Blog Archives

Pinduoduo for China cross-border e-commerce? Here’s why!

November 22, 2021August 27, 2020 by Jacco

At $5.8 trillion last year, China has the second-largest retail market in the world. We’ve dedicated ourselves to helping domestic and international brands unlock this opportunity. This means keeping abreast of key changes in channel and marketing mix.

As you may have seen, one of our focus areas this year is cross-border e-commerce. Cross-border e-commerce in China holds a specific distinction. International companies are allowed to sell certain goods to Chinese consumers online, through platforms such as Alibaba’s Tmall Global and Kaola, at preferential duty rates and without a license to operate a business in China. As you can imagine, that’s a significant reduction in red tape. It also lowers the cost of doing business with China.

We’ve published on cross-border e-commerce trends, launching on cross-border e-commerce and our annual e-commerce calendar.

We’re excited to present readers with a new channel, Pinduoduo for China cross-border e-commerce.

What is Pinduoduo?

In terms of market capitalization and user scale, Pinduoduo is China’s second-largest e-commerce platform in China. Pinduoduo has 683 million active buyers in the last twelve months.

Pinduoduo has taken the lead on several new trends, including social e-commerce, team purchase, and consumer-to-manufacturer demand models (C2M). Each of these have shown great promise in China. You can find more about these initiatives through an instructional video here.

Pinduoduo’s main attraction is that has a significant number of users in China’s lower-tier cities, who are likely to increase their spending on online goods. Given the cities they are located in, this group of consumers is also likely to have limited physical access to international brands. Here, e-commerce is the great equalizer – allowing these consumers in China’s smaller cities to access foreign products.

What Makes Pinduoduo’s Cross-Border E-commerce Different?

To encourage its users to spend more and buy a wider range of goods on their platform, Pinduoduo has decided to enter cross-border e-commerce. Pinduoduo’s cross-border e-commerce offer is called Duoduo International.

The platform has adopted an attractive “0 commission, 0 deductions” model to attract overseas brands. That substantially reduces the costs of setting up in China.

In addition, to help new brands increase sales, Duoduo International will offer additional support services, free-of-charge, to get brands familiar with the platform. This includes work on product selection, participation in online marketing activities and day-to-day operations optimization. Of course, the effects of these additional services are amplified if you are working with an e-commerce partner like AgencyChina to help grow your brand on your behalf.

This All Sounds Too Good To Be True. What’s The Catch?

There is no obvious catch. But Duoduo International is still finding its feet. As of February 2020, Multinational F&B giant Nestle and Thai retailer TMG are among the firms waiting for approval to set up their branded presences on Duoduo International. So brands should be prepared for a typical Chinese platform setup phase.

In addition, we’ve heard on the grapevine that Duoduo International currently has a preference for overseas skincare and beauty brands. That’s because Pinduoduo aims to overtake JD in beauty sales this year. That’s an ambitious goal and the platform will need all the help from overseas brands it can get. We’ve already seen SK-II, Estee Lauder, Olay and MAC on the platform.

Will your brand be next?

Entering a platform like Pinduoduo could be a good move for your brand. But proper duediligence with regards to competitors movements in your sector as well as good preparation and product selection will make the difference between success and failure on the platform. To speak to us about market entry through PDD or to add PDD as an additional platform for your brand in China, drop us a note here.

China E-commerce Developments in H1 of 2020

November 22, 2021July 16, 2020 by Jacco

It’s been a whirlwind year for China’s e-commerce sector. All markets and industries have struggled under the weight of coronavirus. The only exception – e-commerce. In the first half of 2020, China’s online retail sales totalled 5,150.1 billion yuan (US$727.36 billion), up 7.3% year-on-year. That means China’s e-commerce sales are now a quarter of the country’s total retail sales.

Against that backdrop, here’s a summary of key, new developments in China e-commerce in the first half of 2020:

Tencent has unveiled a new tool to make it even easier for merchants to build virtual shops on its popular WeChat messaging service. The new tool, called WeChat Minishop, will allow a vendor to create an e-commerce store inside WeChat using Tencent’s tool instead of relying on expensive developers or other third party platforms. “Minishops” will support livestreaming and provide merchants with features such as order management services, transactions, logistics, and after-sales support.

