2016 China Trends Forecast

Many global brands leave cultural nuance out of their product development and marketing strategies for the China market.

Simply put, they shouldn’t.

Now more than ever before, Chinese consumers are bombarded with brand after brand pushing similar product through stale marketing campaigns. If you think your brand is special, more likely than not, it isn’t in the eyes of our target Chinese consumers.

At ThinkConsumer, we believe that the best ideas for developing and communicating a product or service come from deep cultural insight. We help brands tap into that insight by providing them with a solution to test and refine concepts and ideas with target consumers across China, including lower-tier cities. We’ve been in China long enough to know that it’s not about translating ideas as much as it is about trans-creating them: tapping into the cultural nuance behind consumers’ connection with the brand and developing based off of that. And we help brands do just that: figure out not only which idea works best, but also uncovering why it works and how to make it better.

We put together this report to share some of the cultural shifts that we are seeing in China today and the brands connected to these shifts. We’ve compiled this list from a number of sources (including our own heads) and have included links for further reading. While this list is in no way exhaustive, we hope that it gives you a taste of how brands and culture are shaping up in China in the year of the monkey.

So please, enjoy!

2016 Trends

Affordable Luxuries

Some high-end global luxury brands like Louis Vuitton have scaled back in China recently, perhaps due to a stabilizing economy, the government crackdown on corruption, high VAT compared to purchasing overseas, or simply because consumers want something new. A recent study by Bain & Co. found that 80% of Chinese consumers polled expressed a willingness to buy lesser-known emerging luxury brands over the next three years. Enter home-grown affordable luxury.

China’s middle class is growing, and with it comes a younger, savvier consumer with more spending power than before. They follow more brands than their parents and are more willing to try new products. They value style individuality over logos. They take pride in local labels.

This is not just a tier 1 city game anymore. Some of the
most promising designers are coming from China’s tier 2 & 3 cities.

Affordable Luxuries

Example: Ms Min

Ms Min is the label of Fuzhou-born and Xiamen-based designer Liu Min, who graduated from London’s College of Fashion in 2007 and then worked as an intern in Viktor & Rolf. In 2010, Liu launched Ms Min from her 60m2 apartment in Xiamen. She created the first collection of just a few garments on a small sewing machine. Liu Min likes to adopt delicate tailoring and classic silhouette with eastern elements in details. Now, her brand is carried by a number of China’s premier boutiques such as Dong Liang as well as international luxury retailer Lane Crawford.

Affordable Luxuries

Example: Missy Skins

Missy Skins is a Shangai-based womenswear label started by Beijing-born, Australia-raised Natasha Ivachoff in 2011. She runs the label with her nieces, Jessica and Victoria, who were born in Canada and Australia. They started by selling leather leggings for around 6,500 RMB (~$1,000 USD) and have since expanded into new categories including outerwear, tops, knits, jewelry, accessories, dresses, and trousers.

Their products are not only favored by young, sassy consumers but also popular among A-list celebrities like Fan Bingbing.

Integrated Mobile Wallet

As the largest global eCommerce market, China is leading the globe in integrated solutions to mobile payment, with the ability to pay taxi fares, buy movie tickets, split a restaurant bill, and even give out hongbaos (red pockets) in a single app.

Consumers continue to spend a lot of time on their devices and are comfortable with and trust the functionality of familiar platforms like WeChat and Taobao. Most of their peers use also the apps hosting these services, which makes using these mobile payment apps more social and convenient.

Integrated Mobile Wallet

Example: WeChat Wallet

China’s largest social network WeChat is arguably miles ahead its foreign counterparts in its ability to bring together so many different functions under one app, and it’s Wallet function is just one example. It allows users to pay for almost any service by smartphone including utilities, taxi bills, movie tickets, group buying deals, train and flight tickets, and even splitting a bill with a couple of friends after dining out. WeChat wallet also lets users invest in financial products and transfer money to friends. Think Uber, PayPal, Venmo, Mint, Groupon, and so much more all rolled into China’s version of Facebook.
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Integrated Mobile Wallet

Example: AliPay Wallet

Similar to WeChat’s Wallet, the Alibaba-affiliated mobile payment app has gone beyond its PayPal-like roots, expanding to flight and train tickets, travel packages, paying for gas, and more. In 2015, they launched the City Services function in 12 cities that allows users to book hospital appointments, pay parking tickets and utilities, and other info related to local municipal governments.

The Alipay Wallet ad pictured to the left uses the tagline “Your new wallet” and the visual of an edgy millennial pulling his smartphone out of a pocket, complete with wallet chain. This is clearly a new direction for the eCommerce giant that started as a marketplace for China’s factories.

