Published on February 27, 2014
RETAIL TRENDS IN CHINA WHAT’S IN STORE FOR THE YEAR OF THE HORSE?
CHINA AND RETAIL ARE A DYNAMIC COMBINATION. As China rebalances there will be significant changes and challenges which bring with them tremendous opportunities. Retail is always fast moving, dynamic and change is a constant. The two together, retail in China, represent a potent recipe for success as long as you can orchestrate it effectively and no one has more experience in the field, at the sharp end of retail, than the Smollan and Always partnership, with activities in field marketing and activation in well over 600 cities right across China. So, as we enter a new Chinese year - the Year of the Horse, we have put together the 8 key retail trends you should be watching out for and creating strategies and activities around them. To learn more about the Chinese New Year and how the holiday unlocks year-round Brand and retailer opportunities download this informative and visual BrandZTM study: www.wpp.com/chinanewyear We hope that this will help your China insight and to better understand the fast changing, retail China. Wishing you a very happy and successful Year of the Horse.
电可 子抗 商拒 务的 之崛 不起 THE IRRESISTIBLE RISE OF E-COMMERCE E-COMMERCE WILL CONTINUE TO ENGULF MANY AREAS OF RETAIL WORLDWIDE, BUT IT’S IN CHINA THAT WE FULLY EXPECT TO SEE THE BIGGEST SURGE. So much that by the end of the Year of the Horse China will become the biggest e-commerce market in the universe. Rising digital penetration amongst the Chinese and the development of digital banking (see ‘bank in the hand’ below), is set to sharpen both the appetite and ability to purchase anything and everything online. Businesses like Taobao (consumer-to-consumer online retail) and Tmall (b2c online retail) are already leading the charge – and indeed Taobao’s creation of a safe and cheap option for everyone to be buyers and sellers in a digital market place looks set to cement e-commerce in Chinese daily life. It’s inevitable that as other enterprises realise that online can provide a greater return on investment, they will start to put more effort and resources into it. We foresee more and more businesses beginning to use the digital platform to stimulate their flat traditional retail sales, further fueling the digital retail revolution. Undoubtedly a key enabler of this continued growth will be China’s low cost, dynamic supply chain; products can be delivered swiftly with little or no extra cost to consumers and this, coupled with the decreasing amount of time available to visit stores physically, will help make online shopping a nationwide norm.
便 捷 出 击 CONVENIENCE PULLS A PUNCH RELATIVELY LOW NUMBERS OF CAR OWNERS BY POPULATION, COMBINED WITH CITY CONGESTION, HAS MEANT CHINESE SHOPPERS HAVE ALWAYS VALUED CONVENIENCE RETAILING. So far this has not represented a competitive threat for large format retailers but in the Year of the Horse we expect this to change. Convenience retailers’ growing understanding of the power they have to compete as a true retailer – rather than just an ‘impulse location’ – will exert more pressure on ‘traditional’ retail. Their vast distribution network is already in place and as they tweak their product offering to increase the value of basket sizes, we predict strong growth. Around the world, we’ve witnessed this retail approach lead the consumer away from larger formats and we fully anticipate it will now do the same in China. Look out for competitors vying to buy the well-established traditional branded convenience stores as international retailers realise that these small outlets are real strongholds. Winning will come at a price however, as critical mass and distribution affordability will ultimately be the determining factors for business success. These will take time to set up, and whether already entrenched convenience brands will be able to leverage their head start remains to be seen. Regardless of who and how this slice of the retailing pie expands, we’re confident that it will prove to be a very robust format in years to come.
掌 上 银 行 A BANK IN THE HAND AS E-COMMERCE CONTINUES TO DEVELOP FAST, SO TOO WILL THE ABILITY OF CHINESE CONSUMERS TO BANK VIA MOBILE PLATFORMS. We’re already seeing this happening in multiple ways, from street vendors processing credit cards via their android tablets, to e-commerce companies like Alibaba offering their consumers small savings accounts, to phone-to-phone SMS transfers. Tencent (China’s largest internet portal) has started offering customers a banking platform and with its 400million+ users, it’s destined to have a big impact. In the Year of the Horse we’ll witness consumers being able to use, share and spend money faster and more easily, leading to more transactions in more locations. This is good news for small businesses that have previously been constrained by payment issues, and might well regenerate the steadily shrinking small, informal trader. Just imagine how the ability to transfer a relatively small sum of money with a simple cellphone connection will enable transactions that were simply impossible in smaller rural areas. We expect to see points of purchase springing up virtually anywhere – not just in markets, but even on the most remote street corner. Such is the growing power of digital and peer-to-peer banking.
