Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Days are gone when Chinese consumers carried large plastic bags of cash to pay for houses, cars, international trips, and other big-ticket purchases. Credit cards are big among especially younger consumers, says Shanghai-based business analyst Shaun Rein at the WSJ.
Hong Kong-based marketing guru Ashley Dudarenok discusses the way China’s market is different from the rest of the world in terms of platform, consumer behavior, and other elements of the crowded and fast-moving market. A debate on Vistatalks with Maria Coa.
China’s consumers are still nervous, the economy is weak, but looking good in the longer run, says Shanghai-based business analyst Shaun Rein at CNBC. Consumers are trading down now, but both real estate and infrastructure are not helping the economy, he adds. In the next decade, China’s middle class will grow from 400 to 800 million. Rein saw many of his clients move temporarily to Japan but is sure they will return to China.
China’s consumers are trading down because of deflation, and are looking for cheap prices, says Shanghai-based business analyst Shaun Rein to CNBC. China’s government is unlikely to use financial support for the economy, he adds, as it finds the current growth of 5 percent quite enough, as its priority is dealing with the gap between the haves and have-nots, not at trying to increase that economic growth.
Branding expert Ashley Dudarenok, author of Innovation Factory: China’s Digital Playbook For Global Brands (September 2023), discusses with Pascal Coppens what global brands can learn from China. Business models from the USA, Germany, and Japan have left their footprint in business education. Still, the innovations coming from China have been left out of this business learning process, says Dudarenok, especially regarding ways to reach consumers directly.
Deflation is on the edge of slowing down China’s economy, and falling pork prices are yet another indication not all is well, says Shanghai-based business analyst Shaun Reinat CNBC. As for the less affluent, China Market Research Group’s Rein observed that they are saving money by ordering less pork, according to CNBC.
CNBC:
Deflation — associated with the decline in prices of goods and services and a sign of a weakening economy — is concerning because consumers may postpone investments or purchases in hopes of prices falling further.
“Aside from falling real estate prices and price cutting across consumer goods, the biggest reason for China being on the verge of deflation is falling pork prices,” China Market Research Group’s Managing Director Shaun Rein said.
Affluent Chinese are increasingly considering beef to be a healthier alternative to pork, with 28% of consumers surveyed saying they plan on reducing pork consumption, a study published in February by managing consulting firm McKinsey showed.
As for the less affluent, China Market Research Group’s Rein observed that they are saving money by ordering less pork.
China’s consumers are adjusting their purchasing habits and big players are adjusting their strategies to the search for cheaper products. Marketing expert Ashley Dudarenok looks at the changed strategy of Alibaba’s Taobao for the Double 12 festival, she says at marketing-interactive.
Marketing-interactive:
China has seen an abundance of huge shopping festivals over the years. However, the increasing dissatisfaction with complicated discount systems and the oversaturation of shopping events highlights a need for eCommerce platforms to innovate and align with evolving consumer preferences, said ChoZan’s Dudarenok…
The latest revamp also shows that Taobao is adapting to a change in consumer sentiment. Given the “general disinterest in shopping due to economic uncertainties” among Chinese consumers, shifting towards promoting value and affordability could serve as a strategy to re-engage customers and sustain sales, according to Ashley Dudarenok, founder of China digital consultancy ChoZan.
“Chinese consumers are also tired of the complicated discount systems. Taobao usually offers discounts through the “满减优惠” method (e.g, 50 yuan off for every 300 yuan spent),” she added.
By shifting its focus towards offering products of better quality at reasonable and affordable prices for consumers, Taobao’s move will benefit consumers as well as small to medium-sized brands.
China’s consumers are becoming more cost-sensitive, and that means a profound change in the country’s retail, says business analyst Shaun Reinat CNBC. “The name of the game for Chinese youth in 2024 is trading down. Instead of Starbucks, youth are buying Luckin coffee,” Rein says.
The basement floors — B1, B2 — typically house low-cost gift and souvenir shops, apparel outlets, the supermarket, and other relatively affordable consumer product stores like Miniso and Luckin Coffee.
“Landlords try to put anchor tenants like LV, Apple or Starbucks on pricier real estate on the ground or first floor,” says Shaun Rein, managing director of China Market Research Group. Historically, higher-end shops have attracted more footfall, but China’s weak economy means the cheaper brands are now drawing the crowds, he adds.
