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 : china
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.
The Evolution of Leisure In China
Today Chinese society is in a flux. Both the economic growth as well as the pace of growth of the past 35 odd years has had a massive impact on not just on the economic wellbeing of the Chinese people but also on the society in general. With the increasing affluence levels, higher disposable incomes, access to new product categories and increasing integration into the wider world, has meant not only have the people’s lives changed but also the way they relax, unwind and spend their leisure time.
Unlike in the past where the favorite pastime of most Chinese people was confined to what was acceptable within the social realm, now the same has evolved with the changes in the society. What is acceptable and not acceptable is now more a domain of the individual with the focus firmly on more balanced, engaging and diversified lifestyle.
Consequently we observe evolution of leisure options beyond traditional restaurants, stroll and activities in the neighborhood parks and KTVs to leisure travel, health & beauty, shopping and even online indulgences. This evolution signifies a move away from more basic motivations of safety, nutrition (health) and tradition to more mature-exploration, experience, authenticity, and value proposition.
The Chinese government too has had a hand in this evolution. The government has pushed to increase domestic consumption by providing more days off for Chinese people to spend on leisure activities. In 1995, the government introduced 5-working-day week, providing people with 2 days a week of leisure and rest. In 1997, the golden week and the national day were introduced as additional measures to boost domestic spends. Finally, the new labor law in 2008 was enacted to provide yearly 5 days of paid leave to make Chinese people to connect more with their families and in the process boost the economy.
Explore and Experience
Traditionally for Chinese people, food (a major leisure indulgence) used to be more about nutrition and health. With increasing affluence and consequently travel becoming more common, food is becoming more about experience, authenticity and exploration. Cheese and regional wine are riding high on this wave. 94% of Chinese consumers say they have tried French cheese and were likely to eat some again. Definitely, times are evolving.
While travel on the other hand was previously considered as a leisure activity with a focus on destinations (been there, seen that), it has now shifted more to qualitative and “out-of-time” experience where people want to live the present moment, enjoy the experience, explore and exchange.
A study conducted by IFOP has shown that Chinese people save for difficult times, for their children’s education and… for travel. In first tier-cities (Shanghai, Beijing and Guangzhou) travel even emerges as the primary motivation for saving.
Travelling agencies noticed this shift and have tried to seize this new market by offering for instance journeys focused on particular themes such as gastronomy, relaxation (cruise), or sport (hiking) and in the process work on people’s motivation of experience and explore.
Other emerging trends
The younger travelers focus more on independence when it comes to travel and we also see solo or non-tour group travelers on the increase. They are no longer interested just in running from one scenic/tourist spot to other and endure endless bus rides in the process. They now want to experience and live the moment.
Travel aside, we observe rise of health and beauty based leisure avenues. There is a common Chinese belief that to be successful in life, one needs to look good (and of course healthy). This belief is leading to increasing focus on keeping fit and also quick fixing perceived bodily negatives. This aspect is also seen part of leisure and Chinese people are going all for benefiting from options that cater to these needs. While the elderly have the gym and dance in public parks, most young people are hooked to the gym.
People are also opting to go abroad to seek medical attention. It may be for more serious medical conditions or for cosmetic surgeries. This trend has given rise to new travel trends such as medical tourism (e.g. plastic surgery). Countries like Korea, Thailand are hot destinations for Chinese people to travel to get medical attention and also in the process enjoy visiting the country.
Kings of Shopping
Shopping is considered an integral part of leisure activities of Chinese people. To them it’s more than buying. It’s an experience and a social activity. Rise of malls is an example of this trend that caters to these requirements. Chinese people spend a lot of time living the experience of shopping. For instance, when they want to buy a premium beauty product, it all starts with talking to each other (social occasion). It’s followed by an online search for information (personal engagement and involvement) and actual buying of the product in physical stores in China or abroad (experience). It’s not surprising that online channels are now trying to replicate the physical store experience on the website to engage more consumers.
At the same time, shopping malls are becoming a lifestyle and provide a wide range of services to enhance the shopping experience: game rooms, restaurants, beauty salons, and cinemas are much more numerous than in our malls.
Even when it comes to travel, shopping in the world’s biggest cities remain the top motivation irrespective of age or gender. The voracious appetite for shopping can be seen in duty free stores in the world’s major airports as well as high streets.