本自 土己 零领 售土 商的 成主 为人 LOCAL RETAILERS BECOME MASTERS OF THEIR OWN UNIVERSE YOU CAN SAFELY ASSUME THAT LOCAL RETAILERS WILL CONTINUE ON THEIR PATH OF EXTRAORDINARY EVOLUTION TO BECOMING WORLD CLASS. Undoubtedly, they will become more sophisticated in their deployment of systems, stricter in their management and begin to deliver better value than the international retailers currently fighting for market share inside China. Local retailers, either national or region-specific, are already starting to outstrip their international counterparts and in the Year of the Horse you can expect this to accelerate, with geographic expansion and increased output through existing sites. Local retailers already have the ability, through multiple means, to extract more profit from their locations, with the added advantage of ‘neighbourhood’ knowledge and connectivity. As they absorb elements of global retailing best practice, we forecast an ever-improving performance.
为 生 存 而 执 行 EXECUTE TO SURVIVE AS SUCCESS OUTSIDE ‘TRADITIONAL’ BRICKS AND MORTAR RETAILERS CONTINUES, WE ANTICIPATE INCREASED PRESSURE ON MANUFACTURERS TO CONJURE UP GROWTH. This is most likely to be achieved through a combination of basic marketing principles and decreasing costs in the system which, in turn, will demand greater sophistication in retail execution and sales forces across China. However, this kind of expertise and culture is not developed overnight, and it’s reasonable to speculate that specialists in this area will start taking over from the distributors that typically undertake this function. This does not bode well for these distribution companies that, until now, have had significant power – handling everything from the book, to the movement of physical stock, to in-store dealings. All this has been done with very little visibility for the brand owner, but as growth was so good, everyone was happy. Now, with the slowing in retail sales, we predict that a laser-sharp focus will be on delivering growth at lower cost. What will this mean? More science in field sales operation, better technology to drive execution, and complete visibility for the brand owner in terms of what it is paying for. All of these demands present a very real problem for distributors that are currently not geared for this level of in-store implementation. Don’t be surprised if there’s a sudden growth of outsourced sales force specialists, and an increase in the standard of in-store execution as a consequence.
本 土 奢 侈 品 牌 的 黄 金 时 间 PRIME TIME FOR LOCAL LUXURY LUXURY HAS BEEN A COMMON THEME IN CHINA’S RECENT RETAIL HISTORY. From the Chinese going abroad to buy, Hong Kong as a luxury goods market and every global luxury and premium brand finding a home in the ‘high streets’ and top class malls of China, luxury is seen as more than a status symbol; it is the evaluation of the elite and the definition of the ladder of success. The hunger for luxury is, indisputably, one of the most defining features of the rising middle class and new Chinese generation. It was only a matter of time before we saw the emergence of home grown luxury brands and we envisage them gaining traction in the Year of the Horse – the ability to mix national pride, artisan skills and high-end luxury is an unbeatable formula in China. In our opinion, this segment will take time to build as the mindset of ‘foreign = better’ is still entrenched but we nonetheless believe it will continue to grow and result in the formation of some very strong, innovative Chinese luxury brands. We expect to see these starting to assert their place in Chinese decadence and also emerging as global players within the luxury market. Having watched the creation of Chinese brands in the toughest of conditions locally, we have no doubt that if they can establish their presence overseas, they will significantly strengthen their position within the minds of local Chinese. This is a long road and the Year of the Horse will be an important staging post in the journey.
通 提 GAMIFICATION TO DELIVER 过 供 DATA INSIGHT 游数 DATA IS OF COURSE ONE OF THE MOST IMPORTANT 戏 据 AND ALSO COMPLEX KEYS TO THE RETAIL CASTLE. 化含 机义 制 There are massive amounts available from ‘likes’ and ‘wants’ to shopping patterns and the Chinese consumer is constantly inputting data to social discussions, chats and review sites. However, for some time the burning question has been how to extract relevant and usable data for a brand. In the Year of the Horse, we foresee gaming will become a major part of the plan. Consumers in China love the novelty of gaming and we know they will provide information if asked. The ability to ‘gamify’ users’ experience with a brand to get the best quality consumer feedback has proved to be one of the most powerful forms of information gathering, and we expect to see this gain real traction and begin to drive brand behaviour. Social media has given us some insight into the users’ experience but none has engaged, connected or interacted with consumers in the way gamification has proved itself able to. There is no doubt that eliciting meaningful data is of the utmost importance in driving growth for brands and that gaming will play a key part in the process for smart brand owners and retailers.
