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My 5 Predictions for Chinese Consumers in 2017 – And the Results So Far

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In the past 2 years, Chinese consumers have arrived as a global economic force. And this is really just the beginning. We are going to see an increasing impact by these consumers on business going-forward.

At the start of 2017, I made 5 predictions for Chinese consumers. We are about halfway, so here is how it is working out.

Prediction 1: Chinese consumers (particularly millennials) will “hyper-adopt” mobile and O2O applications.

That Chinese consumers really like using and buying things on their smartphones is not news. What is going to be different in 2017 is the speed of adoption of various mobile applications and services. China’s already uniquely fast adoption rate appears to be continuing – and maybe accelerating.

Mobike and Ofo are the latest examples of hyper-adoption of such mobile applications by Chinese consumers. Twelve months ago, you could find Mobikes and Ofo bikes scattered around Beijing and Shanghai. Now they are everywhere. Shanghai, in particular, can seem almost overrun with Mobikes. Yet both companies were founded less than two years ago .

Another example is Chinese Meitu. They offer a mobile photo editing application that lets you alter your pictures – such as making your chin narrower, your eyes larger, and so on. Its use by Chinese women who want to “beautify” their selfies has surged to stunning numbers. More than 440 million Chinese women are now using the application. And like bicycle sharing, it serves a market that virtually nobody saw coming.

So keep an eye out for more hyper-adoption of such mobile services.

The result so far? Mixed. We are seeing tons of adoption of bike sharing, online videos and other mobile apps. But we haven’t seen lots of new apps breaking-out with big numbers (yet).

Prediction 2: Chinese consumers will “spike” smaller companies and markets around the world.

When Chinese consumers, who are very large in number, get interested in something that is fairly small in size, say a foreign market or product, the impact can be dramatic.

For example, a few years ago, a fragrant purple teddy bear stuffed with lavender became popular with Chinese women. The bear, which was only sold at one farm in Tasmania, was flooded with orders from China. The company had to stop taking phone and internet orders due to the overwhelming volume. A hacker, probably Chinese, then broke into the small farm’s computer system to place more teddy bear orders.

Another example is the case of Swisse Vitamin, a small capitalization Australian vitamin maker. Without any big effort by management, their vitamins became popular on Tmall as Chinese brokers brought their products into the country. The company’s sales surged, probably to management’s complete surprise. A few months later the company itself was bought by a Chinese group.

These “spikes” in smaller companies and markets are mostly a volume effect. Whenever any significant fraction of 1.4B consumers get interested in a small company or product anywhere in the world the impact can be really impressive.

Two more recent examples:.

  • Avocados have historically not been eaten much in China. There are few Chinese dishes that actually use avocados. However, in the past year, avocados have become increasingly popular with Chinese consumers – mostly for salads and because they are viewed as healthy (being foreign helps in this). According to Produce Report, avocado imports to China jumped 375% between 2014 and 2015.
  • There is also the case of tourism in Kidlington, England. Kidlington is a small, rural village outside of Oxford with no real touristic significance. Yet Chinese tourists have been flooding into this town this past year. And they seem particularly interested in taking selfies in front of people’s houses. The residents of Kidlington have been bewildered as to why this is happening. The latest theory is that Chinese tour operators are promoting the town’s quaint houses. It is also apparently on the way to a major shopping area. But nobody is really sure what is going on.

Result so far? True. There are lots of stories coming out of Australia, New Zealand and Japan at the moment. About M&A and Chinese consumer trends having a big impact.

Prediction 3: US President Trump will discover that Chinese consumers are listening to him.

The relationship between China and US President Trump is going to be a significant issue in 2017. And this is now being widely discussed, particularly by those in trade and foreign policy. However, I think a group that everyone is forgetting about in this is Chinese consumers. They are likely going to be a significant part of any China-Trump situation or issue.

Recall, in 2016, Chinese consumers protested KFC China for a largely political issue at the Hague. And Chinese consumers have repeatedly boycotted, or at least decreased their purchases of, certain Japanese products in the past. They are paying attention to global politics and they will get involved in their own way.

I expect any significant back-and-forth between China and President Trump in 2017 will draw in Chinese consumers. I think they are already listening closely. And if they decide to stop, or decrease their patronage of, certain US businesses, it could have a significant impact.

I also don’t think this is something the US government has experienced much before. It will probably come as a surprise. So my prediction is that President Trump is going to discover that Chinese consumers are actually paying very close attention to what he is saying. And they actually have an ability to respond, if they choose.

Result so far? Nope. The big talk about China by the White House in January has pretty much stopped. We’ll see.

Prediction 4: Chinese businesses will follow Chinese consumers out into the world.

Last year over +120 million Chinese tourists traveled outbound, including to Hong Kong and Macau. They made up more than half of the tourists in Asia. An estimated 950,000 Chinese tourists visited New York City, up 700% from 2007. And their favorite destination, Thailand, received around 8 million Chinese tourists.

While this large outbound migration initially caused some friction with local cultures – resulting in some humorous stories – Chinese tourists are maturing rapidly. They are now much more sophisticated and experienced international consumers.

In short, the Chinese outbound tourism phenomenon has matured and is becoming routine. And as a result, I think businesses everywhere are going to increasingly invest and make strategic decisions based on this now stable economic phenomenon.

That is what I predict we are going to see in 2017 – lots of businesses (foreign and Chinese) making increasingly significant investments to support and service Chinese international tourists as a permanent fixture of the global economy.

There have been several examples of this recently.

  • In November, Chinese travel platform Ctrip announced its acquisition of UK-based flight search engine Skyscanner. This will expand its offerings to its Chinese customers to include foreign flights.
  • In September, UnionPay announced that its card is now accepted at 80% of US merchants and 100% of US ATMs. Similarly, in November, Ant Financial invested in Thailand’s Ascend Money.
  • Throughout all of 2016, Alibaba’s Jack Ma has repeatedly stated that 50% of Alibaba’s revenue will be international by 2025.
  • And most recently, the “Plough at Cadsden” pub in England, where UK Prime Minister David Cameron and Chinese President Xi Jinping drank beer together, has been purchased by a Chinese-backed SinoFortone Group. It has become a Chinese tourist destination.

All of these international moves are (mostly) about businesses following Chinese consumers out into the world.

Result so far? Looks true. Alibaba, Ant Financial and others are continuing to go international. Looking good so far.

Prediction 5: Chinese consumers will shift from healthy fashion to healthy living.

Riding the Beijing subway this year, it has been impossible not to notice that over half the men seem to be wearing track suits. And about 70% are usually wearing trainers (yes, I counted). Sports wear is in fashion at the moment and this is consistent with an increased focused on healthy living across China.

However, while “healthy dressing” is great for Adidas, the fashion aspect appears far more widespread than any actual exercising. Apart from a recent surge in Chinese marathon runners, there are still relatively few gyms in China per capita. And smoking remains very popular among men (not women).

So personally I’m hoping 2017 will have a shift towards more healthy living and away from gym clothes. But this prediction is more just something I would like to see happen.

Result so far?: Not much. We’ll see.

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So those were my predictions. I think 2017 could really be the year of the Chinese consumer. Over the past 3-4 years, the foundation for their global economic influence has been laid. This could be the year when things go to the next level. We’ll see in December.

Thanks for reading. Cheers, -jeff

(reposted from China Daily, original here)

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I write (and speak) about how rising Chinese consumers are disrupting global markets. (#ConsumerChina). This also includes work on:

  • China 2025″ – what a region transformed by Chinese consumers, companies and capital is going to look like. (#China2025)

Photo by Sung Ming Whang, Creative Commons license with link here.

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