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By Angie, June 18, 2010 11:39 am

While US consumers are the world’s top shoppers – on and offline – this is only the case for real products.   You’re thinking: What other types of products are there?  Well, let me tell you.  The Chinese are leading the way in the purchase of … virtual products.

So much so that research firms are estimating that the purchase of virtual goods in China reached approximately USD$5 billion in 2009 – over five times that of the United States.

In a country where there is so much fluidity between the ‘real’ and online worlds, this should not come as a huge surprise (though I have to admit, that despite knowing the power of the online world in China, I still was surprised at just how large the numbers actually are).

I do understand the concept of virtual products and virtual gifts.  After all, I’ve given others Facebook gifts in the past and have had fun outfitting an avatar.  Both of those were free.  And for me, the buck stops there.  Putting money into products that I cannot touch, taste or smell seems rather, well, impractical.  But that’s only to me and clearly, scores of other consumers see it in an entirely different light.

Now let’s take a moment to try to understand the motivations of Chinese consumers and the reasons behind their acceptance and desire for virtual products.

1. Blurring of offline and online worlds.  In the eyes of many Chinese consumers, especially Chinese youth, there is no distinction between the two.  The online world is just an extension of their offline world.  If this is the case, why should they act any differently online as they do off?  Online, they can purchase a virtual gift for their sweetie, or a trendy outfit for their avatar, or a power-up to ensure their warrior wins more battles.  Purchases are made to fulfill not only practical needs, but emotional ones as well and for these youth, virtual products satisfy their emotional needs just as effectively.
2. Chinese youth have many friends online.  A third of Chinese youth 16-29 from Starcom’s Youth Surveillance research even said they have more friends online than they do offline.  Furthermore, 43% say they’ve never met many of their online friends in real life before.  Due to this unique dynamic in China, virtual gifts then hold an even greater level of meaning and importance.
3. Anonymous escapism. In a society a little bit more ‘closed’ and where tradition and conservative values still reign, Chinese youth turn to the internet as a way to express opinions, and the image of themselves they are unable to in ‘real’ life.  Over a third of the Chinese youth we studied reported feeling “more like ‘myself’ online than I do in ‘real’ life”, and 57% said “I do not feel as much pressure from society online.”  Online, they can develop their true, desired identity, wear the clothes they would never dream of wearing offline, or buy items for their dream house.
4. Gifting an important part of Chinese culture. Gifts are a large part of maintaining guanxi (a deeply rooted idea in Chinese culture and tradition combining the depth of one’s relationship with another, moral obligation to maintain the relationship, and the idea of giving ‘face’).  Thus it is not surprising that gifting would extend to the online world, and once it starts, it will continue in reciprocity.
5. Greater interaction with friends online leads to greater need for status online. In China, being online is not a solitary activity.  Friends go to war against other friends… or steal veggies from their gardens.  If Xu sees that his friend’s avatar has the newest TurboActionMissile Gun (I’m clearly rubbish at naming guns…), he will want it too, in order to show his friends that he can afford one as well, on top of the fact that the gun probably will make his avatar more powerful.

Why else does this work?

But of course, all this would not even be a consideration if companies were not able to create these offerings, build their business model around virtual product and really create a need.  Virtual money and products on social networking sites in Asia arose partly due to a less developed online advertising market.  Unlike the West, banner ads were not as effective and click-thru rates were low.  This drove Asian web businesses to seek new ways to make money.  Innovative offerings, ease of payment (via mobile phones and prepaid cards), a la carte items (e.g. avatar costume pieces), and very affordable prices have all helped drive the need and acceptance of virtual products.

For companies like Tencent (operator of QQ instant messenger and social networking site Qzone), virtual goods have become their primary source of profit.  In the first half of 2009, the company made over $300 million in revenues from virtual goods.  Compare that to online advertising, which only drew $35 million in revenue for Tencent.

Future thinking

It is certain that virtual offerings will continue to become more innovative, and payment methods will become easier.  All this while the internet continues to spread to even more users in China.  From this vantage point, the opportunities for online goods appear limitless.  How can your company take advantage of this to stay relevant with consumers?

Another consideration might be to come up with effective ways to link virtual goods to real goods, allowing consumers to get the best of both worlds and soothing the protests of consumers uncomfortable with the idea of virtual goods they are unable to smell, touch or taste (like yours truly).

