The Secret to China’s Mass Adoption of Tech Innovation
Plus: The spending power of China's geeks, dairy's content-commerce prowess, and "curious" brand ambassadors.
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We've all heard about how far ahead China is compared to the rest of the world when it comes to innovation. Frankly, yes. But let's clarify: the advances haven't been in technology, they have been in ADOPTION.
China's Consumers Aren’t Evolving Faster — They Respond to Incentives
Silicon Valley's mantra has long been, "If you build it, they will come.” Compare this with the tenet of Chinese tech, or what Kai-Fu Lee likes to call, "getting their hands dirty."
It's not that the rest of the world can't figure out how to make a QR code, or how to execute facial recognition. It's just that the mix of institutions and Silicon Valley offer fewer incentives to do so.
Tencent launched WeChat Pay in 2014 during China’s biggest holiday, the Lunar New Year. Tencent drove its rapid adoption by essentially paying users to accept digital versions of the most common holiday gift, cash in a festive red envelope (hongbao). Recipients of these red envelopes would get the amount sent by family members and friends, plus a little extra, courtesy of WeChat. As a result, WeChat Pay adoption tripled from 30 million to over 90 million within a short period.
By the time I arrived in China in mid-2015, WeChat Pay and Alibaba’s Alipay had already become ubiquitous.
Tencent is not alone in putting its money where its mouth is. Alipay set aside $160 million (that was RMB 1 billion) in incentives for purchases made through their payment systems in 2017, driving more users and merchants to go digital. In the first quarter of 2020, Alipay held a 55.4% market share by transaction volume, whereas WeChat had 38.8%.
Chinese Marketers Understand What Ultimately Drives Adoption
Most of what we'd call “tech” starts off with a bunch of coders in a room, and is then sold to consumers by marketers. In China, marketers realized that the best way to get people to sign up for anything is very straightforward: incentives (aka cold hard cash).
Earlier this year, Douyin launched a series of AR games that generated shareable videos for users. It's fun gameplay — but more importantly, the in-game points earned could be redeemed for digital cash, with prizes up to $1,500. Douyin earmarked $290 million for these giveaways and millions participated.
Tech sponsorship by means of digital hongbao for the Lunar New Year fuels a competitive frenzy. This year, short video app Kuaishou won the lead hongbao sponsorship for CCTV’s Spring Festival Gala (the most-watched show on the planet), promising RMB 1 billion ($144 million) in cash giveaways to viewers to help it reach a target of 300 million daily active users. Not to be left out, Alibaba's Taobao gave out RMB 2 billion ($288 million) to promote its flash sales platform Juhuasan as e-commerce sponsor of the gala, while Bytedance’s Douyin sponsored several of the smaller Spring Festival galas on satellite TV networks as part of its push to give away another RMB 2 billion during the holiday period.
Chinese tech subsidizes user adoption. Last week, I was searching for cheese on the food-delivery app Meituan. In Shanghai (where I lived for four years), I was an avid user of Ele.me, Alibaba’s competing app. But in Shenzhen (where I moved a couple of months ago), Meituan has more vendors. More importantly, cheese is expensive and hard to come by in Shenzhen. Meituan offered me a discount of RMB 20 if I signed up for its payment service.
So:
Subsidized cheese = digital payment adoption.
Further Thoughts:
Is this model feasible outside of China? Would Facebook’s story with cryptocurrency or PayPal’s adoption struggles have turned out differently if they had offered similar incentives?
What do you think of this particular marketing strategy? Would you prefer that marketing departments spend on advertising or on financial incentives to acquire customers?
Resources:
Kai-Fu Lee's full quote, from his book, “AI Superpowers”:
In my view, that willingness to get one’s hands dirty in the real world separates Chinese technology companies from their Silicon Valley peers. American startups like to stick to what they know: building clean digital platforms that facilitate information exchanges. Those platforms can be used by vendors who do the legwork, but the tech companies tend to stay distant and aloof from these logistical details.
