From Mass retail to Experiential Retail
Cultural spaces within a mall, trying on clothing in a fashion show setting… French retailers have much to learn from their Japanese, Korean, Thai and Chinese counterparts in terms of client experience.
Étiquette : brands
The « Made in China » takes revenge
For a long time Chinese-made products were associated with low-cost and poor quality. The « toxic chairs » sold by French distributor, Conforama, gave stinging allergic rashes to some 400 customers. The « harmful dyes t-shirt » which sent a little girl in hospital stuck the knife deeper.
Fed up with the scandals, the world’s second-largest economic power has decided to shed its cheap image.
Inspired by countries such as Japan which used to have a connotation of low-end during the 50’s, China is working on changing its reputation. Manufacturers are seeking to move upmarket by offering qualitative and innovative products whilst maintaining competitive prices.
This initiative is supported by the Government, setting measures for quality control in order to reassure importing countries. It has implemented norms and regulations in its domestic market and created two entities, the AQSIQ and CNAS to supervise the procedure.
Investing in the future is part of the plan. The Government has allocated a more prominent budget for its universities to retain Chinese talents and attract foreign students. R&D is at the very heart of the new Chinese strategy.
The path from imitator to innovator, China conquers the world
China was viewed as the world’s « workbench » rather than as a global innovator. Now it can be proud of its technology sector. The Middle Kingdom has developed its own brands. It no longer plagiarizes or produces for others, it creates added-value items appealing to foreign consumers.
Lenovo is the perfect example of the Chinese success story. In 2013, the brand beat its American competitor, Hewlett-Packard, becoming the world’s leading PC maker operating in 160 countries. Lenovo wants to position as premium by offering top quality and advanced products yet produced with the soul of craftsmanship.
Huawei is another good example. When Samsung and Apple avoid to communicate on product origin, Huawei proudly spells it out at the back of its packaging.
In 2015, the brand announced earnings up 33 per cent from previous year, reaching 5.4 billion €. Still far behind Samsung and Apple, Huawei is however catching up very quickly.
To climb up the value chain and boost sales, Huawei and Leica partnered to set up a new R&D center to be situated at Leica’s headquarters in Germany.
The rise in unexpected fields
Not content to succeed in China, some brands dream of taking on the world.
Chinese brand Herborist is one of the few premium cosmetic brands with international ambitions. The brand reworked its positioning, combining Chinese identity with international design codes. In 2015, Herborist opened its first French store in Paris on the famous “avenue de l’Opera”. The store features a spa, offers a tea ceremony and Thai Chi classes. The brands flashes the Chinese chic in Paris.
The national preference
There was a time when one needed to purchase French to be elegant, American to be cool and German to be strong. This time is over for the Chinese. Buying local is seen as a patriotic deed.
The study « Future of China » conducted by Ifop for OMD showed that 40% of the Chinese prefer local brands and 25% always purchase them, mostly for the quality. Only 9% declare to favor international brands because of their superior quality.
That is all the more true in lower tiers (Tier 3, 4 and 5) where international brands are not always available.
Local brands have the advantage to better understand the population’s needs and they also benefit from a larger distribution channel allowing to meet demand faster than international competitors.
The emergence of emotional-value brands
The emotional drivers play a more and more important role in the purchasing process of Chinese consumers.
The economic boom over the past 3 decades, the access to new products and the growing internationalization transform the Chinese population. They are increasingly sophisticated and tangible product benefits (price, quality etc.) are no longer sufficient to trigger purchase.
Chinese brands know now how to engage and convert consumers. « Lifestyle » brands such as Icicle, Zuczug and JNBY use their proximity to appeal to the Chinese.
Icicle is a clothing brand inspired by Chinese traditional values, endeavored to bring harmony between human and nature. Zuczug is worn by Chinese celebrities and JNBY, inspired from Chinese modern art, opened several concept stores in big cities including Paris.
A unique case: the Chinese footwear brand, Feiyue, was copied by… the French!
The « Made in China » Feiyue by Shanghai Shenglong Shoes are sold 39 rmb (5€) in the country. The French copy is sold 80€ by Feiyue Shoes Holding and was seen in magazines worn by Orlando Bloom and Poppy Delevingne.
