In the past, brands entering into the Chinese market have always been concerned about competition against established domestic or multinational category players. However, now companies are facing a new challenge from emerging market disruptors – a new generation of digital-first brands growing across China over the past five years.
Those newcomers are making a so-called “new consumption wave” in many categories, from fashion and beauty to the food and beverage industries. This new trend has been shaped and strengthened by the COVID-19 pandemic, as well as the rise in Gen Z consumers. How will this trend reshape the marketing landscape and redefine the marketing playbook? Its implication can hold essential lessons for all players in the field.
New consumer brands booming in China
New brands are evolving alongside consumers’ needs, behaviours and trends. Some new brands have taken off quickly within two or three years to occupy the positions that traditional brands earned after decades of effort. Perfect Diary, a beauty brand founded in 2017, has topped the 2020 TMall Double 11 Beauty Brands Revenue Rank. Genki Forest, also a young beverage brand well-known for their sugar-free and low-calorie drinks, tripled its value within nine months to $2 billion USD. The local lingerie brand, Neiwai, became the most talked-about brand through their phenomenal “No Body is Nobody” campaign in the past two years for their one-size-fits-all underwear. These new brands all target niche but high-demand markets that were ignored by established brands, and successfully built up their category-defining businesses.
These types of new market disruptors have been sprouting in Chinese consumer markets since 2015. There are two clear forces that have empowered this wave of successful new consumer brands, one of them being the expansion of Gen Z as major supporters of new brands. The other factor is the digitalisation of media and commerce channels where new shopping habits are developing.
Chinese Gen Z consumers are shaping trends
Gen Z, by general definition, is the group of people who were born between the years 1995 and 2010, and are considered the first generation of true digital natives. In China, Gen Z already exceeded 320 million people by November 2020, making up 28.1% of all mobile internet users. Compared to their predecessors, they were exposed to the internet, social media and mobile phones at an earlier average age.This unique environment inevitably influenced their behaviours and consumption patterns.
Heavy mobile internet users
On average, Chinese Gen Zers spend a much longer time on mobile phones across various apps than older generations of users. According to QuestMobile research, Gen Zers spend around 175 hours on mobile per month, with about one-third of which (48.9 hours) are spent on watching videos, especially the short-form and streaming video content.
Innate online shoppers
The long hours spent on the internet, especially on mobile, has encouraged the Chinese Gen Z audience to develop online shopping habits at an early age. According to a survey by QuestMobile, 82.3% of Chinese Gen Zers were shopping online. Compared to their counterparts in other countries, Chinese Gen Zers showed heavier reliance on online shopping channels. A different survey conducted by McKinsey also indicated that Gen Z consumers in China were more likely to rely on digital means to shop than those from other countries. 47% of Chinese Gen Z consumers said they enjoyed browsing for products in-store before purchasing online, while only 16%-29% of their counterparts in other countries would do the same. Moreover, 36% of the respondents admitted to spending beyond their budgets, highlighting their intentions to overspend on consumer products.
Prevalent but fragmented touchpoints
The heavy use of smartphones amongst the younger generation provides prevalent but fragmented touchpoints throughout their customer journey with a brand. Euromonitor’s recent research outlines the typical daily routine of the average Chinese mobile app user. From social communication to food purchases and transportation, mobile apps have been integrated into every aspect of their lives.
Mobile apps are becoming more and more diversified to serve a wide range of consumer needs, and the time users spend on each app is becoming increasingly fragmented as a result. If you are only active on WeChat, despite its status as the number one super app, you are still missing many opportunities to talk to other potential customers. It’s important that you cover all customer touchpoints across a variety of different apps.
Implication for marketing strategy in China
What can brands learn from these insights into Chinese Gen Z and how can they adjust their marketing strategies accordingly? Below are some tips for brands planning to tap into this younger Chinese demographic.
Omnichannel experiences are key to driving purchase decisions
The growing Gen Z and consumer brands trend can promise a lucrative market opportunity, particularly for foreign brands who are looking to tap into the Chinese market. However, there is a precondition you must abide by to succeed – you have to be able to adapt to the omnichannel shopping trend that has already been prevalent in China before the COVID-19 pandemic. This trend has only strengthened over the lockdown period, making it all the more important for brands to adapt quickly.
If online channels are winning due to convenience, what values are left for brick-and-mortar stores? According to this international survey by Vogue Business, Gen Z shoppers in growth markets like China expect more engaging and personalised in-store shopping experiences. They are still willing to visit physical stores as long as they’re provided exclusive shopping experiences.
Therefore, being successful only online or exclusively on offline channels may not be enough for the new generation of consumers; omnichannel marketing with consistent experiences across the board is what will truly set brands apart from their competitors. Despite already being a digital-first top player within the beauty industry, Perfect Diary still rushed to open 200 offline stores within 20 months between 2019 and 2020 to adjust to the omnichannel trend.
Media channel portfolio selection decides the communication efficiency
Fragmented media and the omnichannel shopping trend make it impossible for brands to reach the majority of their target audience through one single channel. Brands need a more integrated media strategy to connect with their target audience. They need to share the right messaging across the right selection of media channels in situations that resonate best with their audience. A global marketing formula without localisation or tailored content will only lead to confusion and miscommunication. If your target customers are spending more time on short-form video channels, why not be more active on Douyin or Kuaishou? If they are into the subcultures of hip-hop music or street fashion, why not integrate those cultural elements into your advertising creatives?
In day-to-day practice, not all channels are equally important at each phase of marketing. Some platforms may be more effective to achieve certain communication objectives than others. It is necessary to be very familiar with each platform’s pros and cons, as well as the ultimate goals of your campaigns. A well-selected channel portfolio can reach your customer at much higher cost efficiency.