Developed by American scholars, Richard Thaler and Cass Sunstein, the concept of nudge marketing has been successfully applied in both public and private sectors in the Anglo-Saxon society. The key elements of the nudge theory include the choice   (reducing the mental effort to make a decision). In a nutshell, both governments and enterprises apply nudge in China to entice people to achieve expected behavior.

In the business context, nudge tactics are all around us

Nudge theory was popularized in 2008, but we have been influenced by nudging, even in a consumption context, our whole lives. Simply observing the online and offline ecosystems exposes the abundance of nudge marketing tactics in China. Anywhere a business creates the environment in which a decision is made will inevitably include nudges.

Individuals retain the power to choose among alternatives, but the structure of their choice favors one particular outcome. Nudging affects behavior while also respecting freedom of choice of the consumer. Whether it is placing sweets or other impulse purchases near the cash register, or listing the more profitable product in front of the less profitable one online, consumer choices are influenced by the environment around them.

Photo Source: Daxue consulting, Mechanism of nudge marketing

However, Nudge theory has low academic awareness in China

Even though “nudge” is a popular concept in the western world, it has been rarely cited for academic purposes in China. The official Chinese translation of nudge is “助推理论 (nudge theory)”. Other synonyms such as “助力发展 (development aid)”, “助推器 (industrial propellers)” and “助推 (nudge)” are used in ways irrelevant to the concept proposed by Thaler. According to CNKI, a key national research and information publishing institution in China, the attention degree of nudge theory has remained very low in the Chinese academic world. Even so, mare the translation of western academic papers and analysis of the nudge application in western society. These facts reveal that nudge theory, and nudge marketing in China has yet to become popular.

Photo Source: CNKI, Subject distribution of nudge theory in Chinese literature

Nonetheless, it is interesting to notice some enterprises, including online car-hailing platforms, have utilized nudge marketing in China. On the other hand, Chinese scholars have been discussing applying nudge theory to policy making in China. If so, in which context it is most suitable?

Nudge in the business sector: Software-as-a-service industry and E-commerce platforms have applied nudge marketing in China

With the increasing household incomes, improving legal measures regarding intellectual property and development of the 4G network, the software-as-a-service industry in China is booming. While lots of market players strive for market share, how can they attract consumers in China and stimulate the purchase behavior, by applying nudge in their businesses?

Case Study of QQ Music: auto-subscription and excessive exposure of promoted products are nudges

QQ Music (similar to Spotify), one of the leading online music service providers in China, has applied nudge in promoting their core product. Green Diamond (绿钻) is the premium membership that enables music consumers to unlock premium music services such as music quality, customized themes and profile pictures, and more access to paid digital music. In addition to the premium membership, regular membership is the second promotive product, and it merely consists of the basic service, limited access to paid digital music.

Application of heuristics: information availability

Information availability is related to the observation that as people see or hear something frequently, they tend to believe its perceived credibility. QQ Music has applied information availability successfully. On the home page of the member center, QQ Music mostly promotes the premium membership by placing multiple stimuli regarding Green Diamond. The images below display pages of the QQ Music member center.

Source: QQ Music screenshot, navigating a Chinese app means immersing ones-self in a series of ‘nudges’

Four activities which are circled in blue are related to obtaining premium membership. For users that are not familiar with the platform, these stimuli are likely to entice them to get premium membership directly as they might perceive that Green Diamond is the only membership they can obtain from this online music platform. However, they might not know QQ Music has also provided regular membership as this platform does not place any stimulus to promote it frequently.

Photo source: QQ Music, member center page

Inertia and auto-subscription

Inertia is related to the tendency of people to stay committed to current situations. It is caused by the fact that people are unlikely to be proactive to change things when there is no stimulus to do so. Likewise, QQ Music has applied inertia as the stimulus. Some subscription agreements take effect after users enable the auto-subscription condition. For example, users can pay 12 RMB/month by subscribing to the successively 1-month plan. Otherwise, they cannot have 6 RMB deductions per month as a benefit. Once users enable this condition, they need to cancel the plan manually if they want to terminate the plan.

Moreover, QQ Music does not send any notification to remind users of the end of the monthly subscription. Affected by inertia, users are too passive cancel the plan when they have not been prompted to do so, and thus their subscriptions would continue automatically. QQ Music tactic regarding auto-subscription leverages the other side of nudge marketing; consumers are less likely to react to a stimulus that is not present. 

Case Study of Tmall: Reviews, discounts and particular display of information are nudges

Likewise, Tmall has driven online purchase behavior with nudge marketing in China.

Photo Source: Tmall, Nudge marketing on Tmall platform

Social proof and reviews

High amount of reviews are effective in driving purchase behavior as they give more context and personal experience to products. Reviews are technique of social proof, which states that when uncertain, individuals will look towards the behaviors of others to help them make decisions.

Anchoring and discounts

Anchoring, a psychological pricing technique, is using existing information as a baseline for new judgements. The higher price “anchors” the individual to make the discounted price seem smaller.

Autonomy in decision-making

Being able to choose from various options, such as to check out, add to the bag, or paying in installments, it gives consumers the freedom of remaining autonomous in their decision.

Pushing the sales of a particular product

Placing the most attractive product next to similar products that aren’t perceived to be as good of a deal makes that option look even better. On Xiaomi’s page, the most attractive option would be the middle with its attractive specs, which justifies its higher price.

Photo Source: Tmall, Nudge marketing on Tmall platform

Credibility and labels

Labelling as implicit nudges boosts credibility of the product to make it easier for consumers to find what they want.

Photo Source: Tmall, Nudge marketing on Tmall platform

Similar nudges are widely used in video platforms, paying-for-knowledge apps, gaming platforms

In terms of other digital content and service providers, auto-subscription is a common nudge tactic in this market. It is noticeable that the applied nudge tactic in China’s business can be found in the western context. With the growth of globalization, more and more business tactics born in the west have been adopted in China readily.

Applications of nudge from China’s government

Nudge in the policy establishment is more insightful. More and more Chinese scholars have delved into this field and discussed its feasibility in the Chinese context.

Nudge in China’s public policies: it is applicable in the pension system while focusing on different attribute   

One of the most prominent applications of nudge is in the pension system. In western countries, in order to tackle the low propensity of saving, a nudge has been applied to  trigger their saving habits for retirement. Auto-enrolment and display of selected information are the main characteristics of nudge in the western context.

By 2020, China had established the pension system for over two decades. Considering the relatively high propensity of saving, it has not been a significant issue in China’s pension system. Instead, the main issue has been the low participation rate. Because of the unequal economic development, the penetration rate of the pension system in rural areas is low. Among these nonparticipants, some of them have limited education and do not know the benefits of investment in pensions. To tackle these issues, some Chinese scholars have suggested that the government should utilize the heuristic, framing and availability, to attract more Chinese people to participate in this system. By amplifying the benefits of pensions, offering limited investment plans and using plain descriptions, people’s willingness to participate are likely to increase.

Nudge applied to prevent the spread of Covid-19

On top of strict government measures to control the spread of COVID-19, China also used some more subtle tactics to encourage citizens to follow the rules. Simply putting a hand sanitiser dispenser or a tissue nearby will increase the chances that people use them, before entering a building, even when people are carry their own tissues and sanitiser.

Source: daxue consulting, 50 measures China used to prevent the spread of COVID-19 report, tissues placed at the doors of ATMs

Standing spots also served as a subtle reminder to keep a two meter from others. Though this measure could have been implemented without labeled standing spots, the spots remove the mental effort for people to have to figure out how far to stand from each other.

Source: daxue consulting, 50 measures China used to prevent the spread of COVID-19 report, people are nudged to stand on standing spots

Nudge theory in China has yet to be widely discussed

Regarding the nudge in China’s business sector, enterprises have applied nudge marketing in China readily. Nudge amplifies the universal trait of human behavior. Since nudge works well in the western society, it can also bring similar benefits in Chinese environment.

In regard to the application of nudge in China’s government sector, scholars are questioning the effectiveness of nudge in changing people’s behavior. Influenced by Confucianism, China has been rooted in a traditionally paternalistic system that features control and power. By 2020, the legislation in China has been to affect people’s behavior directly, rather than enticing them to behave in a certain way.

In the future, mitigating the differences might facilitate nudge’s occurrence in China’s policies

Nudge for good is meant as a plea and not necessarily an expectation. Richard Thaler, Nobel Prize winner

“Although there are cultural differences between Asia and the US or Western Europe, fundamental traits of human behavior are relatively stable around the world that would allow China to use the tools to design policies.” Thaler said. He also mentioned that applying nudge in government policy would help China’s government to obtain better outcomes. In line with some Chinese scholars’ opinions, nudge is a valuable tool that cannot be neglected. However, this isn’t to say we should ignore of socio-cultural and economic differences. Hence it is worth doing more research on nudge marketing in the context of China.  

Authors: Amelia Han & Della Yuzhou Wang

Many COVID-19 prevention measures were nudges, spot them in our report

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Overview of the Chinese cosmetics market

China’s cosmetics performance in the global stage 

According to Euromonitor, China’s cosmetics market occupies 12.7% of the global cosmetics market, becoming the second-largest market after the US.

Data source: Euromonitor, Top 10 cosmetics markets globally

Even after several years of market expansion, the market still seems to have a fine potential for growth in the future. According to Euromonitor, the CAGR of the Chinese cosmetics market is the highest in the world.

Data source: Euromonitor, Top 10 cosmetics market ranked by CAGR

Based on data from the National Bureau of Statistics, the yearly growing pace is remaining at about 10% since 2013 and the total retail sales reached 299.2 billion RMB in total. Hence, investing in such a large and consistent growing market can bring high revenue to the company.

Source: National Bureau of Statistics, Total cosmetics retail sales in China

Chinese domestic cosmetics brands are prospering

Cosmetics comprise a wide range of products like skincare, makeup and perfume. In the Chinese cosmetics market, skincare products are the main consumption force, and makeup products increased its market share year by year. Skincare products consistently accounted for over 50% of the Chinese cosmetics market. On top of this, makeup products have been continuously increasing since 2014.

Data source: Euromonitor, Cosmetics market distribution by category

Seven of the ten top cosmetics brands in China sare Chinese domestic cosmetics brands. The attention rate of Perfect Diary is far higher than other brands, meaning that a lot of cosmetics fans in China follow Perfect Diary.

Data source: QuestMobile New Media, Which Chinese domestic makeup brands are the most popular

Among the top 100 most popular cosmetics brands in China, 37% are Chinese domestic makeup brands.