Virtual Try-on

Another emerging digital trend related to eCommerce allows users to virtually try on products before purchasing. As “click and mortar” continues to develop, virtual try-on is one areas that many brands are developing to build affinity among millennials. They are working to bring the real-life experience of shopping to eCommerce: like recreating the look, feel and fit of products for an online shopper. The experience of virtually trying different colors and styles is helpful for consumers to form purchasing decisions and transforms an online visitor to an online customer.

Although the experience of virtually trying on product still cannot compare to the real thing, consumers find the experience enjoyable and shareable, adding an extra social layer to something that used to be more personal.

Virtual Try-on

Example: Platinum Guild International

As part of an integrated marketing campaign to drive purchase consideration for platinum jewelry among Chinese millennials, Platinum Guild International (PGI) launched a WeChat mini-site that allows users to digitally try on platinum rings. Users first choose from a range of platinum rings and take photos of their hands. The site then sends a photo of the selected rings superimposed onto their hands, along with links to authorized online distributors where they can purchase the rings. Users can also share their photos on WeChat or Weibo, making the experience social (and opening the doors to not-so-subtle hints to their significant other).

Virtual Try-on

Example: Coastal.com

Coastal.com is an American eCommerce website that sells branded glasses directly to consumers. Upon entering China in 2015, Coastal Vision launched their official online stores on Taobao and JD. They also offer Try On View through their WeChat mini-site which allows consumers to preview the silhouette of any frame models they are interested in trying. With the tool, customers can upload their images and virtually try on glasses to see how they will look on their faces.
A screenshot of the app (pictured left) announces that “virtual try-on technology has arrived”. When prompted to take a photo, the app puts users at ease, stating that their appearance is a unique and divine gift. Awww.

Authenticity Validation

Counterfeit goods are still (and will most like always be) a big part of shopping in China. According to the official Xinhua news agency, more than 40% of goods sold online in China during 2014 were either counterfeit or of bad quality; a report recently delivered to China’s top lawmakers said just under 59% of items sold online last year were “genuine or of good quality”.

While there is a huge demand (and often acceptance of) quality fakes, Chinese consumers are extremely cautious when purchasing higher priced items, such as luxury goods, electronics, and alcohol. Brands are trying to leverage technology and packaging to help consumers verify product authenticity and build trust.

Authenticity Validation

Example: Rémy Martin

Rebottling cheap liquor into more expensive bottles is a huge problem in clubs, bars, and KTVs across China. To combat this, Rémy Martin started using a smart bottle which works in conjunction with mobile phones. The bottle uses near field communication (NFC) tags to verify the bottle’s authenticity and whether or not it’s been opened via a mobile app. To use the system, the user downloads an app from Rémy Martin to their mobile phone and then taps the bottle top. The NFC tag in the bottle will emit a different signal back to the phone depending on if it has been opened or not.

It’s not uncommon for Chinese consumers to pay thousands of RMB for table service when they go out, so they want to make sure that their money is getting them the real thing (that they don’t go blind from drinking the fake stuff).

Authenticity Validation

Example: Xiaomi

Electronics is another category that sees rampant counterfeiting in China. Xiaomi, a popular electronics manufacturer, estimates that there are more fake Xiaomi products in the market than real ones. That’s why when they launched the latest version of the Mi Power Bank in 2015, they let consumers know how to verify that what they were purchasing was the real thing. The product packaging contained a scratch off label with a 20 digit security code that consumers could input on the official website to verify authentication. Xiaomi even created a mini campaign to educate consumers about the new packaging feature.

Deeper Travel

Travel is another area that has seen explosive growth over the past decade. The world has literally opened up to Chinese travelers. Confidence and a sense of adventure are growing. Increasing disposable incomes are providing alternatives to cheap (and often awful) tour packages.

Experienced and confident Chinese travellers are now moving toward more customized travel solutions. With the surge in new car sales and the development of infrastructure in highways, consumers are experimenting with “self driving packages” to meet personal travel desires and to deepen understanding about travel destinations and local culture. We’re even starting to see RVs on the road.

Deeper Travel

Example: Tuniu.com

Road trips are becoming a thing in China. Tuniu, a Chinese online booking platform, has started promoting “self-driving” holiday packages which often include hotels and admission tickets. For those travelling a bit further from home, the self-driving packages also offer flight tickets and car rentals. More than 60% of domestic holidays being taken in China are now “self-driven”, according to a recent study by the Shanghai Academy of Social Sciences that surveyed tourists at hotels and tourist attractions in 40 cities across China. “300 million licensed drivers, and increasing numbers of private cars, have made self-drive touring part of their lifestyles,” said the institute’s deputy head and researcher Wang Zheng.

