2019 was a year of incredible change in China’s retail sphere. The rise of new digital resources, shifts in the international and domestic arena, and rising players have driven vast change in consumer behaviour and brand behaviour. From online-to-offline campaigning, social marketing, bespoke creations and product launches, and to brand campaign wins and losses, conspicuous consumption is still very much a priority for many, and the appetite for exclusivity and excitement still reigns supreme. Here are some of our predictions for 2020 in the Year of the Rat.
The booming sheconomy
Immense social change across China has borne witness to a growing consciousness towards inclusivity and the growing sheconomy - as well as the lucrative male beauty market - in line with a growing movement for rejecting rigid gender stereotypes. Driven by millennial and Gen-Z shoppers, the Chinese female economy was worth more than $700 billion in 2019. Furthermore, research from vip.com and JD.com suggests that more women are the key purchase decision makers particularly in urban households. This is thanks in part to the growing number of women in the workforce and increased average annual incomes, coupled with aggressive growth of the ecommerce sector and online platforms which has captured the attention of female consumers across China. We expect that this trend will continue as Chinese female consumers continue to thrive, and become more financially independent and sophisticated spenders. For retail brands, ecommerce centric festivals such as Singles Day, as well as International Women’s Day are some of the key opportunities to capture the attention and imagination of Chinese female consumers, and an opportunity to focus their marketing and production efforts towards a growing desire for self-expression through fashion decisions.
Chinese female consumers are set to be a huge source of growth for the retail sector
Know your distribution channels
Following on from our last piece is our steadfast prediction for the rise of omnichannel marketing and the importance of knowing your distribution channels. The convergence of ecommerce and social media combined with growing offline capabilities has opened up options for retailers to reach Chinese consumers and sow their seeds. Channel strategy will play a big role in brand success and we predict that establishing oneself solely online won’t quite cut it. We expect brick and mortar to take more of a stronghold when it comes to channel strategy including pop ups, installations and store renovations. Luxury leaders like Harrods have already taken note and opened their first store in Shanghai to meet growing demand from the Chinese middle class and in response to the rising demand for a more ‘permanent presence’, and other brands ought to take note.
Brands entering the Chinese market for the first time often overlook domestic competition. Domestic brands are well-accustomed to the underlying social contexts and consumer demands and thus are the first to respond to emerging trends. 2019 was the year that Chinese brand strength grew insurmountably for digitally native brands like Perfect Diary, who have become the best selling Chinese beauty brand in the market. Last year they even joined forces with the Metropolitan Museum of Art to create a limited edition makeup palette with royal portraits - and without a premium price tag at under 100RMB, roughly $14. Product innovation and local knowledge of consumer preferences has shone a positive light on Chinese brands, and perceptions of homegrown brands are changing for the better. Additionally, in the age of social media marketing, equally as important as creating buzz is the power of products and brand storytelling that resonate with their target consumer base, which is an opportunity for brands to find out what it takes to create the next must-have items in China. We should thus expect foreign brands to step it up in order to meet the growing expectations of Chinese consumers, and to take strides towards cultural sensitivity to the Chinese market.
Perfect Diary’s eclectic range of products has captured the minds of its young consumers
Social marketing and KOCs
Chinese consumers are more and more reliant on word of mouth marketing in a quest for authenticity in the oversaturated KOL (Key Opinion Leader) influencer market. The KOC (Key Opinion Consumer) is set to be the new source of information when it comes to selling in China and consumers are taking a more informed approach to their purchase decisions. Consumers are beginning to suffer from influencer fatigue and are thus placing more value on peer reviews over paid sponsorships, which has seen the emergence of ‘brand communities’. This being said, collaborations with some larger influencers such as Mr. Bags for example are still en vogue, but in a world where everyone is striving towards becoming an influencer, brands need to become more consumer insight-driven, and should focus on harnessing the power of brand communities and building their customer loyalty ladders.
All things considered, 2020 looks to be an exciting year ahead in the Chinese retail market. Direct-to-consumer marketing, omnichannel distribution and word-of-mouth marketing will become the norm as consumers and brand relationships continue to develop. We can expect more themes to emerge from the vast sea of information as brands try to level up in the competition for Chinese consumers attention.