Data source: QuestMobile New Media, Regional Distribution of top popular 100 brands

There are two cosmetics categories where Chinese domestic cosmetics brands have a strong position. These categories are essential skincare related products and eye make-up. Essential skincare products like hand cream, mask and cleanser have high daily consumption. Chinese domestic cosmetics brands could use price advantage to compete, through controlling the supply chain to lower cost. Besides, unique design helps Chinese domestic makeup brands make eyeshadow and eyebrow pencil hot products.

Data source: QuestMobile New Media Database, Origin of brands dominating China’s cosmetics market by product category

The rise of Chinese domestic makeup brands is correlated with sales promotions. According to Askci, 2 of the top 5 sales brands were Chinese domestic cosmetics brands during 618 shopping festival in 2020. Perfect Diary and Florasis ranked first and fourth respectively.

Data source: Askci, Cosmetics brands sold most during 618 shopping festival

Chinese cosmetics consumers portrait

According to data on Tmall and Taobao, consumers under 30 years old place most of cosmetics orders. Most of them are post-90 or even post-00. Students aged 18–22 made up over 25%, but their market share has decreased.

Data source: Tmall & Taobao, Chinese cosmetics consumers distribution by age

However, the share of consumers over 30 years old has an overall increase. This increase might because people aged over 30 gradually build and wake up the awareness of using skincare and makeup. Therefore, the demand for cosmetics among them goes up.

What Chinese domestic cosmetics brands consumers purchase most

According to the skincare top sales, Pechoin harvested 1,733 million RMB in sales, ranking first, followed by Chando and WIS, with 1,653 and 1,515 million RMB respectively.  

Data source: Tmall & Taobao, Top Chinese skincare brands

In the makeup market, top brands are different from top skincare brands, although some makeup brands provide cosmetics products. Perfect Diary maintained its performance and ranked first, with 2,762 million sales.

Data source: Tmall & Taobao, Top Chinese makeup brands

What makes Chinese domestic cosmetics brands different

Compared to foreign cosmetics brands, Chinese brands seem to put their eggs in more baskets. Their marketing efforts are spread through much more variety of activity and spread across many more platforms.

Creating a KOL marketing feedback cycle with short video apps, live-streams and KOLs

The rise of most Chinese domestic cosmetics brands attributes to social seeding through KOL marketing and cooperations. This feeds a feedback cycle where consumers give feedback on open platforms, where brands can then apply to their product development.

Data source: QuestMobile, Online marketing mode

Leverage traffic of multi-channel, post content in different forms

Traffic in multi-channel is other boost for the development of Chinese domestic cosmetics brands. It is common to market on Douyin, Kuaishou, Weibo, Wechat and Red, but each social platform has its own marketing strategy. On Douyin and Kuaishou, where people post short videos, brands cooperated with KOL to post makeup try-on, makeup tutorial and unbox testing. On Weibo, brands normally implement celebrity endorsement. On Wechat official account, brands post deep introduction of products. On Red, brands and KOLs post products-related tutorial.

Data source: QuestMobile, Online marketing in different forms

Launch cross-over products in big e-commerce promotion

Co-branding is more a strategy to get hold of targeted audiences who have complex behaviors. Through cooperating, brands can find a connection between consumers and brands. For example, Chando’s cooperation with Bilibili is a new try for its marketing strategy. As a place attracts most young generation, Bilibili provides a platform for Chando to increase consumers base.

Source: Chando, Chando X Bilibili

Unique marketing strategies for each Chinese domestic cosmetics brand

Perfect Diary, a textbook case for private traffic

Perfect Diary, established in 2016, is one of the young Chinese domestic brands. It targets 20-35 year old women, which is a high spending power group. In March 2017, it opened an online store on Taobao and Tmall. Half a year later, Perfect Diary opened on Red, WeChat store and hosted three Pop-up stores in Shanghai. In 2018, It established a Douyin and JD store. On January 19^th, 2019, it owned the first offline experience store in Guangzhou and expanded to 40 offline stores now.  

Behind Perfect Diary’s bold IP collaborations

IP cooperation is becoming a popular marketing method for domestic Chinese brands. Perfect Dairy cooperated with lots of IPs to launch new products. The most popular IP cooperation is with the Discovery channel.

Source: Tmall, Perfect Diary X Discovery

The history of Perfect Diary’s IP cooperation consists of three stages. In the first stage, Perfect Diary started to explore the market and launched fashion week related products. It reached celebrities, who have high credibility and cultivate the trust in the market. In the second stage which is the explosive phase, Perfect Diary cooperated with cross-over IP and KOLs to promote a single product. In this stage, it cooperated with makeup KOLs and reached to the followers, which increase the influencing power of brand. In the third stage where the brand continuously grew, it cooperated with mass and trendy IP. This cooperation helps to expand customers group, including people make-up beginners. 

Perfect Diary implements private traffic to build brand-owned traffic pool

Perfect Diary builds private traffic in two ways and uses two virtual BA (Beauty Advisor) to manage different types of consumers. Xiaowanzi (小完子) is in charge of consumers, who purchase online and joined through a lucky money card. Xiaomeizi (小美子) maintains the consumers who attracted from offline pop-stores or give aways. The source of customers is different, which requires two virtual BA to communicate customers in different tactics.  

Data source: Maoshihu, Process to reach Xiaowanzi

Florasis redefines the oriental cosmetics

Florasis’ sales performance is rising

Florasis was founded in March 2017 and opened its Tmall flagship store in August 2018. Although the sales for 2018 were only 43.19 million RMB, Florasis’ sales reached 1.1 billion RMB in 2019, rising nearly 25-fold. 

Florasis also presents an excellent in its first Double Eleven promotion. According to Mktindex, Florasis gained 220 million RMB sales and ranked fifth among the top 10 Chinese cosmetics brands that gained most sales.

Distinctly Asian makeup

As a chinoiserie cosmetics representative, the idea behind Florasis brand is ‘the Oriental makeup, using flowers to nourish the makeup look’. It includes everything from product ingredients to package design. Product ingredients highlight to use nature grasses and flower, and nourish the skin mildly. Package design and product name also filled with chinoiserie. For example, Florasis’s carved lipstick replicates the ancient Chinese carving technique and carved flowers on the lipstick, creating a precedent for the three-dimensional texture lipstick in China.

Source: Taobao, Florasis’s classical relievo

Pregnant woman friendly

Florasis gives people a safe and harm-free impression. It emphasizes that its products contain zero alcohol, zero-hormones and contains no harmful ingredients. An actor (Jiani Zhang) in Story of Yanxi Palace, which is a popular Chinese drama, recommended Florasis’ CC cushion. Zhang posted her using experience as a pregnant woman on Red, which drew most followers’ attention and discussion.

Source: Red, Jiani Zhang promoted Florasis’ product

Picking right KOL and spokesman

According to Baidu Index, the spokesman’s effect can be observed. On 3^rd March 2019, search word ‘花西子’ peaked because Justin Lee promoted Florasis’ loose powder. Another peak on 18^th May 2019 is because Florasis announce Jingyi Ju as spokesman. Jingyi and Florasis is a perfect match, because Jingyi owns high traffic and was known as the oriental beauty.

Data source: Baidu index, What increase the search of ‘Florasis’

Little Dream Garden, a black horse in the body care market

Targets ingredient-oriented consumers

Little Dream Garden is a Chinese cosmetic, focusing on developing body care products. It targets customers who care about the ingredients. Therefore, it emphasizes the ingredient and efficacy, naming product by main ingredient, such as Shea Butter body scrub and Ceramide body lotion.

Source: Taobao, Shea Butter body scrub

Posts testing video to build trust

Little Dream Garden leverages KOLs and KOCs to post product testing videos on Red, guiding users to join in the discussion. The opinion of KOL and KOC can increase trust rate and prompt consumers to buy the products.

Source: Red, Products testing video

How WIS involves celebrities on Weibo

WIS is a Chinese domestic skincare brand, created in 2011. It aims to provide scientific and effective products. It does not have any offline store so far. The brand targets consumers aged 18 -35 who have the strong social ability. For brand positioning, low-price capture lots of post-90 and post-00’s interest.

Source: Wechat, WIS products

Weibo is WIS’ social marketing asset

The popularity of WIS results from social marketing on Weibo. For example, a member of Happy family, Weijia Lee, recommended its product on Weibo, which attracted more than 240 million readers and brought around ten thousand followers for WIS. At the same time, celebrities, such as Jiu He and Na Xie, reposted the Weibo and reinforce the marketing effect.

Source: Weibo, Weijia Lee promoted WIS

What can brands learn from the success of Chinese domestic cosmetics brands

Although foreign cosmetics brands represented more than half of the cosmetic market in China, the rise of Chinese cosmetics cannot be overlooked. In fact, they can provide a learning opportunity on how to effectively appeal to Chinese consumers.

• Listen to the customers

Under short video App + Live Broadcast + KOL marketing mode, brands not only promote their products but also listen to the feedback from customers. Upgrading products according to the feedback is an important strategy to maintain brands’ sales performance.

• Pick the right brands for collaborations

Most Chinese domestic cosmetics brands implement cooperation with brands in different fields, celebrities and etc. to launch limited products. This campaign can bring the brands more consumers, strengthen brand image and increase brand volume.

• Promote in an appropriate form

Chinese cosmetics brands promote their products in different forms according to the character of a product. A testing video will gain more trust for a product that emphasizes its harmless ingredients. 

Learn more about the Chinese cosmetics and personal care market

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History of Marie Dalgar

In December 2006, Marie Dalgar ((玛丽黛佳) created its first grafted mascara, which completely overturned traditional view on mascara. It achieved an amazing sales performance: Marie Dalgar claimed that they sell one mascara every 15 seconds. In May 2008, the Chinese cosmetics brand formally established Shanghai Feiyang Cosmetics Co., Ltd., the marketing center. The brand has followed the rapid development path based in Shanghai and expanding to the whole country. In the same year, it launched its official website, providing consumers with a comprehensive information platform. 

In January 2010, Marie Dalgar opened its’ international factory in Shanghai Fengxian Industrial Park, covering an area of ​​20 acres, which is the largest mascara production base in Asia. Besides, it won the “China Cosmetics Annual Best Single Product Award” at the 2010 China Cosmetics Industry Conference.