Digital
Talking about online, the digital revolution especially the rise of social media and e-commerce has had deep impact on the way Chinese people conduct their lives and also their leisure habits. Nowadays, it’s very common for Chinese people to explore leisure ideas, discuss travel plans, look out for promotions for hotels, book tours, all using just their smart phones. Smart phones have made information accessible in a magical way and the Chinese people are using it like no other people elsewhere. As a consequence, possibilities are endless and spend time on wechat or weibo is now considered as leisure.
In conclusion, undertaking leisure activities is becoming more and more commonplace among Chinese people. We can fairly say that Chinese people have truly come off age when it comes to their leisure activities and are now looking to further their experience by spending on numerous avenues that offer them such indulgences.
Article written by Manohar Balivada, Vice President, Ifop, Shanghai. Published in Connexions magazine N.77
Have Chinese Women Started to Look Beyond Beauty Products?
In China, the importance of beauty can’t be overemphasized especially for women. The concept of beauty which is traditionally dictated by fair and pale skin (boiled egg complexion and tone) is now morphing into emphasis also on sharper and fuller facial and bodily features. The belief that skin care products can only do so much to make one look beautiful is taking roots with women looking for quick fixes such as micro or cosmetic surgeries to achieve perfection in their quest to look beautiful.
According to current market estimates, until 2013 only approximately 5 million Chinese women did one or the other form of cosmetic surgery. By 2015 this figure rose to over 7 million and by 2018, it’s likely to touch 11 million. Although the figures are minuscule compared to the size of the population, but the growth is estimated to be stronger going forward despite government regulations and societal constraints.
To contextualize, it’s estimated that between 80 to 90% of Chinese women use skincare products and up to 40% use color cosmetics. Assuming the latter group is more into beauty, and as a consequence more likely to undertake cosmetic surgery, the full potential of this market becomes more obvious. A study by Chinese lifestyle magazine SELF and IFOP Asia estimates that approximately 15% of Chinese women are considering doing micro/cosmetic surgery in the future. Considering this figure of 15% who intend to undertake a surgery in the future, the size of the category skyrockets to nearly 40 million potential consumers in the next 5 to 10 years. (15% intenders among 40% color cosmetic users of the total Chinese women population).
In fact, in comparison to their counter parts in more mature neighboring markets, Chinese women undertake such surgeries on a greater scale than even their Japanese counterparts across all treatments/procedures. However the Chinese women get trumped by Korean women although in terms of interest and intent to undertake these treatments/procedures in the future, they in turn trump the latter.
This category predominantly attracts younger females although in recent years Chinese men too have started going under the knife. This is only likely to add to the huge potential of this category. The acceptance of more comprehensive and multiple surgeries are also on the increase. As of now, the popular surgeries are double eye lid as well as nose job. In the next few years with wider acceptance of the practice, surgeries on other parts of the body too could be commonplace.
The macro reasons for this staggering growth among others, are the increased competition in the job market, the changing societal values, increasing disposable incomes, integration into the wider world and ever more emphasis on personal looks.
According to the SELF & IFOP Asia study, compared to last few years, micro/cosmetic surgeries have become more popular, acceptable and even admired. The study states that micro reasons are multi fold but mostly to do with the continuous propagation of the message in public media, increasing acceptance in the society, open mindedness to having a surgery & the ever increasing desire to look more beautiful and having more youthful skin, both of which are never fully satisfied in spite of increasing spends on beauty care products.
Women of different ages consider these surgeries for different reasons. Fresh graduates, who account for lion’s share of the surgeries undertaken in China, do it predominantly for enhancing their career prospects by building their self esteem (through appearance). A study done by JAMA facial plastic surgery also alludes to this and also suggests that such women also observe an increased level of self efficacy (confidence in ones abilities) compared to before.
The middle aged consumers (25-30 yrs) do it mostly for anti-aging and whitening purposes whilst those who are little older do it for not only anti-aging but also to remove wrinkles, freckles, pigments and bags under their eyes .
Another trend that is also catching up is undergoing cosmetic surgeries abroad. Chinese consumers are also seeking these types of surgeries more and more abroad for both costs as well as safety considerations. According to the Korean Healthcare development institute, in 2012 Chinese consumers accounted for 20% of foreign patients who went to Korea for any medical service and 36% of them sought cosmetic surgery with an average spending of US$1,600. This proportion is only likely to increase given the trends we observe in this market.