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By Angie, June 9, 2010 12:40 am

Online shopping is a big deal in China.
According to the China Internet Network (CNNIC), 632.9 million people made online purchases last year.  In major cities like Beijing and Shanghai, 40% of the online population will often buy products online.

We saw it in our mom research.  We saw it in our youth research.   In this post, I’ll explain the concepts of Tuangou, Shike, tier differences in e-shopping amongst youth, and also the newest form of group e-shopping in China.

Tuangou
Tuangou (group shopping) started offline; with consumers meeting up at stores in large groups to add physical weight to their cause (that’s why it is also referred to as mob-shopping).  Next, it became a pure online-shopping experience, where consumers banded together with others they met via forums. The initiator seeks out the vendor and negotiates online on behalf of those who raised their virtual hands to purchase the product. The idea spread to youth who were beginning to purchase more and more online. One Youth Surveillance respondent told us that she recently joined an online group whose objective was to gather 20 buyers so that they could get a discount buying jewellery with a Taobao seller.

e-Shopping is not only about transactions
It’s about experiences!  It’s about teaching and learning, reviews and entertainment.  So much so that even Taobao has incorporated a new video component service.

Tiered differences
Through Lower Tier Youth Surveillance, we also saw tier differences in the way youth shop online.  Naturally, tier one youth are the most e-shopping savvy and will seek out ways to save money, such as tuangou.  Another concept called Shike has become popular amongst this group – it is a concept that enables consumers to test products before launch and send in their product reviews, thus involving them in the process and fueling their brand sirening.

Tier 3 youth on the other hand, view e-shopping sites as a platform to learn about products they don’t have access to and they view sites like Taobao as entertainment.  Even students who were not on Ren-Ren or Kaixing 001 were on Taobao and they would cite it as one of their favourite sites, despite not making any purchases.

Tier 3 youth view online shopping sites as entertainment

What now?
Within the past few months, an even newer group e-shopping concept has blossomed in China.  The premise of it is that through a site, a retailer offers a special discount on a product/service on the condition that it will be honoured if enough people sign up for the discount or purchase that product/service in advance.  Basically, it takes the “old” format of posting on a BBS/Forum: “hey guys, anyone else want to buy this lamp too?  Let me know and we can see if we can get a group deal”, to something organized, efficient and controlled by the retailers themselves.

This format has grown rapidly.  According to the China Daily, even during the past two months, sites offering this kind of service have ballooned from a mere handful to over 400, with Taobao and even Kaixin001 launching their own version of group buying websites.  Other sites include: Meituan.com, Lashou.com,  and ftuan.com.

Ftuan.com and Meituan.com: Lower left hand side shows the number of participants still needed to achieve the group discount.

Chinese consumers are really serious about taking their traditional practice of bargaining, online.  Are you keeping up with them?

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By Angie, May 20, 2010 11:17 pm

We all know that Twitter is blocked in China.   As of July 2009, so were the existing Chinese versions of Twitter, including Fanfou, Jiwai and Digu – all due to government censorship.   It is clear that a Twitter clone won’t survive in China.  Recently, however, a new player has emerged.

Sina’s Weibo has risen and has seemingly taken China bloggers, micro-bloggers and anyone wishing to get in on the conversation, by storm.   Surprisingly enough, the government appears to be okay with it too.   So what is Weibo doing that the previous generation of micro-blogging sites failed to do?   They are playing by all the rules laid down and there is a strict word filtering operation in place.   As the largest news portal in China, Sina has had over a decade experience in content monitoring.   Bloggers also understand that they need to be careful of their words, as their posts can be deleted by Sina at any time, without notice.

The name Weibo (微博), translates to “micro-blog”, but the way it’s pronounced is the same as “scarf” (围脖).   This translation is what netizens are using as their meaning of “Weibo”.   Scarf, in the sense that they’re being wrapped up with information.

The censorship certainly has not appeared to have dampened the spirits of Chinese netizens.   They have embraced Weibo and according to Sina, the number of registered users of Weibo had reached 5 million as of early March.   Such numbers are a result of not only Sina’s large existing user base, but also their ability to up the cool quotient of Weibo through inviting celebrity bloggers, such as Jackie Chan and other popular stars.   This focus on verified accounts is one aspect that differentiates Weibo from Twitter, with Weibo placing a greater emphasis on them, and granting verified users a little “v” next to their name.   In a country that places such importance on celebrity culture, knowing that the feelings and opinions of Weiboer “Zhang Ziyi” is indeed THE Zhang Ziyi makes a world of a difference.