The reply to a Weibo user’s post on how she and her peers usually go straight to the basement floors for shopping captures the mood of the Chinese youth: “Everything we can afford is underground!”
Anything not in the basement floors is considered to be “in heaven,” signaling it’s out of reach.
“The name of the game for Chinese youth in 2024 is trading down. Instead of Starbucks, youth are buying Luckin coffee,” Rein says.
Consumer confidence is at a new low, and businesses are not optimistic, says business analyst Ben Cavenderin the Jing Daily. Luxury consumption is especially suffering, he says. “However, brands will have to work much harder to resonate with consumers and get them to spend.”
Jing Daily:
The current economic challenges in China are marked by uncertainty and a lack of consumer and business confidence, noted Ben Cavender, managing director of the China Market Research Group. He points out that both small business owners and consumers are hesitant to spend or invest, a sentiment exacerbated by the government’s modest stimulus efforts.
“Any small-scale stimulus is essentially being saved by recipients who still await further signs of economic prosperity,” says Cavender. “With weak domestic and international demand, China grapples with an oversupply issue that proves challenging to address.”
Cavender believes that consumer confidence in China has reached a low point, causing individuals to postpone major purchases, seek more affordable alternatives, and limit spending to essentials.
“For luxury brands, this shift holds particular significance. Relying solely on exclusivity or high prices is no longer adequate; they must cultivate deeper connections with consumers to inspire trust and stimulate spending,” he says.
Young spenders in China, in particular, face mounting pressure to curtail their expenses. In June, the unemployment rate for urban workers aged 16 to 24 hit a record high at 21.3 percent. Furthermore, starting in July, the government stopped publishing breakdowns of unemployment data by age groups, adding to the challenge of assessing the employment situation for this demographic.
Cavender says: “Youth unemployment, coupled with unease about the real estate market, will both have effects. Gen Z consumers were already looking for a more authentic connection with brands before the economy slowed down and this trend has accelerated as their job prospects have waned.”
As such, being expensive or seen as a luxury brand alone is no longer sufficient. “The market is still there,” says Cavender. “However, brands will have to work much harder to resonate with consumers and get them to spend.”
The crowds might be back in China’s restaurants but they are not spending as much as they used to. The economy is not back on track, the labor market is bad and salaries are being cut. Business analyst Shaun Rein has sent his researchers out, and they did come back with bad news, he tells CNBC.
Women account for 70% of the purchases in China’s households, and marketing expert Ashley Dudarenok looks into the 2023 trends for the female consumer at China’s Women’s Day, for the Jing Daily. Most of China’s platforms dive deep into this important segment of consumers.
Ashley Dudarenok:
These business opportunities are set to expand as China’s “she economy” thrives, driven by financially independent young women, particularly those from the millennial and Gen-Z generations, spending on themselves for their own happiness rather than fulfilling traditional roles.
This growth has propelled the emergence of female-centric businesses catering to women’s preferences and needs, making China the world’s third-largest consumer market for women, equivalent to the combined retail markets of Germany, France, and the UK, reports the South China Morning Post. The shift has also prompted other businesses to target female consumers and promote gender equality in their workforce.
The COVID-19 pandemic both positively and negatively impacted China’s “she economy.” E-commerce and digital platforms accelerated, benefiting female consumers who shop online, and female representation in companies improved, while women in the workforce, particularly in the service sector, have lost jobs or experienced reduced hours.
These dynamics are fueling the rise of trends that brands must master to succeed.
Marketing expert Ashley Dudarenok explains how luxury purchases became rooted in China’s complicated market and developed over the past decades. And what trends she expects for 2023.
Health awareness has a profound influence on the requirements of consumers, and brands should pay notice, says marketing expert Ashley Dudarenoktells the Jing Daily.“Women’s athleisure needs to be both fashionable and professional,” she says.
The Jing Daily:
Growing health awareness,government initiatives, and major sporting events such as the Olympics have also contributed to the desire for an active lifestyle. In April 2022, 67 million Chinese people were using fitness apps to work out at home.
