The Rising Influence of Mobiles in China's Smaller Cities
In 2020, if an affluent Chinese consumer buys your goods and services, they're three times more likely to be from a lower-tier city than a megacities like Shanghai or Beijing. Should you be targeting the middle class masses, there's even greater chance they'll be 'small-town' folk.
Cities like Shanghai are already very wealthy - Shanghai's GDP was almost as large as Switzerland's in 2012, and would rank in the top-40 countries globally. However, much of China's growth has moved beyond the mature markets to the smaller cities. By 2020, this rise will see nearly 800 Chinese urban locations with a real disposable income per capita higher than Shanghai's 2010 income per capita.
With 87 Chinese cities having more people than Finland today, there are already plenty of locations brimming with potential customers. Consumers in China's smaller cities have lower average incomes than the big cities; however a lower cost of living means many actually have more cash for discretionary purchases. Much of that cash is being spent online. Last year, consumers in Tier 3 and 4 cities spent an average of 30% more online than their Tier 1 and 2 equivalents.
The Internet's influence on smaller city consumers will continue to grow. Last year, 35% of China's Android smartphones were in Tier 3 and 4 cities - this year it is 45%; further reinforcing mobiles sites, apps, games, search and social media as a vital channel for reaching consumers across China. Mobile payments in China are set to exceed ¥800 billion ($130.4 billion) this year, growing 500% from 2012. And with mCommerce becoming increasingly integrated into uber-popular services like WeChat and Taobao and Tmall's smartphone apps, mobile transactions will soar even higher. But mobiles aren't the only thing to consider to get more Chinese consumers to buy your wares, so we've included a few more below. We hope you enjoy this week's Skinny.
See below highlights of the news this week:
Chinese Consumers
China's Smaller Cities Thirst for the Luxe Life: China's smaller cities are contributing to much of China's increase in luxury spending. In Sichuan province alone, Hurun estimates that there are 25,500 millionaires, and 1,800 'super rich', with assets worth more than $16 million.
Tesco in China: Failing Brand Loyalties: Compared to Western consumers, Chinese are variety seekers. 63% of Chinese consumers have loyalty cards from four or more retailers, believing larger choices gives them more control, increased motivation to make decisions, and a more satisfying shopping experience. Chinese are quick to adopt the unfamiliar, with 46% of consumers purchasing chocolate in 2009 increasing to 66% in 2011.
China Central TV: Champion of the People With a Blurred Picture : In 1978, less than 10m Chinese people had access to a TV. Today CCTV boasts more than 1 billion potential viewers for its 45 channels. With such a reach, there is little surprise that TV campaigns singling out foreign companies have been so harmful to the brands. “The reasons for this bias towards reporting [negatively] on foreign companies are complicated; sometimes it is political as in the case of Google, often it is rent-seeking [trying to force large companies to buy advertising or pay bribes] and sometimes it is just the path of least resistance,” says Mr Shi, a senior journalist who once had close ties with CCTV. Interestingly, ad purchases for CCTV in its annual auction are down as much as 85% in some segments compared to last year, as more advertisers realise online advertising provides better returns.
It Only Takes Three People to Create a Tiger: Nice analogy with an ancient Chinese idiom and how quickly bad PR can spread in China online, including nationalism, poor customer service, and foreign multinational smear campaigns.
Internet, eCommerce, Mobile & Social Media
China has 270m Android Users – that’s Nearly 30% of Global Android Activations to Date: 45% of Android users in China are from 3rd and 4th tier cities, rising from 35% a year ago. Android users downloaded 10.5 apps a month in Q3, up from 8.2 a year earlier. Users check their phones 53 times daily, spending 150 minutes on their devices, 26 minutes more than 2012.
China’s Mobile Payment Market to Exceed 800 Billion Yuan: China's mobile payments market is forecast to exceed ¥800 billion ($130.4 billion) this year, more than 500% up on 2012. 3rd party payment platform Alipay saw mobile transactions jump to a third of all transactions, up 800% from a year earlier. For further confirmation of the rise of mCommerce, Xiaomi sold 150,000 of it's Mi3 smartphone in 9 mins and 55 seconds on WeChat.
The Secrets Of Xiaomi Marketing Success in China: Xiaomi started selling handsets just three years ago, and already outsells Apple for units in China. They expect to sell 18 million smartphones in China this year. Their success can be strongly attributed to their marketing, where staff spent time in forums commenting, sending posts and advertising, also selecting 100 key contributors to give feedback on their operating system and design.
