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Havas Group China November 30Th, 2020 EDITION 2020 #11 Havas Group China 1 November 30th, 2020 Havas Media China is again nominated in two categories for Agency of the year by Campaign Asia Nomination for • China Media Agency of the Year • Greater China Event Marketing Agency of the Year 2 In this edition Key market developments • Economic outlook • Consumer behavior developments • Key category outlooks • Havas POV China advertising market • Advertising market development • Media consumption update • EC developments • Media market news • Havas POV 3 Key market developments Economic outlook 4 In October retail market shows a higher growth driven by a climbing consumer confidence Retail market recover further, 4.3% growth in Oct. consumers confidence index Consumer satisfaction index Consumer expectation index China Retail market YOY Growth Rate 130.6 130.7 128.5 128.9 126.6 126.4 125.2 124.3 124.6 124.2 122.2 9.6%8.9% 9.0% 121.2 8.4% 8.5% 7.8% 120.6 120.1 120.5 3.3% 4.3% 119.3 8.3% 7.6% 0.5% 118.9 118.8 120.7 117.2 120 116.4 116.4 115.8 115.1 -1.1% 117.8 118 117.8 -1.8% 112.6 -2.8% 115.4 115 -7.5% -15.8% 112.3 111.9 111.3 110.8 -20.5% 108.9 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Source: National Bureau of statistics of China 2020; Eastmoney 2020 5 According to China’s newly published long-term goal towards 2035, the dual economy will be developed around 9 aspects Fifth plenum long-term goal towards 2035 1. Overall Economy 2. Industry Development 3. Country System China's economic and technological strength, and composite New industrialization, IT application, urbanization, and The modernization of China's system and capacity for national strength will increase significantly. A new stride will agricultural modernization will be basically achieved. China governance will be basically achieved. The people's rights to be made in the growth of the economy and the per capita will finish building a modernized economy participate and to develop as equals will be adequately income of urban and rural residents. Making major protected. The rule of law for the country, the government, breakthroughs in core technologies in key areas, China will and society will be basically in place become a global leader in innovation 4. Culture 5. Environment 6. Inter-country China will become a strong country in culture, education, Eco-friendly ways of work and life will be advanced to cover The opening-up will reach a new stage with substantial talent, sports and health. The well-rounded development of all areas of society. Carbon emission will steadily decline growth of the country's strengths for participating in all people and social etiquette and civility will be significantly after reaching a peak, and there will be a fundamental international economic cooperation and competition enhanced. China's cultural soft power will grow much improvement in the environment with the goal of building a stronger Beautiful China basically reached 7. People’s income 8. Country Safety 9. People’s Life The per capita GDP will reach the level of moderately The implementation of the Peaceful China initiative will be People will lead a better life, and more notable and developed countries. The size of the middle-income group promoted to a higher level. The modernization of national substantial progress will be achieved in promoting well- will be significantly expanded. Equitable access to basic defense and the military will be basically achieved rounded human development and achieving common public services will be ensured. Disparities in urban-rural prosperity for everyone development, in development between regions, and in living standards will be significantly reduced 6 The RCEP trade deal was signed with 15 countries, to further spur recovery from Covid-19 15 countries includes: The RCEP is expected to eliminate a range of China tariffs on imports within 20 years. It also Japan includes provisions on intellectual property, South Korea telecommunications, financial services, e- Australia commerce and professional services. New Zealand Indonesia Is it important for China? Thailand Singapore For China, RCEP aligns with it “dual circulation” Malaysia vision — refocusing on domestic demand Philippines while taking advantage of trade and foreign Vietnam investment. Brunei Cambodia This marks the first time China enters a Myanmar and nonbilateral free trade agreement of this scale. Laos Source: Ashley Talk 7 China has started the 7th national population census. Audience gifts show a strong dedication to keep China Corona safe • China on Nov 1 started its seventh national population count which conducted every 10 years, with about 7 million census takers going door to door to document demographic changes in the world's most populous country. • The census collects data including name, ID number, gender, marital status, education, and profession of Chinese citizens. • Residents are encouraged to use mobile