Deeper Travel

Examples: Hobby and Fendt

What better way to do a road trip than in an RV? Germen RV brands Hobby and Fendt entered China in 2010 by working with agents in a handful of tier 1&2 cities. Since then, sales of the two brands have increased every year. Most RVs are set up with the usual amenities: bed, TV, sofa, refrigerator, sink, bathroom. However, consumers have the option to special order custom RVs, an effort the company is taking to better localize the experience.

As urban white collars look seek that coveted work-life balance, taking weekend road trips in an RV is becoming a viable option.

Health-driven Wearables

Health-driven wearables allow Chinese consumers to track progress to goal and gives them a sense of achievement for all the efforts they are putting into managing their health. According to a recent survey by Accenture, as many as 67 percent of Chinese consumers are likely to buy wearable fitness monitors and 73 percent want smartwatches in the coming five years, more than doubled 32 percent and 27 percent in the United States.

Chinese consumers are among the world’s most health conscious. As household income continues to rise among Chinese middle class families, demand and investment on personal health improvement is also increasing. For China’s urban white collars, exercise isn’t just about staying healthy; it’s also a great stress reliever. They also pride themselves as being tech savvy, so it’s worth watching any product that falls into the Internet of Things category.

Health-driven Wearables

Examples: Huami and Xiaomi

For 69-99 RMB (13-15 US$), a fraction of the price of its competitors, consumers can pick up a Mi Fitness Band. The very affordable health wearable tracks fitness and sleep, serves as an alarm clock, vibrates when you receive a call, and can even monitor your pulse. The Band has accompanying apps for both Android and iOS. Huami, the product’s manufacturer—and exclusive partner of Xiaomi—is estimated to be selling 1 million units per month worldwide, which is apparently making the guys at Fitbit pretty nervous.

Health-driven Wearables

Example: Apple

It should be no surprise to find Apple somewhere in this report, because Chinese consumers are borderline obsessed with anything Apple. China has been buying nearly one fifth of the world’s Apple Watches. Retailing at ~2,600 RMB (~400 US$), the Apple Watch Sport is relatively cheaper than other Apple products on the market. Its fitness app— called Activity—tracks runs, walks, bike rides, and monitors your pulse.

But are Apple Watches considered a health wearable? We think so. While the Apple Watch is not as dedicated to health tracking compared to other products on the market (nor was it designed that way), we would argue that the Apple Watch is more practical for some consumers, as it fills multiple needs at once. It’s luxury, it’s branded, it’s a smartwatch, and it also helps set and track fitness and health goals. And again, it’s Apple, so it will be around for a while and will continue to evolve.

O2O Home Services

O2O (online-to-offline) refers to mobile or web-based platforms that give customers access to offline goods and services. In a McKinsey & Co. survey in 2015 February, 71% of Chinese online consumers reported that they use O2O apps. Home services is an emerging category of O2O businesses in China. Almost half of all Shanghai families are willing to spend 500 RMB (80 US$) per month or more on domestic services, according to a recent study on the demands of home services in Shanghai, conducted by the Research Center for Family Development, and commissioned by the Shanghai Women’s Federation.

Chinese white collars are overwhelmed by their busy work and social schedules, and O2O services provide them with the balance they need, and it’s convenient and affordable.

O2O Home Services

Example: 1jiajie

1jiajie, which—in English—means “a clean home”, launched in 2012 and quickly became the leading O2O provider in China, processing 30,000 orders per day in 25 cities across China. Its services for individuals and families cover hourly home cleaning, furnishing, Japanese-style room-organizing, and appliance maintenance. The company is planning to go public and is expanding into corporate accounts.

O2O Home Services

Example: Helijia

Founded in 2013, Helijia is a mobile O2O beauty service that provides bookings for various beauty-related services in tier 1 cities. In the app, users can browse photos of local beauticians’ handiwork in the realm of nails, eyelashes, and overall makeovers. If they like what they see, they can book an appointment with whoever did the work, all from within the app. Sina Tech reports that the app already has more than 2,000 artists available to work on nails. It reportedly processes more than 4,000 orders a day, with the average order exceeding RMB 150 (US$24). In early 2015, Helijia founder Meng Xing announced via WeChat that his company has raised a series C investment round worth 50M US$.

Co-working Spaces

Startups are everywhere and, in the US and Europe, companies dedicated to serving startups are growing like crazy. NYC-based WeWork has grown from nothing in 2010 to a 10B US$ valuation. This global trend is gaining traction in China as well. According to the China-based IT website 36Kr.com, more than 3,200 companies offering shared working spaces were founded in China in 2014, a big increase from about 400 in 2008.

