Outlook 2022: China POV
How global trends manifested themselves in the unique and whimsical Chinese market
“China is so different” is a common refrain. And every year when our Outlook trends come out, people are intrigued to see how the year’s global trends played out in this “different” place. What’s the “China version” of it?
The past year has been a rollercoaster for China, the ups and downs of the pandemic, complicated foreign affairs, the stresses of economic downturn, the joy of the 100th anniversary of the CPC (Communist Party of China). Entropy became the core of our lives to a point where we simply got used to the disorder. However, the chaos also brought people closer together than ever.
As we navigated our way through entropy, lines begin to blur between the commercial world and the lives of normal people. Technology became more humanized. People became even more attuned to technology than before — further accelerating China’s world lead in the wide adoption of technological advancements.
Cultural and lifestyle shifts have been quite consistent around the world as a result of the pandemic, Working from Home, feelings of isolation, emergence of the metaverse, etc. While deeper human needs stayed the same, our environment and the ecosystem we live in made our behavior manifest differently in each market. In China, the pivotal point is technology.
China is at an interesting junction between a highly regulated society and an extremely active and people-centric digital world. Let’s see how technology plays a role in shaping culture between these fine lines.
Power to the People
The proliferation of the digital consumer has opened up a whole new world of opportunities. People increasingly carved out a space for their own freedom to see more, access more, and discover more of what’s possible in the digital realm. This space allowed us to find a greater sense of self and gain power without relying on (or rebelling against) corporations and authority.
A regular live streamer can now turn into a celebrity overnight just by selling lipstick, Austin Li’s personal income now exceeds thousands of listed companies. He became so influential that Hermes had to abruptly halt its lipstick launch in China for 18 months because of his bad reviews. Another example, You-tuber Li Ziqi, made videos of traditional village life from her home in suburban Sichuan as a hobby. She quickly acquired a large fan base, while drawing attention to the beauty of Chinese traditions and the goodness of suburban food ingredients. She was soon invited to launch her own brand of cooking ingredients and was appointed the Cultural Ambassador of Sichuan Province. At age 31, she now makes US$ 24 million a year. Unlike how “power to the people” is interpreted in the West, in China, empowerment comes not from fighting or reacting to external circumstances, but simply by having a springboard to unlock new possibilities for people.
The Fan Economy is another interesting manifestation of this theme, where a collective voice and behavior can create such a strong force sometimes bigger than brands and even authority itself. Fans in China feel they have a responsibility to form a ‘barricade’ around their favorite artists, often voluntarily performing duties like promoting positive reviews and cleaning up negative comments.
However, in some recent events, we see that the fan economy can also be counterproductive, and the wall that fans create can easily implode as they turn on the artist. If and when the behavior of a certain fanbase gets out of control, the wall becomes a thick layer of negative sentiment that can immediately bury the artist alive. Xiao Zhan, one of China’s top influencers went from being the brands’ favorite to the brands’ enemy overnight when fans from different circles turned sour, and Xiao Zhan’s overall fan base was deemed toxic and undesirable. When fans become a burden, brands leave. Building a fandom community can be a great way for a brand or artists to expedite growth, but if not done right, it could quickly become a kryptonite.
Lifecycle Loyalty
Looking at a total consumer journey and strategizing against E2E experiences has become the norm now as the ecosystem in China gets more and more fragmented. People have become finicky, eager to jump on the next big thing. Their relationships with brands are becoming ever more transactional and unstable. As a result, many brands have made moves to reach consumers through the lens of a ‘lifecycle,” and engage them at different moments beyond the point of purchase, thus unlocking many more opportunities to drive brand affinity.
One direct result of this trend is “private traffic,” which emerged as marketing buzz word and the top marketing mechanism that everyone tapped into starting in 2021. Private traffic is a form of social CRM that aims to build more direct relationships and prompts more intimate conversations with target consumers. WeChat is the most common tool where ‘brand reps’ (imagine the sales at your favorite make-up counter) use corporate accounts to add customers and form their own branded communities. Customers then receive private direct messages (DMs) from a trusted and familiar brand rep, which they are more likely to respond to.
Private traffic became popular in China not only because of its potential for drawing in customers, but also because these connections helped form invaluable brand assets that enable marketers to re-engage with those that opted in at a minimal cost. Brands often leverage this ‘marketing tool’ to keep their most loyal fans engaged through easy access to the latest product news, group discounts, and sweepstakes.
But a year has gone by, and consumers are now looking for more. Forcing brands to explore new ways to drive brand affinity. Because consumers are increasingly reluctant to be pushed into transactional relationships with brands, demand creation is then of paramount importance. So brands are building whole new cultures, lifestyles and even completely unrelated product lines around their core product proposition, which is then marketed with a sense of exclusivity creating a desire to be part of this new world they have created.
A brand currently in the spotlight is NIO, a Shanghai-based EV brand, whose Chinese name is phonetically identical to the word “future.” On top of basic car services, NIO has built a lifestyle hub to elevate the brand from one that focuses on providing functional products to one that builds cultural connections with people. Shared community spaces are built in different locations for car owners to come together to share and ideate. NIO Life serves as a co-create hub for extending their product lines with collaborations such as a fashion line with renowned UK designer Hussein Chalayan, a scooter with Wallpaper* magazine, and wine collections with the Shanghai Wine Exchange. NIO Life also serves as a forum for community events, based on interests or hobbies, and even for speed dating. Entry level products like backpacks and laptop cases can be bought on their online store. Even if you don’t own a NIO car, you can still own a NIO speaker is the spirit. These entry level product purchases also become quality leads they can follow up on for test drive invitations. This forms a complete closed loop cycle of lifecycle loyalty engagement plus lead generation, making it a true success.
