nz china business summit - kestrel lee

China: how digital disruption is disrupting

commerceUnderstanding the key trends

and challenges to selling in China18 Sep 2015

ChinaNetwork

Clientele snapshot: IT, Auto, Retail & Gaming

1. Digital marketing and E-Commerce are converging in China, turning sales channels into branding ones.

http://v.youku.com/v_show/id_XNzI4NjkwODU2.html

…as in many longer-standing e-commerce markets, they are also developing brand awareness, an increasing proclivity to purchase high quality and/or individually satisfying products, and showing a commitment to brand loyalty and repeat business… - KPMG’s China 360 report: E-commerce in China: Driving a new consumer culture, 14 Jan 2014.

“…we cannot overemphasize the importance of online shopping for brands in China,” said Tony Chen, Chief Digital Officer GroupM China. “The top e-commerce sites are no longer mere sales channels, but media in their own right, with hundreds of millions of visitors ripe for brand communication.” - Group M http://www.wpp.com/wpp/press/2014/jun/20/groupm-charts-china-e-commerce-frenzy/

2. Online domestic consumption drive online purchases like travel, ignoring the declining Chinese traditional economy

These are news headlines that came out the week after China’s stock market issues. An economy in crisis?


Online retail sales has vast growth potential as it only accounts for 10% of all retail sales in 2015’s 1st quarter

3. Digital has divided China’s economy into a declining traditional retail and manufacturing economy that exists along side a thriving service-based retail economy

Nicholas Lardy, senior fellow at the Peterson Institute for International Economics, who observed that a focus on weaknesses in China's industrial sector missed the bigger picture… that the service sector has been the biggest driver of China's economic growth for the last three years as households spent on entertainment, travel, health and education.As one of the encouraging results of economic restructuring, the services sector increased 8.4 percent in the first half of 2015 and accounted for 49.5 percent of China's GDP. http://news.xinhuanet.com/english/2015-08/28/c_134562999.htm "People are still spending but they are more careful about how they spend, with more focus on features and functions, after-sales support and how products fit in their life," according to Ben Cavender, an analyst at China Market Research Group in Shanghai.

3. Digital is creating a situation where traditional FMCG sales are dropping while online FMCG sales are rocketing

4. Local brands’ grasp of ecommerce and alternative offline channels are beating foreign brands in the retail market.

GPJ Experience Marketing proprietary and strictly confidential. Copyright reserved 2014.

Bruno Lannes, a partner with Bain & Company, talked about why domestic brands were winning market share from foreign brands: “An important reason is that they [foreign brands] focus on more toptier mainland cities and their products sell mainly through hypermarkets.” Many Chinese consumers are not making as many trips to the hypermarkets, instead, they are shopping their local supermarkets, minimarts and convenience stores.

Digital and CVS channel are replacing shopping malls and hypermarkets in China as retail outlets.

http://www.warc.com/LatestNews/News/EmailNews.news?ID=33506&Origin=WARCNewsEmail&CID=N33506&PUB=Warc_News&utm_source=WarcNews&utm_medium=email&utm_campaign=WarcNews20140902

http://www.warc.com/LatestNews/News/EmailNews.news?ID=33506&Origin=WARCNewsEmail&CID=N33506&PUB=Warc_News&utm_source=WarcNews&utm_medium=email&utm_campaign=WarcNews20140902

4. Local brands’ grasp of ecommerce and alternative offline channels are beating foreign brands in the retail market.


Iresearch estimated that in 2018, total transaction value would be RMB7.3 trillion (US$1.18 trillion) in China online shopping market.