To stimulate consumption, new shopping festivals, such as Shanghai’s 55 Shopping Festival, have been added to already extensive China e-commerce calendar. The 55 shopping festival, which included online and offline initiatives, pulled in US$2.2 billion of sales in the first 24 hours.

Alibaba announced plans to bring 1000 new overseas brands to China in 2020. This is a huge commitment from Alibaba and Tmall Global focused on getting the best the world has to offer to Chinese consumers.

Pinduoduo, China’s third-largest e-commerce platform by transaction volume, unveiled a livestreaming feature. E-commerce revenue through livestreaming is set to double in 2020 to $135 billion, according to iiMedia Research. Livestream e-commerce has been covered by our team here and is a clear trend that will be around for a while.

Immediate responses to the coronavirus outbreak, which included contactless delivery solutions, online migration of services like gym classes and conferences, and digital transformation to turn retail sales assistants into online sellers.

Pinduoduo livestreaming China — *Image: Pinduoduo Livestreaming*

So, in a changing e-commerce landscape, what do you need to do?

First, subscribe to the AgencyChina newsletter to get all these e-commerce updates (and more), delivered straight to your inbox.

If you’re new to the China market, consider which commerce marketplace (Alibaba, JD, Pinduoduo, Kaola or RED) might be right for you to launch. You can request a free consultation with one of our experts to walk you through some of the considerations.

If you’re already in the China market with a presence on an e-commerce marketplace, then take the time to consider what your next steps might be. To add additional online distribution channels, a stronger approach to e-commerce festivals, a product portfolio revamp or more community commerce. You can request a free consultation with one of our experts to walk you through some of the considerations.

Opportunities for European Brands in China’s Growing Yoghurt Market

July 20, 2020July 6, 2020 by Jacco

China’s yoghurt market has seen exceptional growth. Increasing dairy consumption and yoghurt’s popularity as a snack have meant double-digit growth over the last five years, and created a market worth USD $20 billion. Let’s unpack the size of the opportunity and what it means for imported brands.

Image: Getty Images; szefei

Super-Sized Growth

China’s yoghurt market is already worth an eye-watering USD $20 billion. That’s expected to grow in double-digits into the immediate future. Our friends at ChemLinked estimate the yoghurt market may add an additional USD $10 billion in value by 2022.

Three state-owned enterprises have a strong hold of the yoghurt market. Inner Mongolia Yili Group, China Mengniu Dairy, and Bright Dairy & Food accounted for around 60% of category sales. That sounds like a strong grip on the category, but the truth is that their combined market share has decreased from 75% a few years before. This means Yili, Mengniu and Bright Dairy may be struggling to meet consumers’ increasingly varied need states and preferences. This is the opportunity space imported players can take advantage of.

Opportunity Spaces in China’s Growing Yoghurt Market

Before we get into the opportunity spaces, a quick word on China’s yoghurt market. China’s yoghurt market has a roughly even split between ambient drinking yoghurt (also known as shelf-stable or room-temperature yoghurt) and chilled yoghurt. Over the past few years, ambient drinking yoghurt has seen a faster growth rate because of consumer hesitations over drinking chilled products and improved distribution to cities that have incomplete cold chain distribution. Speak to one of our analysts for a detailed market breakdown.