With the increasing acceptance and popularity of cosmetic surgery, this industry is only likely to explode in the coming few years with implications for both cosmetic surgeons as well as beauty brands. The need for ‘quick fix beauty’ is increasingly becoming commonplace and more importantly being accepted especially by the younger generations. Beauty brands would do well to think and act on this likely surge of the need for quick fixes. Depending on how they react, this trend would either be a boon or a bane for them.
Article written by Manohar Balivada, Vice President, Ifop, Shanghai
Capitalizing on opportunities offered by lower tier cities in china
China is not only the world’s second largest economy but also its dominant engine of growth. However in recent years this economic growth has come under pressure because of multiple reasons, both internal as well as external. This decline in growth rate is having a consequent impact on the way the Chinese government sees as its best way forward. It is striving to increase domestic consumption, encourage services sector and keep a check on inflation.
Adding more complexity to this business context is the more crowded and fragmented market, maturing Chinese consumers, impact of digitalization and smart phone and not to mention declining consumer enthusiasm.
Until recently business opportunity in China was limited to big 3 cities and handful of tier 2 for most multinational companies. The above dynamics means the attractiveness of this opportunity is increasingly fading and multinational brands are being forced to look deeper in to the Chinese landscape for new emerging and hitherto untapped markets in lower tiers.
Are the Lower Tier Cities Next Eldorado?
So this begs the question, do lower tier cities offer the same opportunity as that of their higher tier counterparts? In fact, the opportunity that lower tier cities offer is humungous compared to what their higher tier counterpart’s offer and moreover it remains untapped to a large extent.
Over the last decade or so, Chinese government has embarked on a mission to increase domestic consumption and thereby lower China’s reliance on exports. In the process, they have increased their investments in lower tier cities even in the central and western parts of the country and emphasized urbanization by providing housing and civic amenities.
These efforts have paid dividends. According to one estimate, tier 1 and tier 2 combined only accounts for 17% of the national GDP i.e. to say lower tiers combined account for a whopping 83% of the GDP. However, given the higher tier fixation of most multinationals, it means the focus has been too long and too much on higher tier cities.
Although Tier 3 and 4 have a disposable income half of Tier 1 but given a population approximately 10 times over, it means the potential is not only huge but waiting to be tapped into.
However Opportunity Doesn’t Directly Translates Into Profits
The big question is how to capitalize on this huge opportunity. The challenges are numerous and not very obvious. To begin with, the sheer number of such cities in lower tiers with a million or more is in excess of 200. So which all cities can a brand focus on?
Are these consumers like their higher tier counterparts or do they shop differently with different motivations and preferences? From my experience I can do say that they are definitely different given the context and circumstances that differ across tiers.
So is there a better way to target these consumers? The answer is yes and it’s everywhere around to see.
The Internet Can Make It Possible
Huge proportions of the Chinese population are not only online but are willing to go the extra mile by engaging in it. Lately social media and e-commerce boom has engulfed the country, fueled in part by the high smart phone penetration and also with the more prominence of big players in the market like Wechat, Taobao and Jingdong.
The lower tier cities are not lagging behind on this bandwagon. In fact they are taking to it like a duck takes to water. According to one estimate, the proportion of lower tier city households with internet access is in excess of 50%. This figure is only like to go up and go up fast considering around 85% also have access to a smart phone. These consumers are using internet not just to communicate, exchange or explore but also to buy products and services.
All of the above means, the lower tier cities have opened up for business and are not inaccessible the way they were a few years ago. With a right business strategy and fresh mindset, it is indeed possible to capitalize on this opportunity offered by lower tier cities.
There are as many ways to do it the right way as there are ways to do it wrong. The success depends on the way a brand will understand these consumers, customize its offering and then make itself available through relevant channels.
Article written by Manohar Balivada, Vice President, Ifop, Shanghai
Ifop reinforces its presence in China by appointing Kevin Zhou Managing Director, China operations
Kevin Zhou joins Ifop Asia as Managing Director and partner in the Group’s subsidiary based in Shanghai.
Ifop, the independent Paris based market research group present in China since 1996 is proud to announce the hiring of Kevin Zhou as Managing Director of its China operations. In his new role, Kevin Zhou will be responsible for the management and development of all Ifop Group activities in Greater China, reporting to the Ifop Board in Paris.
