Steady Revenue Growth Amid a Competitive Landscape

In the three months ending September 30, JD.com achieved net revenues of RMB 260.4 billion (USD 37.1 billion), marking a year-on-year increase of 5.1%. The growth was fueled by a resurgence in electronics and home appliances, alongside sustained momentum in general merchandise categories.

JD.com’s Chief Executive Officer Sandy Xu attributed this performance to the company’s ability to adapt to shifting consumer demands.

“In the third quarter, we played a crucial role in China’s government-backed trade-in programs, leveraging our advanced supply chain capabilities. This, coupled with robust user response to our Singles Day promotions, has strengthened our market position and laid the groundwork for sustainable growth,” Xu remarked.

Profits and Margins Reflect Operational Strength

JD.com recorded a significant boost in profitability. Net income attributable to shareholders surged by 47.8% year-over-year to RMB 11.7 billion (USD 1.7 billion), while operating income rose by 29.5% to RMB 12 billion (USD 1.7 billion). The company’s operating margin improved to 4.6%, compared to 3.8% during the same period last year.

This profitability was driven by efficiency gains across its extensive logistics network and economies of scale, which helped offset increased marketing and fulfillment expenses.

Strategic Business Initiatives Drive Engagement

JD.com’s Q3 performance was underpinned by several key initiatives that highlight its commitment to innovation and expansion across diverse sectors:

1. Government Trade-In Program: The company emerged as a pivotal player in China’s trade-in initiatives, operational in over 20 provinces. By integrating its logistics expertise, JD.com enabled customers to seamlessly trade in old appliances and electronics while benefiting from government subsidies. This program has been well-received by users and showcases the company’s ability to adapt to policy-driven market opportunities.
2. Fashion Expansion: Demonstrating its commitment to capturing the high-value fashion segment, JD.com welcomed flagship stores from luxury brands such as Balenciaga and Saint Laurent. This move not only expands JD.com’s product portfolio but also enhances its appeal to fashion-conscious consumers, fostering a new wave of growth in apparel and accessories.
3. Supermarket Milestone: Marking its 10th anniversary, JD Supermarket has become a cornerstone of the company’s retail strategy. With a focus on supply chain efficiency and competitive pricing, JD Supermarket continues to strengthen its partnerships with key brands, ensuring high-quality offerings for consumers.
4. Healthcare Advancements: JD Health made strides in enabling online payments through individual medical insurance accounts, now available in 12 cities. This innovation broadens access to healthcare services for millions, further embedding JD.com into the daily lives of its users.
5. Logistics Integration with Taobao and Tmall: In a notable development, JD Logistics reached a significant agreement with Alibaba’s Taobao and Tmall platforms. This integration allows merchants and consumers to track JD shipments directly within Taobao and Tmall apps, showcasing JD.com’s leadership in logistics excellence.

Commitment to ESG and Shareholder Returns

JD.com has maintained a strong focus on sustainability, achieving higher scores in the 2024 S&P Global Corporate Sustainability Assessment. The company’s efforts span governance improvements, employee development, and supplier management, positioning it as a global leader in retail ESG practices.

In terms of shareholder value, JD.com completed its USD 3 billion share repurchase program, reducing outstanding shares by 8.1% as of September 30, 2024. The company has now launched a new USD 5 billion share buyback initiative, reflecting its confidence in long-term growth.

Looking Ahead

Ian Su Shan, Chief Financial Officer of JD.com, expressed optimism about the company’s trajectory. “This quarter’s results highlight our commitment to delivering value through efficiency and innovation. Our expanding ecosystem and competitive pricing strategies will ensure continued growth and engagement with users and partners alike.”

JD.com’s Q3 results underscore its resilience in a challenging economic environment. As the company continues to innovate and scale its operations, it remains a key player in shaping the future of China’s e-commerce and logistics sectors.

JD.com Reports Significant Profit Growth in Q2

JD.com reported its unaudited financial results for the second quarter of 2024, showcasing a solid performance in its core business areas.

Despite a modest 1.2% year-on-year increase in net revenues, the company demonstrated significant profitability improvements and strategic business growth, particularly in its retail, health, and logistics segments.

In the second quarter, JD Retail strengthened its market position by entering into strategic partnerships with prominent brands like Xiaomi, Lenovo, OPPO, and luxury fashion houses including MONCLER and alexanderwang.

These collaborations focused on smart devices, intelligent supply chain management, and AI integration, underscoring JD.com’s commitment to enhancing user experience and expanding its platform ecosystem.

JD Health continued to innovate by partnering with major pharmaceutical companies to debut new and specialty drugs online, such as the Alzheimer’s treatment drug Leqembi®. These efforts highlight JD Health’s advanced omni-channel supply chain and service capabilities.

JD Logistics, another key segment, saw a significant improvement in profitability due to continued optimization of its network layout, algorithm-based vehicle scheduling, and product structure. These enhancements contributed to cost reductions and efficiency gains, further solidifying JD.com’s leadership in China’s logistics industry.

Financial Highlights

JD.com reported a net revenue of RMB291.4 billion (US$40.1 billion) for the second quarter of 2024, a slight increase from RMB287.9 billion in the same period last year.

Despite the modest revenue growth, the company achieved significant improvements in profitability metrics. Cost of revenues slightly decreased by 0.4% to RMB245.5 billion, contributing to a gross margin increase of 137 basis points year-on-year to 15.8%.

Operating income for the quarter rose by 27.0% to RMB10.5 billion (US$1.4 billion), with an operating margin of 3.6%, up from 2.9% in Q2 2023. On a non-GAAP basis, operating income increased by 33.7% to RMB11.6 billion (US$1.6 billion), with a non-GAAP operating margin of 4.0%.

Net income attributable to JD.com’s ordinary shareholders saw a remarkable 92.1% year-on-year increase, reaching RMB12.6 billion (US$1.7 billion), while non-GAAP net income attributable to shareholders rose by 69.0% to RMB14.5 billion (US$2.0 billion).

This strong profit growth was reflected in the diluted net income per ADS, which nearly doubled, increasing by 97.3% to RMB8.19 (US$1.13).

JD.com also reported robust cash flow figures, with operating cash flow for the twelve months ended June 30, 2024, increasing by 40.9% to RMB74.0 billion (US$10.2 billion). Free cash flow, excluding the impact from consumer financing receivables, surged by 66.2% to RMB55.6 billion (US$7.7 billion).

Additionally, the company’s ongoing share repurchase program resulted in the buyback of approximately 224.3 million Class A ordinary shares during the first half of 2024, representing around 7.1% of its outstanding shares as of December 31, 2023. This move, coupled with JD.com’s record-high operating and net profits, underscores the company’s commitment to delivering long-term value to its shareholders.

Q1 2024

JD.com reported its unaudited financial results for Q1 2024, alongside significant operational developments.

Strategic and Operational Highlights

CEO Sandy Xu emphasized JD.com’s focus on improving user experience, leading to significant growth in active users and engagement. The company continues to provide a superior combination of selection, speed, quality, and price, resonating with consumers nationwide.

AI in Livestreaming

On April 16, 2024, JD.com introduced an AI digital representative of founder Richard Qiangdong Liu for its livestreaming rooms. This innovation attracted over 20 million views within the first hour, marking a significant milestone in AI integration within e-commerce.

Healthcare Expansion

JD Health partnered with pharmaceutical giants like Pfizer and Sanofi to debut new drugs online, enhancing accessibility and upgrading its one-stop medicine retailing and healthcare services through collaborations with Shanghai Pharmaceuticals and Daiichi Sankyo.

Logistics Growth

JD Logistics expanded its support for Chinese brands globally. In Q1 2024, it provided integrated supply chain services to MINISO stores in Australia and Malaysia, showcasing JD’s international warehousing and fulfillment capabilities.

Financial Highlights

• Revenue: Net revenues for Q1 2024 were RMB260.0 billion (US$36.0 billion), a 7.0% increase from Q1 2023.
• Income from Operations: Reached RMB7.7 billion (US$1.1 billion), up 19.8% from Q1 2023.
• Net Income: Net income attributable to ordinary shareholders was RMB7.1 billion (US$1.0 billion), up 13.9% from Q1 2023.
• Earnings per Share: Diluted net income per ADS was RMB4.53 (US$0.63), a 15.3% increase from Q1 2023.

Between January 1 and May 15, 2024, JD.com repurchased 98.3 million Class A ordinary shares (49.2 million ADSs) for US$1.3 billion, representing 3.1% of its outstanding shares as of December 31, 2023.

There are some new “situations” in this year’s 618 festival.

On the one hand, 618 has become an important opportunity for online shopping of high value and large commodities; on the other hand, it’s also a good time for families to stock up, including the sales of home appliances, 3C, food, beauty products, and etc, which will reach the peak in the first half of the year during 618.

At the same time, many big brands lead the promotion activities, and the promotion discounts also attract many new consumers.

Smart and high-quality differentiated products have become the hot spots trends in the field of home appliances, driven by promotions from both home appliance brands and major e-commerce platforms.

Get an introduction of 618 Shopping Festival here.

80% of the enterprises, surveyed by Chinese media Yibang, participated in Tmall 618, more than half of them invested more than 30% of the 618 budget in Tmall, and 40% of the enterprises surveyed expected that more than half of the 618 sales would come from Tmall.

50% of the enterprises interviewed said that in the past year, Tmall had the highest conversion among all platforms.

CIW Dossier: 618 Shopping Festival provides a perspective of the merchants regarding the performance, advertising budget, and sales expectations on the top e-commerce platforms for 618 shopping festival.

Update (21 June 2021): During this year’s “618” (June 1-20), the State Post Bureau observed more than 6.59 billion pieces of parcels, a year-on-year increase of 24.24%, and an increase of 84.16% compared with the same period in 2019.

China’s total 618 sales in 2021 reached 578.48 billion yuan, an increase of 26.5% YoY, according to data from Syntun. Top 3 channels by total sales are Tmall, JD, and Pinduoduo. Download CIW Dossier: 618 Shopping Festival to get more sales insights.

Alibaba Tmall 618

Over 67% consider Tmall as the top platform for 618.

Among the enterprises surveyed, 51% invested more than 30% of their budgets in tmall. Among them, 10.6% of enterprises allocate more than 80% of the ad budget on the Tmall platform; most allocate 30% to 50% of their total 618 budget on Tmall.

Tmall is giving away RMB10 billion (US$1.57 billion) in consumer coupons and subsidies to help further stimulate post-Covid consumption during Tmall 618 Festival 2021.

