it shares resources, basic organization and a system of related services.

Flou, accompany with the precise objective of innovating the bedroom and create a new “sleep culture”, was founded in 1978. Flou had arrived and its continual development saw esthetics and function going hand-in-hand with innovation in the field of materials, technology, and rationalization of the production processes. However, the company philosophy remained unchanged: to produce excellent beds, designed with the precise objective of improving comfort, wellness and quality of life.

Zanotta’s history can be said to be a miniature of the entire Italian contemporary furniture development history. This company, who has accompanied the rise of Italian design in the 1950s, played an indelible role during the progress of gradual dominance of Italian design in the world. Zanotta’s products are sold throughout Europe and the United States, Canada, South America, Japan, Australia. Its exports take up 40% of total sales.

Edited by Amy Wang from Daxue consulting China.

Picture source: baidu

This article China Market Research on the Italian Designer Cappellini is the first one to appear on Daxue Consulting - Market Research China.

Driade is an aesthetic workshop that from the start, began working with designers capable of anticipating new trends. It employs a philosophy of home-living based on the conviction that eclecticism, cultural collage, curiosity and surprise, represent the true sense of our age. Through the years it has produced furniture and other products to suit every furnishing and lifestyle requirement. Today, the Driade catalog is composed of finished furniture, equipment, kitchens, complimentary furnishings and objects of art and daily use.

China market report on Driade’s most recognized designers

Driade owns a number of famous and talented designers, shown by a China market report. And the most recognized ones include:

Naoto Fukasawa: Fukasawa was born in Yamanashi, Japan, in 1956. He graduated in 1980 from the department of product design at Tama Art University. After eight years of working in the United States for the IDEO studio, he became director of their Tokyo branch. In 2003 he founded Naoto Fukasawa Design.

Shaun Fynn: Fynn was born in Chester, England in 1968. In 1989, he received a Bachelor of Arts degree in Industrial Design from Central St. Martin’s College of Art and Design in London. After graduation he freelanced in London before moving to Milan in 1991 and then onto Los Angeles in 1993 where he collaborated with renowned design studios.

Driade’s main competitors and its China strategy: Flou, Zanotta, Cappellini

Driade’s main competition comes directly from other Italian brands of design and furniture, especially from Flou, Zanotta and Cappellini. Driade has made its China strategy to rival these competitors and gain a larger market share than them.

Flou, a company with the precise objective of innovating the bedroom and creating a new “sleep culture”, was founded in 1978. The company prides itself on how its products’ aesthetics and function go hand-in-hand with innovation in the fields of materials, technology, and rationalization of the production processes. Since its inception the company philosophy has remained unchanged: to produce excellent beds, designed with the precise objective of improving comfort, wellness and quality of life.

Zanotta’s history can be said to be a miniaturized version of the entire history of Italian contemporary furniture development. The company, who accompanied the rise of Italian design in the 1950s, played an indelible role during the rise of Italian design in the furniture industry. Zanotta’s products are sold throughout Europe and the United States, Canada, South America, Japan, and Australia. Its exports make up 40% of its total sales.

Cappellini strategy revolves around its limited edition products, to increase the value of its products and the cultural solidity of its realizations, but also to preserve a pinch of healthy fun. Cappellini also conducts in depth research to ensure that its limited edition products will be successful. Progetto Oggetto’s products are simplistic, yet elegant.

Daxue consultants China

Sources:

• Yahoo
• Driade
• China Furniture PDF 1
• China Furniture PDF 2

Picture source: bing

This article Market report: Italian furniture in China – Driade is the first one to appear on Daxue Consulting - Market Research China.