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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This article Nudge marketing in China is omnipresent yet rarely discussed is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David: Allison Malmsten and I today we are going to have a market tidbit on the Stay-at-home Economy in China and we wrote a report a few weeks ago, about this stay at a home economy which was of course impacted by what happened in February, March, April with the Covid-19, the coronavirus and we mentioned through the report a new type of segmentation which is not totally new with the Covid-19, but which is new with the expansion of the internet and apps and so on, Zhai generation, Zhai people – what are the Zhai people, what do we say within the report?

Allison Malmsten: Yeah, so Zhai people is basically definition for people who prefer to stay at home than go out and previously this would include maybe more introverted people, as also related to the Japanese word Otaku, which is related to the Otaku economy which is the economy of watching anime at home, playing video games all day, but now the Zhai economy, and especially since Covid-19 has expanded to include a lot of different services that you can do at home – so the original definition was a little bit geekier, but now it really includes everyone, even people who work out, anybody who has to go to school or anybody who has to telecommute into work.

Matthieu David: So, we couldn’t mention not only the Zhai people but the Zhai economy, meaning you could become a Zhaist from time to time and the pandemic made some more people Zhai people right.

Allison Malmsten: Yeah, and so originally the Zhai economy was a little bit more male than female, about 55% male, 45% female and the age group was mostly 18 to 34-year old’s. It’s a very digital group of people and they’re very plugged in. traditionally they would be gamers but yeah, like I mentioned now it really includes just anybody even shopping for groceries as participating in the – if they’re doing it from home, they’re participating in the Zhai economy from home.

Matthieu David: So, we know that people spent more time online during the Covid-19 pandemic and we know that they actually emphasized some use – they already had but they also had new use of the internet. What are the trends which could have explored and impacted the stay at the home economy with Covid-19?

Allison Malmsten: So some of the trends that we can talk about an increase in social media use and then online shopping is a really big one, of course before in China a lot of people shopped online but now it’s even more so and including online fitness and then, of course, remote work and study platforms is also increasing and lastly mobile gaming and other entertainment including attending concerts from your living room.

Matthieu David: Yeah, I’m talking about fitness app – there is one app which was a winner during this lockdown which is the app Keep – K-E-E-P – what kind of app succeeded in this category, fitness, news app, can you mention a few of them?

Allison Malmsten: Yeah, since you mentioned Keep – what Keep did is it’s an at-home workout app and what they did is they hogged onto all of the short video platforms like Douyin, TikTok and they – for one they invited celebrities or professional athletes like a volleyball player Hui Ruoqi for example and then the athletes would also teach classes and so that was a really big factor to attract a lot of people into doing fitness from home and so its inspired a lot of people to engage in fitness when originally China’s population of gym-goers was relatively low.

Matthieu David: Interesting, so you mean that deliveration through some kind of KOL or people with an authority in fitness in order to get new users and new –

Allison Malmsten: Yes, and this started – they mostly did this during the Covid-19 so as you can see, the way the pandemic has impacted Chinese people it can be really surprising.

Matthieu David: You mentioned that not only eCommerce went up but also entertainment apps, would you mind sharing what kind of app went up and for what kind of use? We all know that Douyin was a big winner in 2019 and it should be not surprising that it would be the winner for the Covid-19 lockdown.

Allison Malmsten: Yeah so actually there are three short video apps that we’ve really looked at. Douyin, Kuaishou, and Xigua so they all have slightly different user bases and they all increased quite significantly. So, for example, Douyin in December 2019 had 459 million monthly active users and then come March it is now 518 monthly active users and Kuaishou and Xigua have similar statistics and each of these groups they target slightly different user base so Douyin is more GenZ and millennials tier I to tier II cities, Kuaishou is a little bit the lower-tier cities and Xigua is actually known for its high-level content and it actually has a more male user base, so you can see that these are all tapping into and expanding in those unique user bases, so the short video market is really expanding from Covid-19. Additionally, we can also talk about online reading, around half of the Chinese chose to read novels every day during this time and reportedly a majority of them – 86.2% of them plan to continue reading online after the epidemic. So, we will see how long this lasts but its another area that has really grown during the pandemic.

Matthieu David: Interesting, something we forget but the biggest market for books is China and reading novels on a smartphone or on an iPad would be quite natural actually, an increase during the Covid-19 lockdown, that’s what you are saying and its quite interesting how people are going to continue to read novels.