To conclude, the « Made in China » is more and more associated with quality.
The Chinese manufacturers have realized that fast and low-cost production no longer generates growth. Chinese brands are able to build innovative yet still cheaper smartphones, tablets and PC. Leaders in the technology sector have fierce challengers!
The reputation of « Made in China » is slowly improving but actions must be taken by the Government to fight the scourge of counterfeiting, detrimental to the development of Chinese companies abroad.
Article written by Thi My Nguyen, Market Research Manager at Ifop Asia.
Hot trend in China: Live-streaming apps turn Nobodies into Internet Celebrities and offer unique money-making opportunities.
A pretty woman casually dressed, eating noodles and talking about the makeup she is planning to buy. A handsome man gazing at the webcam in silence. A lady singing a cappella in her living room. What do they have in common? Hundreds of thousand followers.
The Live-Streaming craze is sweeping across China. Millions of regular people are now sharing bits of their lives with the world seeking for fame and expecting to gain cash.
Yizhibo, Xiandanjia, Douyu and Ingkee are some popular apps among the 80 apps for live streaming available in China, and the number is growing all the time.
Why these videos which seem meaningless have so much success?
These apps allow people to peek into the lives of strangers and interact with them to an unprecedented extent. The viewers can send pop-up messages to the streamer and “tip” them with virtual presents they buy from the apps. The streamers can then exchange their presents for cash.
On Ingkee, one yuan (0,10€) buys 10 “diamonds”. Tipping a beer will cost you 1 diamond, a Ferrari 1200 diamonds and a yacht 13140 diamonds.
Competition between streamers is fierce, a raking based on the number of followers and the number of “diamonds” is accessible. Some accounts have reached many millions of diamonds.
It is necessary for brands to conquer the Live-streaming world.
These Internet celebrities are highly influential leaders among the young generation and they receive money from brands for broadcasting their products.
The apps are already used for commercial purposes. Individuals and companies use them for selling makeup and skincare products.
Celebrities also broadcast to interact directly with fans.
L’Oréal has a live-streaming account and offers sessions of live show with the brand’s muses.
Ingkee, is only one year old but has been ranked No. 1 on Apple’s China app store multiple times. Ingkee says over 50 million users have downloaded its app. Douyu claims 120 million active monthly users.
Live-streaming apps are a great opportunity for brands to reach customers beyond geographical limitations and at low costs.
Article written by Thi My Nguyen, Market Research Manager at Ifop Asia.
How “Made in…” impacts the attractiveness of products amongst Chinese consumers?
Ifop recently conducted a survey among the Chinese middle-class* in five main cities (Shanghai, Beijing, Guangzhou, Wuhan and Shenyang) to understand perceptions towards products made in different countries around the world. This study reveals the strengths and weaknesses associated to “Made in…” China, France, Germany, Italy, Japan, South Korea, UK and USA.
“Made in”: a key purchase driver
The country of origin is an essential information to Chinese consumers: 44% claim to “Always or most of the time” pay attention to it when making a purchase, 30% “Sometimes”. Also 70% consider it as “Very or somewhat” important when it comes to choosing a product or a service.
France is strongly associated with Luxury and the values attached to this sector
From the eight countries evaluated, France is the most associated with one particular field: Luxury. This strength in the field of luxury contributes to associating France to dimensions of know-how, creativity and ability to make one dream which are of high value. However, the association with this sector conceals other good things France has to offer to Chinese consumers and paradoxically this country is not much associated to automotive, energy or aeronautic sectors despite major assets in these fields.
French companies and brands obviously lack visibility there and need to better “educate” local consumers to raise their profile. Automotive maker Citroën shows the way with the success of its DS model positioned as a premium product playing with the codes of luxury: brand heritage, high scale service, extreme personalization, etc.
China is developing legitimacy in technology
Germany is strongly associated in Chinese people’s mind with automotive and technology, Italy with Luxury (but to a lesser extent than France), the USA with technology, aeronautics and Internet. In the field of fast moving consumer goods cultural proximity plays a major role as Korea and Japan are the most associated with Cosmetics while China and Japan are seen as leading countries when it comes to food.