According to the official introduction of Tmall, huge discounts will be launched from June 1 to June 20. The specific activities are as follows:

• 20 yuan off every 300 yuan purchase with a total subsidy of 10 billion yuan
• 88vip members will receive additional 520 yuan
• Beauty products at flagship stores are cheaper than duty-free stores

A total of 250,000 brands participate in this year’s Tmall 618, which is 2.5 times that of last year. A total of 13 million products participate in offering discounts, of which 1.4 million are new products.

Tmall merchants almost all started the official live streaming for this year’s 618 shopping festival. About 100 celebrities have locked in Taobao Live to interact with fans. More than 500 CEOs have already made time for Tmall 618 in the agenda to face consumers and offer more brand discounts.

For more established brands, this year’s 618 festival is all about membership engagement. Shoppers who have signed up their favorite brands’ membership on Tmall can expect more additional benefits.

Tmall 618 sales

Millions of loyalty-program members on Tmall helped drive sales for 25 brands, which had each exceeded RMB100 million in transactions on June 1.

As of June 16, brand merchants have acquired nearly 60 million new members during Tmall 618, and some saw more than 50% of the transactions come from members. On June 1 alone, the first day of Tmall 618, there were 25 brands with a turnover of over 100 million yuan from members.

Since the beginning of this year, Tmall has strengthened its membership operation. The exclusive rights and benefits of brand members will be revealed many times in the search results and commodity display pagse, and various tools such as exclusive rights and benefits of members and member interaction are also provided for merchants.

About 20 brand merchants exceeded 10 million member milestone on Tmall. Alibaba didn’t disclose detailed sales value this year.

Tmall Hey Box: Alibaba’s best seller incubator for top brands

JD.com 618

Jingdong announced it will focus on live streaming, short videos, graphics, and quiz to enrich its content marketing for the ongoing 618 Grand Promotion at a kick-off event on May 20 in Beijing.

JD.com will invite more than 300 celebrities, and executives from nearly 600 brand partners to participate in various promotions through live streaming during the promotion.

The company will also invite KOLs and celebrities to create short videos to assist promotion. More than 1,000 professional buyers or KOLs from different categories will be invited to share their favorite products to drive more traffic to JD.com.

JD will hold two galas through live streaming inviting celebrities to bring consumers the festive atmosphere of 618. Leveraging JD and WeChat’s strength, JD will offer live streaming through 10 WeChat accounts.

Over 30,000 new brands and stores were launched during 618 on JD Super, JD’s online supermarket, with over 2.4 million new products.

Shoppers in Nanjing, Jiangsu province are the most active, taking the crown for the largest order volume.

Group buying is most used in Harbin. The average amount per group buy order in the chilly capital of Heilongjiang province in Northeast China this year exceeds RMB 1,000 yuan.

Other top competitors for 618 include Kuaishou, Douyin (TikTok), Pinduoduo, and Meituan.

JD & Douyin (TikTok)

JD signed a 20 billion yuan collaboration agreement with Douyin (TikTok). And, JD’s products are integrated on Douyin in this year’s 618 festival and users can buy JD products on Douyin directly without being redirected to an external page.

JD 618 Sales

In the first three minutes on Jun. 18, JD Super, JD’s online supermarket, saw sales increase 10 times, and in the first two minutes, packaged foods exceeded RMB 300 million yuan while the maternal and baby category exceeded RMB 200 million yuan.

In the first hour on Jun. 18, JD Fresh saw sales increase 70% YOY. Looking at sub-categories, seafood, meat, eggs and poultry, and fruit and vegetables increased 160%, 105% and 80% respectively. Sales of food which require little effort to prepare increased 160%.

JD.com reported a total transaction of over RMB 343.8 billion yuan for its 18-day 618 shopping festival 2021, representing a growth of 27.7% YoY from the same period in 2020 (RMB 269.2 billion yuan).

The pet category has boomed. Post-90s consumers spent an average of RMB 507 yuan per month on pet products in 2021. During 618, smart pet products increased 47% YOY.

Luxury products. Sales of Ferragamo, TOD’s, and BALLY increased 150%, 232% and 600% respectively. In addition, over 20 designer brands saw sales increase over 15 times YoY on JD platform. Consumers continue to embrace the convenience of buying luxury products online.

Sales of imported gaming phones on JD Worldwide increased by nearly three times. Imported dry cat food increased by 108%.

During the 18-day promotion, sales of JD’s online real estate business increased 230% YOY. Sales of housekeeping and cleaning services increased 6.3 times while the order number of car maintenance increased 285%.

Genetic testing service sales increased 23 times, making it the fastest-growing category of healthcare services on Jingdong. Oral health product sales increased 447%.

The top five international brands are Aptamil from Germany, Estee Lauder from the U.S., A2 from Australia, Nintendo from Japan, and Sulwhasoo from Korea. In the fresh food category, 5 million Zespri kiwis and 260,000 durians from Thailand were sold during the 18-day sale.

Social e-commerce Pinduoduo’s road to brand upgrade

618 Sales performance of other brands and platforms

Xiaomi 618

From June 1 to 18, the total GMV across all Xiaomi’s platforms exceeded 19 billion yuan (US$29.37 bn), with a year-on-year growth of 90%.

Its sales volume of smartphones ranked first among all Android phones, the TV category won first place in the sales volume / sales values. Xiaomi 11 Pro is the best selling model on both JD and Tmall.

Xiaomi’s offline sales channels saw 123% YoY increase in total transaction values. Live streaming delivered 1.34 billion yuan in total sales, an 92% growth YoY.

Douyin (TikTok) 618

Douyin 618 started on June 1st and ended at 8 a.m. on June 19th. The top 5 best-selling brands are:

1. Chuchu (new brand)
2. WHOO
3. China Gold
4. Shepinhui
5. Huawei

Apple ranks sixth overall or second after Huawei under “3C electronics” category.

The top five are expected to have sales of more than 100 million yuan. Unfortunately, Apple, Adidas, Nike, and other international brands are not expected to exceed 100 million yuan in sales on Douyin, according to Chinese media Yibang Dongli.

Douyin saw the largest new user growth of over 392% YoY among post-00s, followed by post-90s (+225.9% YoY).

This is Apple’s second year of participation in 618 and saw a sales increase of 16% YoY, according to data from Counterpoint Research.

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Social e-commerce Pinduoduo’s road to brand upgrade

Centered around the theme of the ‘Spirit of Nature’, this collaboration draws upon Burberry’s longstanding exploration of the relationship between humans and nature.

The fashion house’s affinity to the outdoors links harmoniously with Honor of King’s character Yao, who embodies the spirit of nature and is able to take the form of a deer – also an expression of the Burberry animal kingdom house code.

In keeping with the fashion house’s signature gabardine, pioneered by founder Thomas Burberry and designed to protect its wearer against the elements, Yao plays the role of a protector for her fellow gamers within Honor of Kings.

Yao’s two exclusive skins have been inspired by Burberry house codes as reinterpreted by Riccardo. Seamlessly blending the physical and digital worlds, Yao’s ‘Spirit of Nature’ new skin draws upon Burberry’s rich heritage and includes references to the iconic House check, the trench coat, and the Thomas Burberry Monogram.

Burberry launched its first luxury social retail store, empowered by WeChat

This skin draws upon the classicism of these Burberry hallmarks and reinvents them into a modern look for Yao to reflect her strong, dynamic and adventurous character.

Yao’s ‘Spirit of Nature’ deer takes a mirrored form, drawing upon Riccardo’s fascination with the concept of duality and the creativity found in two perspectives.

In Honor of King’s first collaboration with a brand on its ‘Legend’ skin offering, Burberry has co-created a ‘Spirit of the Forest and Ocean’ Legend skin for Yao using one of the runway looks from the house’s Spring/Summer 2021 collection ‘In Bloom’ – a collection inspired by thoughts of regeneration, dynamic youth and reconnecting with nature.

Yao’s look draws upon the collection’s mythical marine references and features a statement warm royal blue collarless trench coat and a crystal-embroidered vest. Mirroring the essence of the look, the ‘Spirit of the Forest and Ocean’ Legend deer pulsates blue light through its crystal body.

Building upon the existing partnership between the luxury fashion house and Tencent, this collaboration continues to reflect Burberry’s ambitions to push boundaries through innovation and creativity, enabling the Burberry community to explore the digital realm of Honor of Kings in an exciting new concept.

The exclusive Burberry skins will be available to purchase for all Honor of Kings players in mainland China. The skins will then remain part of the players’ permanent collection.

China luxury consumer behavior study 2020

Entering the Mini Program, the user becomes a “Mom” by virtually adopting a Burberry elf for free. And, Tencent and Burberry expect this to be an attractive feature to the female audience in China. Customers can also unlock exclusive content and personalized experiences and share them with their friends.

As customers interact more in the store and online, the elf will constantly transform themselves, upgrading new roles and new styles for customers to explore. Rewards include Burberry’s exclusive Cafe meals and digital content.

Burberry also launched “social currency”, which rewards customer interaction by issuing social currency to unlock exclusive content and personalized experience. In addition, there are many places in the mini program with the voice guide service of spokesperson Zhou Dongyu, and the celebrity will provide room tour.

Through the WeChat mini program, customers can get all kinds of contents such as in-store guide and product information. User can choose to book “Burberry Space” fitting room. Each fitting room has a unique theme, and there are 10 different spaces.

At the same time, users can choose the clothes they want to try on in advance, and Burberry can play different types of music according to their preferences.

Offline shopping experience service is more than just fitting on. “Burberry Space” offline is a place of shopping and fitting, afternoon tea, and style design.

“Fitting in” selfie is a necessary procedure for many girls to go shopping. Burberry has set up a self-portrait spot in each offline fitting room to encourage customers to take photos and share them with friends.

In addition, high luxury theme cafes are no longer new, such as Dior café and Chanel café in Shanghai, but Burberry has played something that China doesn’t have.

Burberry launched Thomas’ café, which is not just an ordinary coffee shop, but a special area for the Burberry community to connect and interact. It offers lectures, workshops, and live performances in addition to various kinds of snacks echoing the “British and Chinese tea culture”.

Users can book or register upcoming events on the WeChat Mini Program. This is the second in the world; the first is in its flagship store in London, UK.

WeChat advertising trends for luxury products in 2020

Data-driven, social media and omnichannel are the focuses of digital marketing growth for luxury brands, while “young”, “geographic concentration” and “social” are the keywords that best describe the trend of luxury brand marketing in China.

A recent report, jointly published by Tencent Advertising and Boston Consulting Group, revealed three major pain points for luxury brand marketing in China:

• how to better reach out to customers
• how to better increase customer loyalty
• how to better use data assets to drive business growth.