In recent months, China has gone into lockdown mode, yet again. Whether it is through private traffic or creating a community like NIO, it is important for brands to keep an ongoing two-way dialogue with consumers and provide an inclusive culture for people to stay connected to the brand, so that brands are ready to quickly rebound once life returns to normal.
The Multiplayer Internet
At the start of this article, we highlighted the paradox between a highly regulated society versus a relatively free and ever-evolving digital world in China. This paradox will have interesting implications on how the metaverse will play out in China. With walled gardens and strict government policies, virtual worlds in China may never become truly connected like they would in other markets.
While we admire the fun and excitement surrounding NFTs in other parts of the world, they are unlikely to reach their full potential in China without a decentralized digital currency system. Earlier this year, major Chinese tech giants Alibaba and Tencent were asked to rename their non-fungible token offerings as “digital collectibles”, essentially a downgrade, due to an increasingly wary eye being cast on them by regulators, as part of their continued efforts to “prevent the irrational expansion of capital”.
However, these limitations have not stopped brands in China from coming up with their own iterations of what the metaverse has to offer. Some brands use the basic principles of the metaverse to enhance customer experiences for their loyalty programs. Fashion brands Li Ning, Burberry, and even McDonald’s have offered “digital collectibles” in China as part of their marketing campaigns. They are essentially limited offers of branded digital art, and consumers were equally excited and generated great marketing results for these brands.
Another area with very promising growth is the development of virtual idols. It started as an engaging new way to connect with Chinese Gen Z. Following the success of many Japanese imports, local tech companies saw this as a new money-making machine. Soon, they also received government subsidies as virtual human projects were considered complementary to the state’s digital transformation plans.
A telling tipping point was when brands started to suffer the huge financial losses from human celebrity endorsers when information about their controversial personal lives was leaked. These people were quickly in the hands of the Government and are no longer allowed to serve as public figures.
Immune to personal scandals, virtual humans has emerged as an easier-to-manage and more trustworthy alternative of human celebrities. Loved by brands and by consumers, virtual humans have become so popular that corporations are now launching virtual employees. Real estate developer Vanke recently welcomed Cui Xiaopan a virtual debt collector into its personnel, and awarded it with the title of “2021 Vanke Headquarters Outstanding Newcomer Award”.
Along with a state-owned, AI virtual reporter at the Xinhua News Agency, China will be deploying more and more virtual humans not to act as idols, but to be in all walks of life and coexist with human beings. Brands can also explore how the use of virtual humans, which are evolving from an abstract object for admiration to a relatable figure close to the everyday lives of consumers.
The Great Escape
While the great escape for the rest of the world seems to be predominantly a reflex from pandemic constraints, the idea of escape has always been in our daily lives in China. This is related to the consistent underlying theme of this Outlook, the contradiction between the rigidity of the system and the democratizing force of digitization.
For some Chinese consumers, the desire to escape from the humdrum of everyday life stem from the cultural emphasis on good grades and the resulting pressure for academic excellence. Through this lens, the demand for escapism can be seen as a reaction to a high-pressure childhood that many shared growing up in China.
Many Chinese people grew up only knowing one path to success: do well in school and try to land a steady government job. Up until recently, creativity was frowned upon in the education system. In a boxed, and predesigned life, young Chinese had to find their own outlets. Hence the enthusiastic and very early adoption of social media and gaming.
China’s own version of social media for students (“Xiaonei” meaning “inside the school”) was launched in 2005. Online gaming also started to take off in China around the same time. By now, China has the most advanced and sophisticated social media ecosystem and is the epicenter of online gaming globally. Despite state-imposed restrictions and parental concerns, esports has become a mainstream industry and, for some, a lucrative alternative career. Even mid-range esports teams in China now can earn up to USD 300,000 a week through brand endorsement.
Travel is also a way to temporarily switch off from the rigidity of the system or their strenuous “996” or “007” lifestyles. Like everywhere else in the world, outbound travel virtually stopped upon the outbreak of the pandemic. In fact outbound travel in China dropped by 87% in 2020 from USD 245BN down to USD 32BN. However, for Chinese consumers, where there’s a will, there’s a way. While international travel dropped, domestic travel surged. In the 3-day Mid-Autumn break in 2021, China recorded 88 million domestic trips, 87.2% of the entire 2019. Gross revenue from domestic travel reached CNY 1.63 trillion (USD 242 billion) in 2021, almost the same amount as previously spent on outbound travel.
During the pandemic, Chinese people found unexpected pleasures from domestic travel, not only could they just hop on a high-speed train (China has the world’s largest high-speed rail network) to go almost anywhere, they soon discovered there is a lot more culture, nature and even infrastructure in China still to be explored. With 56 ethnic minorities, and regions at the borders of some of their favorite destinations like Myanmar or Vietnam, they were able to go far away from home without leaving the country.
In summary, there’s isn’t an emphasis on a “great” escape, as the notion of escapism has and will continue to be part of our everyday lives. Rather than a sudden surge in desires resulting from the Pandemic, is a lifelong exercise here as a reaction to societal pressure. People are constantly trying to find ways to make up for the lacks in their life. This is a rich area for brands to tap into, to provide products and experiences that can fill these yearning for escape that people have accumulated throughout their life’s journeys.
The overall impact of entropy on Chinese consumer culture is not simply a matter of a subsequent order — there is no “before” or “after” entropy. Instead, we see the world as a continuous, multi-dimensional cycle between order and disorder.
With the advancement of technology and digitization, new spin-offs of the existing market trends or consumer behavior can happen at any time and come from any direction, making China one of the richest and most interesting playgrounds in the world for brands and marketers, but at the same time burying landmines everywhere.