In March 2011, Marie Dalgar won the 2010 “Best Makeup Brand” and “Best Single Product” awards in China’s cosmetics industry. In the same year, the brand joined hands with the well-known fashion women’s website Kimiss, and organized makeup contest with international brands such as Armani, Bobbi Brown, and MAC.

Currently, Marie Dalgar is one of the most promising cosmetics brands in the Chinese market.

Marie Dalgar’s brand concept

As the brand claims, besides the perfect effects, makeup is also an artistic master piece. It enhances confidence and it is a factor for different life expression. Marie Dalgar represents the spirit of modern woman’s personality and the attitude of women in this era.

Focusing on young consumers

From the user portrait, Marie Dalgar’s target group is 18-24 year old college students, and 25-35 young white-collar workers in China who have just started work.  Brand has a strong focus on young consumers and builds products that are easy for them to use on different occasions. The youthful brand naturally attracts young consumers through its product innovation and engaging cross-over marketing in the ‘new retail’ environment. Having its own research and development centers and manufacturing bases allows Marie Dalgar to innovate and meet changing demands quickly.

Data Source: NetVoices, 2018 Top Cosmetic Brands in China Report, Marie Dalgar’s consumers by age

Marie Dalgar’s marketing strategies

The domestic brand embraces the “New Retail” concept, taking a unique approach to increase the consumer experience and build brand awareness. On top of this, it has been a pioneer in collaborations.

Cooperating with third parties for campaigns

Co-branding is a key marketing strategy. These collaborations are through co-branding, such as collaboration with KFC and Heineken, and through collaboration with social media platforms like Douyin.

Co-branding rather than embassadors

Every year, Marie Dalgar holds Crossover Art Project. The brand invites artists to express themselves by using its make-up products. For example, fashion photographer Paco Peregrin chose the theme ‘Facing’ in 2015. The following year, photographer Damien Dufresne opted for ‘Through your eyes’ . For its products packaging, the brand also calls on artists, like the young Chinese artist JINLE, invited to celebrate the year of the pig. Out of a limited edition run of 3,000 units, Marie Dalgar sold 1,000 units within 10 minutes. The campaign reached 62 million consumers online, with a total of 50 million engagements.

Source: Marie Dalgar, Wechat, Year of the pig campaign 

Cooperation with KFC

The young makeup brand decided to take advantage of the expanding retail ecosystem by cooperating with third parties for special campaigns. Marie Dalgar outsourced sales efforts and found other ways to use partners’ e-commerce platforms in China. In 2017 Marie Dalgar cooperated with KFC on campaigns and advertising, pulling in traffic from KFC’s huge consumer base.

Source: Chinessima, Marie Dalgar’s cooperation campaign with KFC

Marie Dalgar and KFC created the “Pink is Cool” theme cross-border lipstick gift box. “Pink” and the shared target audience became the basis of this cross-industry cooperation. Marie Dalgar used this collaborative lipstick to create a cool makeup look, and attracted the attention of makeup consumers through the sharing on the Weitao platform. KFC used stores and offline resources to create a cross-border offline theme store to promote this cooperation. The campaign helped the brand win 1.4 million visits on Tmall’s official store and make over RMB 12 million in sales. Most of visits were from selling limited edition gift sets, which included both KFC coupons and lipsticks.

Cooperation with TikTok

In April 2018, Marie Dalgar and TikTok jointly launched challenge event. Being the first collaboration of its kind in the beauty industry, the video challenge had a maximum number of participants of 75,000. The event and related advertisements reached approximately 288 million people.

Cooperation with CCTV

Marie Dalgar partnered with the CCTV documentary series “National Treasure” for a limited-edition lipstick. It helped to build a well-earned reputation among consumers for championing Chinese heritage. Collaborations don’t even need to be in the realm of high culture as long as it will reach the masses in popular spaces.

Cooperation with Heineken

Marie Dalgar teamed up with brewing giant Heineken and Tmall in 2019 to release a “forgiveness” gift box. The gift box was released on Tmall’s “Fans Day” to coincide with the European Champions’ League soccer final, which Heineken sponsors. The hook: soccer lovers could give their partners a gift box to beg “forgiveness” and apologize for ignoring them while watching the final. “Wearing a green cap” in Chinese means “to cheat on your loved one”–in this case, with soccer. Two boxes were offered in “his” and “hers” editions. One box featured green lipsticks and green tea flavors, while the other contained limited-edition Champions’ League bottles of Heineken.

Marie Dalgar uses AR to attract customers

Marie Dalgar and Ali jointly launched the “unmanned color vending machine” and the beauty unmanned store “TO GO “ combined with the platform’s big data to reach more potential consumers.  Marie Dalgar’s “TO GO” store features an augmented reality (AR) mirror to link offline consumers’ experience with their online purchase. This application of AI in beauty  boosted both offline and online sales.

Source: Chinessima, Marie Dalgar’s “TO GO” store in Shanghai

WeChat and Tmall are key platforms for brand’s retail and marketing

Marie Dalgar established the “Playing Color Academy” on WeChat. They use this mini-program to make more customers to reach offline channels. On top of this, Marie Dalgar uses WeChat database for analysis of user portraits and then send it to product development department.

Marie Dalgar actively uses Tmall and gained popularity among its users. In 2018 its rating there was even higher than such cosmetic giants as Armani, Estee Lauder and YSL. Besides, brand’s live streaming on Double Eleven was equally astonishing, with a total of nearly 100 live broadcasts for 300 hours and 1.3 million views. 

Data Source: NetVoices, 2018 Top Cosmetic Brands in China Report, Make-up brands rating among e-commerce users in China

Marie Dalgar is one of the leading cosmetic brands in China

Marie Dalgar is one of the fast-growing brands in the make-up market in China. Such foreign cosmetics brands in China as YSL, Dior and MAC are on the top of ranking.

Data Source: Kantar, Top-5 fast-growing make-up brands in China

Innovative products push Marie Dalgar’s sales in China

In its early stages, Marie Dalgar attracted attention thanks to its “grafting” mascara, especially adapted to the relatively short and sparse eyelashes of Asian people. “It lengthens eyelashes by 300% and increases their density by 700%”, according to Jumeili.

Marie Dalgar’s Innovative products:

• The world’s first grafted mascara
• The first micro-vibration electric mascara in China
• The first domestically baked eyeshadow and blush
• The first mascara with retractable brush in China
• The first vibrating mascara in China
• The first domestic mascara with adjustable thickness and variable extension brush

Pioneering projects:

• The first domestic mascara with 360° rotating brush
• The first custom-made DIY eye shadow in China

Marie Dalgar was the number one domestic makeup brand during the 2018 Double Eleven festival

On Double 11 shopping festival in 2018, Marie Dalgar’s online flagship store was on the Tmall’s Top Beauty brands list. Its mascara also was in TOP 3 hot single products. The daily turnover of offline shopping mall channel stores increased by 414% year-on-year during 11.11 festival. Marie Dalgar participated in Tmall Double Eleven many times, and won the “New Retail Outstanding Contribution Award” from Tmall. The relationship between Marie Dalgar and Tmall are complementary.

Marie Dalgar expands to the Asian market

All of these steps helped to make Marie Dalgar one of the best-selling local brands and advanced the company onto the global stage. It became the first Chinese brand to sell its products in Sephora stores outside of China.

Expansion to Singapore

At the end of 2018, the brand entered Singapore via Sephora. To Mary Dalgar’s CEO, Chen Haijun (陈海军), Southeast Asia is only a preamble before Europe and the United States. “Worldwide markets will represent 20% of the brand business within 5 years”, he said.

Because of it’s strong innovation power, and collaborations to expand it’s consumer base, Marie Dalgar is one Chinese brand that is worth learning from.

Learn more about China’s cosmetics market in our report

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Matthieu David: Hello everyone, today we are going to go through our new vitamin and health supplements sector in China report, which was published in July 2020.

Here to talk about it with me is Allison.

Allison Malmsten: Hi, I am Allison, the marketing manager at Daxue Consulting.

Matthieu David: Thanks for being here. So today we go through this topic which is the Vitamin and Health supplements sector in China, which has been a topic for years, it has been impacted by cross border eCommerce, it has been – actually I don’t know if I could say dominated but influenced a lot by brands from overseas and we are going to see which countries are more valued by Chinese consumers, but if we compare China to the west, what would be your conclusion, Allison, after reading the report?

Allison Malmsten: So, I think one thing that really sticks out is there’s different motivations to take health care supplements in China. In China the number one concern is skin health and the appearance of the skin, so a lot of the supplements will market themselves towards skincare and you might even see for example a specific supplement that’s in China marketed as a skincare product, but then it helps with skincare and then in the west, it might be marketed as it helps with the immune system or something else.

Matthieu David: Very interesting. So it has been in some ways rebranded for the Chinese consumers and I think in the report we mentioned that there was some – also fake statements – do you feel that the fact that the same vitamins would be branded for skin instead of immune system in other countries, would be considered a fake statement or is it just different properties which are – communicated on – what’s your reaction when you read reports?

Allison Malmsten: Yeah that’s very interesting. Its hard to say whether it’s really fake, I mean we would really have to dig into the research done by the companies that created the products and did their own testing further on health departments and their local governments’ approval, but yeah I do think that – for example, some products in China might be marketed as skin lightening, especially like – on another note, some moisturizers might be marketed as skin lightening, whereas in the west moisturizers are known to keep your skin more tanned because it causes you to not shed skin. So, yeah, I think in order to really know the answer to that, you would have to follow a group of consumers for a while to see how it really – how the vitamins really manifest in the body. To a certain extent there’s obviously going to be an amount of the mental factor or the placebo effect like if you believe a certain vitamin is going to make your skin look healthier or it’s going to improve your immune system, you might look in the mirror and say – wow, my skin is glowing today when in reality you don’t really know if its improved that much.

Matthieu David: And in the topics you wanted to mention too when we compare China to the west, is about the level of consumption and the room for growth which seems to be still steep in China?

Allison Malmsten: Yeah, so currently China’s vitamin market has about a 10% YoY growth rate, now this is about the same growth rate as the US in the 70’s, but in the US in the 70’s a lot of these products were still developing and a lot of them would have very negative side effects, and so obviously this would hinder the market growth. But, right now a lot of these products they have already been perfected over a couple of decades now, and so there’s a lot of room for them to really be successful and grow very quickly. However, that being said, China’s market size is still quite a bit smaller, if I look at the number – sorry I have to look at the number really quick but China’s market size –

Matthieu David: The numbers you came up with when we talked about it is that – it was a per capita standing and China was still standing on 18$ USD where the US is –

Allison Malmsten: Yeah, the annual consumption is only 18$ USD per person, whereas in the US it’s like around $400 or was it 140?