5. Slow growth does not mean no growth, thanks to the growing digital service and ecommerce economy


5. Slow growth does not mean no growth, thanks to the growing digital service and ecommerce economy

6. Digital enabled retail marketing can target increasing consumption and ecommerce in lower tier cities

Although average disposable incomes in China's Tier 3 and 4 cities are two thirds of Tier 2 and just over half of Tier 1 cities, a lower cost of living and soaring growth is seeing many 'small town' folk get out and spend. 65% of FMCG sales come from Tier 3 or lower cities according to Euromonitor.Consumers in lower‐tier cities aren‘t just buying everyday household groceries. Of China’s top‐10 cities by per capita GDP, seven are Tier 3 or lower. Four of China‘s top‐10 cities for disposable income don Tier‐4 status and are mostly underserved by premium brands. － China Skinny

6. Digital enabled retail marketing can target increasing consumption and ecommerce in lower tier cities

In July 2014, the ministries of finance and commerce chose 55 poor counties to receive 20 million yuan each to develop their ecommerce industry in a bid to reduce poverty. One of these counties was Tongshan, in the central province of Hubei, which had per capita GDP of 4,000 yuan in 2014, compared to the national average about 46,000 yuan. Tongshan has opened a Taobao shop to sell tickets for its main tourist attraction, the Jiulong Mountain scenic area. In the past, the area sold about 1,000 tickets a month, Hu said, but the online store has pushed that figure up to 10,000. Then local hotels got into the act, launching promotions on tourism websites such as Ctrip.com and Lvmama.com.

However，rural retail sales in China were increasing faster than those in urban areas, at 11.6% compared to 10.4%, reflecting disparities in income growth: per capita disposable income for rural people was up 10% in this period, while that for urban residents rose 8.3%. - National Bureau of Statistics (NBS)

1.明星效应!Celebrity/influencer

engagement!

2.紧跟潮流 Lifestyle/trend memes!

3.互动Event Online to offline event engagements!

4.与电视节目《美丽俏佳人》合作 TV program sponsorship!

乐蜂网

7. Thriving ecommerce build inter-connected ecosystems between their online, offline and content platforms

8. 89% of the Chinese people uses smartphones as their key gateway! to social media and ecommerce.!!

9. In China, social media is also mobile media - WeChat dominates open rates on mobile. !

A branded app strategy is redundant in China. Raising brand and retail offer visibility on WeChat and other mobile channels is the way forward!

especially in the sharing of discount and ecommerce offers.!

10. Ecommerce is becoming mobile commerce!Kantar Worldpanel: “…research found that 80 percent of Chinese consumers who bought online in 2013 made at least one purchase from a smartphone.”!

11. WeChat is driving online-to-offline social commerce through sharing, giveaways and loyalty card services

O20WeChatecommerceac4va4onapproachinChina:Userjourney

Creatememorablesocialcampaigns

aroundbrandvaluestocreatebuzz,raiseproductawarenessanddriveleadgenera4on

Provideproduct

contenttoemphasizethelifestyle,consumerandstrategicbenefitsofusingourclient’s

brands.

Samplingatstoresandroadshowsfordriveto

trialprograms

UsesocialmediatodriveTAaKerengagingwiththebrandonline,

tobuyfromecommerceshopsor

actualstores.

TrackingInternetWord-ofMouth

(IWOM)andorganicsearchtrafficfor

brand/productqueriesorecommercetransac4ons.

SPARKSEEK/

WEBROOMINGSAMPLE SHOP/

SHOWROOMINGPOST-SALES

ENGAGEMENT

BLUE=ATLSOCIALPROGRAM GREEN=POS/SOCIAL/DrivetoTrialPROGRAM

22 GPJ Experience Marketing proprietary and strictly confidential. Copyright reserved 2014.

BoughtMedia(Display,Facebook

Ads)CreatedMedia(Facebookupdates).

Boughtmedia

(Search).

Earnedmedia(PR/BloggerOutreach).