Allison Malmsten: Right. And according to a survey a lot of people will keep reading, but then again self-reported like everybody likes to think that they will continue to read but we’ll see how that plays out.

Matthieu David: You mentioned eCommerce and a lot of people who were not allowed to go out had to use and to rely on eCommerce and – I was going through the report, I was actually surprised by the low level of users for Hema for instance where I would have expected it to be much higher in terms of active users, but still, of course, it increased massively during the epidemic in China. What about the grocery eCommerce more specifically and do you see that as a game-changer or just a period of time or a few months where people had to use it?

Allison Malmsten: I do think it could potentially be a game-changer because once you’ve used it once it really releases a lot of the friction to using it the first time. Everybody was basically – they have a lot of pressure to use it for that first time but now the app is downloaded on their phone, their payment method is plugged in and so it’s a lot easier to maintain a consumer than to acquire a new one and it looks like the monthly active users for Hema and some of the grocery apps, they stayed pretty stable between January and April and in April China was – it was very open. People could really leave their apartments and go grocery shopping almost like normal again and they still maintained a lot of their userbase.

Matthieu David: And what’s surprising to me is that we’re talking about 2.8 million monthly active users for Hema which is for the size of China very small and it increased massively again during Covid-19 but the base was much smaller than what I expected. Was this your feeling too when you were reading the report?

Allison Malmsten: Yeah for the amount of attention that Hema specifically has gotten I would have expected the monthly active users to be possibly a bit higher but what’s not surprising is the amount of growth, I mean its grown like nearly seven-fold from December 2019 to January 2020 so over a month-long period. So I think that’s what’s the most interesting to me is that it’s grown so much and then it continues to grow through February, March, April and so a lot of the users they appear to be staying on the app, granted they might not be ordering the same amount of volume as they were before, but its still definitely has made a big impact in China.

Matthieu David: Carrefour left China like nine months before the Covid-19 lockdown and they could have benefitted from that. I feel that’s really the wrong timing for this player to go out, I mean they could have benefited from a very unpredicted event like this. You mentioned also online education and it grew naturally because students were not at school and actually, they just went back to school a few weeks ago and I think it was early June or mid-June –

Allison Malmsten: Yeah so online education absolutely exploded and this is mostly to do with schools, they still require an education and so these students they have to download these apps and they have to learn the way of telecommuting and so what’s interesting is that some of these apps have actually grown 50 fold, for example [inaudible 11:41] is an app that it used to have only a 124,000 weekly active users but now that’s 6 million – 6.1 million, so that’s quite a bit and what’s also kind of funny is if you look at – for some of these telecommuting apps if you look at the reviews on the Chinese app store, the reviews are actually quite negative, because if you look at what the reviews are saying, tis a bunch of kids, the reviews say like – my school makes me do this online instead of playing my video games, it’s a very disruptive app, I wish it didn’t exist. So that really shows that a lot of the user base is students who whether they like it or not they use these apps for school.

Matthieu David: Funny. Was not designed for it initially?

Allison Malmsten: Yeah well, I think the students are just mad that they have to go to school when they could be sitting at home gaming, participating in other parts of the Stay-at-home Economy in China.

Matthieu David: Yeah, not focusing much on the app and the function but the fact that its taking time out of their games.

Telecommunication, of course, the time spent on telecommunication has increased a lot. What can we conclude on that, what are the key learnings on telecommunication apps and meeting apps for work, for meeting with family, to get news, what kind of learnings can we get?

Allison Malmsten: So, some of these telecommunication apps they have a massive amount of users and a short amount of time. On the first day of resumption of work on February 3rd, 200 million people logged onto DingTalk to work from home. So that’s a lot – whether the telecommuting apps will continue to be used in the future – of course, Covid-19 is a huge factor that has again – its kind of lowered the friction to use it, it’s already downloaded on their computers, but whether people continue to use it really depends on the trust in the workplace. That’s a really crucial factor and then there’s also demand for working across regions. 80% of large and medium sized enterprises in China set up offices in at least two different areas, so telecommuting will definitely continue to be used on a large scale but it will be interesting to see if downloading, if having used this apps before during Covid-19 will make it easier for a large amount of people to start working from home and even start working from home on a daily or like, permanent basis or if it’s just going to be something that they will continue to use only for meetings.

