In Chinese culture, next week sees the Year of the Rooster end as we embrace the Dog for the next 12 lunar cycles. China regards the dog as an auspicious animal, one that is loyal and honest much like the wolfhound companion of Chinese god Erlang. If a dog happens to come to a house, it symbolizes the coming of fortune. Yet anyone who has studied marketing in China will know that the finding fortune will take a little more than a visit from a friendly pooch.
Most of the trends we forecasted last year are still very relevant and should be considered for many marketing strategies, but here are six nascent trends we believe are worth watching during the Year of the Dog:
1. Convenience 2.0
Convenience stores have long been among the fastest growing retail channels in China due to urbanites’ lives becoming increasingly busier. Convenience store grocery sales will grow 13% annually until 2025 according to Bain. Yet for Chinese consumers, expectations of convenience - fāngbiàn - are far greater than popping down to the local mart for a quick snack. With disruptive plays such as ecommerce, mobile payments and food delivery now mainstream in China, brands and retailers who don't have a convenient end-to-end experience will fast become irrelevant. Every touchpoint needs to be simple, digitally available and consistent across all channels. Product and brand information should be easy for customers to find. Avoid painful checkouts and long archaic queues (unless they're fashionable for categories such as cream cheese tea) to appeal to the ever-less-patient Chinese consumer. There isn't a category that won't be affected, so we'd recommend a fresh review of your customer journey and a rethink of marketing and processes.
2. New Retail is a Must-Have
Following on from convenient consumption, New Retail will marry convenience with experience, on the back of big data analysis and established logistics networks. This year is likely to see New Retail shift from a novel concept to the mainstream. Alibaba expects to grow its current 20-odd Hema grocery stores to 2,000 over the next three to five years, in addition to rolling out New Retail across its Intime, RT-Mart, Auchan, Suning chains. The company will also dive into experimental retail projects such as vending machines selling anything from live hairy crabs to new cars.
Tencent is hard on its heels, investing in digital integration with Carrefour, Yonghui, Wanda Plazas, unmanned WeChat stores and 1,000 7Fresh grocery stores in conjunction with JD and Walmart. Walmart and subsidiary Sam's Club will likely learn from the experience and follow suit. With so many of China’s biggest retailers jumping on the New Retail bandwagon it will become a hygiene factor - those retailers who don't get on board will be distinctively disadvantaged and less sustainable. It will no longer be a case of whether to incorporate New Retail, but how best to do it.
3. Smart Selection of Lower-Tier Cities
Further to last year's trend of investing in lower-tier cities, brands will not only target the less competitive markets in the hinterland, but be much smarter about which cities they focus on. Smaller cities are leading the growth on Alibaba’s ecommerce platforms and have propelled social commerce Pindoudou become one of the most popular apps in China. This is supported by increasing consumer wealth and sophistication, and improving logistics. Ecommerce growth is both raising awareness of new products, categories and origins, but also provides a depth of data that can help determine local and regional preferences. Smart brands will utilize this data, coupled with regionalized trends and local distribution contacts to cherry pick cities to target.
4. Information Partnerships
More brands are realizing that they can't do it alone in a market as fragmented, complex and dynamic as China. Large corporations will sign more partnerships with companies like Alibaba and Tencent such as the recent WeChat and Lego and Alibaba and Ford deals. These deals won’t just be about tapping into their powerful marketing and sales channels, but gaining knowledge from their enormous deposits of consumer data.
In addition, businesses who understand and can translate the market will become increasingly attractive partners for brands seeking to maintain or gain leadership in China. While marketing services become commoditized, brands will be increasingly prepared to invest in smart, differentiated strategies that incorporate a holistic view of the Chinese market, rather than being limited by a segment-specific orientation.
5. Green, Natural, Healthy & Environmentally Friendly
Health has been a big trend for the past few years in China, but consumers' definition of what is healthy is maturing. Although there is a lot of hype around sustainability, the decision process remains mostly focused on the personal benefits of "green" products. For example, in the food and beverage market there is a movement towards natural and unfitted products with organic credentials; in furniture, it is formaldehyde-free furniture that families want; in fashion, natural products are increasingly trumping polyester. The growing trend towards sustainability is being assisted by Government policy and state media outlets, driven by Xi Jinping's goal of environmental leadership and pledge to have blue skies in three years.
6. Artificial Intelligence
Artificial Intelligence has increasingly become a topic of conversation over the past few years, but expect it to ramp up a gear in China in 2018. AI is a biggie for China, and an industry that Beijing is throwing its support behind.
The phenomenal adoption of smartphones, coupled with increased surveillance and other initiatives, has seen consumer's digital footprints widen and deepen more than anywhere else in the world. The resulting mountains of data are impractical to manipulate and utilize with anything but AI. Beijing understands this and has initiated a $2.1 billion AI research park to host 400 businesses in the capital, with hope of producing $7.6 billion in annual output by 2023. Even Xi Jinping has a couple of AI books on his bookshelf.
China is better placed than anyone to lead the AI revolution. There is support from the very top in Beijing, lax attitudes to privacy, incredible amounts of data necessary to feed the AI machine, motivated and cashed-up tech behemoths and millions of patriotic engineers keen to see China lead the world in the field. AI is already starting to become mainstream in China with mobile darling Toutiao using it to provide individual news feeds and Alibaba presenting customized storefronts. Expect more brands to embrace AI to provide consumers with personalized experiences that are relevant and unique to them. It will have an impact on convenience, New Retail and each of the other trends above.
That's the six big trends we see influencing marketing in China this year. There are plenty more, but they’re the ones that we think will have the most widespread relevance. Happy Year of the Dog: hopefully the fortune of a visiting pooch will find you!