Matthieu David: Its 148 – the number you came with, so that’s a very, very common way of looking at where you could still grow in China, what segment could still grow is to look at the per capita consumption and to say that China within the coming 10 -20 years will catch up the level of Korea or the US. So, it would be a ten-fold or maybe 8-fold growth if you look at the numbers. That may not happen but that gives a little bit an idea of the gap which could be caught up. At least certainly the case let’s say for – half the population is certainly believable, maybe not the entire population, so its still a fold of maybe 4-5 times.

Allison Malmsten: Yeah and then for japan and Korea the per capita expenditure on health supplements is 100$ so that’s still five times more than China.

Matthieu David: Yeah so that’s certainly why as well a lot of brands are looking at China because they see there’s an appetite for it, there is a culture of eating supplements or superfood, to become a little bit of – that’s the topic I’d like to discuss, a bit of a superhuman, I feel there is a bit in China, a culture of being super-efficient and superman or superwoman and in order to reach this level, either to exercise or to eat a lot of supplements. So, in terms of culture, it seems to fit and in terms of spending it seems not to have reached the maximum.

Allison Malmsten: Yeah definitely I think Chinese especially millennials and Gen-Z are really looking to become the best that they can be and they’re willing to make purchases to do so. Some factors for a healthy lifestyle perceived amongst Chinese people are for example a balanced diet which in a survey by Mintel, 50% of Chinese believed that its important and they do have a healthy diet, but then 49%believed that it is important, but they don’t believe that their diet is healthy enough. And so, this is just an example of about 50% of people are out there and they think they want to do better, they want to close that gap between their ideal self and their current self.

Matthieu David: And that’s something interesting in the report as well. We didn’t want to dig in too much when we were talking about the report today but when you look at the search on Baidu and what’s trending, one of the trends during and after COVID-19 was to try to understand what is junk food and what is a healthy food, because actually people have a hard time to distinguish what is junk food and what is healthy food. We think about fast food when we think about junk food, but it’s not necessarily healthy when its not fast food. Are very oily dishes healthy? Certainly not. And so, there is a request – quest I would say, by Chinese consumers to understand what healthy and not healthy is during COVID-19 and after COVID-19. So, that brings up a topic about COVID-19, how COVID-19 has impacted the industry overall, the self, the perceptions, and I think it’s also impacted prices.

Allison Malmsten: Yeah definitely. So, Covid-19 did stimulate the sales of the vitamins and health supplements sector in China, for sure one topic is immunity and based on the results from Baidu’s searches, you can see that the search for how to improve immunity has skyrocketed around the time that Wuhan was closed down. And then that results in people trying to optimize their health and so vitamins – they had some big online deals, so during February – March, and April, some top brands like By-Health and Swisse were already up in sales by around 40-60% from the year before, and, of course, a lot of this is because people were in general shopping online more and so because this is measuring online sales, that can explain some of these numbers, but there was a lot of price dropping from February-March-April to try and encourage these consumers to shop online and buy their products.

Matthieu David: Yeah, to that we need to remember that the shops closed, the online sales may have cannibalized the offline sales, so all in all the market may not have grown as much as 40-60% during and after Covid-19.

What kind of vitamins Chinese eat most? You mentioned that some vitamins are marketed towards skin more than in the west, but are there some vitamins that Chinese prefer, or health supplements?

Allison Malmsten: So the most popular vitamin is vitamin E and in the US for comparison, Vitamin E falls in like the 8^th or 9^th spot for Vitamins and Vitamin E is marketed as something for skin, something to help elderly, and then after vitamin E comes Vitamin C – which is a bit more popular in the US at least, because it’s known for immunity – preventing colds – so yeah – and then after that is vitamin A which is of course known to help eye sight.

Matthieu David: We mentioned at the beginning that health supplements and vitamins – again I’m not sure to use the right word by dominated, but are largely influenced by overseas players, foreign players. How the different countries perceived by Chinese people. We know that Australia and New Zealand usually have a good image in terms of nature, in terms of food – is it a case in vitamins and health supplements and what other countries stand out?

Allison Malmsten: So Australia definitely stands out, 22% of the vitamin imports in China are from Australia, they’re know for vitamin C – calcium, collagen, grapeseed and dietary fibre and I think the idea that Australia is kind of green, healthy, natural is definitely true in this case – there is one Australian brand that their offline store is kind of like an Australian theme and its decorated kind of like a forest or a jungle and its all green and leaves and I think that’s definitely consistent with their marketing message of being – hey, we’re Australian so we’re natural and yeah I think that’s very effective in the vitamin industry.

Second is the US – they account for 20% of the imports and they’re known for big brands like GNC and so some of those marketing strategies they use like KOL’s and they’re known because they have a big strong brand name and so some people when they’re looking for trustworthy brand names, they might go for some of these foreign brands.

Matthieu David: So you already touched the point about marketing strategies for herb supplements by mentioning some KOL – you mentioned three strategies or tactics that you wanted to go into – one is to use multiple channels to reach consumers – you already mentioned shops – offline shops, and the second one is the market to the right consumers and in the report, we see that the most – the segment expressing the highest interest into vitamins and health supplements, doesn’t mean the segment which is buying the most actually. But the one which is expressing most interest is about 20-29 years old and then you have the 30-39, but this is really the core segment, which looks always a bit younger than the one you would expect – 20 – 29 and so to market to the right consumers would be your second recommendation, to be very careful on this, and secondly its to leverage social media and gain insight from them. Can you elaborate a bit more about those three directions you suggest to form brands in the health supplements and vitamins to explore?

Allison Malmsten: Yeah so first point – using multiple channels to reach consumers, in China omni channel is very important. New retail which is the combination of online and offline – so like we talked about earlier a lot of these products are sold on platforms like Alibaba’s Taobao and Tmall, but at the same time a lot of the brand awareness comes from seeing the stores and going into the stores. One of the strategies that brands use is pop up stores, which is where they kind of have a little exhibit pop up in the street or in the mall and these little pop up stores, they really encourage people to take pictures and share on social media which for them after the cost of the pop up store, the following social media sharing is all free for them.

GNC has had pop up stores, Blackmores and yeah – so that’s how they reach consumers, they do branding offline and you can of course purchase offline too, that increases their brand awareness and then the stores are very interactive and then they might hop online for that final purchase.

Next point – marketing to the right consumers. So, based on our analysis from Baidu, who is searching about vitamins?

Well, it appears that 20-29-year old’s are the main people searching for these products. In contrast when we did an analysis on searching for healthy food, the target age – the age group of the people searching for healthy food was the 30-year olds. So, it does show that the 20-29-year old’s, they are definitely curios to learn more about these products and maybe compare them online, so a lot of the brands do cater their marketing tactics to reach these groups. One strategy is KOL marketing, another example which I thought was pretty clever was that one brand that had a sleep supplement, it’s called [Chinese 16:37] it’s a Chinese brand, they actually target people who stay up late at night, which is likely to be college students and they have these videos that play late at night, talking about marketing their products and they also have comics released late at night, kind of to target those people. Similar to Zhai people like we talked about last time, its targeting that group of people. So that’s kind of some interesting ways – there’s another By-Health, collaborated with transformers, which was really popular when the 20 -29-year old’s – when they were kids. So, it’s a little bit of a nostalgia marketing right there – so that’s –

Matthieu David: It’s interesting to see them targeting a specific context in which you may think of health supplements or vitamins, I really like those niches where you find your sweet spot and Chinese seems to have found that and By-Health, working with, collaborating with Transformers.

I have been always, since I’m in China – surprised how transformers have been popular in China and competing with Disney. I don’t know if its part of Disney, I don’t think so right –

Allison Malmsten: I don’t know, I was never a fan of it.

Matthieu David: But it seems to be more familiar to Chinese than the very well-known Disney cartoon or movies that we would have been familiar with in Europe or in the US – Transformers have really made a mark in China.

AAllison Malmsten: Right. And what’s also interesting is that whilst Star Wars kind of took over the world and everybody ahs seen all of the Star Wars movies; Star Wars is actually not famous in China at all.

Matthieu David: Interesting too, yeah. Very interesting, we need to challenge what we believe as well known and as taken for granted in China, always reconsider it.

And the last one you were mentioning is leveraging social media to reach consumers and gain insights.

Allison Malmsten: Yeah, so when it comes to reaching consumers, one interesting thing is Chinese people – especially on WeChat, they love to use emojis and those little dancing cartoons, they love to use those and so Blackmores has actually released their own emoji for one and then also something that’s very interesting is – if these brands can do some social media listening to see what Chinese consumers are saying about their brands, there’s a lot of learning.

1 – some three key things that we picked out, that was very interesting to us is some of the three biggest complaints about vitamins was 1] that the pill tasted bad. 2] that the pill was too large and 3] that the effects were not obvious enough.

For the first two points –

Matthieu David: Sorry to interrupt but I like to stop on pill tasted bad – maybe that’s something you wanted to say but the fact that the pill tasted bad, I’m wondering if its not good. Because you don’t expect something healthy to taste good. You don’t expect a medicine to taste good. Actually, if it tastes bad, it may link more to something more scientific and chemical or – chemical in a positive way, made by science – something made on purpose, not to please you but to do good for your body.

Allison Malmsten:  Yeah what I thought was really interesting is that – these vitamins are obviously – like they’re not made to be eaten or really chewed on. So that’s why – what’s interesting in China they say literally eat medicine, but in the West, we say take medicine – I don’t know how it is in French but in English, we don’t think of it as eating, and so I think what was very interesting is they would say that the medicine or that the vitamin it doesn’t taste good and I think – well, from my perspective, from the western perspective, obviously – its not candy. I mean, they can add a little bit of sugar to the recipe to maybe make it taste better, but the purpose is not for taste. Although some vitamin C ones might taste citric, but there are some pills like fish oil pills, for example, they’re not going to taste good. So, I just thought that’s very interesting that they comment that it tastes bad and they complain about that.

I actually went and looked at amazon reviews in the West and I saw that nobody was commenting about the taste, cause you just think that’s irrelevant, but that’s a good point to say – maybe the product was not stored properly, maybe it was not kept in a cool enough condition or maybe it was past the expiration or something. Yeah, and then the second point was –

Matthieu David: It’s interesting how semantics could influence also the comments from consumers because of the expiration to eat medicine, in French we say the same as in the US – to take medicine, instead of taking – which certainly would imply different thinking in French relationship with food and with medicine and to associate food and medicine because you eat medicine – it’s a very interesting point.