Matthieu David: Interesting, I guess we will have to update this report in 3 or 4 months to see how the Stay-at-home Economy in China has been impacted for the long term, or it was just for the short term that it was impacted during Covid-19. Thanks, Allison, for sharing.

Allison Malmsten: Yeah thank you for having me.

Find the full Stay-at-home Economy Report 

This article Market Tidbits transcript #2: The rise of the Stay-at-home Economy in China is the first one to appear on Daxue Consulting - Market Research China.

Product Innovation: Fruit Tea & Soft European Bread Pairing

Nayuki introduced the “fruit tea and soft European bread pairing” as its signature product to the market. Although product pairing has been widely used in the retail industry, it was quite an audacious move for Nayuki to make. Most of Nayuki’s competitors in the industry, including Starbucks and Hey Tea, choose to stay “focused” and stick to one category only, no matter it is coffee or tea. With unique insights into the psychology of Chinese female consumers, Nayuki’s founder Peng Xin, however, considered “Fruit tea & European bread” a great combination that meet “two kinds of needs in a single scenario” and the sales number of the soft bread take up no less than 50% of Nayuki’s total sales nowadays.

Source: Sina Weibo, Nayuki’s soft European bread and tea pairing

Behind the success of Nayuki’s product innovations are its high-quality raw materials and stable supply chain. In order to ensure the quality and distinct taste of Nayuki’s products, Peng Xin and her team have visited and signed contracts with several renowned tea plantations across China and Taiwan. Nayuki has also built its own factories to manufacture fruit in season, which further enhanced the stability of its supply chain.

Aesthetic-Centered Marketing

Although China’s new style tea market is quite a large cake to share, getting a slice of it is not easy considering relatively low barriers to enter the industry and fierce competitions from both local and foreign companies in China. According to the white paper for 2019 new style tea consumptions co-published by Nayuki and 36kr, about half the consumers of new style teas in China belong to the post-90s generation and female consumers take up 70% of the market. Targeting a young and female-dominated market, Nayuki has been taking an aesthetic-centered marketing approach.

Nayuki has been working on a branding project called “Nayuki Cupseum” since 2019, which has been quite successful so far. The concept of the project is to exhibit artworks made by world-renowned artists using Nayuki teacups. So far, Nayuki has held three series of exhibitions which include “Big hugs to you” collaborating with American artist Christopher David Ryan during May 2020, “Being A Cat” with Pepe Shimada and “Ni Hao New Year” with Cinyee Chiu. Apart from the “Nayuki Cupseum” galleries, Nayuki cooperated with the 50th Anniversary of Anderson Lifetime Achievement Award in September 2019, during which every store would exhibit paintings of “The Ugly Duckling,” “The daughter of the sea,” and “Gorrila.”

Source: Nipic, Nayuki Poster

“Marketing isn’t just about advertising. Product development, space design, developing new techniques are all marketing,” according to Peng Xin, the founder of Nayuki. The emphasis on Nayuki’s aesthetic appeal is reflected on its physical stores as well, from lighting, to color tone, to location, all tailored to the needs of young female consumers, such as taking pictures inside the store to publish on social media. The in-store experience seems to be no less important than the quality of the tea itself for consumers. Nayuki is selling more than a cup of tea, but a whole package of experiences from purchasing online, to picking up at the store, to taking a selfie with its beautifully made teacup, which at its core is a reflection of a lifestyle ideal consumers have been longing to have.

Nayuki’s Cultural Appeal: The Arts of Cultural borrowing

Nayuki might strike consumers as a Japanese brand, but it is in essence a local Chinese company that borrowed a Japanese name. This should not come as a surprise as this kind of cultural borrowing is hardly an uncommon practice, especially in the fashion industry. The rising of Nayuki implies the strong influence of the Japanese cultural exports among Chinese consumers. Although tea-drinking culture originated from China and later exported to Japan, the Japanese tea-drinking culture has evolved a system of its own and become quite different from the modern-day Chinese tea-drinking culture. Therefore, taking on a Japanese brand image has facilitated Nayuki’s success by differentiating itself from other local Chinese beverage brands.

Post-Pandemic Age: What to Expect for Nayuki and China’s New style tea Market?