Luxury marketing in China: Young, geographic concentration and social are the keywords that describe the future trend

In 2018, China’s luxury market exceeded 110 billion Euros while maintaining a growth rate of 6%, accounting for 33% of the global luxury market. It is expected to grow at a CAGR (compound annual growth rate) of 5-6% in the future and to contribute over 40% of the global luxury retail sales by 2025.

It is an indisputable fact that China has become the most important market for luxury brands. The report shows that this growth is mainly driven by three major trends of Chinese consumers:

• luxury consumers continue to be young
• Geographically, the majority of luxury consumers are from the top 50 cities
• Social media influence remains strong

The report reveals that luxury consumers are becoming younger. Consumers aged between 26-35 y-o contribute 62% of luxury sales and consumers between 18-25 y-o contribute 12%.

Geographically, the majority of luxury consumers are from the Top 50 cities: At the same time, luxury consumption has become more widespread in China and shows an apparent trend of geographic concentration.

High-end luxury consumption has gradually penetrated into second-tier cities. Luxury consumers in the first and second-tier cities account for around 70% of the total number and contribute over 70% of total sales.

Currently, domestic luxury consumers from first and second-tier cities tend to travel abroad to buy high-end luxury goods while due to a limited number of local luxury shops, luxury consumers from third & fourth-tier cities tend to make their purchase in the first & second-tier cities. Therefore, how to use digital channels to manage retained customer assets will be one of the focuses in the future.

Social media influence remains strong. Because of the ubiquity of mobile social media in China, Chinese consumers have also demonstrated strong social orientation when making luxury consumption decisions. More than 80% of Chinese consumers choose the “rational” way of researching online and purchasing offline when buying luxury goods, far above the global average.

The core channels influencing Chinese luxury consumers’ purchase decisions are shifting towards high digitalization. The social media penetration rate is now as high as 67%. Luxury brands can, through social media platforms, better reach out to their target customers, attract and influence the younger generation of core consumers with customized contents.

For luxury brands, the key to growth is to know how to better leverage social media platforms and to achieve a tight online-offline connection in order to form closer relationships with their customers.

Pain point 1: How to leverage social media and reach out to customers

According to the report, customers spend a significant amount of time on social media platforms and contents, and at the same time, KOLs’ endorsement has a very significant influence on their purchasing decisions.

Therefore, how to leverage on social media has become a critical topic that luxury brands need to think about.

Kiki Fan, General Manager of Tencent Advertising’s Key Account Sales and Operation Department, shared the new idea of leveraging on social media with Tencent’s Smart Marketing Solutions:

“…no longer focus on a single social media platform, but use a more global perspective, connect users with all touching points through four major traffic channels, and make social media the key to generating traffic.”

First, the brands must have their own traffic. Currently, an increasing number of luxury brands have set up their own WeChat official accounts, mini-programs, and other tools in the WeChat ecosystem.

Because of the unique characteristics of luxury brand marketing, proprietary channels can best present the brand image and allow them to position most precisely in order to achieve in-depth interaction with their customers, which is also the best way to retain and accumulate loyal customers.

The social media traffic is in turn generated from fission marketing as well as voucher campaigns initiated by the brands. In this way, they can acquire traffic from the social behaviors of their customers within the WeChat ecosystem.

This approach can maximize the social energy of WeChat and help achieve exponential traffic growth. In the end, this traffic can still be directed to the brand’s own channels such as their mini-programs in order to build a true marketing closed loop.

The report shows that researching online and purchasing offline is the main way Chinese consumers make their luxury purchases.

Tencent’s Smart Marketing & Smart Retail Solutions offers a series of tools to allow brands to convert their offline traffic into online traffic and integrate the two. This can help them convert their traffics in offline shops and from shopping guides into direct sales.

The advertising traffic provided by Tencent Advertising, as paid traffic, can be an amplifier for brand marketing campaigns, enabling a wider range of customer connections under diversified contexts of the Tencent platform.

A number of luxury brands, including Cartier, Bulgari, and Gucci, are experimenting with these four traffic solutions provided by Tencent to effectively expand their customer base and realize growth.

Pain point 2: How to better improve customer loyalty

According to the report, among the current online purchase channels, proprietary channels are emerging and account for over 30%. Brand-managed mini-programs and WeChat public accounts became the fastest growing channels last year.

This phenomenon is closely related to the unique characteristics of the luxury industry. For luxury brands, their customers expect the same shopping experience online as in offline boutiques. Therefore, for luxury brands, the key to realizing future growth breakthrough is to build proprietary platforms in an asset-light fashion that can interpret their brand image and help them build a tighter relationship with their customers.

Kiki Fan stated that: “Tencent Advertising provides the Brand 2.0 model for luxury brands. With mini-programs as the core, we can help brands establish and operate their proprietary sales channels on WeChat mini-programs and help them achieve closed-loop marketing throughout the chain.”

Brand 2.0 does not only allow brands to establish their proprietary sales channels in an asset-light way through mini-programs and mobile payment but also enables them to offer consumers a richer shopping experience through the social media platform of WeChat.

Online mini-programs can provide brands with long-term online boutiques as a non-stop sales channel. It can also be used as the ground for pop-up shops as the brand’s online marketing campaign.

Tiffany launched its limited edition product line in its pop-up shop mini program during the 520 period (20 May, Chinese Lovers’ Day), and achieve efficient sales conversion with the help of advertising campaign in WeChat’s social sharing channel Moments and injection of social media traffic.

At the same time, on their proprietary channels, brands can deepen the emotional connection with consumers through collaboration with IPs or KOLs, or by creating customized contents that attract consumers.

On these channels, brands can communicate with consumers effectively, and by using the Tencent Smart Advertising tools to analyze and manage collected data, service their consumers more precisely, create their own CRM and in turn increase their brand loyalty.

Pain point 3: How to achieve business growth leveraging on data assets

In the past, the communication and marketing of luxury brands relied mainly on creating emotional resonance with and conveying brand values to consumers.

In a highly competitive market environment, how to collect and retain consumer data from the four major channels and convert it into business and strategic insights in order to drive growth has become the third biggest pain point. Tencent Think Tank can effectively address this pain point and help brands explore potential growth opportunities.

Thanks to its accumulation of data insights over the years, collaboration with third-party partners, and excellent multi-dimension strategy development capabilities, Tencent can help brands match target consumers as well as potential consumers through its Data Think Tank, provide advertisers with many options of group combinations and expansion models.

With Model LAB’s more intelligent customizable model, flexible targeting, positive-negative target sample comparison functions, and machine learning training models, Tencent help advertisers precisely target group combinations, optimize marketing budget allocation, increase client base expansion capability and ultimately boost conversion throughout the entire chain, according to the report.

This is like providing luxury brands with a compass on the sea and help them effectively reduce the time spent seeking growth in China.

For luxury brands, China still has huge prospects and potentials to be explored in the future.

“Data capability is the foundation of growth for luxury brands, and is the basis on which marketing strategies should be developed.” Kiki Fan said.

She states that thanks to Tencent’s Data Think Tank’s multi-dimensional insight and strategy development capabilities, brand data assets collection and analytic capabilities, and the one-click marketing applications, luxury brands can obtain 360-degree portraits of their consumers at different stages of the consumption cycle and truly understand them.

This can allow them to identify key loss/conversion nodes in the consumer decision path, and to understand the relationship between audiences and advertising. Brands can then develop a more optimized and effective marketing strategy in order to capture the business opportunities and achieve growth brought by China’s 820 million mobile Internet users.

Chinese consumers were expected to contribute 40% sales to the global luxury goods market and hence drive 75% of this market’s growth.

58% of luxury goods consumers were the youthful population. 58% of them located at tier-2, tier-3, and lower-tier cities. Mobile occupied 54% of luxury goods consumers’ attention. 58% of consumers prefer collecting information online and buy luxury goods through offline channels.

China’s personal luxury goods market is going to grow at a compound annual growth rate of 6%. Retail sales of luxury goods in China reached €105 billion (US$120.41 bn) in 2017, which was estimated to hit €162 billion (US$185.77 bn) by 2024, accounting for roughly 40% of the global luxury goods market, according to a joint report by BCG and Tencent.

58% of luxury goods consumers were the youthful population who ages between 18 and 30 years. 71% of them at least held bachelor degrees. 71% of them were female.

58% of them located at tier-2, tier-3, and lower-tier cities.

They were deeply influenced by digitalization and obtained a variety of news from smartphones. On average, they spent 87 minutes on WeChat or QQ, 45 minutes on mobile games, 75 minutes on video, news, and music.

The consumption path of luxury goods was highly digital and fragmented. They would collect relative information from various social media and online platforms once they find favorite luxury goods.

After that, they tend to buy the products via a set of channels not just limited to brick-and-mortar, if that works, such as Daigou (a freelance cross-border shopping agent), online mall, overseas e-commerce platforms, brand’s official accounts, and social media.

Mobile occupied 54% of luxury goods consumers’ attention. To break it down, KOL (WeChat and Weibo) for 12%, brands’ social accounts for 12%, brands’ official website/app/mini-programs for 11%, brands’ digital ads for 8%, third-party e-commerce platforms for 7%, and online word-of-mouth for 4%.

Tencent-affiliated mobile apps took 50% of users’ mobile usage time. By comparison, Facebook accounted for just 22% of  American internet users’ mobile usage time.

KOL (Key Opinion Leader) played an essential role in reaching users. On average, every account of the top 30 online celebrities attracted 3.2% of consumers’ attention. Brands’ official accounts or mini-programs had its way to interact with consumers.

The average page view of articles could reach 20,000. Furthermore, the page views of some good content could occasionally exceed 100,000.

Speaking of purchasing method, 58% of consumers prefer collecting information online and buy it through offline channels.

16% of consumers in tier-3 & lower-tier cities bought luxury goods online while that was 8% in tier-1 cities and 9% in tier-2 cities. On the other hand, 51% of consumers would make some comparisons online and go to nearby higher-tier cities to buy it.

Though platform shopping is still the mainstream, social shopping has been rising quickly in the luxury goods market. 11% of Chinese consumers bought luxury goods through social shopping channels like WeChat while that was just 2% in Germany, America, and Europe.

Continue to read China’s luxury consumption trends in the new retail era

Three major trends are shaping China’s luxury market today: expansion of luxury brands into everyday categories, increased attention towards niche brands and personalization, and “normalization” of online sales of luxury goods.

On August 21^st, CBNData and Tmall published a report entitled “Luxury Consumption Trends in the Era of New Retail, 2017”. Using Alibaba’s consumer data to analyze consumption patterns, the report highlights several trends in changing luxury consumer demographics as well as showing the changing ways that luxury brands pursue consumers in China.