And the last thing you wanted to mention is about healthy lifestyle, right?

Allison Malmsten: Yeah so, we were curious to look at how do Chinese define a healthy lifestyle – obviously that can be perceived as differently across cultures. What we found was very interesting among Chinese people, nutritious food is definitely the most important factor in their – the first choice they make to improve health condition. After that is trying to make better life choices like sleeping more or maybe even using Chinese traditional medicine and then health supplements comes next – but what I thought was interesting is sports and fitness came last and I don’t know if this is my own personal bias but I think in the US when we think – oh we want to make healthy life choices – we think first we go to the gym and the very last thing is changing our eating habits. We always want to outwork a bad diet, we always want to try and work it off at the gym, but in China, it looks like it’s the opposite. It seems that nutritious food comes first and fitness comes last. Health supplements are in the middle, but like you mentioned – with the language, especially with the word for taking health supplements being to eat – I wouldn’t be surprised if that’s more closely related to the perception of nutritious food.

Matthieu David: Interesting. Also in China, my experience is that there is this tendency to think about a miracle solution like when you get – you don’t feel good or you have a cold, you would drink hot water and then you have this one solution fits all – I feel with vitamins and with health supplements, you have this relationship also like miracle solution to whatever problem you have, except that you may have one specific vitamin health supplement to solve your specific problem instead of one solution fitting all.

Another thing I liked in the report and found very inspiring, interesting and something certainly to look at more deeply in the future, is about how to market vitamins and health supplements and it seems that the packaging is very important. It seems also that when you want to connect with the Gen-Z, you may think also about Buddhist healthcare. You may also think about some ingredients like honey, goji berry, tea with health ingredients, fermented food, wheat proteins, things that resonate with the Gen-Z and lastly health is not only – we talked about eating medicine, but actually there are a lot of other products to make it possible for health supplements and vitamins to cobrand their product, which are devices, which are affiliated appliances that somethings certainly a bit new in the mind of consumers to have like air purifiers, to have water purifiers, to have different tools, devices plugged with electricity, IoT, using the internet for health – one being all the Xiaomi devices to track your health, like your pulse and so on.

So, there are a lot of opportunities to communicate about your health I feel in China – it’s a very, very aware market about health. Do you feel the same?

Allison Malmsten: Yeah, in fact, you mentioned about the Chinese magical solution – I think that’s very interesting because I think eastern medicine is kind of – it’s about bringing the body back into balance and I believe that all health problems are caused from the body being out of balance and so doing something like drinking hot water to somebody who believes in that is – drinking hot water, it will solve digestive issues, it will solve skin issues, it will solve any kind of stomach ache if you ate something bad, of course, if you have the flu or anything, you absolutely are supposed to drink hot water. So I think that there’s a lot of belief that no matter what problem your body is having, its having it because its out of balance and then there is this key thing that can bring your body back into balance whether it means cooling you down or warming you up, based on the yin-yang, whereas western medicine is targeting like – okay so you have a stomach problem and we have to identify what the problem is and based on what the problem is there will be a specific remedy for that or medicine for that and it might not be – we won’t relate it to another problem that you’re having in the body.

So I think even though there’s a lot of Chinese people today who don’t necessarily believe in Chinese medicine, you will still find that when talking about food or when talking about a lot of these different life things that these beliefs will kind of sneak their way into the conversation and into the thought and yeah – if that makes any sense – whether they believe in Chinese medicine or not, they’ve grown up with the culture and they’ve grown up with family members telling them what to eat when you’re feeling a certain way or what ingredients help with what type of illness and I think its hard to separate that for the rest of their life. So I think that using these very traditional ingredients like goji berries or fermented food or even using them and then marketing them in the products, again ginger is a really good one and ginseng – that could be really beneficial for marketing in China, versus like if you use ginger in your marketing in the West, people might be like – okay! What is that supposed to do?

MatthMatthieu David: Very true. Thanks for taking the time Allison to talk about the report, and if you want to know more about the report you can find the report on SlideShare, they are all stored on SlideShare and on our website. Thanks for listening everyone.

Find the full Vitamin and Health Supplements Market Report 

This article Market Tidbits transcript #3: A quick glance at the vitamin and health supplements sector in China is the first one to appear on Daxue Consulting - Market Research China.

These are some of the successful case studies of brands that creatively appealed to Chinese millennials through nostalgia marketing.

Nostalgia marketing and co-branding in China

Whether it is a cartoon, a candy, or even characters from an textbook, items from childhood and teenage years tend to leave a strong impression on the emotions. A common practice of nostalgia marketing is to partner with a brand that is was dear to the target market during these formative ages.

Wang Wang x Nayuki (旺旺 hot kid x 奈雪の茶 Nai Xue’s Tea): Nostalgia marketing and co-branding in China

Wang Wang, a food maker known for rice crackers and flavored drinks from Taiwan, collaborate with Nayuki (also called Nai Xue’s Tea, a tea drink brand from Guangdong which is rated as one of the top 10 tea drink brands in China) in 2019. The Chinese snack brand aimed to let the target customers recall their happy childhood memories. Therefore, Wang Wang launched its collaborated products on Children’s day in 2019.

Source: naixuecha.com – Children’s day, come to Nayuki and become the luckiest kid

The resulting products from collaboration combined the characteristics both from Wang Wang and Nayuki, including milk flavored drinks, three different flavor of milk custard. Moreover, customer could redeem Wang Wang logo tea cups with consumption points. This brand collaboration went viral online and was very successful given its limited edition nature, which is why we included it in the 10 most epic marketing campaigns in 2019.

Nostalgia marketing strategies in China has proven to be successful. Moreover, nostalgia marketing often resonates with millennials, who are in the sweet spot for having a relatively materialistically rich childhood while having increasing spending power in adulthood. Hence, brands can leverage optimistic feelings and encourage consumers to make a purchase.

Wahaha x Zhongxuega (哇哈哈 x Chicecream 钟薛高): You are young today

The Wahaha Group Co., Ltd. is the largest beverage producer in China. AD calcium milk (AD钙奶) is one of their products carrying many memories of the post-80s and 90s generation. ‘Zhong Xuegao (Chicecream 钟薛高)’ was the three surnames from Hundred Family Surnames, which is an authentic Chinese ice-cream brand. The brand uses an unique Chinese tile design, supplemented by the top ‘back (回)’ pattern in Chinese, meaning ‘back’ to the original taste.

In March 2020, Wahaha and Zhongxuegao jointly launched AD calcium milk flavor ice cream ‘pre-adulthood ice cream’. The main target customer of the new ice cream are adults who have grown up but “don’t want to grow up”, mainly millennials and Gen Z.

Source: Socialone.com- AD calcium milk: Wahaha x Zhong Xuegao launched “Pre-adulthood ice cream” together.

Wahaha and Zhongxuegao made the flavor of ‘Pre-adulthood ice cream’ in layers, the first taste is rich, delicate with milk flavor. After that, Brazilian orange juice and French lemon puree bring fresh fruit flavor and restore the flavor of AD milk drink.

As Generation Z has become an emerging consumer force, domestic brand Wahaha has been trying to communicate with young people. AD calcium milk, as one of the largest IP of Wahaha, has a highly recognizable taste. As a famous product in the 1990s, AD calcium milk still reaches many generations.

Wahaha uses the marketing theme of ‘don’t want to grow up’ to label young people as ‘babies’ and arouse the resonance of more young people.

The cases of nostalgic marketing in China of these two F&B brands have attracted many consumers. The co-branding nostalgia marketing campaigns in China between brands from different industries also worked.

Nostalgia marketing and co-branding in China between brands from different industries

White Rabbit x Scent Library (大白兔x气味图书馆): Be a little bit childish

White Rabbit is a brand of milk-flavored candies. Originally from Shanghai, the brand has a history of more than 70 years. It cooperated with Scent Library, a domestic fragrance brand which is regarded as ‘National fragrance cleaning and care brand’ in 2019. They launched a variety of skincare and beauty products including perfume, fragrance, lotion and shower gel. All the products from the collaboration incorporate the White Rabbit’s signature milk candy flavor.

Like Wang Wang and Nai Xue’s milk tea, the co-branded products were strategically launched during Children’s Day, which triggered the feeling of nostalgia among millennial consumers. More than 14,000 collaborated products were sold out in the first 10 seconds after the collaboration was launched on Tmall on May 23rd, 2019. In addition, in the two months after rabbit launched its online store, the campaign generated 15 times increase in visit and 1.6 times increase in sales revenue.

Source: creative.adquan.com – White Rabbit x Scent Library: Be a little childish!

Scent Library is not White Rabbit’s only partner in Chinese nostalgia marketing. The candy brand also launched a limited-edition lip balm with Maxam (美加净) and milk-candy gift box with Agnes.b which did the test for its future brand co-operations. Through the nostalgia marketing campaigns in China, White Rabbit has capitalized on taste, smell, and appearance that has already left an impression on Chinese millennials during childhood. Now that their target market is all grown up, White Rabbit successfully morphed its brand image from an old brand to a classic, fashionable brand.

Wangyi Yanxuan x Hulu brothers (Yeation 网易严选 x Calabash brothers 葫芦兄弟)

Wangyi Yanxuan (Yeation 网易严选) was officially launched in April 2016. Yeation is a NetEase (网易, a Chinese Internet technology company),  e-commerce platform focused on furniture,   and embraces the brand concept  “good life, but not so expensive”. The Chinese name of the brand ‘Wangyi Yanxuan’ also refers to the meaning ‘NetEase helps you select strictly the products in high quality’.

Calabash Brothers (Hulu Brothers) is a Chinese cartoon series produced by Shanghai Animation Film Studio, which was very popular when it was broadcast in 1986-1987.

The cartoon is about a story of seven colored calabash brothers who protect the villagers and their grandpa from a Scorpion spirit and a Snake spirit.

Source: Official Weibo account of Wangyi Yanxuan, co-branding campaign with the Hulu Brothers

NetEase selected seven different functional beauty products according to each super power of the seven brothers.

The brother with great strength corresponds to the hand cream, so no friction will be generated (smooth skin) if the customers use the hand cream. Eye shadow corresponds to the brother with clairvoyant skills, while the brother with water skills corresponds to face mask for moisturizing. The brother with Invisibility skills corresponds to the makeup cushion product for hiding skin imperfections.

