Millions of Chinese people across the world are celebrating Chinese New Year today. It is the most important holiday in the Chinese calendar and, according to the 12-year cycle of the Chinese zodiac, 2019 is the Year of the Pig.
China has been in the news a lot more in the past year due to Trump’s trade wars, problems for Huawei, population surveillance and slowing growth. Regardless of what is going on at a geopolitical level, for regular visitors to China like myself, taking a deeper look at what’s happening away from the headlines can help marketers understand how Chinese trends are going to eventually affect us all. As Peter Frankopan, Oxford historian and author of the book ‘The New Silk Roads’, writes: “All roads used to lead to Rome. Today they lead to Beijing.”
When it comes to China, it’s hard to get away from the one thing the country is most famous for: size and scale. The statistics are always mind-boggling. Black Friday may seem like a big event in the UK retail calendar but it cannot compete with Singles’ Day in November. Alibaba alone racked up more than £24bn in sales on the day 2018 – 27% up on 2017.
Alibaba also set a world record for most payment transactions with Alipay, its online payment platform, processing 256,000 per second. The number of delivery orders surpassed one billion. In just one day.
Then there is the scale of ambition western brands have for China. Starbucks said in 2017 that it would open 2,000 new stores in China by 2021 – one every 15 hours. Prada is opening seven stores in the city of Xi’an – three in just one shopping mall, with two stores alone for its classic British shoe brand Church’s.
Luxury brands are one thing. What about something more prosaic, like healthcare? The Ping An insurance group launched China’s largest online healthcare services provider in 2014. Ping An Good Doctor (what a great brand name!) has AI-geared ‘one-minute clinics’ with online consultations, as well as 24/7 compact booths and more than 100 common drugs available through refrigerated smart vending machines.
Each clinic has an ‘AI doctor’ trained to collect data on patient symptoms and medical history through voice and text input, with human doctors providing remote diagnoses, medical advice, and prescriptions.
If scale is one half, speed is the other half of the equation. Partly, speed is driven by the work ethos: working on the ground in China and directly with Chinese customers has shown me that the mantra of 9-9-6 holds true – meaning 9am to 9pm, six days per week. Not exactly a 40-hour working week.
The city in China that symbolises speed is Shenzhen. In the 1980s it was not much more than a fishing town. Today, Shenzhen produces 90% of the world’s electronics and has 12.5 million people. The city’s real claim to fame is hardware – this is, after all, where your iPhone or drone is made.
Shenzhen has its own 70 million square foot shopping area called Huaqiangbei Electronics Market, where you can buy circuit boards, LEDs, microchips, sensors, mini-cameras and microphones on the spot. Shenzhen is the place where you can then get your crazy idea turned into a real product.
There is one other thing in China that British marketers can look on in envy at: convenience. The phrase ‘friction-free’ is the best way to describe the everyday reality of many transactions in China – to a level that is extraordinary compared to the UK.
To understand convenience in China, you have to understand the influence Tencent and Alibaba have. The vast majority of online activity in the country happens through proprietary applications run by these two companies – and nearly all this is done by phone. Mobile is ubiquitous in China – a way of life, not only a medium of communication.
Alibaba’s online payments system, Alipay, controls about half of China’s online payment market. Aside from the business-to-business site Alibaba.com, Alibaba also has its Tmall marketplace for business-to-consumer, and Taobao marketplace for consumer-to-consumer sales. Combine eBay, Paypal and Amazon and you get an understanding of Alibaba’s brand portfolio.
Tencent owns WeChat, which has a billion-plus users – an incredible combination of Facebook, Twitter, Spotify, WhatsApp, Paypal and YouTube, as well as gaming, in one ‘super app’. WeChat was recently called the ‘operating system of China’.
Most Chinese companies have recognised this and build their advertising and marketing, social communication, shopping, purchasing, and payment programmes around mobile. Brands are not just purveyors of products and services but partners helping consumers with daily living.
You can use your phone for literally everything. On mobile, consumers talk, text, shop, hail taxis, book travel, trade stocks, pay for utilities, deposit money into their bank or transfer money.
As a result, China is increasingly a living insight into a future of ‘frictionless living’ – and consumers expect it. Jumping on a bike, ordering a meal from a huge range of restaurants, giving money to beggars on the street — all can be done at the touch of a button. From a pure payment perspective, WeChat and Alibaba’s Alipay are making cash obsolete.
On a recent trip to Dalian in north-east China, I found it difficult to pay cash even in modern supermarkets and convenience stores. As Duncan Clark – venture capitalist, author of the definitive biography of Alibaba founder Jack Ma, and longtime resident of Beijing – writes: “I feel on returning to London or Silicon Valley that I’m going backwards in time.”
The thinking about convenience has extended beyond just payment. Ma coined the phrase ‘new retail’ to explain Alibaba’s vision of blurring boundaries between the online and offline shopping world.
The company put this into action with the purchase of the Hema supermarket chain. Each of the 50 Hema grocery locations can deliver within 30 minutes. All the aisles have interactive, digital screens to give customers product information, show similar products and promote the most popular items in the aisle is (by age group if that is what you want).
Prices on the screen can be changed via WiFi, including products such as seafood where prices are determined by supply and demand. If you want, each store will cook the food you buy at one of the in-store restaurants rather than the shocking inconvenience of actually having to cook it yourself. And, of course, there is an automated checkout that recognises each product and accepts Alipay.
The next stop is facial recognition: Alibaba’s Ant Financial has teamed up with KFC to debut a ‘smile to pay’ service’.
Yet amid all this scale, speed and convenience, you might believe things aren’t all rosy. Most will have heard about slowing Chinese growth and how Trump’s trade wars mean China is going through a downturn.
A look at China’s annual growth figures make interesting reading compared to the UK, however. In 2018, retail sales growth was 6.9%, compared with an increase of 9% in 2017. Not exactly a crisis. In the UK they are flat. There are still big opportunities for Western brands that understand the nuance and can offer a customer experience that keeps pace with Chinese expectations.