The rising attractiveness of local brands
The new aspirations of China’s middle class (part 4 out of 4)
Faced with the rising position of China on the world stage and the success of high profile local companies such as Tencent, Alibaba or Xiaomi, the Chinese middle class expresses growing pride and trust in the leadership capabilities of its country in terms of economics and lifestyle, which translates into an increased interest for local brands. These are perceived as much more price competitive and often better distributed across the country than their Western counterparts, faster at taking positions (launching new products, opening points of sales in new places), efficient at adopting communication codes that appeal to the locals and also more and more often innovating. This is what makes the success of Herborist or Inoherb in the field of cosmetics, Haier or Midea in household equipment, BYD in automotive.
As a matter of fact, the middle class emerging in peripheral cities has been less exposed to foreign brands, usually concentrated in Tier 1 and Tier 2 cities, than the previous waves of rising middle class. It turns more naturally to local brands in its daily life, even in categories traditionally dominated by foreign players such as beauty products or sports goods.
This growing competition from local brands has become a major issue for international brands in China. Its impact is probably stronger than the slowing growth of GDP on which Western media tend to focus but which does not yet impact the propensity of consumers to get richer. Local brands eat up foreign brands market shares and develop an intimate relationship with consumers, a factor of lasting success. In front of this, the reaction of large international groups sometimes consists in acquiring these new competitors, like when L’Oréal purchased the Chinese leader of beauty masks Magic Holdings, or to develop alliances like Danone with Mengniu in the field of dairy products. But the key trend is there: local brands are progressively developing the attributes of genuine brands, Chinese consumers aspire to consume them and this is changing the rule of the game in the China market.
Article written by Christophe Jourdain, Ifop International Director.
Beyond present into the future
The new aspirations of China’s middle class (part 3 out of 4)
Access to a higher standard of living allows the Chinese middle class to look further than the present to anticipate and secure the future. Within all population strata keeping healthy is considered the first factor of happiness in life and the share of wallet dedicated to the family’s health increases regularly. Besides, the Chinese middle class has a high tendency to save: in a recent Ifop survey 79% of Chinese declare they save money on a regular basis, and the way they allocate this money is directed in priority towards long term projects such as housing, education of child and retirement. These aspirations carry the upcoming shift of the country towards an economy of services.
Simultaneously, the Chinese middle class is more and more sensitive to some of the negative effects of the consumption society, pollution and food safety in particular. The former has become a major worry in Tier 1 and 2 cities, and the latter is sensitive everywhere but more particularly in Tier 4 cities were the level of supervision by local authorities is perceived as lower and safety equipment more limited. On these matters, the willingness to act at the individual level, notably via more sustainable consumption behavior, is developing essentially in Tier 1 cities and within the younger and culturally more open strata of population. But it will expand further and brands increasingly need to deliver messages and proof of socially responsible actions if they want to stay in touch with the expectations of the rising middle class.
Article written by Christophe Jourdain, Ifop International Director.
Acceleration, individualization & socialization thanks to digital
The new aspirations of China’s middle class (part 2 out of 4)
Chinese people are very much attracted by technologies and most urbans are frantic users of smartphones. China is now the number one e-commerce market in the world and, leveraging the power and simplicity of local platforms such as TaoBao, Tmall, WeChat, etc., its consumers are together with South Koreans the most advanced of all in terms of mobile purchases.
Digital allows middle class citizens to satisfy their quest for consumption experiences that are:
- instantaneous, via the real time dimension of internet coupled with the efficiency of parcel deliveries throughout the country,
- personalized, thanks to algorithms taking into account consumers profile and historical behavior to provide individualized offers,
- and shared, via the social dimension of internet and the consultation of peers’ opinion not only before but also during the act of purchase.
It brings the satisfaction of “shopping smart”, a high expectation among the middle class, and spreads across even the most daily tasks as shown by the success of the YiHaoDian website and application selling fresh food delivered within three hours.
Amongst the young, the quest for emotionally rich experiences goes primarily through digital and represents a key lever for brands. In secondary cities where a lot of companies have no presence nor distribution, digital provides individuals with an access to brand consumption which they can’t find in their physical environment, and brands with an opportunity to develop without investing massively into retail. Nowadays these secondary cities are the engine of the country’s growth. So the brands that are not yet on Tmall or other digital platforms relevant to their industry are not only missing the train of digital commerce but also the development of the economy into peripheral cities and the interior of the land: they are out of the game!
Article written by Christophe Jourdain, Ifop International Director.