Between 2014 and 2016, the number of luxury brands using online sales channels has continuously increased; by 2021, online sales are expected to account for 13% of the luxury goods market.

Changing consumer demographics…

It considers young consumers, consumers from small cities, and cost-conscious consumers to be the up and coming forces driving growth in luxury consumption.

The generations known in China as the “post-90’s” and “post-95’s” are now a major market for luxury goods, and increasingly the primary targets of marketing campaigns by major players. There has been steady growth in the numbers and purchasing power of the post-90 generation since 2013, and the past few years have seen a rapid expansion of the post-95’s online presence.

Residents in the increasingly prosperous smaller cities, with lower costs of living and fewer pressures to save, are entering the market en masse, making up an ever-larger portion of consumers. Online sales of luxury goods have driven their penetration into second- and third-tier cities and rural markets where few have an offline presence.

In 2015, the size of the average luxury purchase by consumers in third- through sixth-tier cities surpassed the average for first- and second-tier cities. At the same time, the ten cities with the highest growth in luxury consumption are almost uniformly third-tier and lower. High-end cosmetics and watches are particularly explosive markets in smaller cities.

Consumers generally fall into three categories: “quality of life” consumers, mass consumption consumers, and price-conscious consumers; price-conscious consumers are coming to the forefront as the generations born after 1970 and 1980 settle into family life and more closely consider how to spend their larger disposable incomes.

In recent years luxury goods brands have effectively pursued the latter two markets, increasing their market share in those demographics. However, marked differences remain between each group’s purchasing habits; cost-conscious luxury consumers embrace brands with an image of utility (ex. Tissot) and up-and-coming brands, while “quality of life” consumers remain focused on household names such as Burberry.

… and new market trends…

At the same time, it shows that three major trends are shaping the market today: expansion of luxury brands into everyday categories, increased attention towards niche brands and personalization, and “normalization” of online sales of luxury goods.

Luxury brands have “infiltrated” certain sectors to the point where they account for significant portions of daily spending; from 2013, the share of skincare product sales held by luxury brands has continuously increased, while luxury brands now account for more than 40% of all watches and alcoholic beverages sold. Luxury goods, in these sectors, are no longer conspicuous consumption; they’re just consumption.

“Luxury” is no longer synonymous with “LV, Gucci, and Hermes”; rather, Chinese consumers are increasingly aware of niche brands which more closely match their needs and preferences. When entering the market many brands choose to list on Tmall and other e-commerce platforms to increase visibility and attract younger consumers.

In years prior, Singles’ Day events provided a huge boost to luxury goods sales; in the past two years that effect has become less pronounced, as luxury goods have become a more “normalized” part of people’s everyday consumption patterns

… are changing the luxury goods market

These three trends are improving customer experiences and quality assurance to further drive movement of consumers to e-commerce, making new retail formats the preferred choice for luxury consumption. Luxury brands are working to more finely target smaller markets, with goods that will fill gaps in their everyday lives, through online channels.

Other trends affecting the market include gradual reductions in tariffs for imported luxury goods, relaxation of import regulations, and global pricing strategies on the part of major brands, all reducing the appetite for grey market goods or those purchased while traveling abroad.

One result is that the flow of luxury spending abroad is gradually coming back to China, with part of the 600 billion yuan (US$90.2 billion) currently spent by Chinese abroad on luxury goods shifting to domestic e-commerce platforms.

Deloitte released the “2017 China Whitepaper on Luxury Consumption online”, hoping to answer two questions: Who are the consumers buying luxury goods in China, and what are their consumption habits?

The answers may be surprising; China is second only to the United States as the world’s largest market for luxury goods, and the average age of luxury goods consumers has dropped from 35 to 25. Even more surprising is that the primary drivers behind luxury sales are not women, but well-educated men.

Informed observers believe that China’s Millennials and Gen Z’s will change the face of China’s luxury markets in years to come. How brands respond to these changes will be crucial to their success in China. Both digital and diversified sales channels are important, but young customers want to experience personal contact and exclusive experiences which make them feel valued.

In 2017, the trend among luxury goods brands is to develop diversified sales channels, including online channels; for these brands, this is not just a change to their channels, but also a shortcut to understanding consumer preferences.

Several main points from the white paper are covered below:

Luxury consumers average 25 years old

Despite the feeling in recent years that younger consumers are dragging down the luxury market, not expanding it, Deloitte found that the average age of luxury goods consumers has fallen markedly. In 2017, almost half of China’s luxury goods were purchased by people less than 30 years old, with many saying that even recent graduates can afford Gucci and LV.

By 2025, it is projected that China’s Millennials and Gen Z’s will account for 50% of disposable income in China. Since they grew up with the internet, they’re used to buying everything online, and that trend will no doubt continue when it comes to luxury goods. Although online sales accounted for only 8% of sales in 2017, the white paper predicts that this will rise to 13% by 2021.

They are geographically diverse

Geographically, the top four markets are Beijing (10%), Guangdong (9%), Sichuan (8.8%), and Shanghai (8.5%); the presence of Sichuan on this list is surprising, as despite its large population it is a relatively less-developed province. It’s residents outspending Shanghai’s on luxury goods is a new phenomenon. Less surprising is the fact that first- and second-tier cities still account for nearly half the market, at around 48%.

They aren’t all female

In fact, they’re 51% male, exactly in line with China’s gender distribution. Analysts speculate that, for men, luxury purchases are driven by business needs, while women’s purchases are concentrated in beauty products.

They want more personal experiences

Consumers are turning to niche brands, as opposed to the biggest name brands, because they’re seeking more personal and less mass-produced experiences. This trend extends even to personalization, with more than 40% saying they want to be able to personalize and customize their luxury goods and experiences, while only 20% say they do not. No longer do consumers buy things to show them off; rather, they say they want to be “a little better to themselves” or “search for a higher-quality luxury”.

They’re changing their whole lifestyle

Not all luxury goods buyers read “Caijing”, own an iPhone, and watch documentaries; in fact, more of them love watching TV dramas.

Over half have a high-end phone; while a third of those do have iPhones, nearly as many have Huawei’s. Compared with ordinary consumers, luxury consumers pay more attention to antiques, TV dramas, and arts and culture. There is also a strong correlation between luxury consumers and those people willing to pay considerable amounts of money to own and support pets, or on their children’s education. All of this information suggests that they are changing their lifestyles in a comprehensive fashion, not just upgrading their purchases in one category, and luxury brands should market and brand themselves accordingly.

Younger consumers shop differently from older ones

They’re more likely to believe information from official channels or informed experts, and pay little attention to celebrity endorsements. Expert bloggers have been invited catwalks and product releases, because they influence these young consumers. WeChat public accounts connect with them and drive sales of everything from bags to BMW’s. Moreover, they’re not brand-loyal in the way that earlier generations were, tending to prefer whole clusters of brands and product types.

China’s retail market has seen huge shifts in consumer preferences and buying habits over the past decade, a trend which has only accelerated in the past few years. To cope with the changes, retailers are rushing into the high-end market and integrating on- and offline retail experiences into a seamless package, selling experiences and quality of life rather than goods.

New retail boosts the high-end retail market

The e-commerce segment of China’s consumer electronics market is trending towards saturation, forcing changes to retail patterns. Online retailers are increasingly venturing offline as well, breaking the barriers between the two and developing an “all-channel” sales strategy, ushering in a new era for retail.

Consumers, under the influence of this new retail paradigm, are also shifting from consumption based on the need to consume for personal development, from standard consumer goods to the provision of customized services. This trend, moving away from material needs and towards personal ones, means that the future of China’s consumer electronics market can be summed up with: higher prices for higher quality and personalized service.

According to data gathered by GfK, China’s offline retail sales rose 7.0% year-on-year in the twelve months trailing July 2017, and high-end retail markets grew by 8.1%, accounting for 18% of the market. In the same timeframe, online retail sales rose by 39.8%, with high-end retail rising by 51.9% to account for 14% of the market. This indicates that high-end retail still makes up a higher portion of offline purchases than online, but its online segment is growing rapidly.

High-end retail should focus on differentiated services

To meet the needs of a changing market, retailers should not only integrate on- and offline sales channels and shift to high-end merchandise, but also consider the high-quality services which can be added onto such goods. In the high-end market, retailers should improve product development, displays, and customer service to provide consumers with a better experience.

In the regional high-end retail market, major retailers have kept pace with changes in consumption patterns, shifting from the sale of goods to the sale of lifestyles and experiences.

For example, when Sundan updated its flagship store on Suzhou Times Square, it’s interior design scheme used woods and natural tones to give the store a warm and people-oriented feeling. At the same time, it scrapped its “suggested purchase” guides and let the consumer take control of the shopping experience. The addition of a rest and leisure area in the store pushed the idea of the quality of life to the forefront of the consumer experience.

Customization and differentiation are the future of high-end retail

As the online retail market exhausts the supply of low-hanging fruit and the battle to attract traffic brings increasing costs, the newest issue retailers face is trying to entice consumers back to offline modes of commerce.

Sundan’s drive to differentiate the shopping experience and service quality at its flagship store highlights this trend and points the way forward for high-end retail. In the future, high-end retailers will focus on high-end goods and services both, seeking to differentiate themselves on the basis of service and experience, not just price, to position themselves in the future high-end retail market.

Recently, French beauty product retailer L’Occitane is opening the first Café in mainland China (Nanjing). As the brand competition becomes more and more fierce, skincare brands have to develop various by-businesses to attract and maintain more customers.

The L’Occitane Café in B1 floor of Nanjing Deji Plaza is still under decoration. The decoration enclosure plate has continued L’Occitane’s Provence style: share slow and leisure lifestyle in southern France.

The B1 floor of Nanjing Deji Plaza in Xinjiekou Metro Station has high passenger flow volume. Every passenger going by the L’Occitane Café is curious about this new shop. Not far away from the Café, you will find the L’Occitane store. The Café will open in early July. Among nearly 200 direct sales chain stores in Mainland China, the store in Deji Plaza has relatively high sales volume.

With many passengers coming and going here, Deji Plaza is committed to becoming a collection and distribution center of high-end cosmetics. The stores gathering here hardly need to worry about their sales volume. Maybe this helps us understand why Nanjing Deji Plaza is chosen as the site for the first L’Occitane Café in Mainland China.