“Driven by the fast-paced life, people desire to get rid of the shackles of stress and want to have a relaxed and dynamic living atmosphere,” states Ashley Dudarenok, founder of Chinese marketing agency Chozan and Alarice. “Athleisure wear has become one of the fashion choices for young people because of its comfortable wear, both functional and casual, and can easily cope with multiple scenes in work and life.”…
The booming sector indicates a lucrative opportunity for activewear, but brands need to be aware of women’s diverse demand. “Women’s athleisure needs to be both fashionable and professional,” remarks Dudarenok. “Nearly 65 percent of female sports consumers prioritize the need for dressing. And functionality, design, and quality are also the main factors considered.”..
Premium players are also foraying independently into elite sports. Given China’s skiing boom, brands like Max Mara, Prada, and Fendi have all ventured into alpine collections, creating fashionable ski looks and astonishing pop-ups near resorts. Besides skiing, upper class lifestyle sports like golf, tennis, snowboarding are becoming a new outlet for fashion luxury items. “By investing in these trendy categories, luxury brands can find and connect with their targeted audience quickly and effectively,” points out Dudarenok.
When even an acknowledged China bull like strategic analyst Shaun Rein turns negative on its short-term economic development, things do not look well for the middle kingdom. “Consumer confidence has brutally collapsed and I think investors need to think twice or maybe even three or four times before investing in China right now,” says Rein in the Economic Times.
Shaun Rein
I have been in China for 25 years and this is by far the worst consumer confidence and business confidence I have ever seen and it is really because of the implementation of zero Covid. Most people in China actually support zero Covid because it saves lives and the Chinese government should be credited for what they did in 2020 and 2021 but in 2022, the implementation has been a disaster. That is the only way you can word it. It has hurt mental health, it has hurt other health issues and it has actually killed people because people cannot get to hospitals or as we saw in Xinjiang and Urumqi fire, people could not get out of their homes.
Consumer confidence has brutally collapsed and I think investors need to think twice or maybe even three or four times before investing in China right now. The next three to six months are going to be a real struggle because the government cannot ease up on zero Covid without causing a lot of deaths but they cannot continue the current pace without causing a lot of lack of business confidence. We are in a very difficult conundrum right now. No matter what the government does, the economy is going to be weak for the next three to six months…
The problem that we have right now is each province, each city, each district, even each street are making up their own rules as they go along and they are not following the directives of the central government. So sometimes the street will put up barriers and say one cannot cross the street. These local officials do not have the right to do that, the central government is telling them that they do not have the right to do that but they are so scared of Covid, that they are still putting up barriers.
China’s annual Single’s Day has been in 2022 relatively lackluster, and Alibaba and JD.com even did not release figures this year. Marketing guru Ashley Dudarenok presents for brands new ways to measure their performance. Four metrics she explains at her vlog for brands to prepare for the next shopping events in this fast-changing consumer market.
China’s sportswear giant Li-Ning got into hot water when netizens got upset about a possible new fashion line, looking very similar to Japanese military style. Marketing guru Ashley Dudarenok gives in Campaign Asia some advice on how to deal with such a PR crisis. Li-Ning has not yet responded
Campaign Asia:
When Campaign reached out to China marketing expert, founder of Alarice and ChoZan, Ashley Dudarenok, on how the brand should manage this PR crisis, she believed that “silence is not a particularly wise choice at this time, but rather a response should be made as soon as possible”.
She added: “In particular, if Li-Ning as a local national brand continues to delay a response, the negative sentiment among Chinese consumers may fester even more dramatically. Li-Ning’s failure to respond to the market will continue to raise questions as to whether the brand’s design crisis is deliberate”.
Dudarenok offered more advice for Li-Ning on how to resolve the issue. Firstly, she said the brand should monitor public opinion by identifying the exact problems and to what extent they have developed. Then, the brand should react quickly and show a serious attitude about this issue. This is to “calm the immediate negative sentiment in time to avoid further development and festering”. Finally, Li-Ning should take practical action to control public opinion and avoid further furore. “
[The brand should] provide a sincere explanation of the problems in the design of the garment and apologise for the negative impact,” said Dudarenok. “To avoid another PR crisis, it is important to respond rather than just trying to cover up the incident.”
China’s consumers are trading down because of deflation, and are looking for cheap prices, says 