I signed up and took a look at what Weiboers are chatting about at the moment, and one of the top mentioned is, of course, the Shanghai Expo.  Even the name of the Expo volunteers is a hot topic.
In case you are wondering (and I know you are!) they are called “Little Cabagges” due to the colour of their uniform.

A new Valentine’s Day?

But one the hottest topics in China today (May 20th) is Internet Valentine’s Day.   Whaaat’s that?   You took the question right out of my mouth. Upon further micro-blogging, reading and digging, I found out that May 20 translates to 520 … and in Chinese, saying “520″ sounds like saying “I love you”.

The traditional February 14th Valentine’s Day has always seemed like it was for older people, those who are married, and this is something that Chinese youth cannot relate to.   Thus, young Chinese netizens have taken it upon themselves to declare May 20th as Internet Valentine’s Day, where they can express and profess their love for someone via any online method (blog, micro-blog, online bulletin board, email, etc. etc.).   This is especially good for those shy Chinese youth who can’t do it in person and prefer the digital shield of the internet…

Starcom’s Youth Surveillance research shows very clearly the importance of anonymity for youth online. Furthermore, 79% of a youth segment we identified as being uber involved social networkers even said that they felt more like themselves online than they did offline.

But the fact that they’re redefining the so-called traditional festivals (granted Valentine’s Day is more of a Western idea) to fit their own needs and turning them around and making them more relevant to themselves AND sharing it on the platform they are most comfortable with – the internet – is fascinating!   Not only that, but the idea has spread so quickly and leagues of young netizens are embracing it wholeheartedly… all I can say is wow.

I’ll definitely continue to keep tabs on the ins and outs and cool trending items on Weibo and report those back to you!

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By Angie, May 12, 2010 3:14 pm

We all love a good human interest story.

Like the handsome beggar’s rapid rise from obscurity, there are stories about other Chinese internet sensations.  While there is nothing new about internet fame – especially when one looks to Youtube and the number who earn their 15 minutes via self-posted videos – I feel that the difference in China is that many of those who are widely recognized on Chinese video-sharing sites, like Youku or Tudou, are ordinary citizens who were not seeking fame, but who had it thrust unexpectedly upon them.

One of these sensations is Ren Yueli, a now 22 street musician from Zhuozhou, Hebei Province.   She was forced to quit school at 14 due to economic constraints and at age 16 went to Beijing in hopes to make money to send home to her poverty-striken and disabled parents.  Constantly cheated of her payment while working at a local restaurant, she decided to try something new.  For 100 RMB (around 12 USD) she convinced a guitarist she met performing in an underground tunnel to teach her to play and ended up practicing every night.  When she was confident enough, she began busking herself – through the freezing winters, where her fingers were often too stiff to strum, to the swelteringly hot summers.  By doing this, she was able to earn 1000RMB a month, sending half home to her family.  Her monthly room rent was a few hundred dollars and she lived off 10RMB a day for food.  Last January, a passerby recorded her singing in the Xidan subway underpass, and posted it onto Yukou. Within one week, it was viewed 3 million times and quickly exceeded well over 30 million views (not to mention the millions of hits on re-posts and other user-generated videos featuring Ren Yueli).

The speed in which this information travelled was incredible.  At its peak, the viewer tally went up by 10,000 views per minute and was reposted on many major BBS discussion forums.  “Xidan girl” ranks amongst the fastest rising search engine keywords.  Human flesh searches (scroll to the bottom of the post) were even conducted to find Ren Yueli’s constant whereabouts and to learn information about her life and her past.

Ren Yueli - "Xidan Girl"

Due to her internet success and popularity, Ren Yueli has signed on with a local Chinese record label and is in the process of recording her first album.  Occassionally, she will return to the underpass where she started and sing.  “I just want to help my family live a better life. If things don’t work out, I will go back underground and sing,” she says.

Reading online discussions about the top web celebrities of 2009, I was actually really surprised by how many became sensations based on appearance alone.  Some of them include:

Gu Jiawen, a bus ticket seller dubbed “bus beauty”, from Shanghai.  She was ‘discovered’ after an admiring customer took her photo and posted it online.