Although the coronavirus has been contained very well in China, consumption patterns have largely shifted from offline to online, which might continue to be the new normal until the vaccines come out. In the meanwhile, new challenges have been raised for the China’s new style tea market and brought new opportunities for Nayuki as well. In response to consumers’ expectations for a higher security standard, Nayuki has adopted a new operating mode that requires no direct human contact. According to Baidu index search frequency data, the search volume for Nayuki peaked in middle of the pandemic on April 1^st, during which Nayuki brought 3,000 free drinks to cheer up the doctors and nurses at the Leishen Mountain hospital in Wuhan.

Data Source: Baidu Index, Search Index for Nayuki from January to August 2020

The pandemic has also rushed China’s new style tea market into digital transformation. During the period when Covid-19 was at its peak in China, Nayuki offered free delivery for all online orders. As a result, the total number of transactions completed on Nayuki’s WeChat mini program have doubled compared to the previous year. However, such transformation requires both financial and technological support, which might imply a reshuffle of the market. Although major companies such as Hey Tea and Nayuki could probably make through the pandemic with enough funding to adjust to the new normal, small beverage stores might find it very difficult and eventually exit the market.

What we can learn from Nayuki’s success

• Nayuki conducted market research to precisely identify their target consumers, then focused their marketing tactics on them. Nayuki has a clear brand positioning that targets 25 to 29 year old women. Nayuki’s marketing campaigns such as the “Nayuki Cupseum” projects and art exhibits with the Anderson Lifetime Achievement Awards are both tailored to satisfy the cultural and aesthetic needs of a young female audience.
• Nayuki differentiated itself from the myriad of other new-style tea brands on the market with its product pairing and store aesthetic. Additionally, the brand borrowed a Japanese name which is unique and stands out.
• The tea-store used an O2O marketing strategy to establish online presence, which was especially useful during the COVID-19 pandemic. Consumers are raising their standards for safety and convenience, which is particularly important for brands to establish online presence during a pandemic. Relying on third-party platforms like WeChat, Nayuki realized digital transformation and made it through the pandemic.

Author: Isabella Li

Learn more about the tea market in China

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This article The success of Nayuki, the Chinese new-style tea store going global is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David: Hello everyone, today we are going to look into the beauty sector in China, and the report we published a few days ago, maybe two weeks ago about how Covid-19 impacted the beauty sector in China. How it impacted during the epidemic and after the epidemic. I’m here to talk about the report with Allison Malmsten who has worked on the report and we will like to share today with the audience a few conclusions we had on the report, especially Alison you mentioned, an overview of the beauty sector before Covid-19 and some of the trends which came out of this and which were a change in the sector. What kind of changes and differences did you see before Covid-19 and just after Covid-19 in China.

Allison Malmsten: Right, hi – so I am Allison, one of the marketing managers at Daxue Consulting. So, first, China’s beauty market is by no means small, it’s the second-largest in the world at over 300 billion renminbi in annual revenue. Skincare taken 54% of the beauty sector in China and some trends that we saw before Covid-19 were – 1] the high-end segment was growing proportionately faster, so high-end brand segment was growing at 18% year on year while the mass brands were only growing at 5% year on year. 2] Second is that social commerce is blossoming, this is Xiaohongshu and also WeChat has its own platform called 有赞 (youzan) and what we saw is on these platforms, especially for the beauty sector in China the conversion rate is pretty high, and so this is kind of a new way of shopping and the year on year growth for Xiaohongshu was double in 2019. Lastly, there’s a rising preference for a domestic brand. Looking at the top 20 beauty brands in China, in 2012 only 7.6% of them were Chinese while in 2018 14% of the top 20 beauty brands in China were domestic Chinese brands, so this growth is pretty significant.

Matthieu David: Very interesting, it seems that the Covid-19 accelerated some trends which were already happening before such as social commerce, Xiaohongshu being one example, that’s what existed before, and the epidemic was let’s say a time where people had more time to spend online and to do social commerce. Do you have the same analysis at the trend that is not necessarily new, whether they have been accelerated with Covid-19?

Allison Malmsten: Right so out of the three trends I mentioned, yes, the social commerce is definitely even more significant now because obviously during the pandemic people were less willing to go to offline stores and they were doing more live stream shopping and more shopping on Xiaohongshu and KOL marketing is definitely very important during this time. There is one trend that might take a turn and that is the high-end segment was growing very fast before and we might see the slowdown as people will be preferred – they’ll be looking more at ingredients and less at brand names, so this could give a chance to any brands that focus on natural ingredients and focus on skin health and skin repair.