WeChat Sneaking up on Heavyweight Alipay: Alipay dominates online payments in China, accounting for 78.4%, or 275 billion yuan (US$45 billion) in the first three quarters of the year. Although small, WeChat is one to watch in the future, with 350,000 payments by October this year totalling 100 million yuan (US$16.4 million).
New Threat Spurs E-Commerce Giant into Action: WeChat users ability to make quick purchases by scanning QR/bar codes, and then track deliveries and review products, saw 80,000 purchases on Singles' Day. Taobao and Tmall smartphone apps have 320 million registered users, who now account for 10% of sales from 1.1 million vendors. 20,000 businesses are using Alipay for mobile payment services.
Food & Beverage
Producers Urged to Push Sweeter Sparkling Wines in China: A promising and relatively untapped niche wine category in China? A wine producer at the HK International Wine Fair found their sweeter, sparkling wine appealed to Chinese consumers, especially females and young professionals. Sweet wines that were a balance of acidity and refreshing, were popular for another producer. China's sparking wine market in 2012 grew 60%.
Grace Vineyard Launches New Labels in Beijing: Interesting branding, not your traditional wine positioning ... the People's Series wines with propaganda-themed labelling.
Social Media is "Essential" for Brands Looking to Break Into the China Wine Market: "Having a Weibo account reassures consumers that the brand is real and established," says research manager Rui Su at the HK International Wine & Spirits Fair. "According to our recent survey, it is now the most important source of information on wine for imported wine drinkers".
Social Dining Popular Among Chinese Consumers: A restaurant's specialty is the top reason why Chinese choose a restaurant, followed by atmosphere, reputation, service quality, prices, privacy and location.
This Week in Toxic Food: Bean Sprouts: Another food item to add to the list of potentially dangerous foods in China. Cancer-causing banned chemicals including growth stimulants, antibiotics, bleaching powder and preservatives used to whiten bean sprouts and keep them looking fresh have become standard practice for many growers.
Investment and Finance
China's Rich Fleeing the Country—With Their Fortunes: Half of China's ultra-rich, those worth more than $16 million, have investments overseas. Wealthy Chinese have an estimated $450 billion - $658 billion of investments overseas, which is expected to double in the next three years.
No Longer Just for Chatting, WeChat Will Soon Become a Financial Service Platform: WeChat users will soon be able to link their bank accounts to the app, allowing money to be deposited on Tenpay and management of bank accounts, making it easier to spend through the app.
Sport
China Sports Insider – Joe Montana Interview: 3 min video: NFL legend Joe Montana beamed in from the Great Wall with his thoughts on the future of American Football in China and the likelihood of a Chinese player in the NFL.
Entertainment
New Musical Partnership in China: A Chinese-Western partnership of classical music heavyweights looks to create new paths for performances and marketing. Tens of millions of children in China are learning to play the piano or violin, and new theatres and concert halls are being built throughout the nation. Even Barbie has a violin in China.
'Gravity' Thrills, 'Catching Fire' Chills as China’s Box Office Tops $3 Billion: Hollywood films having a good run in China since October, accounting for 55% of the market and 47% for the year overall, although Chinese film launches in December are expected to decrease this share.
Auto
Chinese Car Buyers Willing to Wait for Discounts on Autos: Around 75% of surveyed car buyers in China said their final purchase decision was prompted by a special deal or promotion, which can include cash discounts, extended warranties or giveaways. Last year it was 40%.
Nissan Gets Back to Marketing in China: In the first major piece of marketing in China from a Japanese auto maker since the Diaoyu/Senkaku Island dispute, Nissan launches a 9 minute micro-movie starring Chinese A-lister Huang Xiaoming.
Chinese Browse Used Car Lots: In 2012, used car sales grew 11% to 4.8 million vehicles. New cars, although a much higher 15.5 million, rose just 7%.
China Turns to Cities to Help Boost Electric Car Sales: Of the 19.3 million cars sold in China last year, just 11,375 were electric. Still a long way to go to have 500,000 electric cars on the road by 2015, and 5 million by 2020. The Government has pledged ¥4 billion (around $650 million) to help car companies strengthen design, batteries and other technology. They are also providing subsidies of ¥60,000 ($9,800) to electric car buyers, and assisting 28 pilot cities and urban areas to promote them. Let's hope it works.
That's The Skinny for the week! China Skinny would love to discuss how we could help with your marketing, online initiatives or research to take advantage of China's opportunities. Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
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