Before this, L’Occitane Café has opened five stores in Tokyo, Macao, Taipei and Moscow. New types of Café and SPA services in luxury hotels have become highlights in many companies’ financial report. Both of them are designed for attracting customers to spend more time there. The financial report of the first quarter in 2017 shows that Chinese market has become the biggest growth engine for L’Occitane, accounting for 64.6% of contribution to the company’s sales growth.

In spite of stable sales volume, the brands in Deji Plaza still struggle to tell better stories in limited space with limited attention resource. In such situation, a Café where customers can spend more time seems a nice idea.

In fact, it is not surprising for cosmetic brands to open a Café. Innisfree flagship store on Nanjing East Road in Shanghai has also opened a DIY coffee shop where customers can not only enjoy coffee and desserts but also participated in some interactive activities such as skincare classes and DIY skincare products. Earlier on, some lady-oriented niche brands boasting their natural products with plant extracts also open coffee areas for customers to take a rest or have more interactive activities.

It has become a trend for natural skincare brands to open petty bourgeoisie coffee shops. Moreover, Chanel also opened a pop-up café before. Instead of selling coffee, these brands actually expect to create more opportunities to interact with their customers. Choosing and buying can be done in a flash, but the real driving force behind them has a lot to dig.

Yet, opening a café is not always the best choice for skincare brands. After all, not every brand is so rich like L’Occitane to open a café in Deji Plaza where the rent is extremely high. How to tell an appealing story? It is a question that all sorts of brands in Deji Plaza have to face every day.

A traditional trick is to invite a superstar. A cheaper and more common way is to invite a famous creative director such as Mr. Kevin to share his knowledge and experience on some popular and frequently asked questions like “are you removing your makeups correctly?” or “what are the basic steps for moisture retention before putting on makeups?” and so on. Now some brands also arrange for a live streaming hosted by an online beauty makeup celebrity at the same time.

The most economic and innovative way is to set up an interactive brand terminal machine. L’Occitane has set up a gift machine on which you can get a sample product by scanning the registration QR to become an L’Occitane member.

Under the background of real economic downturn, the cosmetics industry is one of the few varieties to keep a growth in sales. With the relatively lower unit price and high repurchase rate, cosmetic products prove giant market potential.

Source: 36Kr

Retailer websites or apps are the first digital information source in all countries – most notably in the USA, UK, Germany, France and China according to a survey by Digitas.

92% of respondents in China used smartphones for online shopping.

The top 3 categories for digital purchase in China are food (94%), fashion (92%), and household items (89%). Some other interesting data include:

• 56.9% of 25 to 34 years old age group purchase online at least once a day
• 39.6% of fashion purchases by 18 to 24 y-o are done in their bed
• For 86.9% of buyers, online chat is a ‘must’
• 83.1% do not expect delivery within one day (or less)
• 94.3% of people feel real pleasure when shopping online
• 38.5% of online purchases are not made alone
• 68.9% of people don’t want to share their personal details
• 91.4% of people like to have personalized products or services
• Only 2.1% of shoppers head to blogs or forums first, to get product information
• 35.5% of people first search for product information on a retailer website or app
• 20.8% of online food purchases by women are made on Wednesdays
• 39.1% of DIY-Home improvement purchases online are spontaneous
• 35.1% of online purchases for travel & leisure take more than 30 minutes
• 71.1% of Technology purchases online are planned
• 25.3% of people use connected TV at least once a week to purchase online

Also read: China online shopping market overview for Q2 2016

Chinese millennial shoppers are shifting toward an emphasis on life experiences, convenience, and a healthier lifestyle according to a PwC report on China’s retail and consumer products sector.

The shifting demographics and consumer behaviour are leading the changes of retail in China with younger, urban, more affluence consumers according to PwC. Chinese millennials, a combination of post-80s and post-90s, composed roughly one-third of China’s total population in 2014 based on estimates from Goldman Sachs.

Luxury brands have to rethink their strategy due to downturn luxury retail sales, including an expanded online presence and creating ‘affordable’ luxury products. PwC thinks sales are likely to gradually rebound as cyclical trends turn positive.

Apparel and footwear sales remain resilient with the rise of ‘fast fashion’, ‘premiumisation’ products, and the continued popularity of sports and lifestyle brands with consumers.

Sales in personal and beauty care products remain buoyant in China. According to the PwC report:

Younger consumers’ interest in personal appearance, as well as an expanding line of beauty and environmentally-friendly products, is likely to promote growth in the segment over the short-term

Sales of consumer appliances are decelerating in China and remain sluggish in Hong Kong.

PwC offers a number of insights for companies in the retail and consumer products sector:

• Deepening coopetition: New market entrants challenge established business models;
• Transformative mergers and acquisitions: Moving up the value chain;
• Creating trust: A retailer’s online presence is not exclusively for selling or marketing;
• Data is value: Leveraging analytics and the proper use of data
• Increasing corporate social responsibility

Also read: WeChat Payment reached over 300K retail stores

The number of Chinese tourists traveling abroad increased 19.5% YoY to 120 million in 2015 and the number was 13 times higher than that of 1998 according to China National Tourism Administration. Data of Feng Li & Fung Group Research Center showed that consumption of Chinese tourists totaled US$229 billion in 2015.

The number of Chinese visitors to Singapore increased by 20% to 2.07 million person-trips in 2015 and the number is expected to increase to 2.35 million this year. The growth rate will slow down according to HSBC.

In contrast, Chinese tourists visiting Japan and Thailand are expected to increase by 46.2% and 41.7% respectively in 2016 which will maintain a strong growth rate in visitor arrivals.

Singapore was not a good desirable place for Chinese tourist doing shopping compared with Japan and Korea. According to a research covering 300,000 Chinese social media users by HSBC, the United States (46%) was the most desirable tourism locations for Chinese people, followed by Japan (26%) and Hong Kong (21%). Only 5% of respondents chose Singapore.

Chinese tourists were more likely to buy luxury products, cosmetics, clothing and watches in those countries according to 6Estates. And they preferred to buy local brands, such as Charles & Keith in Singapore, Uniqlo in Japan, Sasa in Hong Kong, and Coach in the US.

Also read: China Outbound Travelers Shopping Overview 2015

45% consumers prefer to watch videos to get new luxury products information, 27% prefer to watch products photo gallery, and 14% prefer articles or special visits to know products according to the latest research of Mintel.

With increasing luxury brand awareness in more China’s urban areas, channels for consumers to get knowledge of luxury products become more comprehensive. 51% female consumers between 20 and 24 years old and 46% middle-income groups (family monthly income between US$2,468.56 to US$3,085.55) are more likely to become aware of luxury brands on fashion magazines.

Traditional media such as magazines and newspapers are still very effective channels for luxuries marketing, especially for apparel, accessories and shoes. Video websites which can best reflect the brand value and introduce new products are the most popular channel of consumers. Male consumers have a higher acceptance level for digital marketing methods.

Customized luxury products also drive the development of the luxury industry in China. 43% respondents believed that customized products, such as custom made handbags colors, are a great innovative marketing method and 41% prefer designs of combination of colors with Chinese culture according to Mintel. Other 31% prefer the marketing method integrating art and music.

Clothing (55%), fashionable accessories and watches (42%), jewelry (50%) are the most popular luxury products. Male (32%) have a higher enthusiasm towards food and beverage luxury consumption than female consumers (26%). On the purchase of the electronic equipment, men’s purchase intention (39%) also remains high than the female (19%).

Experiential luxury products have gradually become popular in China, including health, culture, leisure and high-end travel products. 58% respondents show they plan to buy luxury goods or experiential luxuries in a short period. 28% will buy catering luxuries and 22% are willing to pay for cultural and leisure luxury activities. 21% urban consumers in China are interested in experimental luxury buying.

Also read: China Overall Advertising Insights Q3 2015

Tourism-related consumption in China in H1 2015 totaled 1.65 trillion yuan (US$0.26 trillion), an increase of 14.5% YoY with over 2 billion person-trips. 61.9 million Chinese traveled abroad in H1 2015, an increase of 16.11% YoY.

Chinese women use smartphones more frequently and more engaged in lifestyle and travel research. And, they have higher quality travel needs. Women are more inclined to choose nature as a quick getaway from busy urban life, doing yoga, taking a walk or going to spa. Some hotels and resorts launch custom service for women’s such needs.

Find out more in previously published Chinese Women’s Travel Willingness Report in 2014

Also read: China Hotel Search Behavior Overview 2015

Chinese online shoppers prefer to take advantage of the occasional promotions to buy imported goods; and, they also prefer imported goods at promotions, accounting for 65% of online FMCG (fast-moving consumer goods) sales according to Bain & Company and Kantar Worldpanel research.

Online shoppers are very interested in imported goods and goods on sales, which is one of the biggest features of China online shopping. About 38% of online sales come from big online activities such as Double 11 and Double 12. Alibaba revenues reached 57.1 billion yuan (US$8.98 billion) on Double 11 2014, which set a record  in history of online shopping. Imported products are also very popular on the internet, which accounts for about 40% of total online sales while offline only for about 10%.

China FMCG market grew by 5.4% in 2014; the growth three years ago was 11.8%. However, online FMCG sales grew by 34% in 2014. 60% of online retail sales came from newly created demand while 40% as replacement of offline sales.

The variety of FMCG goods Chinese consumers buy online are limited. Skin care products, baby formula milk powder and baby diapers, health-related, and easy delivered goods sell best online. Top ten popular online FMCG  sales categories account for 77% of the total online sales while the offline only 43%.

Chinese consumers are likely to purchase overseas goods and luxury or upscale goods although sometimes that prices online are much higher than those offline. For example, the average price of toothbrushes online is 102% higher than that of offline, as well as beer and hair conditioner.

Also read: China E-commerce Market to Reach US$3.8 Trillion in 2018

With the policy of “internet +” in China today, a large number of consumers tend to research the hotel information through online search engines, book or reserve hotels in OTA and hotel official websites, and share the experience in the social networking platforms. Chinese consumers’ demands are showed on the Internet; therefore internet data become a powerful tool to understand Chinese consumers’ needs and behaviors.

Baidu has released a report on China’s hotel industry. Luxury hotels and budget hotels account for definitely large market share, and midrange hotels only makes up 7% of the total market. High-end hotels keep a fierce growth momentum and competition; the budget hotel market is eventually shared by several chain hotels. Midrange hotels only possess 7% of the market, and are less influenced by the season.

Resort hotels and premium luxury hotels are top 2 most searched high-end hotels. Basing on consumers’ major search words, high-end hotels pioneer in localized services, such as wedding feast, honeymoon tour, fitness and so on to enlarge marketing and maintain high growth.