In technological fields the USA and to a lesser extent Germany are perceived to be leaders, but China stands closely behind in its citizens’ view. Obviously China is becoming more and more confident about its own capabilities in the field of technologies, most probably thanks to the success stories of Alibaba, Huawei, Xiaomi and the likes.
One should notice that none of the investigated countries is clearly associated to sustainable development nor to high quality of service, two areas highly encouraged by the Chinese authorities and offering obvious opportunities to companies in today’s China.
This is an abstract from an article written by Christophe Jourdain and published in the Connexions magazine by the French Chamber of Commerce in China.
(*) With at least 5000 RMB monthly household income
M-commerce is booming nowhere else as much as in China!
China is the first e-commerce market in the world*. What is striking is how quickly habits shift towards mobile, to such an extent that the major part of online shopping is now done through a mobile device. This trend is a great change for brands.
Alibaba dominates the Chinese ecommerce with 80 % market share and more than 350 million active buyers a month. With two main platforms Taobao (CtoC) and Tmall (BtoC), the group realizes an annual transaction volume higher than Amazon and eBay altogether: it is a monster! Indeed, in one year, between the second quarter 2014 and the second quarter 2015, purchases on mobile increased by 125% for Alibaba and their proportion raised from 33% to 55% of all transactions: a boom!
The growth of m-commerce is explained by numerous factors, including the huge appetence of Chinese consumers for digital, the power of local e-commerce platforms and payment solutions, the weakness of physical trading outside the big cities, etc. (see also Why are Chinese consumers so Digital?). It speeds up the transition to a consumption-led economy and contributes to the growth of both rural and peri-urban areas. It is thus greatly encouraged by the government and benefits from a snowballing effect.
There is lots of indication that the growing practice of m-commerce anticipates what will happen, at a slower pace, in most of the others markets in the world. What is currently happening in China has to be followed closely. But what exactly does that change?
Initially, the shift from physical trading to “traditional” e-commerce (not mobile) extended the purchasing time to every moments when consumers are using a computer, and the shopping location to all the places when they have access to a desktop. This evolution meant also a larger amount of information, of influence sources, of comparison means, of collaborative solutions, allowing everybody to buy in a “freer and smarter” way. Nowadays, the shift towards mobile purchase as observed in China goes one step further.
With smartphones and consumers like bosom buddies and permanently connected to the internet, we really move to a 24/7 commerce. Chinese consumers go mad for social networks such as WeChat (one quarter of the population logs in more than 30 times a day) or Weibo and other e-commerce websites such as Taobao or JD.com, they are in a quasi-permanent purchasing mind, searching for bargains. Consumer can also switch and be in a selling situation, which multiplies transactions and compels brands to find a space on the mobile media if they want to exist. The permanently connected smartphones make online commerce more and more part of consumers’ daily life and expose them to more and more products categories, e.g. the growth of YiHaoDian (“Number 1 store”), an online shop specialized in fresh food products (fruits, vegetables, seafood) providing a user-friendly app offering delivery within 3 hours from purchase.
M-commerce is social by nature. Most of the Chinese consumers use their smartphone to post pictures and comment their purchase on e-commerce platforms or social networks: they are much more active than the Americans or Europeans. They also share their experiences via dedicated apps such as XiaoHongShu (“little red book”) where girls flaunt and comment their purchase, creating communities of interest in the latest trendy studded shoes or about the new smooth-eyebrow product. Their reviews influence other netizens and are considered by e-commerce platforms which emphasize on the best-rated products. The consumer is now in the center of the offer deployment process instead of the brand and the distributor.
Moreover, with his smartphone the consumer can instantly ask his network of friends for recommendation. He is never alone during the purchasing process: word-of-mouth not only plays a key role prior but also during the purchase.
M-commerce is also going further with customization. When connecting to an e-commerce website, consumers are recognized and their preferences recorded during their previous visits are taken into account. Taobao illustrates it by giving its consumers access to their “footprints”, the history of actions on the website, which allows to target them offering products and discounts matching their needs. The mobile dimension adds geolocalisation, continuity and instantaneity. Digital manages to flip over positions: the consumer, often anonymous in the real life, becomes a well-known and taken into account customer in the virtual space.