CreatedMedia(Digitalscreens)OwnedMedia

(Mobile)

EarnedMedia

SPARK SEEK SAMPLE SHOP POST-SALESENGAGEMENT

BLUE=ATLSOCIALPROGRAM GREEN=SHOPPER&DRIVETOTRIALPROGRAM

23 GPJ Experience Marketing proprietary and strictly confidential. Copyright reserved 2014.

O20WeChatecommerceac4va4onapproachinChina:Mediamix


Challenge:GPJ/JUXT China identified an area in customer relationship management for Porsche to address. How best can the brand engage its existing drivers who have bought a Porsche already? Given the stiff car market competition in China, every brand needs to continually engage its current clientele to build brand loyalty during and beyond the car purchase. Insight:GPJ/JUXT China identified a need-desire gap in that Porsche drivers rely mostly on their car to get to where they need to go. So when they send their cars for servicing with Porsche, their mobility and even their lifestyle for the day is greatly disrupted . Solution:To create buzz and to thank existing Porsche customers, GPJ/JUXT China created and launched Porsche China’s “VIP Customer Day” integrated campaign. This was to create awareness of Porsche’s social CRM outreach program on WeChat that allowed existing Porsche drivers in China to book a day to send their Porsche for servicing while they pick a specific “away-from-the-car” package from Porsche partners such as spa, fishing, yoga promotions for that very same day. Besides providing a service, Porsche drivers will not waste a day with their car being serviced while enjoying the type of lifestyle that Porsche believe they should experience.

Loyalty ecommerce program based on after-salesYour Porsche VIP day campaign starts on the very day

you make an appointment on our customized WeChat platform to send your Porsche for servicing and you to a day of relaxation based

on the VIP package you choose or buy on the platform:http://youtu.be/mlE0VGKQn5c

WeChat case study: online-to-offline full year customer service program by GPJ/JUXT Shanghai for Porsche China


WeChat case study: Online to offline shopping marketing and loyalty program for 55 Parkson Malls in China

“We are pleased with GPJ/JUXT Shanghai’s efforts to launch our online to offline shopper marketing campaigns using social media and in-store event activation for our 50+ departmental stores in China. They did a great job in this new area of marketing.” – Lim Shea Lee, Senior Manager, Marketing, Parkson Department Stores, China. Christmas promotion WeChat case study: http://v.youku.com/v_show/id_XOTQwOTM3NjE2.html

China: how digital disruption is driven by

millennialsAs the new middle class in China,

they can either make or break a brand


Millennials are the engines of emerging economies in the world!Be it BRIC or MINT (newly coined growth markets), these economies are driven by growing middle class

driven by growing numbers of young workers who are using technology to learn, live and work. !


Millennials are the engines of emerging economies in the world!Millennials are the key consumer segment driving business success in new

economies, as well as old ones. Just ask Burberry. !

http://www.theguardian.com/business/2013/jun/16/angela-ahrendts-Burberry-chav-image!

A five-year study begun in 2011 to monitor a group of youngsters' attitudes towards and use of technology reveals the inevitable future of the British high street stores as collection of showrooms. Stores in the UK have had to close down through recession and, says Amaze, "due to massive changes in how people use technology". !http://www.amaze.com/news/news-items/Amaze_generation_newest_release.aspx !

Millennials are a group of Chinese consumers currently missing in Western marketing planning


http://www.warc.com/LatestNews/News/Western_brands_err_on_China_positioning.news?ID=33612

McKinsey reports that China's emerging consumer class is more emotional than previous generations of shoppers and firms must shift their marketing strategies to keep pace with them i.e. 51 per cent of city-dwellers by 2020, up from 6 per cent in 2010 http://in.reuters.com/article/2012/09/25/china-economy-consumers-survey-idINL5E8KP0OQ20120925 Group M China’s Dec 2013 Study also stressed the importance of building emotional connections with their consumers. Emotions impact consumers differently with market maturity. Respondents aged 15 to 64 in Tier four cities are the most bonded with brands, citing feel good factors such as 'make me feel more confident and attractive'.!

McKinsey: China’s Emerging Millennial Consumer Class Are More Emotional Than Past Generation of Consumers


Their Millennial Social & Spending Habits are Driving Social e-Commerce

Source: Tong Ji university GPJ Experience Marketing proprietary and strictly confidential. Copyright reserved 2014.

Source: Tong Ji university

Social Content and Emotional impulse Drives Brand Preference And Buying Decisions for Chinese Millennials


•  Adidas gained 11% of the sportswear market compared to Nike’s 12.1% •  12% rise in fourth-quarter China sales for a 15% climb during the full year •  Nike is setting up 1000 discount stores to get rid of its inventory •  Nike + did not take off in China

Nike China did not understand how to market to millennials


•  Adidas responded to an increasingly sedentary millennial population, which happened to be the new Middle Class in China •  It positioned sports to women with a strong social purpose i.e. a peer to peer social activity.