信 并 TRUST IS PRICELESS AND WILL CREATE A 任 为 CLIMATE FOR GROWTH 是业 FOOD SAFETY WILL CONTINUE TO BE A MASSIVE RECENT 无 务 CONCERN THROUGHOUT CHINA, IN THE TRADINGPAST IT HAS EVEN SPARKED CROSS-BORDER IN 价 成 PRODUCTS SUCH AS INFANT FORMULA MILK. 的， 长 创 造 条 件 For many there is a breakdown in trust for some homegrown food brands, with the quality perceived as being far lower than the comparative imports. We anticipate this will create a great growth opportunity for multinationals. With their ability to claim global standards and the trust and footprint to back these claims up, we foresee international brands able to push slightly harder on sales and margins. However, the pedestal is a wobbly one as any perceived advantages can just as quickly disappear at the emergence of any hint of scandal, no matter how small. Nevertheless, we will be looking to international brands in key categories of food, infant care and the like to really lead the way with growth in the Year of the Horse. Chinese put the value of trust way beyond a premium price point and if a brand can guarantee them that safety, they will be willing to pay the extra for it. Expect Chinese brands to intensify their efforts to improve their supply chain, production chain of custody and intensify their communication on safety and security in store. This sector is going to be hugely dynamic.
HISTORY OF THE CHINESE NEW YEAR THE CHINESE NEW YEAR, KNOWN IN CHINA AS SPRING FESTIVAL, IS THE COUNTRY’S MOST IMPORTANT HOLIDAY. The Chinese New Year is based on a calendar established about 4,700 years ago. Various legends explain the origin of the Chinese New Year. One describes how people dreaded the New Year because a fearsome beast named Nian annually terrorised the population and devoured children. Then one year a child appeared dressed in red. The beast, frightened by the colour, fled and never returned. That’s why the Chinese New Year traditionally features red lanterns and noisy firecrackers to ward off evil spirits. The Chinese New Year is based on a calendar that calculates time using both lunar and solar events. Time passes in 12-year cycles with each year represented by an animal of the Chinese zodiac. Traditionally, people prepare special foods and hope for a future of good luck. They attend many family dinners, starting with a New Year’s Eve feast. Travel home for the family reunion produces a mass migration. The New Year period culminates in the lantern festival, a joyful celebration around the first new moon in the lunar New Year. To learn more about the Chinese New Year and how the holiday unlocks year-round Brand and retailer opportunities download this informative and visual BrandZTM study. www.wpp.com/chinanewyear Get the interactive version on your iPad Download the free WPP BrandZ app and select the ‘China New Year Publication’ https://itunes.apple.com/us/app/wpp-brandz/id571644755?mt=8) THE YEAR OF THE HORSE CHINESE ASTROLOGY MA HORSE (YANG, FIRE) Believers of the Chinese astrology attribute a person’s personality characteristics to the profiles of their birth year animal. It’s not that simple of course. Following the Chinese view of the world as comprised of opposites, the zodiac animals are equally divided into yin and yang. They are also combined, according to their similarities, into categories called trines. In addition, each animal is connected to one of five elements: wood, fire, earth, metal and water. The possible combination of animals and elements produces a 60-year cycle and a complicated astrology. People who are born in the year of the horse are believed to have these characteristics: Cheerful, popular, quick-witted, changeable, earthy, perceptive, talkative, agile – mentally and physically, magnetic, intelligent, astute, flexible and open-minded. They can also be fickle, arrogant, childish, anxious, gullible and stubborn.
Smollan is an international field marketing organisation delivering growth for clients across five continents. With extensive industry experience, an exceptional human platform and sophisticated systems, Smollan has provided consistent excellence in operational execution to retailers and manufacturers for three generations. Smollan delivers growth by acting as an extension of our clients’ brands: • Ensuring perfect representation on shelf through outsourced sales forces, and instore merchandising, stock management and promotional implementation; • Engaging shoppers to create an experience that delivers on the client’s brand promise; and • Providing actionable insights into the trade through Smollan’s technology offering of category management, dashboard reporting and a custom mobility platform. From a traditional sales agency, founded in South Africa in 1931, Smollan has grown into a full-service fieldmarketing company with over 49,000 employees. Always is the largest field marketing services agency in China, providing total field marketing solutions from “Sell In” to “Sell Out”, from “Activation Strategic Planning” to “On-The-Ground Execution”. With a network of 90+ fully-owned offices throughout China, Always has the capabilities to activate in 600+ Tier 1 to Tier 6 cities. Services include Promoter & Field Marketer Management, In-Store Activation / Promotion, Retail Audit / Mystery Shopper, Event / Road Show, POSM Management and Premium / Gifting. Always manages 800+ projects on an annual basis across 500+ cities, executing more than 3.5 million activations on behalf of a portfolio of blue-chip clients. www.alwaysmkt.com Barry Leung President, Always Marketing Services firstname.lastname@example.org www.smollan.co.za Michael Smollan CEO, Smollan China email@example.com BRANDZ™ Established in 1998 by WPP and constantly updated, the BrandZ™ database of brand analytics and equity is the world’s largest and most authoritative containing over two million consumers interviews about more than 10,000 different brands in over 30 countries. BrandZ™ is proprietary to WPP companies. For further information about BrandZ™ contact Doreen Wang, Millward Brown China Doreen.Wang@millwardbrown.com or David Roth firstname.lastname@example.org PHOTOGRAPHY BY CECILIE ØSTERGREN IN COLLABORATION WITH
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