Facility, location, price, service and catering are major focal spots of Chinese consumers. They always lay emphasis on facility and location when planning to live in budget hotels, attach importance to service and catering in luxury hotels, and price in midrange hotels. Different from the traditional three-star or four-star hotels, midrange hotels grow out of local budget hotels and usually are part of hotel chains. Prices are mostly set between 300 yuan to 500 yuan per night. To improve sales, midrange hotels need to broaden business items and foster brand loyalty.

Low price, convenience and good service are powerful merits for budget hotels to attract consumers. The search volume of budget hotels fell slightly, but comments and reviews increased. Cheap hotels should enhance public fame and publicity. Major budget hotels in China are Jinjiang Inn, 7 Days Inn, Home Inn, Huazhu Hotels and so on.

Since 2012, China had been the largest outbound tourism market in the world. With the rising living status, more and more Chinese would like to pay a visits in famous scenic spots. Many tourists prefer to book air tickets and hotels together in advance. For example, according to a report by the Chinese online tourism website (tao.117go.com), as high as 61% of Chinese tourists have ordered air tickets and hotels in advance for the tour in Chinese National Day. In the future, online hotel booking will become the major booking method, and it is expected to make a large step forward.

Also read: China the Largest Inbound Tourism Market for Japan H1 2015

Recently Hotels.cn released the fourth ” Survey on Chinese tourists traveling abroad in 2015″, which reveals that the sustained and steady growing China’s overseas travel market has brought enormous business opportunities to the global tourism and hotels. In 2014, the number of Chinese traveled abroad exceeded for the first time 107 million, with an increase of 20%. And the latest annual survey also shows that the high-tech and younger generation and more affluent tourists has become the main force in the growth of the population.

Since 2012, China had been the largest outbound tourism market in the world. Chinese overseas travelers are expected to reach 174 million in the next four years, and the total annual consumption was up to USD 264 billion, almost equivalent to the annual gross national product of Singapore and other developed countries. The report shows the growing influence of the “Millennials” tourists, who prefer to high-tech products, and are between 18 to 35 year-olds. 59% of respondent hotels have indicated that in the past year they feel Chinese tourists at the age of 35 or younger increased, and the trend is expected to continue. The Chinese “Millennials” growth is more significant in Asian; 78% of respondent hotels said that a certain proportion of the population kept growth in the past year.

Another highlight in this report is the growth of visitors who rank in the top 10%  Chinese high spend group. In 2014, the average daily consumption of Chinese oversea tourists (including accommodation) was RMB 3,324 (USD 536) while the average top 10% tourist’s daily consumption was up to RMB 13,800 (USD 2,225), four times higher. While the top 5% on average spent RMB 20,896 (USD 3,368) per day, marked the emerge of the “super luxury”.

Using the Internet for travel booking is quite common nowadays among outbound Chinese tourists; so is travel planning. In the past 12 months, 80% Chinese tourists said they had used mobile phones, desktops or laptops to book tickets and plan trips while the ratio in 2013 was only 53%.

Also read: How Many Chinese Students Studying Overseas Compared with Others?

There are about 2.7 million HNWIs (High Net Worth Individuals) in China each of whose assets totals over $0.95 million. And, the number of ultra high net worth individuals (UHNWIs), each with personal assets worth over $15.8 million, reached 63,500. 

Over 60% of HNWIs in China are collectors; and, watches are their favorites. The collections mainly are from their personal interest.

Hong Kong is really a paradise to shop and 73% of Chinese HNWIs like to shop there during a year.

Watches are favored by males and cosmetics are favored by females in overseas shopping.

UHNWIs are tending to favor yachts and jets more recently.

HNWIs would like to send watches as best choices for gifts. They usually spend $24,000 per year on giving out gifts.

Although China’s real estate is not running so well in recent years, it is still HNWIs’ favorite personal investment.

Over one third of HNWIs in China have pets and 5% of pets owners have chinchillas.

Travel accounts for 19% of HNWIs’ total spending, and it is estimated that they will spend more on travel in the future.

Education is another huge spend of HNWIs, 85% of HNWIs like to send their children abroad for further education.

18% of Chinese have belief in Buddhism; 29% of HNWIs have belief in Buddhism.

Although most Chinese HNWIs are not used to online shopping, Internet is the first choice for them to know details of their necessary goods.

Most HNWIs are Beijing, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong and ect.

Also read: Alibaba Chairman Jack Man is the Richest Man in China

Calvin Klein Launches Tmall Flagship Store in China on 19 Sep 2014. CK’ commodities can be classified in 3 categories: jeans & casual clothes, underwear products, and luggage & bags. All of its products are featured with street fashion style and it is specialized in new autumn and winter products with prices ranging RMB200-3,000.

Burberry officially launches Tmall flagship store on Apr 23 2014. This is the first time that an international Luxury brand enters into the third-party online shopping platform, which is some quite surprising. Now among American brands, in addtion to CK, Apple, Microsoft, Beats, Bose, NBANike, Gap, Levi’s, Disney, New Balance, Estee Lauder have all launched their own Tmall flagship store in China.

Tmall has speed up its fashion chase since this year. Tmall has signed contracts with governments of France, Italy, New Zealand and so on. Now there are over 4,000 flagship stores from 45 different countries on Tmall and Tmall also has established nation parts for different brands from different counties.

Also read: Estee Lauder First Day Tmall Sales Data Leaked

There are often distinct differences for almost everything between China and the rest of Asia and Oceania and there’s no exception for luxury travel industry. Here are some insights Brand Karma study revealed.

Luxury travellers from China place higher value on helpfulness and efficiency of service while the other APAC travellers prioritise breakfasts and peacefulness in their travel reviews, according to research from Brand Karma.

The Chinese prefer to post on Ctrip and Weibo while the others use TripAdvisor and Facebook most.

Google+ has 100 million users in China, Twitter has 80 million, and YouTube has 60 million. LinkedIn has over 20 million users according to Business Insider. China does not have a strong Facebook presence and the luxury hotels participate in Weibo.

Top Hotel Review Sites

In 2013, 88% of all traveler reviews were posted on OTA sites. The category’s share of reviews peaked at 91% in Q1 2013.

China sees only 16.8% of luxury reviews posted on TripAdvisor compared with 48% in the rest of Asia Pacific. And Chinese booking and review websites such as Ctrip, Qunar, Dao Dao, and Dian Ping
continue to gain shares of luxury hotel reviews globally.

In China, Ctrip receives most positive reviews (71%) and Dao Dao with least positive reviews (19%).

Chinese travelers are increasingly posting reviews via their phones, and average review length (number of words) is declining.

The Guest Experience

Chinese families strongly appreciate when hotels offer a luxury experience that includes great childcare. Being friendly and staying up-to-date with all the hotel and surrounding location have to offer are important to delight guests.

As the largest population in the world, the Chinese are used to crowds, but they are disappointed when
hotels feel crowded, especially in swimming areas and at breakfast. Chinese guests are as connected as ever and expect to remain so while travelling. As such Internet access costs disappoint many luxury travellers who feel complimentary and fast Wi-Fi should be available.

In addition to business needs, they want to share their experiences and pictures with friends and family on Weibo.

Top Performing Luxury Hotels in China

• The Puli Hotel And Spa
• Golden Gulf Hotel Yantai
• Crowne Plaza Hotel Suzhou
• Sheraton Guangzhou Hotel
• Glenview ITC Plaza Chongqing
• Crowne Plaza Hotel Lijiang Ancient Town
• Le Meridien Chongqing Nan’an
• InterContinental Suzhou
• Intercontinental Tangshan
• Hyatt on the Bund, Shanghai

It’s important for marketers to understand the uniqueness of Chinese travelers, the preferred social networks and features of each.

One example is Wechat; it now offers payment solutions and we have seen airlines like Spring Airlines to utilize the feature to provide convenience and high conversions.

Source: Brand Karma

China Tourism Academy estimates total revenue generated from China’s travel industry is going to reach RMB 3.3 trillion (USD 530 billion) this year with 3.76 billion person trips.

Some Chinese shoppers buy products on oversea online retailers, which will be delivered directly to their Chinese address. These group of users are commonly known as Haitao in China.

According to China E-Commerce Research Center, China online shoppers’ oversea purchase reached RMB74.4 billion (US$12.5 billion) in 2013 from RMB12 billion in 2010, and it’s estimated to reach RMB 140 billion (US$22.68 billion) this year.

Popular Products

There are eight categories of consumers products that are very popular among oversea online buyers:

• Cosmetic and skin care products
• Makeup products
• Women clothing
• Perfume
• Toys
• Health supplement products
• Milk powder & food supplement
• Miscellaneous products for women

Popular Shopping Locations

Chinese online buyers’s most oversea purchase last year was from the U.S., followed by these locations:

• Hong Kong
• Malaysia
• Netherlands
• South Korea
• Denmark
• Japan
• Taiwan
• United Kingdom
• Sweden

What are Chinese Buying from Oversea E-tailers?

50% of the purchased products from United States are milk powders, men and women’s clothing, and health supplement products.

Premium clothing and luxury products are much more popular oversea online purchase this year and the total transactions have been increased by over 20 times. In addition, outdoor products purchase has seen growth by over 50%.

The growth will likely continue as the Chinese government promotes cross-border e-commerce.

Source: Taobao

The turnover of Estee Lauder’s Tmall flagship store in June was nearly 10 million yuan, stimulating the off-line store sales at the same time.

According to CCW.com.cn, there were a total number of close to one million visitors and over two million views on Estee Launcher Tmall store. Their products were bookmarked over 50 thousand times by over 30 thousand visitors.

Estee Lauder launched Tmall flagship store on 21 May as the only authorized third-party e-commerce platform in China and the sales exceeded RMB 3 million on the first day.

Tmall has received a lot of expectations from luxury brands such as Burberry; and, it can not be treated as an alternative sales channel without an operation strategy. Estee Lauder chose Tmall as product launch platform of its upgraded product ANR3 eye cream with limited quantity. ANR3 has 25% market share in China’s premium skin care market. In China, every one of four bottles of eye cream is ANR eye cream.

Estee Lauder launched their official online shop on Tmall on 21 May 2014 and the total sales reached about 3 million yuan on the first day according to leaked sales data online.

According to the leaked data on Weibo, Estee Lauder Tmall store had 7,941 transactions on 21 May 2014; with an average customer purchase value of 339 yuan, the estimated total one day revenue is about 2.69 million yuan.

Estee Lauder has about 170 counters in the country, according to annual sales of 3 billion yuan, the average daily sales is 49,019 yuan per store. The one day sales on Tmall is more than one month revenue of one offline store sales.

Burberry also launched their flagship store on Tmall this week with disappointing performance.