NetEase chose to create Calabash Brothers collection in the beauty category. The nostalgia marketing of NetEase instantly caught attention from customers through waking up their childhood memories, generating emotional resonance. Through this co-branding, NetEase not only attracted customer to create topics and contribute to the traffic for the brand, but also attracted fans of Calabash brothers cartoon, which boosted sales conversion.

Foreign brands apply nostalgia marketing campaigns in China

Mcdonald’s x Li Lei and Han Meimei： the classic characters from English textbook in China

Li Lei and Han Meimei were the two main characters in the English textbooks of junior high school published by People’s Education Publishing House from 1990 to 2000. These two characters accompanied a total of 100 million people in their English learning journey. As a result, the classic lines (as follows) have become Chinese millennials’ first impression of English.

Source: Slideserve.com – The characters that taught millions of Chinese how to greet in English

McDonald’s used this memory for reference and leveraged Li Lei and Han Meimei these two characters in the mini comic where they taught students how to order food in English. In the advertisement, Li Lei and Han Meimei went abroad with their classmates. Li Lei struggled to order food at McDonald’s because of his poor English while Han Meimei as a top student, teaches Li Lei how to order food.

The two familiar characters combine Chinese and McDonald’s elements, refining the original memories by blending the old with the new.

Source: Shangyexinzhi.com – China’s favorite English class characters order food in a McDonald’s ad

In the collaboration with ‘Li Lei and Han Meimei’, McDonald’s chose the topic of ‘Ordering food in English’, which is very consistent with its own brand tone and also a practical and interesting topic. Indeed, as one of the largest fast-food chains in the world, McDonald’s has about 30,000 subbranches around the world and the context of ordering in English in the ads fits the reality of many Chinese consumers traveling overseas.

KFC: Back to the price in 1987

In 1987, KFC opened its first store in China. On the brand’s 30th anniversary in China in 2017, KFC launched “back to the price in 1987” campaign, which triggered a wave of collective nostalgia. During a one-week campaign, the mashed potatoes cost only 0.8 yuan and the Original Recipe chickens cost only 2.5 yuan.

Source: Sohu.com – KFC launched ‘back to the price’ in 1987 campaign

Meanwhile, KFC started the topic of ‘I have the fried chicken, do you have a story to share?’ This marketing campaign became the trendy topic and got the traffic and sales for KFC at the same time.

From consumers’ point of view, the price was obviously favorable. Hence, customers invited their friends into the store and inadvertently ordered a lot of food as a salute to their happy childhood. Consequently, the campaign aroused customers to chat about their past youth on the social platform of KFC.

过去进行食 (The Continuous Past) Restaurant- The Museum of Memory in the ’90s

Source: Dazhong Dianping – The atmosphere of the nostalgia-inspired restaurant

The Continuous Past restaurant is a nostalgia restaurant located in Shanghai, China. The restaurant’s layout recreates the classrooms and the boys’ and girls’ dormitories of the 1990s. Complete with musician posters, a blackboard, magazines and books from the 90’s,  ustomers raved about the detailed design of the restaurant. Even the tableware and are the same as in old days, with a classic tin ‘lunch box’, and a  menu in the form of an exam paper. Many customers have commented that the restaurant took them back to their school days.

The restaurant serves customers’ daily cuisine and drinks and food that were popular in the 90’s. Additionally, the background music of the restaurant is also vintage, resonating with customers’ memory of school and youth time. For a cherry on top, the restaurant even has a school bell that rings every hour.

Tips for nostalgia marketing in China

1. Appeal to the senses

Research shows that senses are closely related to memory, and one familiar scent, sound, or image can cause a myriad of memories and feelings to arise. Therefore, in nostalgia marketing, think of how to appeal to these senses. The restaurant The Continuous Past, uses a school bell sound to cause customers to remember their school days. White Rabbit converts their traditional taste to a similar scent in their new co-branded products. There is even more opportunity to uncover in terms of music and scents that appeal to Chinese consumers.

2. Discover what was popular among the target during their children and teenage years

Between the ages of 12 and 22, dopamine is activated a higher levels. This causes people to have a greater connection to the music, media, and products they were exposed to during that time. For millennials this would be the 80’s and 90’s, a time when China had significantly less cultural influence from the west. If the target market is the silver generation, this would be even truer. Hence, it takes consumer research such as in-depth interviews or focus groups to uncover what your target market truly feels nostalgic for.

3. Co-brand with brands from the past

Fresh, new brands don’t have to miss out on nostalgia marketing. While at the same time, many old, cherished brands can create new opportunity through a second-wind. Co-branding is mutually beneficial in helping both brands expand their consumer base. White Rabbit, has renewed itself through co-branding with a variety of different young and hip brands, effectively turning it into a classic brand.

Author: Qing Zheng

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This article Nostalgia marketing in China：Case studies of brands sparking cherished memories is the first one to appear on Daxue Consulting - Market Research China.

Westin has over 230 hotels and resorts in 36 countries and districts in the world. It focuses on the market of high-end consumers. All Westin hotels are recognized by local authorities as five-star hotels. Westin prefers to place its hotels (resorts not included) in city centers, providing its customers with the most convenient location if they want to go sightseeing or shopping. Westin’s 160 hotels and resorts are all known for their modern design, exceptional customer service and relaxing atmosphere.

Westin Hotels & resorts provides customers with relaxing accommodations for them to come back to after spending a day enjoying the surrounding locations. Each Westin Hotel is located in areas that offer unique experiences for its customers. Westin has a history of focusing on wellness, and it continues its commitment to its travelers’ well-being and healthy lifestyle.

What is unique about Westin in China

Westin now operates 25 hotels in China Mainland: four in Guangdong, four in Hainan, three in Zhejiang, two in Beijing, two in Fujian, two in Shandong and one in each of Anhui, Jiangsu, Jilin, Hubei, Shanxi, Tianjin, Wuhan, Shanghai. The above hotels are located in Tier 1 or Tier 2 cities. Currently, China is home to the second largest number of Westin hotels worldwide, second only to the United States. In China’s luxury hotel market, Westin ranked eighth in terms of the number of hotels among all international 5-star hotel brands in 2008, while Sheraton had the most number of hotels (70).

Increasing demand in China’s luxury hotel market brings opportunity for Westin China

Since entering China in 1991, Westin has targeted wealthy Chinese customers. In the last 20 years, China’s promising GDP growth and increasingly affluent consumers have led to high demand for luxury goods and services. The growth of high-yielding consumers contributes to the blooming of the domestic high-end travel and China’s luxury hotel market.

According to GlobalData, China was the largest luxury hotel market worldwide in 2018, with year-over-year (YOY) growth of 18.3%. In 2019, China’s luxury hotel market still had a YOY growth rate of 10.2%. It is predicted that China will continue this momentum in the next few years with a growing number of high-net-worth citizens.   

How Westin adds Chinese elements

Westin also pays close attention to the local culture of the city and the country where its hotels lie and holds cultural events to accommodate these differences.

In Wuhan, Westin held a luxury traditional family reunion dinner to celebrate the Spring Festival. The event offered Westin customers dishes from different geographical regions of China. Various types of tea were also available.

In Hefei, the Westin held a “Mooncake Show” in late August. The show was held in preparation for the Mid-Autumn festival where mooncakes are traditionally eaten. The Westin offered each of its customers four different mooncakes at the show to give them a little taste of China.

In Beijing, the Westin offered its customers a variety of crab dishes. Chinese people love to eat crab in Autumn, but crab is not farmed in Northern China. The Westin gives Northern consumers a chance to enjoy a delicacy that they normally cannot enjoy.

Westin in China：leveraging the power of new marketing. Co-branding marketing

Source: Westin China’s Weibo, Co-branding marketing of Westin China × KEEP

Partnering with “KEEP”, an easy-to-use  Chinese fitness app, Westin is able to improve customer experiences and strengthen its brand image. Westin and KEEP cooperate to satisfy business travelers’ sports needs by providing a full range of fitness activities. 

The collaboration covers in-room courses, running-related and fitness center courses. First, for in-room courses, KEEP and Westin jointly open exclusive TV channels provided in Westin Hotel. Based on the space environment of hotel rooms, KEEP customizes a set of sports courses suitable for hotel guests to exercise in the room. Second, Westin China adjusted its “RunWestin” program, generating its characteristic health running map route in the KEEP App. Hotel guests and city runners can easily use the Westin health running map in the App, and the App can record and collect related personal performance data. Third, for fitness center courses, KEEP also provides Westin with a complete solution, including training, yoga and other courses. These are to better serve the personalized fitness needs of travelers. Hotel guests can easily scan the QR code in the hotel gym to get recommended courses and enjoy working out. 

Why the Westin x KEEP co-branded marketing works

Why is this innovative collaboration so successful? Two similarities between two partner brands can explain this.

First, both brands advocate healthy lifestyles and emphasize keeping fit. Westin hotel has focused on fitness since it was created and is committed to bringing customers health and wellness in addition to a comfortable accommodation experience. Westin promises to enable guests to maintain their workout routine during they stay in the hotels. Such a promise aligns with KEEP’s brand image that has always been centered on creating a “free sports ground”. Based on the same idea, two brands can join forces to help travelers stay fit and have a healthy lifestyle.

Second, two brands share a similar customer base. Westin and KEEP team up to explore the material and emotional needs of high-end traveler groups. Through this cooperation, both parties leverage rich experience in different fields to jointly develop deeper customer insights, and achieve a full range of sports needs for the target customers.

Innovative marketing method achieves better results

Different from simple co-branding marketing, in which two brands only jointly hold activities or produce products, the cooperation between Westin and KEEP has more significant meaning and better results. It embodies a common vision of two parties, and tightly integrates brand values, market experience and customer insights.

Partnering with KEEP, Westin creates some brand new elements to its traditional hotel identity. Hotel’s high-tech hardware facilities and services activated by the Internet help Westin shape a more active and rich brand image. Westin will attract more loyal guests by offering them one-stop solutions for sports needs in traveling. 

New marketing strategy: social media marketing

Nowadays, social media has built an instant and tight connection between brands and customers, especially for the hospitality business. More and more Chinese are used to checking peer reviews and comments on popular Chinese social media like Weibo, Xiaohongshu and Tiktok before purchasing products or services. In these cases, social media plays a vital role in deciding travelers’ purchasing choices. Several Westin hotels, which are instagrammable luxury stays, earn their reputation on Chinese social media.