How a WeChat hongbao (red envelope) actually works (YouTube)
- by Tanya Van Gastel
Mentioned in today’s newsletter: Alibaba, Armani, Bilibili, Bytedance, Cartier, Chanel Beauty, Coppolella, Douyin, Ele.me, Fendi, Gucci, Juhuasuan, Kuaishou, Meituan, Mengniu, Shiseido, StockX, Taobao, Xigua Video, Yili.
CCI Take: Luxury Can’t Afford to Ignore China’s ACG Community
by Avery Booker (contact Avery)
As of June 2020, the fast-growing video platform Bilibili had nearly 172 million average monthly active users and 12.9 million paid subscribers, and thanks to recent deals like Sony’s purchase of nearly 5% of Bilibili in April 2020, the platform will have a steady supply of anime and online gaming content to keep its millions-strong user base entertained for the foreseeable future.
The size and rising spending power of China’s ACG community has attracted a flood of brands — mostly in the consumer technology, food and beverage, and sports sectors — looking to launch brand collaborations or integrations. Big names like Nike, KFC, Maybelline, and dozens of others have increased their investment on platforms such as Bilibili to reach its audience in meaningful ways, but one segment that has yet to make strong moves is luxury — owing, most likely, to an expectation that ACG lovers lack enough spending power or demand.
However, a handful of higher-end brands have experimented with Bilibili, among them Shiseido, which launched a livestream earlier this year featuring its brand ambassadors that racked up 1.34 million engagements. Others, including Chanel Beauty and Gucci, have invested in ads shown on the Bilibili opening screen, while Fendi launched a promotional campaign across its personal and discovery feeds.
Read the full article on Content Commerce Insider
Brand Film Pick: Director Chen Kaige’s Got Milk
by Sky Canaves
The marketing powerhouses that are China’s major dairy firms appear to spare no expense when it comes to using content to drive commerce in their competitive industry, from sponsoring the biggest reality competition shows to partnering with state-run institutions to highlight their patriotic bona fides.
With the recent Mid-Autumn Festival a prime opportunity for brands to promote family connection through short films, China’s dairy brands once again entered the fray, with examples from Yili and Mengniu proving especially moving this year.
For its premium Satine line of organic milk, Yili raised the stakes by enlisting acclaimed director Chen Kaige (best known globally for “Farewell My Concubine”) to direct a 13-minute film, “Shuzhen” (淑贞), telling the story of an energetic (and milk-loving) 90-year-old woman from her teenaged great-grandson’s perspective, as she grapples with Alzheimer’s disease and faces the loss of her memory.
The film takes a mixed tone between the gravity of illness and the lighthearted nature at the heart of its central character, as she continues with her active housework routines and even shows a willingness to try new things, such as learning how to use a computer and wanting to eat burgers for the first time in her life.
Chen has discussed how he integrated Yili Satine’s brand concept of “organic lifestyle” into the film, describing it as not only covering diet and health, but more importantly, love and happiness, and drawing inspiration from his own upbringing in a multi-generational Beijing courtyard home.
Reviews have been overall positive given the heartwarming themes, and Yili’s Weibo hashtag for the film’s release (#陈凯歌淑贞上映#) has been viewed 200 million times.
News From China
Chinese celebrities are ubiquitous in the domestic marketing scene, serving as a crucial link between content and commerce. Brands have been keen to engage stars in new ways, moving beyond the standard ambassador or spokesperson roles to finding new ways of engaging with fan-consumers, such as through e-commerce livestreaming.
One recent trend that is picking up steam is for major tech platforms to sign on celebrity ambassadors. Last month, Bytedance’s Xigua Video announced that popular actor Deng Chao (best known for starring in the 2016 megahit “The Mermaid” (美人鱼)) would be the platform’s “chief curiosity officer,” aligning Xigua’s rebrand, which included changing its slogan from “Giving you freshness and good-looking” to “Lighting up curiosity for life.”
In his new role, Deng will produce vlogs for the platform, share snippets of his daily life, and promote Xigua Video’s upgraded content offerings of high-quality productions from both professional creators and film and television studios, with the hopes that Deng’s broad appeal will help widen the audience beyond Gen Z youth. Xigua Video also added Yu Shuxin of girl group The9 as a “curiosity ‘like’ officer” to further help users explore the wealth of content on the platform.