Burberry officially launches Tmall flagship store on Apr 23 2014. This is the first time that an international Luxury brand enters into the third-party online shopping platform, which is some quite surprising.

According to its recent sales report of the website, its flagship store on Tmall sold only 132 products in 18 days, including 32 unconditionally returned ones, a high refund rate of 26.4% comparing to the average refund rate of 7.21% of similar products on Tmall.

Previously, Xiu.com and Jingdong mall also sold outdated Burberry bags windbreakers and other products at special offer, but they did not obtain the official authorization or recognition of Burberry. Apart from Burberry company’s official website, the Tmall flagship store is the only sales channel that has been authorized and recognized by Burberry.

Burberry’ commodities can be classified as 3 categories: men’s, women’s and coat, and sub-categories for each. For example, its women’s products include coats, bags, sweaters, scarves, accessories, dresses, make-up, watches, fragrance and so on.

The products sold on the website is the same as those on its official website, and almost all of them are seasonal new arrivals. And the prices are also the same. Burberry’s flagship store on Tmall guarantees that if the purchased goods are in original state and not used, Burberry can provide free return service within 15 days from the date of delivery of the product. However, items purchased from Burberry’s official flagship store on Tmall cannot be returned to its retail stores.

Compared with Burberry’s official website, the information of its flagship store on Tmall such as sales, return and exchange, reivews and other information are open to the public. According to information displayed on the website, it had more than 300 SKUs, and had sold 132 commodities in 18 days, most of which are fragrances priced between 300 to 500 yuan, followed by clothes priced between 2000 to 3000 yuan, such as Polo shirts, jeans and trousers.

It can be seen from the information displayed on the website, the most expensive product that has been sold is a designer leather wallet, priced at 4,200 yuan. And there is no sales record of any coat or bags that are priced at 8,000 yuan.

A yellow diamond-level (one of many Taobao/Tmall ranks for online buyers) buyer makes an anonymous comment: “The packaging is very good, the pants fit perfectly. My size often need to book from the counter, the online shopping saves me a lot of trouble.”

A netizen from Beijing buys a product as a birth gift for his friend, “The perfume I bought from Tmall flagship store is certainly a certified perfume, it is much faster than get the fragrance delivered from the UK than the official website, it only takes three days for me to get it, it is quite convenient.”

Although Burberry flagship store gets high review ratings in the “product match with item description”, “service of the seller” and “seller delivery speed” with average score of 4.9, 4.8, 4.9 respectively, it is higher than the average score of 60%, indicating that it delivered good user experience.

But its “refund rate in the nearest 30 days” makes people feel eye-popping: the number of returns is 32 times, with a refund rate of 26.4%, it is much higher than the average of 7.21%, and it gets 3 complaints.

The high refund rate could be caused by three reasons:

1. The high unit price of products make customers  more demanding and easier for them to feel dissatisfied
2. It is normal if the size of clothes does not meet the size description, making clothes not suitable, so the return probability is high
3. Some customers might purchase more than one items of the same product but with different colors, who would return the undesirable, so that they could take advantage of the free return service

Buying Directly in China v.s. Buying from Overseas Merchants

Luxury products sold at overseas purchasing store is often at least 30% cheaper than that sold in the luxury brand’s official Tmall store. For example, a classic Burberry plaid tote bag is priced at 8,250 yuan at Tmall flagship store, but it only costs 5,600 yuan in a French purchasing store. Despite that it is difficult to distinguish the genuine from the fake ones, but some buyers are willing to try and buy.

Many oversea Chinese, with their connections in China, can easily open oversea purchasing service store on Taobao, making profit from the big price differences between retail prices in China and the oversea ones. This is very common for luxury products, skin care and premium products in China.

At the time of writing this post, I can no longer find Burberry’s Tmall flagship store. It’s easier to blame Taobao for not being the right platform for luxury products than developing the appropriate business, product and marketing strategy for Tmall operations.

The lack of strategy and planning is why Burberry did not perform well on Tmall. I will follow up with another post on whether international brands should sell their product on Tmall or through their own official website.

Update (8 Jul 2014): Burberry has re-launched its flagship store, indicating “upgraded” version. Taobao and Tmall displays total number of sales for each product item but this “upgraded version” has those numbers blocked:

The Hurun Research Institute recently conducted an investigation about luxury consumption towards 551 rich men and women from 31 cities. Among the rich, 69 people were billionaires. The average age of multimillionaires and billionaires was 38 and 40 years old respectively. And the average money they spent yearly was 1.77 million yuan (USD 290,000), less than 3% of their average wealth which was 59 million yuan (USD 9.67 million).

Brief Summary

• Moutai dropped from the fifth place of last year to the thirteenth place, falling out of the Top 10 Preferred Brands for Gifting, but it still remained the only Chinese brand in the list.
• One out of four rich people had confidence in the development of economy, indicating the ratio dropping from 56% three years ago to 25%, sinking to an all-time low.
• The average sleeping hours of billionaires were six and half hours, with half an hour more in weekends.
• The enthusiasm for collections rose rapidly, with watches ranking the first, calligraphy the second and contemporary art continuing to fell to the sixth.
• The rich concerned about health, time and family life most.
• Burberry, Gucci, Montblanc squeezed into the list of Top 10 for the first time this year.
• Brother Watch (Biaoge) phenomenon affected the ranking of Swiss watches, resulting in the fall of watches ranking. Accessories were favorite gifts for rich consumers.
• Billionaires spent one third of time on the way and 9.2 days every month on business trips, 3 days less than last year, 1.7 days more than multimillionaires.
• Australia, being the best tourist destination in 2006, dropped out of the top three for the first time in recent nine years.
• France still remained the top of international travel destinations for rich consumers. England rose from the thirteenth in last year to the fifth this year. The Maldives went through spikes and drops in the list, falling from the fourth of last year to the tenth this year, being out of the Top 5 for the first time during these three years.
• The Internet was the primary access to information, newspaper and magazine ranking the third and fourth. TV was down to the fifth from the first in last year.
• Switzerland rose from the eighth to the fourth in the education destination list.
• 60% of riches were willing to let their children grew up freely.
• The most proud identity was an entrepreneur for a man of wealth.
• 43% of multimillionaires and 58% billionaires held a master degree or EMBA degree.

The Hurun Research Institute published Hurun Report Chinese Luxury Consumer Survey 2013 for the ninth consecutive year in the press conference of Hunrun Best of the Best Awards dinner party. This survey aimed to reveal a holistic picture about the brand recognition, consumption habit and the lifestyle of China’s wealthy consumers. Statistics about happiness index was added into the survey for the first time this year.

Among all the brands favored by rich consumers, Moutai dropped out of the Top 10. Impeded by the alcohol regulation and the health scare involving the use of plasticizers, its ranking dropped from the fifth to the thirteenth this year. French wine maker Chateau Lafite became the only alcohol brand in the top 10  brands for gifting list, indicating the increasing favor of wine for the wealthy.

The ranking of watch was influenced by the Brother Phenomenon about financial irregularities of government officials which stirred up public opinions. As a result, Swiss watch Rolex was squeezed out of the Top 10 for the first time, and replaced by Longines which was cheaper and ranked the fifteenth of the list. Every multimillionaire owned 4 watches on average while the average number of watches owned by Billionaires dropped from 5.6 to 4.9.

French and Italian brands were favored mostly by the Chinese riches. British brand joined the list of Top 10 for the first time, owing to the performance of fashion brand Burberry which ranked the ninth. Accessories gained the most popularity of gifts for the wealthy.

Apple, being the only electronic brand in list, was widely welcomed by the wealthy, rising from the fourth of last year to the second this year. Due to the massive expansion in the Chinese mainland, Gucci and Montblanc performed particularly well and both broke into the Top 10 list.

Rupert Hoogewerf, the chairman and chief investigator of Hurun Report, said that the wealthy preferred to buy the luxury brands with high reputation but modest price.

Personal Investment

Despite the macroeconomic regulations and controls by Chinese government, the wealthy still kept the faith for the real estate investment which was the primary choice up to 40% for all investments. Stock declined to 43.6% for four consecutive years but it still ranked the second. Fixed income and gold came the third and fourth.

Economy Confidence

One out of four rich persons had confidence in economy. The percentage dropped from 56% to 25%. The ratio of the wealthy with no confidence rose from 1% three years ago up to 9.4%. Under such circumstances, even though most of the entrepreneurs were reluctant to take risks but still more than one third of the wealthy took initiative to invest.

Society Responsibility

Tax payment was still the best way to show responsibility. The concern for environmental protection rose up to 17% from 11% of last year, ranking from the fifth to the third, especially for the respondents who were under 45.

Collection

One out of three rich people had favor for watches. Even though, the watches still remained in the first position but the trend went down for the recent four years. Passion for cars was surpassed by Beijing quadrangle dwellings and Shanghai aged villas. The love for contemporary art fell to the sixth from fifth. And the ancient calligraphy and painting remained the second place.

Travel

Travel was still the first choice for leisure. The frequency dropped for the first time for past five years. Multimillionaires went abroad for 2.8 times on average and billionaires for 3.4 times dropping from 4.2 times in 2012. One third of billionaires’ time were on the transportation with 9.2 days business trips per month, 3 days less than last year and 1.7 days more than multimillionaires’ business trips. The holidays for billionaires were one day longer than the ones for multimillionaires and up to 21 days. The resorts in Sanya was the best destination.

Tourist Destination

Australia dropped significantly to the seventh from the third, staying out of top 3 for the first time for three years. The Maldives went through spikes and drops in the list, falling from the fourth of last year to the tenth this year, being out of the Top 5 for the first time for past three years. Half of the countries were from Europe in the Top 10 list. In last year, there were only two European countries in the list. Japan dropped out of Top 1o this year.

Sports

Swimming, replaced golf, became the favorite way of sports. In recent years, swimming and golf occupied the first two places all along. The ratio of interest for horse-riding doubled and became the fastest growing interest. 40% of the wealthy did exercise three times every week.

Study Abroad

There was a stable ranking for the top three countries, America, England and Canada. Australia dropped from the forth to the fifth. France rose from the ninth to the seventh. One third of the wealthy chose to send their children to study abroad during high school.

According to a study from Fortune Character Institute, Chinese would buy 47% of the luxury products worldwide in 2013. The November 11th, also known as Chinese Bachelor Day, had become a shopping carnival for Chinese netizens to satisfy their shopping desire. It’s even reported that a lady from Zhejiang Province bought a 13.3g diamond ring on that day. Zealousness for luxury products has made China the biggest market place. Now let us take a glance of Chinese luxury purchasing customers and their interests.