terminals to report personal and family information. • Residents will get small gifts after the census Source: Xinhua news 8 Key market developments Can we find a picture without mask? Consumer behavior developments 9 Double 11 dilemma – topline sales growth while brand profit and likely consumer sentiment show a downward trend Sales of Double 11 on Tmall Consumer sentiment & brands profit on Double 11 Y2009 Y2020 (1st year of double 11) Brands Consumer profit sentiment 52 498.2 million billion With bigger discount and longer Consumers highly postpone timeframes, higher bidding against purchase for necessary products competitive brands, profits go down until double 11, rather than 27 brands participated 250,000 brands participated substantially create new purchases Source: Tmall; Qiluwanbaowang 10 Declining consumer sentiment for Double 11, consumer fatigue on EC festivals increases more than in previous years 1. Rational consumption “I didn’t buy too much on this year’s double 11, only spend 1000 rmb. Previous years I would store serum 2. Less price advantage due to frequent EC and cream, usually would spend 3000 rmb. festival and live streaming 今年双11我没买什么东西，只花了1000多元。往 年都要囤精华、水乳，可能会花个3000元左右“ “It isn’t seen too much difference on price between double 11 and daily live streaming, 现在的双11和平常直播（价格）没有太大差别。” 3. Complicated rules push consumers away “ I will have something left that I bought from last year double 11, so there’s no need to refill. The purchase rules are too complicated, I am not that interested as before. 去年囤积的产品没有用完，所以暂时不需要购买；平 台规则太复杂，自己的热情也大不如前了” Source: Pedaily.cn 11 The rising conscience of anti-consumption importance restrain consumers to spend more on unnecessities During this Double 11, NetEase Strictly Select released a short film parodying luxury ads like Gucci Perfume, Patek Philippe, Rimowa, and Adidas to Conscious spending attitude is on the rise encourage netizens to buy the brand’s label-less products. When questioned about the concept behind this video, a spokesperson for the company said, “We are simply trying to say that we have eliminated high premiums for Consumers, especially the young ones, are becoming consumers so that they can enjoy pragmatic products.” more prudent The film was then redistributed by Chinese state media Xinhua News Agency and other local media on Weibo in an attempt to cool off luxury shopping at the festival. By November 11, two hashtags of young consumers intend to plan more of their #ConceptOfConsumptionOfModernYoungsters (#当代青年人的消费观#) and 60% #ConsumeNotConsumerism (#要消费不要消费主义#) have collectively been consumption and reduce their impulse spending. viewed 164 million times. 42% of young consumers intend to save more as a result of the Covid-19 Source: JingDaily 12 Hence, more and more Double 11 mechanisms are created to stimulate consumption Longer time period Live streaming Mini games Longer period, more Short decision time when Mini games keep shoppers opportunities to shop more shopping at live streaming coming back for more Oct 20th, Austin Li sold 3.3 billion and Viya sold 3.2 billion The total number The cumulative of Tmall cat game time of Taobao live users exceeded streaming lasted for 1660 years 500 million Source: Tmall 13 From content to sales - social media apps are pushing integration of sales function/EC process Most Chinese social media apps have already integrated the sales process. Here are a few prominent ones: • Douyin has had its in-app store since 2018, where users can instantly buy products • Kuaishou employs the same concept while serving lower tier cities. • RED and Mogujie focus on beautiful pictures and are teaming with influencers to drive traffic. • Pingduoduo now has 568 million monthly active users as of Q2. Group-buying is also social commerce. The platforms offer prices that get increasingly discounted the more items a group purchases. 14 China’s KOL industry maintains a momentum of evolution, higher influence through micro KOLs and authenticity Seeking out micro-KOLs and brands’ own Authenticity matters KOL marketing in China is indispensable Livestream for brands Brands cancelled around 30% of the content collaborations they Consumers still want to learn about and gain KOL marketing in China is indispensable for brands, had booked with the agency’s influencers in the month of April recommendations on products and services, but they may particularly in the post-Covid world. By their nature, alone. have grown disillusioned with putting faith in KOLs as these initiatives are difficult to scale. Brand-owned trusted messengers. communities are supposed to be exclusive to a tightly Brands have switched their attention to micro-KOLs and micro- defined group of consumers, and therefore, there’s a influencers. The mechanics of working with micro-influencers are That’s a double opportunity for brands. Firstly, brands can natural upper to the number of consumers a brand will like any KOL campaign.
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