Entrepreneurship, opportunities to collaborate and network, and high office rents are all drivers for co-working spaces.

Co-working Spaces

Example: SOHO 3Q

Launched in February 2015 by Beijing-based real estate giant SOHO, 3Q is a community-focused shared office solution that has 11 locations with more than 11,000 desks. SOHO 3Q provides both private offices and individual workstations in an open-office layout. Tenants are allowed to rent individual desks on a weekly basis. Additional services available to tenants include free WIFI, conference rooms, printing machines and phone booths. SOHO 3Q also organizes events such as "Pan's Dialogue", where chairman Pan Shiyi discusses entrepreneurship with well-known business personalities such as Xiaomi's Chairman Lei Jun, and entrepreneur Kai-Fu Lee.

Co-working Spaces

Example: WeWork

The NYC-based leader will be opening its first location in Shanghai this year. WeWork’s rapid global expansion has proven that they’ve tapped into the right formula. It will be interesting to see if, and how, they’ll be able to crack the formula in China. One obvious advantage that WeWork has over its local competitors is its presence in other major cities outside of China, which brings with it an established community of global tech leaders. For globetrotting entrepreneurs, or investors looking for the next big startup in China, this will definitely be worth looking into.

The Female Economy

As more and more young professional women break into higher management and executive-level jobs, we will see China’s female economy fuel overall economic growth. According to the Boston Consulting Group, we expect to see the female economy in China grow stronger. Female earnings in China will grow from $1.3 trillion in 2010 to $4 trillion by 2020, up from $680 billion in 2005 and $350 billion in 2000. That is more than a tenfold increase in 20 years.

Chinese women’s rising education level and workforce anticipation allow them to live more independently and spend more on themselves which provides more opportunities for brands to tap into this market. Entrepreneurship and ambition are on the rise among young women.

The Female Economy

Example: Oreo Delight Thin

Oreo launched ”Delight Thin” cookies, which are 40% thinner and lower in calories than the classic Oreo. This is an effort to target urban females who are health-conscious and have strong fashion sense. The sleeker snack alludes to contemporary “slim-line” design trends, like smartphones and clutch bags, making it more than a mere cookie and answering the fashionista’s desire for a lighter way to enjoy Oreo.

The Female Economy

Example: Nike

Nike opened its women’s-only store at iAPM shopping mall in Shanghai in 2014. The more-than-4,500 ft2 store offers top-of-the-line Nike products for women, including premium women’s running, training and sportswear styles. The store also has on-site group fitness sessions along with opportunities for consumers to trial the latest in training and running footwear and apparel. Specialized services, weekly programming, and tailored events are designed to inspire and enable the community of active women in and around the central business district of Shanghai.

Solutions to Air Pollution

Although air pollution has been an issue in China for decades, recent events have pushed consumers to all but give up on relying on the central government to fix the problem and are, instead, taking matters into their own hands. Last year, Beijing tried to censor a documentary about air pollution, while issuing its first red alert. Shanghai recently announced “emergency measures” of its own after an orange alert was issued for the city.

With Chinese consumers left scrambling to protect themselves from the pollution, products such as air filters and face masks are in hot demand. According to Mintel’s 2015 Consumer Trends report,  pollution in China's cities can be so bad that consumers are increasingly searching out products that can help protect them from its worst effects. In 2016, we will see more products that are designed to meet consumer needs.

Solutions to Air Pollution

Example: Dior

Dior used air pollution as a marketing platform when, in 2015, they launched a social media campaign and mini-site that displayed Chinese cities’ PM2.5 ratings alongside personalized product recommendations. This was in response to Chinese women’s concerns that the pollution might do damage to the beauty of their skin. The site also listed, ostensibly, pollution-fighting skin products for users based on their selected age, city, and main skin concerns.

Solutions to Air Pollution

Example: Vitality Air

Vitality Air bottles feature fresh mountain air from Banff and Lake Louise in Alberta, Canada. A single canister of the company’s “premium oxygen” costs 179 RMB (28 US$), while a canister of its Banff air costs up to 24 US$. The first shipment of 500 Vitality Air bottles have already sold out, with another 700 on the way. The company has only been marketing the product in China for two months.

While this product may very well just be a novelty, the underlying reality is that Chinese consumers are so fed up with the quality of air, they’re looking for solutions, however absurd they may seem.

Trends in China move quickly. We believe the best way to stay current is to listen to what consumers are saying. 

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