Matthieu David: Very interesting to see indeed, in the report we mentioned that Chinese consumers online were looking at the ingredients and at the quality of the beauty product they were buying, more than before and I think within the report we found out that not all the categories went up and for instance make up went down if my memory is correct and specifically some beauty products and financing on natural ingredients grew faster.

Allison Malmsten: Yeah so, cosmetics were hit the hardest. A McKinsey survey showed that 44% of respondents purchased less make up, while 31% purchased less skincare but then also 25% of people purchased more skin care so it’s kind of balanced out but yeah and then within makeup, obviously lipstick pretty much because everybody is wearing a mask, so there’s a beauty style now called the ko [inaudible 05:00] its makeup for wearing masks, so the focus is really on the eyes and also the skin and so the skin care sector, it did take a bit of a hit but it’s also doing pretty okay and a lot of the focus when people are at home – our social listening showed that a lot of people are talking about its time to be at home and they’re wearing less makeup so they see that their skin is getting healthier so they’re very excited about those results and it inspires them to purchase more skincare products, while at the same time wearing a mask for a long time can be very damaging to the skin, so a lot of people are searching for products that have skincare repair functions and also skin sensitivity is a big keyword now. A lot of people are finding that they have sensitive skin and they’re looking for skincare products that can help repair their skin damage from wearing a mask including anything like natural ingredients are really popular right now.

Matthieu David: And some of the comments we found online through social listening were saying that people were switching from makeup to skincare instead of putting makeup to take more care about their skin with specific products, I would say more natural products. I’d like to go back on the Chinese brands – you mentioned that Chinese brands took off during the Covid-19 lockdown and after the Covid-19. Do you see here long-term trend or it’s just short term and was during the epidemic, or do you see a substantial change which is going to stay?

Allison Malmsten: I think that this is going to – the preference for domestic brands, I think this is going to be a long-term trend. I think this is a trend that was accelerated from Covid-19 and the reasons are 1] because patriotism is a very high right now in general, 2] because also domestic brands really understand Chinese consumers and they understand how to reach them. They’re usually very proactive about social commerce and also, they are familiar with like some Chinese herbal ingredients that are very in right now and so they include those in their ingredient list and yeah, I think that a lot of Chinese brands are gaining momentum right now.

Matthieu David: And we looked into a very specific brand called Perfect Diary in the past and it’s a very, very Chinese company which is doing very well. In a topic, we’d actually like to talk about which is product traffic and Perfect Diary has been an example of being very good at product traffic. Product traffic being something very specific to china where e-commerce started with marketplaces like Taobao and then Tmall and then JingDong and many other marketplaces where having your own website and selling through your own website was not mainstream and now its becoming more the case – not selling through your own website, but your website, your WeChat groups, your WeChat channels and your live streaming. So, using a marketing platform to convert on your own asset, your own digital asset, and not through a marketplace. What did you see in terms of digital changes during the pandemic and after?

Allison Malmsten: So, I saw some digital changes, one like you mentioned private traffic and then two is also live streaming. Live stream obviously ballooned under lockdown, while everybody was at home they spent more time on their phone and inevitably they spent a lot of time shopping on their phone or looking at products and so some statistic for that was that as of February 18th, the monthly number of live streaming events on Taobao ballooned by a 110% year on year. Also, Douyin, also experienced around 70 to 100% growth during the lockdown period, so a lot of brands are using live streaming now. And then also one case, in particular, is [inaudible 09:10] which is an Australian beauty brand, during the coronavirus they directed its offline stores to all sell on WeChat, so that is over a 1000 stores that would normally have offline sales, offline staff, they all went online during that period and they actually had sales of 6.3 million renminbi during a live stream event that happened during the coronavirus lockdown in china.

Matthieu David: I believe that the next step is to see those trends now continuing or if it was just a short-term trend during and after the pandemic.

Allison Malmsten: Right, yes that will be very interesting to see because once stores open up, I’m sure people are very eager to go out shopping again but at the same time they might be a little bit more cautious to hit the stores.

Matthieu David: Thank you, everyone, for listening and we will continue with new reports, we will go through together online.

Find the full beauty sector in China Report 

This article Market Tidbits transcript #1: Major changes in the beauty sector in China after COVID-19 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.

