Extreme Brand Collaborations Vie for Consumer Attention
Plus: China’s “Prime Day," E-Commerce Results, and Bilibili’s “Next Wave”
Brand collaborations, also knowns as crossovers (跨界, kuajie, “stepping beyond the boundaries” or 跨圈, kuajuan “stepping out of the circle”) are a major trend in Chinese marketing, as brands seek out creative means to reach new consumers beyond those already familiar with their core products. But the huge uptick in collaborations between brands on joint products has led to more extreme tactics to draw attention, leading to increasingly unusual offerings, especially among “time-honored” domestic brands that look to connect with younger generations in new ways that tie into nostalgia and a desire for limited-edition goods.
Last year the traditional confectioner White Rabbit partnered with fragrance brand Scent Library on a range of candy-scented products, including perfume, shower gel, and hand cream. The limited-edition collection, created for sale on Tmall, sold out within 10 minutes of its release.
More recently, Mayinglong, a brand best known for its hemorrhoid cream, collaborated with the state-owned China Gold to produce a line of jewelry based on the red and gold packaging of Mayinglong’s signature product. The series was another Tmall partnership, developed in conjunction with the platform’s “New National Goods” campaign promoting domestic brands, and was reportedly inspired by images of trendy Chinese women wearing small tubes of Mayinglong ointment as earrings. Mayinglong is no stranger to fashion, either, having produced a line of streetwear styles that was launched at Florence Fashion Week in May 2019.
KFC’s fried-chicken Crocs were a hit in China, the only market outside the U.S. where they were sold. In a more recent (and purely Chinese) collaboration, the fast-food chain has launched two joint products with insect repellent brand Liushen: an herbal-water-flavored KFC coffee drink and a coffee-scented version of Liushen’s repellent.
Netease’s home lifestyle brand Yeation worked with Shanghai Animation Film Studio to create a line of cosmetics linked to the 1980s series “Calabash Brothers,” with specific products tied to each of the cartoon’s seven key characters and their defining attributes, such as a moisturizing facial mask for the “water brother” and an eyeshadow palette for the brother with enhanced vision.
Inspired by the coronavirus epidemic and increased consumer interest in health and wellness products, the Chinese cold medicine brand 999 collaborated with RamenTalk, a premium packaged-noodle brand, to create a cold-care gift box that looked like an extra-large box of 999. Inside were packages of cold medicine and two types of noodles, along with useful items such as a face mask, coaster, and bags of tea. The set was promoted via a series of short video commercials and by various influencers who shared vlogs of the unboxing and eating process.
Starting Tuesday, June 2, CCI will be launching a monthly feature to highlight the top brand collaborations from China, so be sure to check back next week for the best of May.
Mentioned in today’s newsletter: Alibaba, Bilibili, Fosun Group, JD.com, KFC, Netease, Pinduoduo, Scent Library, Sephora.
Results Wrap: E-commerce, Livestreaming, and the Coronavirus
China’s biggest e-commerce platforms have announced their financial results from the first three months of 2020, which coincided with the outbreak of the coronavirus and strict measures to bring it under control. All three of the majors reported solid revenue growth during this period as demand for daily necessities such as fresh food compensated for slowdowns in other sectors.
Alibaba (NYSE: BABA)
The e-commerce giant has a fiscal year that ends on March 31, so it reported full-year earnings along with results for the first three months of 2020, including an annual gross merchandise volume that reached $1 trillion for the first time, accounting for around for one-sixth of China’s total retail sales.
Revenues for the first three months of 2020 were up 22% year-on-year, to RMB 114.3 billion ($16.1 billion), though its net income was RMB 348 million ($49 million) in the same period represented an 88% drop, which the company attributed to losses from equity investments, compared to gains it made in 2019.
Alibaba added 15 million active customers on its Chinese retail platforms between January and March, for a total of 726 million. Tmall sales grew by 10% in the quarter by GMV, with demand for fast-moving consumer goods, electronics and home furnishings and appliances offsetting declines in categories such as apparel.
CEO Daniel Zhang highlighted the importance of livestreaming as to draw customers in lower-tier cities and rural areas, who now account for about 70% of new users, and shared thoughts on the role of fame in driving sales: “If you have a one-off sales event with a celebrity influencer, you get a user to make a one-off purchase, fine, but the question is can you then keep that user in the long-term and continue to market to them and get the full value out of that relationship.”
JD.com (NASDAQ: JD)
JD.com reported a similar boost in revenues as its bigger rival, with a 20.7% year-on-year increase during the first quarter to RMB 146.2 billion ($20.6 billion), with general merchandise sales up by more than 38%. Its net profits also saw a significant drop from the previous year, down 85.4%.
The e-commerce retailer added 25 million new customers during the first quarter, for a total of 387 million.
CEO Lei Xu noted that coronavirus experience has increased enthusiasm from brands and merchants eager to participate in this year’s 618 shopping festival. “I think it's the highest since in the past 17 years,” he said on an earnings call. “They are very engaged.”
Pinduoduo (NASDAQ: PDD)
Though only founded in 2015, the fast-growing social e-commerce platform already reported hitting $1 trillion in annual GMV in the 12-month period that ended in December 2019, continued to hold that distinction through March 2020. First-quarter revenues were up 44% year-on-year at RMB 6.54 billion ($923.8 million). Net losses were RMB 4.12 billion ($581.8 million), compared with RMB 1.88 billion in Q1 2019, largely due to increased sales and marketing expenses for advertising, promotions, and coupons.