Retail store counters report that they see more women walking into shop. Anecdotally, tracking of online buzz

show "fairly positive" comments written about the campaign, like "This is exactly how I feel", "This encourages me to do

sport", "Sports doesn't have to be hard", "This isn't like the brand that I

had in mind before"

Adidas China did it by creating social relevance...



1. Millennials include your new MACs from the Western and Southern part of China i.e. lower tiers city!

Ecommerce is a better a way to target increasing consumption in lower tier cities, not Tier 1.!!NOTE: Xi Jin Ping’s ambitious 2013 to boost consumption and personal credit access focuses on Western Tier 3 cities with regards to culture and entertainment. !


2. HENRYS and the LGBTs are the new black.!

These HENRYs — “high earners, not rich yet” — are young Chinese professionals who pride themselves on their individuality, shunning flashy labels and the “secretary” look, according to Reuters. These buyers take their fashion cues from social media and prefer to buy from multi-brand e-retailers, such as Shangpin.com and Italy’s Yoox, trendy boutiques, and high-end department stores, including Lane Crawford and Galleries Lafayette.!


3. New millennial mothers drives household consumption at 3 levels.


Digital-led retail marketing can help brands target millennials who grew up with technology and social media especially millennial mothers

2. New millennial mothers drives household consumption at 3 levels.

Gifting helps to make your product or services more premium in the social commerce space.!!Spending on gift-giving by Chinese luxury consumers was down a further 5% in 2014, totaling 30% over two years according to Hurun Research Institute.!!Consumer electronics was the gift of choice in China, lead by Apple overtaking LV and last year’s top choice Hermes, which dropped down to seventh. Red wine dropped to third place in the preferred gift. Watches rose to second place. Overall spending crept back up to the levels of two years ago. Travel gift vouchers continued to show a strong rise for the third year running. There is a gifting opportunity here.!

1.  Focusing on women travellers through gifting strategies as China is the largest gifting economy in the world.

Travel and study overseas is the ultimate Luxury in the new borderless Chinese economy


2. Appeal to rich and affluent families and youths through education tourism packages

May 2015: In WeChat’s latest update this week, a new feature allows users to collect payment in easier way by simply clicking on the plus icon in the main interface.Users who initiate the “collect payment” feature will see a QR code which he or she can use to show the other party to scan and make the payment.

3. Leverage on mobile commerce to promote or test trial offers such as what is happening on WeChat in China

•  Wechat users scan the QR code displayed on the website on desktop computers to finish payment.•  Use Wechat payment on mobile apps.


Current QR code driven cross border templatesin the fashion industry In the food industryAGENCY SEE POTENTIAL UNTAPPED COMMERCE AND BRANDING OPPORTUNITIES FROM REDESIGNING

QR CODE AND BAR CODES.!!

Branding and commerce opportunities!Barcode redesign campaign: http://v.youku.com/v_show/

id_XMTI4NTczNjkyNA==.html !!

QR code building http://v.youku.com/v_show/

id_XMTI4NTc0NzcwNA==.html !!

RICE CODE REFERENCE: http://v.youku.com/v_show/id_XNzQwMTIxNTA4.html

!



4. DOUBLE SCREENING: In-store /event experiences via augmented on smartphones & wearable technology!

Burberry: https://www.youtube.com/watch?v=G9zvkbKaY-4Sight systems: https://www.youtube.com/watch?v=lK_cdkpazjI

Thank you !!!Please consider this document proprietary and strictly confidential. The concepts, methodology and information produced by George P. Johnson (A Project: Worldwide Agency) and contained in this document shall not be used or adapted in any form, either in part or as a whole without the written permission of George P. Johnson (A Project: Worldwide Agency). Copyright Reserved 2014.

nz china business summit - kestrel lee

Economy & Finance