So, now to the opportunity spaces. Currently, our expert analysts have used online and offline retail sales data to identify these opportunities:

Clean-label ambient drinking yoghurt
Ambient drinking yoghurt calibrated to ideal body shapes (e.x.: “jacked”, “cut”, and “slim”)
Ambient drinking yoghurt to aid post-meal digestion
Non-dairy yoghurt for lactose intolerant family members
Chilled yoghurt with added protein
Chilled yoghurt with probiotics

Image: Getty Images; dairyreporter.com

Things To Remember

For brands that don’t have a strong track record in China, you may need to build up a sales track record via e-commerce in order to establish your credentials with Chinese retailers and distributors. Fortunately, Alibaba’s cross-border e-commerce marketplace, Tmall Global, has announced plans to bring 1,000 new overseas brands onto its e-commerce platform over the next 12 months. This plan falls under Alibaba’s $200 billion, five-year-import program. To get on Alibaba’s radar, you’ll need the commitment to modify your current yoghurt format, texture and packaging for the China market. We offer research and e-commerce services that can help you understand what modifications are needed. And, under our Restart 2020 program, these research and e-commerce services are offered to promising brands at preferential rates.

If you’re looking for a capable partner that’s up to the challenge of making your brand go places in China, let’s get in touch!

Three quick insights on 618, China’s second-largest e-commerce festival

August 13, 2020June 23, 2020 by Jacco

Chinese e-commerce giants Alibaba, JD and Pinduoduo have seen a boom in sales during the 618 shopping festival, the first major shopping festival this year. From publicly-available sales figures, China’s two biggest e-commerce giants, Alibaba and JD, handled $136.51 billion of sales through their platforms over 618. For those that are unfamiliar with 618, it is China’s second-largest e-commerce festival after Double 11.

Here are a few quick takes from our e-commerce team, who provide brands with the support they need to sell online in China across multiple platforms, including Alibaba, JD, Kaola. You can read our previous write-ups of e-commerce sales events here.

Preparation Is Key With Festivals Starting Earlier, and Running Longer

618 runs for 18 days from 1 June to 18 June. However, platforms whet consumer appetites well before 1 June. JD’s warm-up deals started on May 21 and Alibaba’s warm-up deals started just a few days later. We advise brands that they need at least a 90-day planning window to get themselves into shape for the biggest e-commerce festivals of the year, 618 and Double 11. Use our e-commerce calendar to find additional opportunities for you to increase your brand’s share of voice and category sales.

Integrated Campaigns More Important Than Ever

In response to the economic effects of the COVID-19 pandemic, some companies have cut their marketing spend. However, 618 showed us that spend in one channel alone isn’t enough. The best marketing efforts integrate assets from inside and outside Alibaba and JD – buying full-screen ads on apps and services that resonate with your target audience (such as NetEase Music), having banner ads within the e-commerce marketplaces, shareable offers sent through WeChat Official Accounts, as well as widespread seeding activities that put real products in vocal consumers hands. If this sounds like something you need help with, get in touch with our marketing specialists.

618 shopping festival campaign preparation

Short Video’s Integration With E-commerce Is A Game-Changer

We’ve spoken about e-commerce livestream’s potential before. That opportunity is well-established and we’re not going to add anything further here. Instead, what 618 showed us is the recent tie-up between JD and short-video platform Kuaishou is a real winner.

Now, short videos (if you’re reading from overseas, think TikTok) have e-commerce integration. That means if you like the product you see in a short-video, you can buy it without leaving the app.

Kuaishou has 490 million monthly active users and its partnership with JD to means all the in-video products link back to JD. This significantly increases JD’s attractiveness as an e-commerce platform. Through Kuaishou, JD can serve millions of additional customers who might not otherwise have its app. If you’d like to explore opportunities on JD, China’s second-largest e-commerce platform, feel free to get in touch.

—

Well, that’s a wrap on our quick takes. Next week, we’ll explore a few more themes in closer detail. To make sure you don’t miss the latest from us, you can sign up to our newsletter here.

Playing to win, not to participate, in China’s consumer market

June 11, 2020 by Jacco

The last 18 months have been an important point in AgencyChina’s growth.

We’ve been fortunate to work with household names (like Johnson & Johnson), as well as up-and-coming brands (like VeraCova). Our insights and expertise has been recognized by Wall Street Journal, Bloomberg, Reuters, Vogue Business and Business of Fashion. We’ve also added consumer research and e-commerce teams to complement our core marketing and social media business.

Over this period, whether our partners are large or small companies, there’s something that unites them: a winning aspiration.