Other commercially valuable celebrities that have recently taken starring roles representing tech firms include:
Idols Lay Zhang and Wang Yibo for Youku’s VIP paid subscriber service
Actor-singer Chen Kun for short video app Kuaishou
Actress Liu Tao for Alibaba’s Juhuasuan flash sales platform
Actress-singer Ouyang Nana for Alibaba’s New Power Week promotion
Celebrities are also accelerating moves to establish their own brands, with a major emphasis on the streetwear space. Jay Chou, the king of Chinese pop, is a model for others with his far-reaching business interests that include restaurants, headphones, and the clothing brand and retailer Phantaci, followed by others such as Edison Chen (Clot), Wilbur Pan and Li Chen (NPC and the controversial MLGB), and Shawn Yue (Madness and Common Sense).
This year’s crop of launches is being led by popular idols and singers, who may have had more time to devote to brand development as a result of the coronavirus, which halted productions and live performances for a time.
Singer Jackson Wang has worked with luxury houses such as Armani, Cartier, and Fendi (for which he co-branded a capsule collection), but his own Team Wang label is more accessible, with prices ranging from around $50 to $225. The brand made a splashy debut in July with the opening of an artsy pop-up store and concept space in Shanghai, and has collaborated with StockX for a limited edition “IPO” product drop.
Justin Huang (Huang Minghao) started his TwoEx2 brand last year, but boosted its marketing earlier this year via social media and the opening of Taobao shop to sell the small collection of nine pieces.
William Chan made his first attempt at a streetwear brand in 2018, but it failed to take off. This year, his Canotwait line made a more successful launch with the opening of a creative Venus flytrap-themed pop-up shop in Shanghai and a collaboration with Japanese designer Masanori Morikawa’s McDada (formerly known as Christian Dada), which sold out within three hours of being released via the Chinese lifestyle and streetwear resale platform Poizon.
And last but not least, Hua Chenyu’s Born to Love brand goes beyond clothing to offer collectible figurines imbued with the singer’s symbolism (Mars, mouse, love, and his 30th birthday), the ultimate celebrity derivative product.
Webinar: C-Beauty Secrets — Learnings From China’s Top Cosmetics Brands
Join CCI sister publication Jing Daily for “C-Beauty Secrets: Learnings From China’s Top Cosmetics Brands” to hear from international leaders in the market, including Japanese personal care brand Shiseido.
During the webinar on Wednesday, October 14 at 10:00 a.m. EST, Jing Daily will discuss Chinese consumer preferences, the evolving demand for domestic and international color cosmetics and skincare in China, and the local selling tactics Western beauty players can tap to remain competitive, including peer-to-peer social selling, AR/VR try on, and livestream e-commerce.
News in English
Bilibili appears to be well on its way to a secondary listing in Hong Kong, reportedly hiring four major investment banks to prepare for a $1.5 billion IPO. Nikkei Asia
Luxury watch brands such as Piaget and IWC are taking lessons learned from Tmall to create virtual boutiques that aim to elevate the digital experience while bridging the gap between online and offline and retailing. SCMP
Chinese watch brands have a long way to go in developing the prestige associated with Europe’s big names, but younger consumers may develop a taste for “Made in China” timepieces that reflect the nation’s culture and traditions. Financial Times
Chinese fashion retail group Peacebird recently acquired Coppolella, an Italian streetwear and skateboarding apparel brand, and seeks to take it global with a major emphasis on the Asian market. Sportswear International
From the 150-year-old New York apothecary C.O. Bigelow to Magic Johnson-endorsed CBD purveyor Uncle Bud’s, here’s a look at eight brands selected to make their debuts on Tmall Global via Alibaba’s recent pitch fest. Coresight Research
With China’s recent box-office rebound fueled by local productions, the market is growing further apart from Hollywood, deepening the bleak outlook for U.S. studios. The Hollywood Reporter
Recent auto sales in China highlight the widening consumer wealth gap, with premium and luxury car sales up 1% for the year through August, compared with a 23% overall decline in the market. CGTN
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