From the first chart, it shows that 6.34% more female concerned about luxury products than male.
Chinese younger generation tended to pay more attention to the luxury product. 19-30 years old customers accounted for almost 60%.

Chinese female customers tended to be younger. Below 18 years old, there are 11.33% more female than male.

Chinese luxury consumers frequently visited news media, portal media and female media.

They liked fashion and emphasized life quality. They would pay attention to travel, sport, clothes, IT products and luxury autos.

Chinese luxury consumers preferred to travel abroad.

Chinese loved SUV and luxury cars .

As overseas purchasing was becoming popular, logistics industry was growing as well.

Shanghai Free Trade Zone officially launched cross-border e-commerce platform kuajingtong.com on December 28, 2013.

It is the first cross-border e-commerce enterprises granted by Chinese government as the government supports cross-border shopping.

Many Chinese don’t hold high expectations of Kuajingtong.com, but still they expressed their attitudes by actions; a lot of consumers bought Frappuccino at the price 14.8 yuan (USD 2.42), some luxury products such as belt and wallet were quickly sold out. Consumers complained that their beloved products were all out of stock.

Kuajingtong found out Achilles’ heel of China e-commerce, cross-border e-commerce, a blind spot which was long occupied by a variety of private overseas purchase agencies. No customer service; no way to ensure products authenticity and long delivery time are tricky problems existed in overseas purchase business.

Kuajingtong aims at becoming the official and standard cross-border e-commerce platform. Kuajingtong, supported by Shanghai Customs, Shanghai Entry-Exit Inspection and Quarantine Bureau and State Administration of Foreign Exchange, has the advantage in product authentic guarantee, competitive pricing, transparent taxes, convenient logistics and customer service.

Kuajingtong overseas products only requires 50% custom duty, while normally other enterprises have to pay 150%.

Kuajingtong.com is an open cross-border e-commerce platform, the company contacted about 20 international B2C enterprises about “direct shipping to China”, and negotiation with online B2C platforms including Amazon and eBay. Kuajingtong plans to become the portal site of China cross-border e-commerce.

If you need such service, you can contact Incitez China team.

Tuhao has been a hot word all over the media, it represents rich Chinese who love to show off their wealth on internet while claiming to be poor.

According to an article from Sydney Morning Herald, China’s vulgar rich: befriended but unloved, a crowdsourced translation call on China’s social media yielded “new money,” “slumdog millionaire,” the “riChinese” and “billionbilly.” When English falls short, French is on hand to help: Tuhao have the artistic sensibilities of the arriviste, the social grace of the parvenu, and the spending habits of the nouveau riche.

Tuhao is referred over 56 million times on Sina Weibo, everybody wants to be friends with tuhao, but nobody really likes them. They have caused attention of many foreign media, BBC made a special program about Chinese tuhao.

The popularity of tuhao began early in September, Sina Weibo started an acitivity “Let’s be friends with tuhao”. It’s similar to diaosi, which is a kind of insult of poor and unattractive young man who are struggling for life in cities in the beginning. Then it raged all over online, all of sudden, many young people self-deprecated themselves as diaosi. Diaosi, or “be friends with tuhao”, separate common people with rich class in China.

The most famous Chinese tuhao is a woman from Anhu province in early October 2013. Chinese media reported an anonymous woman gave 4 million yuan (USD 652,193) worth Bentley to her son-in-law as wedding gift. Whether the story is true or not, we could not know. But it was a sensation across internet, arousing mixed feelings with mock, envy, jealousy and hatred. Another father in Liaoning province, bought a kindergarten for his 4-year-old daughter to offer her a nice education environment. He said it was a nice kindergarten in many aspects after he searched for a long time and quite cheap, it merely cost him 10 million yuan (USD 16.03 million).

On September 20, 2013, Apple launched a new golden iPhone 5S, it was quite popular and soon sold out in China. The official price for golden iPhone 5s is 5,288 yuan (USD 862), in China, golden iPhone 5S price is above 8,800 yuan (USD 1,435).

On September 22, 2013, Chinese richest man Wang Jianlin celebrated his new Chinese Hollywood in Qingdao with top Hollywood stars, such as Nicole Kidman and Leonardo DiCaprio. Wang Jianlin, founder of Dalian Wanda Group, invested 30 billion yuan (USD 4.89 billion) in Qingdao film and entertainment industry park.

A research done by A.T.Kearney in October 2013 showed that 2% Chinese consumed one third of global luxury brands.

Tuhao is just another online word for Chinese rich people, especially for those who became rich quickly. Common people have different attitudes towards tuhao, they laughed at them, mocking their tastes, at the same time, they want to be friends with tuhao. The gap between the rich and poor has deepened, a part of Chinese became rich during the early stage of China reform and opening-up policy. Rich people live a luxury life while most of Chinese young people are struggling for life, they could only make their life less miserable by calling the rich tuhao.

2013 Forbes’ China Rich List collected 168 billionaires, much more than last year’s 113 billionaires. The total wealth of top 400 Chinese rich people mounted to 3.475 trillion yuan (USD 567 billion).

In 2013, China luxury brands market growth slowed down due to economic and other factors. But, how would China secondhand luxury brands market perform? Institute Fortune Character, an institute of Fortune Character which is a luxury lifestyle publication in China, did a survey of more than 200 secondhand luxury stores in Beijing, Shanghai and Guangzhou and many secondhand luxury store owners and 573 luxury brands consumers.

Secondhand Market Scale

As the largest luxury brands consumer group, Chinese consumers had accumulated more luxury brands than they could use. It is estimated the secondhand luxury brands market would be 300 billion yuan (USD 48.95 billion), and the annual growth rate will be 20%.

Because of consumer attitudes and immature secondhand market, by the end of the first half of 2013, secondhand luxury transaction was merely 3 billion yuan (USD 489.5 million). However, the annual growth rate reached 30%, faster than luxury brands market. Though the growth was promising, most secondhand luxury brands stores were small and many were in net loss.

Tier One Cities

Tier one cities consumers were more likely to trade secondhand luxury brands, Beijing ranked the first, followed by Shanghai. 60% Beijing consumers expressed their strong willing to sell their luxury brands. However, Guangzhou consumers willingness to trade secondhand luxury brands obviously were lower than Beijing and Shanghai, it was due to the luxury brands market and consumer attitudes in Guangzhou.

Data showed that tier two and three cities consumers’ willingness to trade secondhand luxury brands was quite low. Rich people wouldn’t purchase secondhand luxury brands, and common consumers were still sensitive to price. Secondhand luxury brands were more expensive than fake luxury brands and non-luxury brands.

Tier Two and Three Cities

Secondhand luxury brands stores increased from 512 in 2012 to 823 in 2013, with 37.8% annual growth rate. The new stores were not only opened in tier one cities, but also in tier two cities such as Changsha, Hangzhou and Chengdou.

Tier one cities were still the main market of secondhand luxury brands with relatively mature and rational luxury consumers, and tier two and three cities were new markets that many began fighting for.

Fake Luxury Brands

Fake luxury brands in secondhand market were quite common. Most fake brands came from manufacturers and dealers, and some stores sold out the fake luxury brands on purpose.

Top 10 fake luxury brands were: LV, GUCCI, CHANEL, HERMES, PRADA, ROLEX, Cartier, BOTTEGA VENETA, Dior and BURBERRY.

Secondhand Luxury Consumers

Consumers between the age 21-30 and 31-40 were the main consuming group in secondhand luxury brands market. 27% post 80s, whose ages were between 21-30, said they would purchase luxury brands from secondhand stores; 50% said they wanted to sell luxury brands to secondhand stores.

In 2013, consumers whose assets were below 10 million yuan (USD 1.6 million) and between 10-50 million yuan (USD 1.6-8.2 million) tended to sell their secondhand luxury brands more than last year. Their purchasing willingness dropped accordingly to 29% and 21%.

This means Chinese secondhand luxury brands market has expanded, however, 80% were not the main consumers who had relatively low income, unstable consuming power and high price sensitivity. It would be even more difficult for secondhand luxury stores to make profits, leading to the popularity of fake luxury brands dealers. According to Institute Fortune Character, the percentage of fake brands in secondhand luxury market reached 80%.

The main active consumers should have around 10-50 million assets, who desired the luxury lifestyle but limited to their finance status to buy luxury brands.

Most consumers in secondhand luxury market had bachelor degrees, and consumers with higher education background were more open-minded and more likely to trade secondhand luxury brands. In 2013, more consumers without bachelor degrees entered into secondhand luxury market, their willingness to purchase and sell increased to 25% and 44%.

In 2013, male’s willingness to purchase secondhand luxury brands increased significantly to 25%, surpassing female’s willingness to purchase  for the first time. Male consumers had a strong willing to sell luxury watches, leather products and autos.

CIC and GroupM jointly released China social travel white paper in 2013. By collecting and analyzing social media discussion and related information, they classified Chinese travelers into five categories which could be helpful for brands to make market strategies.

China National Tourism Administration estimated that Chinese tourism industry would reach 2.9 trillion yuan (USD 471.4 billion). Travel became the hot topic in social networks, and social networks played an important part in travel plan making.

This white paper was based on Sina Weibo. CIC and groupm analyzed 2.96 million posts about travel and more than 10 thousand travel lovers’ Weibo posts. They classified Chinese travelers into five categories in the order of online discussion participation from low to high: business travelers, self drive travelers, group travelers, luxury shopping travelers, backpackers.

Hotels and transportation were the major topics of business travelers. In contrast of talking about five star hotels, they talked more about economic hotels. They cared about the service and location of the hotel. When considering about airlines, they preferred the one with meals and punctuality. One suggestion for marketers is when put out an ad, try to show your real product and service and avoid exaggeration.

Self drive travelers are usually big fan of cars. Except for talking about auto club activities, they would also discussed about car renting and maintenance. They preferred to get information from car dealers. Data showed that the self drive travelers’ discussions were motivated by making friends, enjoying freedom and spending time with family. For advertisers, they could achieve unexpected effects highlighting freedom and family time.

Group travelers loved to share information about travel agencies and their photos. Group travel was more likely to be affected by social news and social media discussions. Advertisers should combine their characteristics with social events.

Luxury shopping travelers loved show off their stuff on social networks. Leather products and haute couture were the favorite topics. They usually got their information from Taobao sellers and social shopping platforms. One way to stimulate their consumption is to make your brand special and unique.

Backpackers loved to share their experience on social networks more than the other four categories. They loved talking about Yunan and Hunan provinces, outdoor equipment and camera. They cared about the world and freedom, if brands could embody these elements in ads, they would attract backpackers.