Galloping toward the Year of the Horse

Date : 30 January 2014

Spring Festival, the biggest festival of the year in China, is not only a time for reunions, but also the busiest period in the Chinese retail calendar. During the last Spring Festival holiday in 2013, sales at stores and restaurants around the country surpassed RMB539 bn (USD89 bn). With all the gatherings and family visits during the week-long holiday, shoppers are splurging on everything from family dinners to beauty products.

Retailers are gearing up for the Year of the Horse that begins on January 31st 2014. Heavy promotions are taking place as expected, but retailers are also trying to add a twist of innovation and using technology to stand out from the crowd in a competitive market.

Source: Retail Analysis 2014

Straight to the source

Whether it is imported or sourced locally, shoppers care  more and more about where their food is from, especially during a time of the year when festive well-wishers come bearing gifts of food and drink.

Increasing income, changes in lifestyle, convenient access to a variety of brand options as well as concerns about food safety has driven increasing consumption of imported food in China. As a result, retailers are showcasing more imported food to cater for shoppers’ changing palates as well as demonstrating the provenance of the products and ingredients. By 2018, it is estimated that China will become the world’s biggest food importer. (source: the US Food Industry Association)

On the other hand, like much of the developed world, there is a growing trend of sourcing perishables and fresh goods locally to meet consumers’ environmental and ethical expectations by reducing food-miles. This is especially true among high-end retailers targeting affluent young shoppers who see premium local products as fresh and safe.

Source: Retal Analysis 2014

Festive shopping moves online

By 14th January, the volume of Spring Festival goods sold on Taobao, China's leading ecommerce platform, had increased by 103% year on year. Yihaodian.com, of which Walmart has a 51% stake, also announced that its 2014 Spring Festival sales volume has seen a 46% boost. Among all categories, imported products such as wine and snacks have proven to be popular this year with a sales volume increase of over 60% year on year.

 Traditional brick and mortar retailers are also jumping on the bandwagon, taking advantage of digital marketing to attract an increasingly connected consumer. For example, consumers who follow Carrefour on WeChat (a popular mobile messaging and digital wallet application) receive a message each day promoting the latest "hot deal".

Source: Retail Analysis 2014

 New gifting trends

Packaging and presentation is also important at Spring Festival. Attractive tins, hampers and wrappings are used to differentiate products, often carrying price tags with lucky numbers such as 888. However, due to central government initiatives to discourage gifting and conspicuous consumption by bureaucrats and party officials, the gift packages are designed more for general consumers. Luxury brands that saw a slower growth rate last year are trying harder to appeal to the mass market this year to make up for the loss of ultra-high end consumer business.

Source:Retail Analysis 2014

Developments in the digital world are also changing the tradition of giving “red envelopes” filled with money at this time of year. WeChat allowed its 600 million users around the world to link their WeChat and bank account to enable sending and receiving of virtual “red envelopes”. The new add-on went viral and was widely spread among young users. Retailers like 7-Eleven have established cooperation with WeChat to enable payment through the application and hope to benefit from the fast expansion of usage of the payment platform.

Despite the great leaps forward in technology that are revolutionising retail in China, it is important to keep in mind that in a country of 1.3 billion consumers, brick and mortar retail still represents over 90% of the market. As the new year approaches, companies need to continue to think outside the box, develop and promote innovative products that are relevant to Chinese consumers’ tastes and needs, and adjust their marketing strategies to reach diverse groups of customers through both online and offline channels.