Another is Kang Xiaohan, nicknamed “Tanghulu Xi Shi”.  Tanghulu is a snack similar to a candied apple, but using hawthorne, yams, or other fruit skewered on a bamboo stick, and Xi Shi is the name of one of the Four Beauties renowned in ancient China.

Kang is from a poor rural family in Anyang, Henan province, and works in Xi’an near a local university selling Tanghulu.  Similar story to “bus beauty”, where she was noticed, her photo taken and uploaded online, she became an overnight star.

Yet another is a policeman, Meng Kunyu, given the title of “most handsome traffic cop in Beijing”, after a group of female university students took his photo and posted it online.

Meng Kunyu -"Most Handsome Cop"

I wonder what the fascination with nice-looking ordinary people is amongst Chinese netizens.  Does it lie solely in their looks?  Or in the fact that young, good-looking people are not usually seen working jobs (e.g. bus ticket sellers) that are normally occupied by an a-yi (older women, “auntie” type)?  Or is it a beast all unto itself, where quick-talking, sensationalism-desired netizens can create topics of interest out of practically anything?  Regardless of what it is, the remarkable force, power and speed of the Chinese online community is astounding.

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By Angie, April 25, 2010 12:00 am

Enigmas, these China lower tier cities.
And we’re not talking about only tier 2s and 3s.
It is also important to consider even lower tier levels like 4s, 5s…

So what do marketers currently know about lower tiers?  The majority have focused on top tier cities, as the distribution infrastructure is better there, the consumers have greater spending power, and they are seen as being more knowledgeable, with sophisticated product tastes.

Gradually, as these markets become saturated with products and consumer awareness of brands are high, the only logical thing to do is to branch out. When developing messaging for the different tier groups, there is a common train of thought amongst marketers that top tier cities will buy products due to their aspirational qualities, appealing to their higher emotional needs, versus lower city tiers, who are still in the product learning phase and where communication about the product needs to be simpler, focusing on explaining base product benefits.

However, just how true is this?  Especially when looking at youth in lower tiers, are they really that much less knowledgeable and less sophisticated versus their top tier neighbours?  I suspect that while there is truth in this, it is not the full story, as:

1. Given the power and reach of the internet, digitally savvy youth in every tier have access to everything that top tier youth have access to. They see how others are dressing, what their interests are; they follow the same celebrities, and view the same clips on Youku.  So while they are not clueless about products and trends, product education may still be important.
2. In a rapidly growing country like China, people see China’s success and want to mirror that in themselves also. Youth especially, in every tier, are optimistic and hopeful about their future.  Many lower city youth aspire to make it big, for example as an entrepreneur in their home town, or setting their sights to top city tier advancement.  Thus, the aspirational messaging that strikes a chord with top city tier consumers may in fact work on lower city tiers also.

However, the income gap between lower and top tiers is a fact and this is a large reason for the slow movement into lower tiers.  Instead of the knockoff luxury brands found in top city tiers, lower city tiers will also find knockoff FMCG brands for sale. So instead of Pringles, they are buying ‘Prangle’ chips and this is where it gets tricky for our FMCG friends.  Why would lower city tier consumers want to pay more for the actual product, when there is a similar one on the shelves, with a similar look and feel?

What does this mean for us as marketers?

1. It is crucial to research and understand our lower tier neighbours, and just what their existing knowledge of your product is.
2. They are more price sensitive, so appeal to them via promotions and in-store displays.  Their pace of life is not as hectic as upper tier consumers, so they may pause for more detailed conversations with in-store salespeople and try sampling.  This would be an important space to engage them, especially for FMCGs.
3. View them as aspirational beings (because they are!), but also understand their limitations.  It may be monetary, or education, or training, etc.  See how you can help them by sponsoring community classes, or online training courses.  Help them to achieve their dreams and overcome their obstacles.  This leads me to my next point…
4. Become a part of their community.  Their communities are smaller and many families may have been there for generations, leading to a very relationship-oriented culture (unlike the overpopulated top tiers).  Trust will be an essential part of their life.  Earn their trust and build relationships by showing you care about them, as people, and are willing to give back to their community.

These are just a few thought-starters about lower tier consumers.  This is an incredibly interesting topic and I’ll be sure to revisit it regularly.