Source: Weibo, Red –KOLs’ posts about Westin China

On Chinese social media platforms, it is easy to find some KOLs (Online Key Opinion Leaders) posts about people’s stay experiences at Westin hotels. Their posts usually show the luxurious decoration, comfortable environment, considerate service and stunning views of the hotels. With more and more KOLs sharing wonderful stay experiences, Westin raises its awareness among Chinese consumers. Currently, Westin hotels in some cities, like the Westin Chongqing Liberation Square, have become “internet-famous” hotels, attracting tons of travelers to stay or just take pictures.

Source: Weibo, Red –Consumers’ posts about Westin China

Many people, especially millennials, are keen to share their high-quality lifestyle experiences on social media. It is trendy for them to post fantastic photos of the hotel and share their feelings when staying in the hotel. These posts can have millions of views, and thus cause a “network effect,” which helps advertisement for the Westin.

Recovering from coronavirus: upscale hotels should take “smart” strategies

The tourism industry and the hotel market have suffered huge losses from the coronavirus outbreak. In order to reduce loss and raise occupancy rates, many hotels made dramatic price-drops during the period of the COVID-19 pandemic. Until now, a lot of hotels have still dropped the price to entice consumers. However, it is not a wise strategy, since starting a race by dropping the prices will hurt profits across the entire industry. All hotels will lose out and it would be hard for the hotel market to recover from the crisis. In addition, price promotion strategies may have a negative impact on brand images of upscale hotels like Westin.

To recover from the COVID-19 pandemic in a relatively short time, hotels could take action more smartly. For example, they should offer more “value-adds” services to attract travelers, like Westin’s co-branding marketing. Also, leveraging popular Chinese social media to have users advertise for brands seems like a wise marketing strategy.

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

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

The Chinese perception of Marseille

Why are Chinese so enthusiastic about this Mediterranean city?

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

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

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

Qualitative analysis of Chinese perceptions of Marseille

Source: Baidu index of Marseille 马赛 Chinese perceptions of Marseille

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

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

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

Footprints of Chinese KOLs in Marseille

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

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

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

Marseille’s cultural output towards China

China has one million Olympique of Marseille fans

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

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

Source: Weibo, Chinese poster of the Olympique of Marseille

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

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

Source: Douban, Chinese poster of Taxi 5

Chinese tourism in Marseille

Chinese tourists’ top destinations in Marseille

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

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

Chinese tourists’ eating, living and shopping in Marseille

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

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

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

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

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

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

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

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

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

What you should know about Chinese tourism in Marseille

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

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

Source: Zhihu, digital tourism marketing channels in China

The economic links between Marseille and China

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

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

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

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

The popular industries, brands and companies of Marseille in China

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

Skin care products

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

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

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

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

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

Alcohol        

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

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

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

Logistics

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

Source: CMA CGM, key figures of CMA CGM China

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

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

Future prospects for Marseille and China

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

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China is the second largest cosmetics market in Asia and the fifth in the world. It has been a profitable paradise for foreign cosmetics brands for a long time. Foreign cosmetics brands in China own around 70% of the market. In 2018, P&G and L’Oreal had the biggest market share in China, with 25.8% and 21.5% accordingly. The American Procter & Gamble, the French L’Oreal, The Japanese Shiseido, the Anglo-Dutch Unilever and the American Estee Lauder are the key players in China’s cosmetic market.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands)

Chinese consumers’ behavior is evolving very quickly, due to the huge economic growth. Hence, the middle-class in China are more sensitive to their life quality and health-awareness. Therefore Chinese consumers have been more interested in using overseas products which have a long history and more refined products.

Marketing strategies of foreign cosmetics brands in China

L’Oreal is a huge success among foreign cosmetics brands in China

L’Oreal shows rapid growth in Chinese e-commerce

The French brand has grown ten-fold on e-commerce since 2011. It is the leader on e-commerce in China, which is the fastest growing channel for L’Oreal. In 2020 e-commerce already makes up 50% of L’Oreal’s China sales.

Data Source: L’Oreal Group Annual Reports, Percentage of Loreal China sales from e-commerce

The next step for L’Oreal is new retail: the combination of the offline and online channels. It includes such technologies as augmented reality, virtual reality, and artificial intelligence. Today L’Oreal in China already provides skincare diagnostic supported by artificial intelligence for Vichy on Tmall.

Foreign cosmetics brands actively use KOLs in such online platforms as WeChat and Weibo. For example, many celebrities like Li Gong, Zhilei Xin (Famous Chinese actresses) promote L’Oreal cosmetics among Weibo users. 

Personalization and co-branding are the key cosmetics marketing strategy in China for L’Oreal

More and more companies focus on offering personalized experiences for their customers. To create a more customized digital experience, L’Oreal has integrated technology to let people “try on” lipsticks by pointing their smartphone camera at themselves. The L’Oreal-owned Giorgio Armani make-up brand became the first luxury line to use the technology on WeChat. WeChat users can order them from Giorgio Armani Beauty’s mini-program shopping site. Users also can screenshot, save and share images as well as view before and after images to elevate the consumer shopping experience. 

Source: Cosmetic Design Asia, Loreal Group has launched of its Augmented Reality (AR) make-up try-on application ModiFace in China

L’Oreal’s quick rebound after COVID-19

The French brand reported that its China sales have seen signs of recovery since the COVID-19 outbreak. Despite overall sales for the quarter shrinking globally, L’Oreal China achieved high growth in March 2020. The CEO of L’Oreal Group, Jean-Paul Agon highlighted that the company’s performance in China was “remarkable”.​ “China was able to close the quarter at plus 6% which is pretty amazing when you think about the difficulty that they had due to the pandemic.”​ L’Oreal China recovered quickly due the early restoration of operation and wide usage of the online-to-offline model. Additionally, during the Women’s Day Festival on March 8^th, 2020, L’Oreal group launched an online shopping event in China to trigger sales.

In March 2020 sales of L’Oreal Group in China became positive again. That proves that using of online-to-offline model and social networks promotion were successful marketing strategies for L’Oreal in China, and especially boosted their sales through the tail end of the pandemic.

Estée Lauder tops the list of 100 most prestigious cosmetics brands in China

Estée Lauder targets young Chinese millennials

The beauty brand targets young millennials to tap into China’s booming cosmetics and personal care industry. Its shift away from older consumers is part of its long-term investment strategy in the country. Estée Lauder’s cosmetics marketing strategy in China is to position itself as millennial-focused. It quickly identified that tapping into the high spending ability of young Chinese consumers with specialized luxury lines is essential for its success.

To gain a clear, competitive edge over its rivals, it redesigned its marketing campaigns. For example, Estee Lauder in China increased digital engagement, leveraged social media platforms such as WeChat and Weibo. Additionally, like many other foreign cosmetics brands, it collaborated with the local celebrities.

Estee Lauder focuses on digital strategy

E-commerce in China has developed rapidly and is a popular way to shop for most Chinese. Thus, it took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, the brand became one of the first high-end cosmetics brands to enter Tmall. They built a professional team with 50 persons to focus on the brand’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder Group in China had 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, as a part of its cosmetics marketing strategy in China, Estee Lauder opened online stores for its sub-brands. It helped to bring more consumption to the Group.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

KOLs and special products push the sales of Estee Lauder in China

Estee Lauder invests heavily in digital marketing, social media, and KOLs. For example, Yang Mi, a famous actress in China, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over 500 percent more sales. Meanwhile, some popular KOLs in China helped to increase consumption. In 2019’s double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Estee Lauder’s matrix covers almost all categories of cosmetic products and price ranges, reducing the risk that customers switch brands as their preferences evolve. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

P&G’s cosmetics marketing strategy in China highlights premium innovation and product mix

P&G launches a premium skincare brand in China

Unlike other top foreign cosmetics brands in China, Procter & Gamble (P&G) decided to put focus on the premium segment. In 2019 this American company brought a premium skincare brand called Oriental Therapy to the Chinese market. Chinese herbal medicine inspired the company to create this cosmetic line.

What makes it especially unique is that it meets skin’s different needs during the four seasons. According to Oriental Therapy’s Weibo post, the beauty line focuses especially on Chinese women.  The brand is now available via Tmall, WeChat, and Xiaohongshu shopping platforms. P&G believes that Oriental Therapy will fill the gap P&G has in its beauty offering in China. One of its key products, Springtime Hydrating Essence costs 450 RMB or 65 USD. The brand’s skin-care sets cost between 740 and 1140 RMB, or 107 to 165 USD.

Source: Weibo, Premium skin-care brand Oriental Therapy for China

However, P&G faces a lot of competition among foreign cosmetics brands. For example, companies like Estee Lauder and Shiseido are also upping the ante through launching new brands including DARPHIN and D-Program.

P&G uses Alibaba to sell in China

To expand its e-commerce P&G has turned to Alibaba Group, which operates the country’s largest online marketplaces. Alibaba also offers digital marketing solutions and access to a huge audience via its media ecosystem, including  Alibaba-related companies such as video-streaming site Youku and the Twitter-like Weibo microblogging site.

“E-commerce also plays a significant role in brand building, which is changing P&G’s century-long brand-building model.” – says Jasmine Xu, the company’s vice president for Greater China e-business and branding. Oriental Therapy has also opened a flagship store on Tmall, where it offers products in different combinations.

China is the second biggest market for Shiseido

Shiseido adopts cooperative cosmetics marketing strategy in China

In 2020 the Shiseido Group opened its first Beauty Innovation Hub outside of Japan at its flagship space in Shanghai.  Shiseido Beauty Innovation Hub represents a new way of working to drive consumer-centric solutions in China. At this space, Shiseido plans to collaborate with Chinese startups and disrupters, and create innovation which will deliver true value. Cooperation and localization, rather than head-on confrontation, is the strategy Shiseido takes. The Beauty Innovation Hub aims to work with local startups in the extended beauty space. On top of this, Shiseido in China plans to experiment and create new businesses. The hub serves as an open innovation platform for Chinese startups, opinion leaders, area experts, media and scientists.

Source: Medium.com, Shiseido Beauty Innovation Hub in Shanghai

Shiseido in China joins Tmall to promote online sales

In 2018, Shiseido revealed their New Retail strategy. A part of this strategy is a platform they developed called the “Shiseido Official Beauty Star Product Hall”.