Matthieu David interviews Vincent Djen, Director of Cheng Kung Garments and CEO of REMAKEHUB. The textile industry has consistently been a labor-intensive industry. In this episode, we explore what the future hold for the garment industry and how a circular economy fits into that. Are Chinese consumers already requesting fashion products made from recycled materials? Can textile factories be digitalized yet or is there still a long way to go before that happens? Find out the answers to these questions and more in this new China Paradigm interview.

• 0:00 Guest introduction
• 5:59 How did the current outbreak affect the garment industry?
• 7:51 Is the winter collection delayed as a result of the coronavirus outbreak?
• 8:17 The story behind Cheng Kung Garments
• 10:31 How and why did Vincent Djen decide to take over the family business?
• 13:28 Cheng Kung Garments – the current size of business
• 14:27 What are the highs and lows of a season in the garment industry?
• 17:05 How much of Cheng Kung Garments’ production is in-house and how much is outsourced?
• 20:53 Is China still the best place for the textile industry?
• 24:31 Why is the textile industry still so labor intensive?
• 26:39 What are the costs of using robotics for manufacturing instead of people?
• 28:56 What are the initial costs for entrepreneurs who would want to get into the textile industry?
• 33:01 Is there support from the Chinese government to make factories more innovative?
• 37:03 How is 3D printing helping the textile industry?
• 41:09 How does Recycling fit into the day to day activities of the Cheng Kung Garments factory?
• 44:06 Mechanical vs Chemical Recycling – how many times can a product be recycled?
• 46:42 REMAKEHUB – what and why have specific products been picked for recycling?
• 48:12 Why was adding traceability for waste products recycled by REMAKEHUB important?
• 49:42 REMAKEHUB – following the “Cradle to cradle” design concept
• 50:50 Do big fashion companies already use recycled products?
• 52:50 Is it easy to tell if a finished product is made from recycled materials or not?
• 54:03 Is recycling mandatory for companies or is it still an optional feature?
• 56:18 Are consumers already buying products because they come from recycled materials?
• 57:51 What are the challenges of creating a brand in the fashion industry?
• 1:00:26 What is Vincent Djen’s greatest business goal?
• 1:01:28 What books have inspired Vincent Djen in his entrepreneurial journey?
• 1:02:43 What does Vincent Djen read to stay up to date with China?
• 1:05:24 What productivity tool does Vincent Djen use to run his business?
• 1:08:25 What unexpected business success or failure has Vincent Djen witnessed in China?

One relevant episode

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

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

This article China Paradigm 116: Contributing to the Chinese circular economy is the first one to appear on Daxue Consulting - Market Research China.

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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The founder of the Chinese e-commerce site Biyao, Bi Sheng was first to propose the C2M model in China. The C2M model is when consumers connect directly to manufacturers to purchase a product. In the C2M model, consumers place orders directly through the platform, and the factory receives consumers’ personalized orders.  

The C2M model short-circuits all intermediate links, such as inventory, logistics, general sales, and distribution. It cuts off all unnecessary costs, allowing users to buy ultra-high-quality products at ultra-low prices.

A major point of the C2M model is that it produces on demand. The user places an order first, and then the factory produces it. There is no inventory-sales ratio, which eliminates chronic inventory problems. The defining feature of a C2M model is highly competitive pricing brought about by connecting factories with consumer insights, such as preferences, location, and behaviors.

Victor Tseng, vice-president of corporate development at Pinduoduo said that “C2M is essentially evolving traditional manufacturing from an R&D and marketing-driven process into a consumer-driven process”.

Biyao – first C2M platform in China

A C2M model Chinese e-commerce platform, Biyao, started in July 2015. This is the first application of the C2M model in China’s e-commerce. This platform includes a number of companies in the automobile, home furnishing, clothing, eyewear and related industries.

After the user places an order on the platform, the order will be directly sent back to the factory. Then, the factory produces and delivers the order. E-commerce platforms can use big data to get customer group portraits and analyze consumption characteristics. It helps manufacturers to select products, transform processes and reduce inventory pressure.

Source: iResearch, Biyao C2M platform

Advantages of C2M model

First of all, C2M model realizes the direct connection between the user and the factory, removes all intermediate links, which increases the price. It also connects designers and manufacturers, and provides users with “big brand quality, factory price” products.

For consumers, the C2M model emphasizes user-centricity and organizes production according to users’ individual needs.

For manufacturing companies, the C2M model improves productivity and promotes the transformation of enterprise production lines, supply chains and internal management systems.