That is, our partners enter and operate in China with the mindset to win a sub-category or niche. They don’t just play to ‘get a slice of the action’.

This article explains why this is important.

What’s a Winning Aspiration?

We’re big fans of Playing to Win, and we hope you are too. For those familiar with it, you’ll know a wining aspiration starts the strategic choice cascade.

The operative word is “winning”. The simple reason is, that if you’re not winning, you live in fear of the competitor in your space that is. If they’re winning and you’re just participating, they can use the resources that derive from winning to beat you up.

The only place in competitive endeavors with any degree of safety is that of the winner. If you’re not winning or attempting to unseat the winner, you’re simply playing a game that will leave you bruised and battered with only marginal gain to show for it.

So, what do winning aspirations in China look like?

Winning aspirations start from framing questions the right way.

If you’re entering the China market for the first time, then your research questions should look more like “What will it take to win in x category?” rather than “What do we need to enter China?”.
If you’re already in China but not seeing the results you want, you may need to ask “In what sub-categories can we focus on to win?”, “What do we need to win in the channel?” or “What will it take to win with light buyers/heavy buyers?” rather than “How can we turn things around?”
And, if you’re in China and already seeing positive results, you should be asking “How can we extend our advantages to win further in the future?”

The insights you gain from these questions may lead to winning aspirations like the examples below:

“Our winning aspiration is to be the ice cream with highest brand recall” (general winning aspiration)
“Our winning aspiration is to be the top brand on Tmall Global for pet supplements next year” (time-bound winning aspiration)
“Our winning aspiration is to win one in every three purchases of organic baby food in China’s Tier 1 cities” (geography-bound winning aspiration)
“Our winning aspiration is to be the first foreign bruise treatment cream available in China’s leading supermarket and convenience chains” (channel-bound winning aspiration)

Why is a Winning Aspiration Important?

You get it, a winning aspiration displays your intention to be dominant in a sub-category, channel or with a type of consumer. But why is that important?

First, when you have a winning aspiration, you consider a fuller range of options. Because you’re playing to win, as opposed to playing to participate, you are emboldened to think of new possibilities. Considering a fuller range of options also shows you how many ways there are to win.

For instance, an organic French skincare brand we advised realized it couldn’t win in China from its own brand strength alone. It would stretch and overcommit the brand, without delivering desired returns. So, it sought out a production partnership, supplying a local Chinese brand with organic skincare treatments that supported the brand’s expansion into high-margin categories.

In another example, a Nordic snack food brand we worked with realized that its stodgy packaging wasn’t good enough to meet its winning aspiration in China. So, it redesigned the packaging with Chinese consumers in mind, and came up with smaller formats to better suit the consumption occasions it wanted to win.

Second, when you have a winning aspiration, you find and direct resources appropriately. A winning aspiration, and a clearly-formulated strategy, gives management a better indication of what resource levels – from funds to talent – are needed and why.

Third, a winning aspiration inspires employees, stakeholders and even consumers. It’s tough for your local team to come to work if management are content being #54 in a product category. It’s even more tough for retailers to support, or consumers to repeatedly purchase the #54 brand.

The bottom-line? Play to win, not to participate in the China market.

If you’re trying to work out your winning aspiration in China, or are interested in what categories and propositions could be winners in the categories we keep a watchful eye on, get in touch.

Out with Daigou, in with CBEC launches

June 11, 2020May 27, 2020 by Jacco

Over the last 18 months, we’ve been taken aback by how quickly grey-market imports through suitcase shoppers (Daigou) have shrunk.

Daigou (“to buy on behalf of someone else” in Mandarin) have been taking advantage of price arbitrage and product scarcity for around a decade. In Australia alone, there were estimated to be 150,000 Daigou, buying and selling FMCG products to consumers back home to the tune of AUD 2.5 billion (USD 1.7 billion).

But two things have crippled the Daigou trade.

The first was new regulations, which came into effect last year. These require Daigou to be ‘legitimate’ corporate entities, which means would-be Daigou need to fork out for a business license, keep proper accounts and cough up tax.