In 2019, Shiseido signed a partnership with Tmall. It helped to develop new products based on what Chinese consumers are searching for on Tmall. The first co-developed products, a ‘mild and refreshing scalp shampoo’ and an ‘essence oil for split ends’ will launch on Tmall under Shiseido’s hair and body care brand Aquair. Shiseido said it expects e-commerce to generate 40% of its China sales by 2020.

“Without a doubt, whether it be e-commerce or digital innovation, Alibaba is the leader. Alibaba is one of the most important strategic partners for Shiseido China as well as for the entire group,” said Fujiwara, Shiseido’s CEO.

Data Source: Shiseido Annual Reports, Percentage of Shiseido China sales from e-commerce

Mary Kay uses scientific innovation in China

Mary Kay China targets young consumers

As Chinese consumers are more and more informed about beauty, Mary Kay is facing the challenge of developing interesting products. “In China​, beauty consumers demand for products and services are constantly increasing.

The current consumer trend of skin rejuvenation in China is strengthening, and the purchasing power of the 18 to 24 age group is rising,” said Katherine Weng, general manager of Mary Kay China. To cater to younger consumers, the company’s cosmetics marketing strategy in China is to create “bold and interesting” ​products. In 2019, it launched Pink Young brand in China. As company claims, “It’s the answer for today’s woman who wants to show her femininity along with her fierceness.”

In 2018, the company invested around $50 million in the Mary Kay Science and Technology Center, located in Shanghai. Additionally, the company sees the need to increase its online presence. It has launched a new channel which enables consumers to use WeChat to place orders with independent beauty consultants.

Mary Kay focuses on direct sales in China

Mary Kay is one of the world’s biggest direct selling enterprises of skin care products and cosmetics. Within a short time, Mary Kay China established its name among Chinese consumers and experienced steady growth in the country’s first-tier cities. Now, it has set up 35 branch offices across the country. When the company first began expanding beyond China’s big cities, its direct-sales model was new to consumers in China’s second- and third-tier cities.

Mary Kay has three key strategies. First, it drew up strict rules on how beauty consultants should conduct themselves and present Mary Kay products. Second, it developed advertising campaigns in a variety of regional print and broadcast media. Third, the management team established special training programs for consultants.

The sales force represents a competitive advantage. Consultants know their customers well. Such personal networks are vital because Chinese consumers tend to trust people with whom they have a good relationship. Their close relationships with relatives and friends would ease making follow-up visits to get feedback and introduce new products.

Summary of the marketing strategies of foreign cosmetics brands in China

Co-branding

Not many foreign cosmetics brands use co-branding as a key strategy. Co-branding helps brands “exchange” customers, and effectively expand their consumer base. As competition in the Chinese cosmetics market is fierce, such giants as L’Oreal or P&G have not shown interested in involving other brands for cooperation. Shiseido has another approach. It has its Innovation Center in Japan, where it also cooperates with other local brands. Thus, cooperation with the Chinese start-ups was a natural marketing strategy for this company.

KOL marketing

KOLs are popular social media users who can influence a wide audience. In China they usually post on WeChat or Weibo, but other platforms like Xiaohongshu can be considered depending on the target audience. Many foreign brands cooperate with them to expand their audience, especially among millennials. To gain new consumers and increase sales, L’Oreal and Estee Lauder chose this cosmetics marketing strategy in China.

Direct sales

Direct sales are a traditional channel for all foreign brands in China. However, as of 2020 most brands consider e-commerce as a key sphere for development. During the COVID-19 outbreak direct sales showed its vulnerability. Mary Kay is the brand which always had its special strategy of creating personal relations between beauty consultants and customers. Nevertheless, now Mary Kay in China is also considering using digital technologies to promote its products.

E-commerce

The target audience in the cosmetics industry is the post-80’s and post-90’s generations. They always keep up with the latest trends and care a lot about their appearance. One of the most effective ways to approach them is to find where they spend most of their time: online platforms and social networks. Most foreign brands widely use online methods to expand their influence in the Chinese cosmetics market.

Special products

Some foreign brands focus on a special approach to the Chinese market. They create products and sub-brands oriented on the Asian audience. It could be skincare products created specifically for Asian skin or inspired by the Chinese traditional medicine. That helps to increase customers’ loyalty and increase sales in the Chinese market.

Author: Valeriia Mikhailova

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This article Marketing strategies of foreign cosmetics brands in China is the first one to appear on Daxue Consulting - Market Research China.

Meanwhile, Estee Lauder Group launched twelve brands into the Chinese cosmetic market, enabling China to be its No.2 international market. In 2019, Estee Lauder Group’s net sales in the Asian-Pacific region reached 3.6 billion USD. In contrast to the American region’s negative change, the Asian-Pacific area earned a 21 percent increase year-over-year.

Data Source: JUMEILI.CN, Regional Net Sales of Estee Lauder Group

History of Estee Lauder

Mrs. Estee Lauder created Estee Lauder in New York. Now, it is the world’s biggest company for skincare products, cosmetics, and perfume. Its products are available in over 13,000 outlets in over 130 countries around the globe. One of Estee Lauder’s strengths is R&D and product development. Also, it keeps a harmonious relationship with its customers, making it possible for the company to acquire more growth in the future. Mrs. Estee Lauder had always insisted that a woman can always be beautiful and fashionable. Thus she injected her lifestyle and sensitivity to fashion into the brand.

The layout of the Estee Lauder Group in China

Estee Lauder Group launched many well-known brands, promoting its whole layout in the Chinese cosmetics market.

Estee Lauder Group in China desires to provide a wide range of cosmetic products to Chinese customers

When Estee Lauder initially entered China, it focused on high-end product sales. In 2005, however, it launched six new brands into the Chinese market. Estee Lauder assigns its brands to different target customers. It hopes every customer can find suitable products from Estee Lauder Group. M.A.C highlights the personal style, looking more fashionable, while Estee Lauder is a typical high-end brand. Now, all-around brands’ matrix almost covers all categories of cosmetic products and price zone, reducing the risk that customers change their preferences. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

Brand matrix of Estee Lauder Group in China

Now, Estee Lauder Group has many famous brands. Its top brand is LA MER. Then Estee Lauder follows as the first tier brand, and Clinique and Origins follow as the second-tier brands. Smaller brands also include Aramis, Prescriptive, Tommy Hilfiger Toiletrie, Kiton, Darphin, Michael Kors Fragrance, and Bobbi Brown. Currently, only parts of its brands are in the Chinese market. However, Estee Lauder Group never stops its expansion in the Chinese market. On June 16th, 2020, two luxurious fragrance brands from Estee Lauder Group, BY Killian and Editions de Parfums Frederic Malle, initiated in Shanghai International Finance Center.

Source: JUMEILI.CN Original Brands of Estee Lauder Group in China

Source: JUMEILI.CN Acquired Brands of Estee Lauder Group in China

Strategies of Estee Lauder in China

Through decades of development, Estee Lauder has a big market share in the Chinese cosmetic market. Fan Jiayu, the general manager of Estee Lauder China, shared that Estee Lauder paid attention to what they do now and looked forward to the future’s business environment. Estee Lauder China always keeps its awareness of possible crisis to evaluate its position and prepare for potential risks. That allows the brand to strengthen its brand awareness in China and customer stickiness.

Estee Lauder established an R&D center in China to better satisfy Chinese customers’ needs

According to the CEO of Estee Lauder in Asian and Pacific Districts, Fabrice Weber, Estee Lauder contended a keen interest in the Chinese market. He hoped that Estee Lauder could merge into China market instead of being a ‘foreign’ company. In 2005, Estee Lauder set up a team to research Asian skincare needs. In 2010, Nutritious Super Pomegranate series appeared that were designed for Asians to improve dehydrated skin. On June 2^nd, 2011, Estee Lauder announced the establishment of its Asian R&D Center in Shanghai.

Estee Lauder China’s e-commerce sales boomed in 2020

Ecommerce in China has developed rapidly and is quickly becoming the main purchasing method among Chinese. Thus, Estee Lauder took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, Estee Lauder became one of the first high-end cosmetic brands that entered on Tmall. Estee Lauder built a professional team with 50 people to focus on Estee Lauder’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder in China got 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, Estee Lauder Group opened online stores for its sub-brands, bringing more consumption for the group.

After the COVID-19 outbreak spread through China, Estee Lauder’s March e-commerce sales spiked, with a 135% YoY increase. During this same period, Lancôme’s Tmall sales increased by 110%, and those of Perfect Diary’s by 29%, according to data from WalkTheChat.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

Estee Lauder builds close relationships with celebrities and KOLs

Celebrity endorsement marketing is also behind Estee Lauder’s success in China. Fabrizio Freda, Estee Lauder’s CEO, contended that 75 percent of investments were spent on digital marketing, social media, and KOLs, earning a high efficiency. For example, Yang Mi, a famous Chinese actress, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over a 500 percent increase in sales. Meanwhile, the cosmetics brand also engaged in  KOL marketing in China. In the 2019 double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Source: Weibo Estee Lauder, Estee Lauder announced Yang Mi to be its Asian-Pacific region brand ambassador, gaining over one million shares.

The cosmetic market is competitive, so Estee Lauder needs to prepare for potential risks

Estee Lauder received great results in the Chinese market due to its excellent strategies. However, Estee Lauder in China also meets tremendous challenges from both thriving domestic brands and well-known international brands. Particularly, L’Oréal Group, has an identical layout in the brand matrix that involves different levels of brands. Especially, one of its cosmetic brands, Lancôme, is the main competitor of Estee Lauder. One of their eye creams uses similar technology and has similar functions, triggering aggressive competition between them. Yet, although Estee Lauder won significant market shares in China, it still faces crucial competition. Therefore, Estee Lauder needs to maintain vigilance in case of potential risks.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands only)

COVID-19 impact on Estee Lauder Group in China

COVID-19 had a great impact on the cosmetic market. Travel retail channels could not function well due to decline in China’s inbound and outbound tourism.

In March 2020 Estée Lauder reported a 11% decrease in net sales from the same period last year. As a result, the company has implemented a host of measures to reduce spending in advertising, administration, and human resources, as well as furloughing part of its vast retail staff and cutting salaries of top management.

The short-term impact on Estee Lauder online business in China is roughly the same as that of physical channels, but e-commerce can play a leading role in business recovery in the future.

Authors: April Peng & Valeriia Mikhailova

Learn more about China’s cosmetics and personal care market

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This article How Estee Lauder adapted to China with strong e-commerce and R&D 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.

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