But mobile also stimulates the convergence with the physical shop: both have complementary roles in which purchase experience, service, branding and customization are increased via the complementarity of touchpoints. For instance, convergence is seen with QR Codes, much more used by Chinese consumers than Western ones, to find information, promotions, services, and reviews in the physical store… or even to the online store! This convergence is also seen in the payment process, with e-commerce payment solutions such as Alipay and WeChat Wallet which are now adopted by physical stores like Walmart or Carrefour. Easier, quicker, more secure than cash or credit card, containing full and instantaneous information about the consumer, these mobile payment solutions are growing in all sectors of physical daily life such as, in Shanghai, in millions of grocery stores, taxis or restaurants.
Eventually, let’s note that the Chinese m-commerce mostly goes through multi-brand platforms and apps. Nobody wants to go on the slow-debit internet to look for a brand own website then go to another one to compare, type-in the 16 digits of your credit card, etc. when all brands are available on the same app with one-click away payment. This creates the necessity for brands to be present on Tmall-like platforms, WeChat stores, etc. and generates new positioning challenges as, for example, it is not obvious for a lifestyle or luxury brand to sell its products in a space where it stands alongside a multitude of mass market players.
Thus, a crucial challenge for Western brands is to grasp this revolution as fast as possible in order to gain new clients, many clients!, in China now, and to be ready to gain even more clients everywhere else tomorrow.
Article written by Christophe Jourdain, initially published in French in Siècle Digital.
Tags: digital, e-commerce, m-commerce, store
(*) According to Bain and company
The Chinese luxury market is getting more mature
The Luxury division of Ifop recently published the results of the Luxury Trend Report, a yearly look at Luxury trends as evaluated by luxury professionals (general management of luxury houses, heads of brands, marketing and commercial directors, experts from agencies specialized in luxury, etc.) from all sectors of luxury.
This year, in a context of moderate optimism for the luxury industry as a whole, China appeared once again as the most strategic market among developing countries. It remains quite strong in terms of prospects, especially as compared to other BRIC markets, notably Russia and Brazil that are losing a bit of appeal in terms of strategic priority as compared to previous years.
While a year ago, due to a slowing GDP growth and to the impact of anti-corruption measures, a majority of luxury professionals were expecting the Chinese luxury sector to continue to slow down in growth, this year their perception is much more balanced and the general opinion is that we are heading towards a stabilized growth situation.
Luxury professionals generally agree that Chinese consumers are changing rapidly and most of them underline the fact that they are becoming more demanding and more critical towards major global luxury brands. This is a sign that Western brands cannot compromise their quality of product, service and purchase experience with Chinese consumers. It also implies that these brands are expected to be at the top of services that are common in China but may not be as critical in other markets such as e-commerce, home delivery, social media connection, etc. which is rarely the case today. In this demanding market, luxury brands must therefore not only keep their core promise of quality and uniqueness but also deploy it in locally sensitive areas of the brand-consumer relationship.
The new chinese consumer
China has become a huge and essential consumption market. Its enrichment brought a society of consumers where rich elites go alongside a middle class who displays its purchasing power. This population of over 350 million will continue to grow to reach 850 million by 2030. The Chinese consumers of today – and of tomorrow – will not be those of yesterday.
In a time of global economic crisis, most experts consider that domestic consumption is what stimulates the growth of China. For now, China is still the major country where consumption represents the smallest percentage of GDP, less than 50% compared to about 70% in Europe and 80% in the US, while investments represent nearly 50% of GDP vs about 15% in G8 countries, a record in economic history. This shows how much room there is for consumption to grow further.
The changing tastes of chinese consumers
It’s inevitable, the taste and consumption model of the Chinese people doesn’t stop evolving. How far can this this exploration go? What’s the image of French products in China? A study conducted recently by Ifop among Chinese people aged 20 to 40 living in major cities answers these questions.
Chinese people are experiencing a major shift in their eating habits. They tend to eat more fruits (64%), fresh market products (56%), dairy products (53%) and meat (41%) than 5 years ago, and in Shanghai specifically more prepared foods (38%), a phenomenon that can be associated to the fast paced lifestyle and westernization of the city.
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