The second is COVID-19. When the outbreak first hit China, there was a rush of transnational panic-buying which initially sent Daigou into overdrive. However, as COVID-19 spread around the world, international travel and postal systems crawled to a halt.

Now, if consumers in China purchase via Daigou, parcels will take anywhere between five and seven weeks to reach their destination. That’s far too long a wait for consumers who are used to same-day or next-day delivery as standard.

Accordingly, we think grey-market imports through Daigou have been dealt a heavy, heavy blow. While Daigou channels may have some resilience left in them, especially for high-value luxury goods, we don’t see Daigou returning to their former glory. Ever.

So, what does that mean for brands who are looking to launch into China?

Build Up Awareness Via Instagram Influencers China’s Hippest Netizens Follow: One way to gain-on-the-ground awareness in China without being in China is via Instagram. Yes, Instagram is technically blocked in China. However, millions of Chinese netizens continue to access Instagram via VPN. There are also dedicated “content movers” (内容搬运工) who take Instagram content and place it on platforms Chinese consumers can see. Get in touch with us to see how you can improve your brand awareness in China by product seeding and paid promotion with Instagram influencers that are widely-followed in China.

Consider Travel Retail Distribution: Prior to COVID-19, travel retail was a promising channel to reach Chinese travelers. Given time, we think that momentum will return. When it does, be in a commanding position to put your best foot forward with Chinese travellers.

Test The Water Via Cross-Border E-Commerce (CBEC): Cross-border e-commerce in China holds a specific distinction. International companies are allowed to sell certain goods to Chinese consumers online, through platforms such as Alibaba’s Tmall Global and Kaola, at preferential duty rates and without a license to operate a business in China. As you can imagine, that’s a significant reduction in red tape. It also lowers the cost of doing business in China.

Have A Track Record When You Approach Distributors: Growing traction on CBEC platforms is a minimum requirement for a meaningful conversation with in-country distributors. Local brands are becoming more sophisticated and distributors want to have certainty foreign brands have the chops to navigate China.

AgencyChina is a full-service marketing agency. We take brands from strategy to launch. We even can act as distributors for brands that we have specific expertise in. We’re keen to hear from brands who think they have what it takes to crack the China market. Drop us a line to get in touch.

China’s May Day holiday shows positive signs

August 13, 2020May 18, 2020 by Jacco

We’re back from our May Day Holiday, China’s first nationwide holiday since the lockdown lifts and ease of domestic travel restrictions.

And there’s good news for tourism in China post covid-19 – after previous positive indications, this year’s holiday showed promising signs of domestic tourism revival, having suffered through a three-month lull. As of May 5, 115 million trips were made over the holiday, resulting in RMB 47.56 billion (US$6.74 billion) in revenue for travel operators, said the Ministry of Culture and Tourism. That’s over double the 43 million trips taken over the Qingming Festival this April.

No matter how you look at it, that’s a lot of people! Importantly, it’s a vote of confidence in China’s measures to curb the pandemic in its own borders.

Great wall tourism in China post covid-19

Image: Reuters

Trends in tourism in China post covid-19:

A few things our team on the ground observed during the period:

Shorter Trips – travelers are keen to get out and about, but their travel to avoid destinations far from home or peak travel times. According to a report released by Lvmama, a popular travel agency in China, 30 percent of its users traveled within their city of residence and 40 percent went to destinations within their province.

Car-first trips – as part of efforts to minimize risk and increase control over their surroundings, travelers opted for car rentals. China’s Ministry of Culture and Tourism observed that travelers drove to destinations that they might otherwise have previously taken China’s high-speed rail to reach.

Preference for four-star accommodation – travelers are managing risk by staying at nicer accommodation. Ctrip, one of China’s largest online travel agents, reports that 55% of accommodation bookings are at four and five-star hotels.

Caps on tourist destination capacity – ticket sales for major tourist attractions were capped. All ticket bookings and purchases transacted online, to enable caps to be monitored and enforced in real-time. Once caps had been reached, relevant apps and online tourist agencies stopped selling tickets for that day.