C2M in China as a driver of e-commerce

C2M in China is a new driver in the e-commerce landscape. In 2019, $420 million worth of C2M-related bookings and sales were made in a single day during China’s Double Twelve shopping day. According to data from iResearch, this figure reached $2.5 billion in 2018. Forecast shows it will reach $6 billion by 2022, which includes a compound annual growth rate of 24.4 percent. Though still a small percentage of China’s total e-commerce market, it’s a model that crucially enables brands to better address issues of inventory and supply chain efficiency. C2M is another indicator that brands which fail to listen to consumers on product preferences will miss a trick.

Data Source: iResearch, C2M in China market size

Big data and AI in China push the development of C2M in China

Companies like Alibaba and JD.com have both been utilizing C2M in China. JD.com, for example, has been testing the C2M model since 2017. The company launched its fashion technology research institute in 2018 to explore the application of AI, VR/AR in China, as well as big data.

Through the application of AI-powered data analytics, online retailers, consumer brands, and AI companies are jointly making mass-customization possible in China. The key for C2M is to connect consumers and manufacturers through data and computational infrastructure.

Young generation in China – the key users of C2M e-commerce platforms

Chinese millennials have diversified needs, while user channels have significant segmentation. They include a host of online marketplace platforms such as Taobao, Pinduoduo, and Douyin.

Customization options for consumers were previously costly and limited to luxury product categories. In the current e-commerce industry, the post-80s and post-90s generation is the key consumer group. The younger consumer groups have a stronger demand for product customization. C2M caters to the needs of personalized and differentiated products that young consumers pursued.

Data Source: iResearch, Age structure of Chinese online shopping app users 2019

Key e-commerce players in the Chinese market use C2M marketing

Pinduoduo is gaining popularity among Chinese consumers

Pinduoduo (拼多多) is an e-commerce platform that allows users to participate in group-buying deals. Using the app is simple, the consumer can buy a full price item or get a discount if they invite other people to participate in the purchase. After paying, there are many ways to invite friends, not only through WeChat, but also with QQ, QR code, image, or with a voice recording. In the end, they ship the discounted order when the required number of people purchase it.

It is especially popular in third and fourth-tier cities. More than 65% of users come from third-tier cities, while only 5.9% come from first-tier cities. Unlike other e-commerce apps such as JD.com or Taobao, it has decided to focus on small towns. This policy has made it possible to attract low-income families to the App. We can make a conclusion that people in the third and fourth-tier cities are more likely to use the C2M model.

Data Source: Statista, Pinduoduo user distribution in China as of October 2019, by city tier

In June 2018, less than three years after the launch, Pinduoduo’s monthly active users reached 195 million people. In 2020, 487 million shoppers use Pinduoduo for their online purchases every month. In addition, many international brands such as Huawei and Apple have launched their single-brand stores on the platform, further consolidating the company’s credibility.

Data Source: Statista, Number of monthly active users of Pinduoduo

Jiaweishi case

Shenzhen’s Jiaweishi is a manufacturer of brand-name consumer goods, including Philips and Whirlpool. In 2018, they established their own brand of robot vacuum cleaners. When they started selling online through Pinduoduo’s “New Brand Initiative” program, they got direct access to huge buyer traffic.

Following the success of the initial sales of the original robot vacuum, Jiaweishi is now able to greatly improve their product and further increase sales. Based on the data collected from Pinduoduo, the robot vacuum’s randomized cleaning route to a more orderly one. Besides, Jiaweishi redesigned product’s appearance to make it more appealing to consumers.
They also addressed consumer concerns with regards to the quality of an unknown brand’s product via live streaming videos. These live streams make the manufacturing process transparent to consumers, while simultaneously spreading Jiaweishi’s brand name.

The advantages of using Pinduoduo for manufacturers

E-commerce giant Pinduoduo has been able to tell manufacturers not only how to customize in great detail, but has also been able to advise on packaging redesigning and price point setting.

Pinduoduo saw the launch of 106 manufacturer-owned brands last year and is aiming to establish 1,000 more. Even automakers are engaging with C2M firms amid a prolonged slump in sales. Pinduoduo held a team purchase promotion with car dealers during the Double Eleven shopping festival in 2019. Some 3,100 cars from five major auto brands were sold in just nine hours. Carmakers were able to gain an insight into demand and better predict consumers’ intent to purchase. This could help them optimize manufacturing and save money at multiple stages, and these savings could trickle down to consumers.