Pinduoduo’s user base also grew rapidly, with more than 628 million users at the end of the first quarter, adding nearly 43 million since December 2019.
Although the platform only opened livestreaming to all merchants in January, CEO Colin Huang emphasized its importance over the course of the following months. ‘With Covid-19, we realized that the boundaries between [the] virtual and the physical worlds have blurred to an unprecedented degree.” He said in an earnings call. “We see livestreaming not only as a channel to sell products, but more importantly a value for merchants to share their personal experiences and interact with the users…Livestreaming opens a window into the lives of producers and unfolds the story of the product in a way that a simple listing cannot.”
Warming Up for China’s “Prime Day”
While Amazon has had to push back its annual Prime Day sales extravaganza to September as it struggles to return to pre-pandemic operations, Chinese e-commerce platforms are going full steam ahead with their corresponding mid-year event, the 618 Festival next month. Originally launched by JD.com to mark the company’s anniversary in 2004, rivals such as Alibaba and Pinduoduo have taken up the date for promotions as well, and it has expanded from a single day into several weeks worth of campaigns.
This year’s 618 Festival is being watched as a bellwether for China’s consumer recovery in the post-coronavirus era. Last week, the central government abandoned its annual growth target after China saw an economic contraction of 6.8% in the first quarter, but there are hopes that consumer sentiment will fare better.
Subsidized shopping is the order of the day. JD.com announced plans to offer RMB 10 billion ($140 million) in subsidies, another RMB 10 billion in coupons, and “hundreds of billions of discounts.” Alibaba’s Tmall is also offering RMB 10 million worth of subsidies, and has more than 100,000 brands on board this year (twice as many as last year).
We can expect to see the continued use of livestreaming to drive 618 sales over the coming weeks. JD Retail CEO Lei Xu hosted his first sales broadcast on May 22 with a real estate promotion, offering chances to win a Beijing apartment for 61.8% of its listed price. Meanwhile, Tmall has seen a strong start to pre-sales on May 25, reporting a more than five-fold increase in sales volume in the first hour compared to 2019, which was a record-setting year for 618 sales.
Brand Film Pick: Bilibili’s “Next Wave” Speaks to Class of 2020
As a sequel to “The Rear Wave” (后浪), Bilibili’s recent tribute to Chinese youth from a middle-aged actor that drew mixed reviews from its target audience, the video platform aimed for a more generationally appropriate music video to celebrate the class of 2020, which has faced an especially challenging end to the college experience.
Set to an inspirational new ballad by the popular singer Mao Buyi, “Enter the Sea” (入海) encourages China’s youth to fearlessly dive into their futures without fear. A young man (played by actor Lüyun Heliao) is seen entering a taxi as he leaves campus for the last time, filled with emotional memories. Then the driver turns, revealing that he is the same person as our protagonist. The video progresses through a series of seamlessly edited clips depicting the same man in a variety of jobs, from cook to coach to tailor to pro gamer, highlighting the apparently infinite range of positions available to him (and, by extension, all graduates) along with the hard work required by each.
The film is directed by Zhang Dapeng, who has made innovative films for brands such as Tencent, Nike, and Phillips, and is perhaps best known for the live-action trailer he shot for the animated “Peppa Pig Celebrates Chinese New Year,” which he also helmed.
Bilibili’s brand is subtly but savvily placed in just two shots where the protagonist is watching videos on his phone, but otherwise the platform engages users outside of the narrative by leveraging its unique community to contribute supporting content. The film closes with a collection of dozens questions sourced from this year’s graduates expressing their concerns about the future, and the audience is encouraged to take the time to talk to them and share their responses. Viewers have also been invited to create their own music videos to the song, with cash prizes for the best productions.
The response from young viewers has been largely positive, with more than 9 million views on Bilibili and another 12 million-plus on Weibo, where it was shared by Mao Buyi to his 16 million fans, and more than 100,000 comments across the two platforms.
News in English
Chinese conglomerate Fosun Group is investing in livestreaming, and chairman Guo Guangchang recently appeared before the cameras to sell a variety of Fosun Group products, including Lanvin facial masks. Bloomberg
The big-talking “boss” livestreamer Luo Yonghao may be wearing out his welcome amid complaints that he is promoting substandard products. SupChina
Tmall’s Luxury Pavillion saw strong sales during the recent May 20 “Valentine’s Day,” with 400,000 transactions and average spending per order up 61%. WWD
Sephora has partnered with Tmall Global, Alibaba’s cross-border e-commerce platform in China, to offer 25 international brands in China. BeautyMatter
Luxury brands face a challenging proposition in figuring out how to sell to Chinese consumers who are no longer able to travel internationally to shop. WSJ
The return of the Popeye’s chain to China was greeted enthusiastically by consumers in Shanghai, thanks to successful marketing campaigns on WeChat and Weibo. Forbes
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Thank you for reading! We’ll be back on Thursday with more news and our popular “Report Corner.” Until then, please reach out anytime if you’d like to inquire about advertising or a collaboration, have general feedback, or just want to say hi!