Shopping across the holiday – consumers that stayed closer to home engaged in some retail therapy. Online sales of physical goods increased 36.3 percent year on year during the May Day holiday. 28 provincial-level regions have issued over 19 billion yuan of vouchers since the outbreak to further stimulate spending.

Beijing may 1 tourism in China post covid-19

Image: Visitors take a video as people watch the flag-raising ceremony at the Tiananmen Square in Beijing at daybreak on May 1, 2020.)[Getty/Kyodo]

What does this mean for you?

We reckon all this adds up to some positive signs for tourism providers inside and outside China:

First and foremost, Chinese travelers are out and about again.

Safety considerations will be a key feature of the post-COVID travel landscape. Travelers are looking for assurances that transport hubs, public transport, hotels and tourist destinations have taken adequate precautions.

Staycations, short trips and travel in one’s ‘backyard are the first phase in a travel recovery. Hoteliers and tourism providers can orient service around local clientele, before looking ahead to return of international travelers.

Things people do when they have time off are changing. It’s no longer the case that travelers just want to get away from it all and sit on a beach. Some look to wind down, others look to explore the unknown, others look to get ahead. Tourism operators need to be clear as to who they are serving now, and how that group’s needs may shift going forward.

Our resident China travel expert, Claudia Verbost, has helped individual travel operators, hotels and entire regions get their offer right for Chinese travelers. Keep on the lookout for her updates via LinkedIn. And, while you’re there, make sure you follow AgencyChina to keep up to date with what’s happening in China.

Alibaba wants to bring 1,000 new overseas brands to China

May 12, 2020 by Jacco

Overseas markets face a challenging business environment. Many companies are looking to China for growth. Alibaba, China’s pre-eminent e-commerce company, wants to help high-quality overseas brands make the leap.

Alibaba’s cross-border e-commerce marketplace, Tmall Global, announced plans to bring 1,000 new overseas brands onto its e-commerce platform over the next 12 months. This plan falls under Alibaba’s $200 billion, five-year-import program. This was announced during the China International Import Expo in Shanghai in 2018. It’s a huge commitment focused on getting the best the world has to offer to Chinese consumers.

So, what does incubation mean for overseas brands?

First, it offers a bigger toolbox. Tmall Global will offer incubated brands a series of tools, incentives and campaigns to help them flourish in China.

You read that right – Alibaba’s looking to give these brands an unfair advantage. To top it off, that unfair advantage gets bigger the better a new brand performs. Companies that hit pre-agreed targets receive a whole bunch of benefits – like a reduction in platform fees, and the opportunity to participate in special events and programs, like e-commerce festivals.

If you’re looking for a capable partner that’s up to the challenge 
of making your brand go places in China, then let’s get in touch.

Second, it offers speed to market. Incubated brands will have access to English-language customer service and self-registration which allows brands to get up and running inside 30 days.

Third, it offers return on investment. Tmall Global aims to help each new brand make RMB 1 million in its first 90 days. Last year, Tmall Global piloted the incubation program with brands like Fenty Beauty, DPC and Brandfree. Top sellers were in the cosmetics, medical care and personal care product categories.

Prior to this initiative, Tmall has a track record of incubation to meet the needs of its 670 million customers. For instance, Tmall’s Innovation Centre and Tmall’s watch division developed a report on China’s wristwatch market. Based on the report’s findings, Tmall invited 50 young designers to create 600 designs. Of these, 50 were selected for concept testing with a small group of shoppers. 17 designs were taken up by 10 Chinese watch brands — including Wussa, Geya, and Jonas & Verus and were launched during Singles Day, the biggest e-commerce event of the year.

Does this sound like something you’re interested in?

If you’ve got a brand worthy of incubation, drop us a note to assess your brand strength and market entry possibilities. We’re always on the lookout for top talent, and we’re excited to connect brands with the China market.

Let’s get in touch.