JD.com enters C2M in China

JD.com rolled out its C2M unit Jingzao in 2018. The platform now offers products including custom shirts, luggage, towels, and bedding. Moreover, JD partnered with electronic brands such as Lenovo, Konka, HP, and Dell to develop tailored products under the C2M model.

In 2020 JD.com has signed a partnership with South Korean manufacturer LG Electronics to sell RMB 5 billion ($707 million) worth of products on the e-commerce platform. Under the partnership, the two companies will cooperate in a range of areas, including product development under the C2M model.  The two companies have already worked under the C2M model for small home appliances. In May 2018, they started to develop C2M air purifiers, beauty tools, hand-held vacuum cleaners, and clothing care steam “styler” systems based on JD.com data. 

Besides, in 2020, the Italian designer brand Sergio Rossi co-designed a new product based on JD’s big data analysis of customer preferences. The new product is a short boot (a style quite popular with JD customers) that features the brands’ recognizable Icona logo.

Alibaba launches C2M in China through Taobao

In March, Alibaba launched a new app on Taobao called Special Offers, which works with factories to create C2M products. Its goal over the next three years is to help 1000 industries build ‘super’ factories that can directly supply customers. By 2020, more than 500,000 factories and 1.2 million production-capable suppliers in China have signed up to the platform. Chinese apparel, sportswear, and fashion companies, such as Anta and Bosideng Group, have signed up for the app and opened authorized stores online. Bosideng already collects and shares information through enterprise resource planning that helps them penetrate consumer preferences and consumption habits.

Backed by Alibaba’s AI algorithms and cloud technologies, the C2M team was able to offer real-time analytics. It helps companies to respond to changing consumption trends and identify new growth points.

Data Source: Taobao, Taobao YoY sales growth on Women’s Day 2020

Odis case

Odis started producing car-cleaning products that consumers wanted and needed. These included portable sanitizing sprays containing at least 75% alcohol. In 2002, with the help of Alibaba, Odis was able to adjust its production lines in three days to create these items. The process would have taken Odis three months to complete on its own, said the factory. Based on analyses of consumer preferences, the factory also started making their sprays in plastic bottles instead of aluminum cans.

“Alibaba’s C2M team worked with us throughout the entire product-development process. We had a clear roadmap of exactly what consumers wanted and how many units they needed,” said Qu, Odis’s general manager.

To bring consumers closer to their products, Odis leveraged Alibaba’s digital ecosystem and organized a campaign on Tmall. It allowed consumers to pre-order the sanitizers in China before production kicked off. They sold more than 200,000 bottles of the spray within 24 hours. Alibaba also created a new section for car-sanitization solutions across its online marketplaces.

Thanks to the C2M team’s efforts, online sales accounted for more than 90% of Odis’ revenue during the pandemic. When the coronavirus spread overseas, Odis’ clients in other countries also started showing interest in the product. Since March 2020, the factory has sold close to 30 million more bottles overseas.

Prospects of C2M marketing in China

C2M model gains momentum during COVID-19 outbreak

First the US-China trade spats hit China’s huge manufacturing base with delays and uncertain revenue, which was then followed by the COVID-19 pandemic. Demand plummeted both domestically and overseas. The C2M model proved especially crucial during the COVID-19 outbreak in China. Factories across China had to halt production. Even when operations resumed, manufacturers have struggled to generate pre-pandemic levels of business.

When many of China’s brick-and-mortar factories found their production and sales channels disrupted during the Covid-19 crisis, digitization of operations became a new lifeline for survival. China’s e-commerce platforms are able to use their massive databanks of consumer behavior and algorithms to analyze and predict what China’s factories should make to respond to demand.

C2M will benefit in the long run

The move to C2M will benefit manufacturers in the long run. Firstly, it makes them more flexible in times of crises, by pivoting online and selling directly to users. Secondly, factories can also save an average of 20%-30% in production costs. The model has huge potential in China’s lower-tier cities. According to a study by Morgan Stanley, these consumers are in search of bargains but are also increasingly willing to pay more for things of higher quality.  Getting factories to embrace the C2M model, however, is not without its difficulties. Manufacturers need to be open to engaging with every step of production in order to succeed.

Author: Valeriia Mikhailova

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This article Prepare for the burst of C2M (consumer to manufacturer) in China: Pinduoduo, JD.com, Biyao 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

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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.