Consider niche e-commerce festivals to make your mark in 2020

August 13, 2020May 7, 2020 by Jacco

As we move into our fifth month living in a global pandemic, physical retail continues to lag behind online retail. Many consumers have begun aggressively shopping online for products that would have otherwise been bought at physical retail stores.

Previously, AgencyChina put together a 2020 China e-commerce calendar to help you identify critical e-commerce shopping festivals to focus on, and to prompt deeper thinking about content and sales rhythms.

We’ve now updated the calendar to include a bunch of niche e-commerce festivals that might suit smaller brands. You can download your copy here.

We know that budgets are tightening amid this uncertainty. However, we’d strongly encourage you to consider this punchy article which summarizes the relevant research about marketing during downturns. Savvy brands will increase their share of voice in a category when other brands pull back their marketing spend. Online shopping festivals are a part of this mix. Especially the niche e-commerce festivals in China.

If you’re thinking about marketing plans for the year ahead, talk to our team about what levels of expenditure are right for growth in this environment.

What price hike apologies tell us about post-covid China

August 13, 2020April 24, 2020 by Jacco

With all the news out there right now, you may have missed this – two of China’s most recognisable restaurant chains have apologized for price hikes after re-opening restaurants after China’s quarantine measures eased. It is worth diving into what happened with these price hikes in post-covid China.

Haidilao, a hotpot chain, and Xibei, a chain specialising in north-western China fare, had increased prices of dine-in and takeaway dishes. The price increases weren’t necessarily steep — Haidilao increased its prices 6% and Xibei’s adjustment was much less than that.

Price increases following natural and man-made disasters are pretty normal. COVID-19 has affected supply chains and consumer demand. This puts pressure on businesses of all shapes and sizes. Some companies – especially in the hard-hit hospitality sector – have tried to ease that pressure by passing the cost onto consumers.

Reasonable, right?

So what got consumers’ noses so out of joint about this price adjustment from two beloved restaurant brands?

There are a couple of things to unpack here.

1. It wasn’t just about the post-Covid price hike

Haidilao and Xibei were charging more for smaller portions. This feeling of paying more for less — and getting ‘ripped off’ in the process — is what triggered consumers’ anger.

English translation of Weibo post:
*“A price increase of 6%? I can’t believe I ate 400RMB of hot pot!”*

This isn’t the first time China’s consumers have expressed anger at getting ‘ripped off’. Each year, netizens turn anger toward companies that are ‘named and shamed’ in China’s Consumer Protection Day (hosted on March 15 each year). Volkswagen, Nike, Esprit and Apple are among the companies previously caught up in this event.

Indeed, one of the defining features in China’s consumer landscape over the past few years has been the harmonization of prices between China and overseas markets. In luxury alone, Chanel was the first brand to harmonize their prices on three key handbag models, followed later by Cartier, Burberry, and Patek Philippe.

Against that backdrop, consumers aren’t going to take kindly to price hikes or price gouging at the best of times, let alone after a global pandemic.

This is a clear wake-up call for foreign brands who are charging at price premium well above what they charge in their home market. Review pricing to ensure you’re not going to get caught out.

2. Consumers are re-prioritising discretionary spending post-Covid

As you can imagine, the pandemic has placed pressure on discretionary spending, particularly clothing and entertainment budgets. The end of strict quarantine measures did see an uptick in social gatherings, but it will be a while before spending on travel and hospitality returns to pre-pandemic levels. By upping their prices just as folks were coming out and seeing their friends and family again, Haidilao and Xibei triggered an adverse knee-jerk reaction. Clearly the consumers are not ready for price hikes in post-Covid China.

But it’s not all bad news

China’s central government is pushing local governments to find ways to encourage consumer spending in the wake of the coronavirus pandemic, so not all is lost. We think the most exciting consumer sectors right now are:

1️⃣ Health and wellness

2️⃣ Goods and services that help escape or break the monotony of quarantine at home

3️⃣ Home-related expenditure to support the home’s multi-purpose role as a kitchen, living space, a gym, a home office and a sanctuary from uncertainty