Digital Disrupted Podcast : What do Chinese and Japanese consumers really want?

Manuela

You’re listening to Digital Disrupted from IMS, the podcast series that looks at how the next Digital Trends are impacting you.

 

Japan & China: Two of the biggest consumer markets in the world

 

Celeste

Japan and China are two key markets that you want to be in if you’re looking to grow your brand globally.

 

Manuela

Get it right, and you’ll unlock access to two of the biggest consumer markets in the world. A commonality for success in both markets is the understanding of cultural traditions and rapidly evolving consumer trends. It’s the reason why a US coffee brand like Starbucks has become the fourth largest market in terms of store count for Starbucks globally in Japan, a country you would typically associate more with tea drinkers.

 

Celeste

In this second episode of Digital Disrupted, we’ll be examining the key consumer trends that will impact your brand strategy in driving success in China and Japan. We’ll also have a look at how COVID-19 has reshaped some of these behaviours.

 

Differences in digital landscapes between Japan & China: Social Media

 

Manuela 

Let’s start with how consumers use social media. One important distinction to draw is the difference between both landscapes. Celeste, how do these two countries differ in terms of their digital landscape?

 

Celeste

That’s a really good starting point that we need to draw attention to because one of the biggest differences between China and the rest of the world is that China is a cyber sovereign country, which means American internet service providers or external internet service providers are banned. Consequently, China has its very own digital landscape characterised by its own social media channels. Compare that to a country like Japan, which largely has adopted the use of Western social media channels such as YouTube, Twitter, Instagram. So, Manuela I think to start we can dissect what the Chinese digital landscape looks like for some of the listeners who are not aware.

 

Manuela 

Absolutely. One of the key things that characterizes the China market is that it has its own unique channels and platforms where consumers browse, consume content and – ultimately – shop. The first distinction to mark is that marketing to Chinese consumers today is very different than it was a decade or even five years ago. That’s because Chinese consumers are becoming more sophisticated. They’re less dazzled by big brand names, and they’re more likely to shop for quality and value, or buy into brand storytelling. This means that if you’re a brand looking to market to Chinese consumers, heritage, craftsmanship and quality are all important factors that are going to affect the decision–making process. And this decision-making process translates into more sophisticated research behaviours, most of which began on China’s online social media channels.

 

Celeste

One of the social media channels that you’ve got to know is Little Red Book. What’s so specific about it that makes it different from the Western apps that we usually encounter?

 

How Chinese social media successfully integrated with e-commerce

 

Manuela

One of the key differences with Little Red Book (or XiaoHongShu) is that it’s also an e–commerce channel, which means that consumers browsing online and trying to research products can actually check out seamlessly without ever leaving the platform. It is a lifestyle platform. Their mission is to facilitate brand and product discovery through users sharing lifestyle content. And the great thing about the platform is that its algorithm really values great quality content. So the more value that a user adds through the post that they publish, the more likely it is that that post is going to rank higher in the search results. This means that brands that can really drive great content strategy can really leverage this platform to reach a wider range of consumers and engage them and eventually convert them. It’s one of the key touchpoints for consumers during the consideration phase. Other common touchpoints are Weibo, which is kind of like a hybrid between Twitter and Instagram, and WeChat. WeChat has well over 800 million monthly active users and is an incredibly diverse platform: it’s your Uber, it’s your delivery, it’s your WhatsApp all-in-one. Chinese consumers spend a lot of time on there.

 

Celeste

Traditionally WeChat’s core function was 1:1 messaging, so we could compare it to WhatsApp or to Line, which is the biggest messaging app used in Japan right now. And although Line has integrated other functions, such as Line Pay, where you can charge your accounts (you can recharge it at convenience stores or with your credit card), WeChat does a lot more than WhatsApp or Line, correct?

 

Manuela

Yes! So you can actually make payments on there, but you can also shop directly. It’s really its own giant ecosystem that offers a lot of different things for consumers, and even businesses through WeChat for Business. So tell me a bit more about Line in Japan because we know that Japan is characterized by having some Western social media channels, but it also has its own channels that are unique to its market.

 

Celeste

So Line is actually used by over 60% of Japanese people daily. And its primary function is messaging, similar to WhatsApp. They even resemble each other in appearance. What distinguishes it is largely Line Friends, which are essentially emojis that you can purchase from the app and use in conversations. Each emoji, which is an animal, has its own personality and character. It is suited to the gamification aspect of Japanese culture.

 

Manuela

Those characters have actually become so popular that I’ve even seen them in pop–up stores here in Hong Kong. It really goes to show how much gamification has an impact. That’s something that it has in common in China as well. China is all about gamification. And a lot of the experiences that brands offer, let’s say, on WeChat, are gamified. As an example, loyalty programs or referral programs tend to have this aspect of gamification as well. So Celeste, when consumers are making a purchasing decision in China, how did they go about it? Do they research on the search engine? Do they look at Instagram? Are they communicating with their friends online? How can brands use the social media touchpoints to reach their target audience and further adapt their social media marketing tactics?

 

How Chinese & Japanese consumers make their purchasing decisions?

 

Celeste

The Chinese consumers, when researching brands, are not just going to take the brand messaging or the official brand voice as the only source of truth, right? They’re going to do a lot of side research, which is why some platforms like Zhihu are quite popular with Chinese consumers, which is very similar to the American equivalent of Quora, the question and answer platform. Another thing that Chinese consumers do is check blogs and read reviews and consult user–generated content to make that purchasing decision. So as a brand, it’s not enough to have your official channels, you actually want other users to spread the message as a part of your content marketing strategy.

 

Manuela

Right! Chinese consumers are really into channels like Zhihu because they offer a lot of in-depth material that helps consumers make purchasing decisions. And as Chinese consumers are becoming savvier, they’re also educating themselves on aspects like product origin, or manufacturing processes and ingredients for skincare brands, for example. And all these factors are pushing them to consider factors that aren’t priced as a more decisive influence in their purchasing decisions.

 

Celeste

Yes. The last 10 years Japanese consumers similarly have adopted behaviors which are very similar to their Western counterparts. So for Americans and Europeans, they’re not just looking at the value for money, they’re looking at the quality, the values that the brand is seeking to represent. And they’re concerned about safety and sustainability as well.

 

One of the most desirable yet competitive consumer groups in China & Japan: Women

 

Manuela

Let’s talk about women as a consumer group in China, because this is one of the most desirable consumer groups to market to. It’s also one of the most competitive. And it’s very interesting because as societal expectations and norms start to evolve, we can see how brands can respond to those initiatives. Over the past few years, we’ve seen a handful of brands that have really bravely led the movement towards women empowerment by using emotional storytelling and personal stories or anecdotes to connect with our audiences and deliver the brand stories. And so one of the key trends in marketing to women is that brands are recognizing them as their own identity and not just a label such as a wife or a mother.

 

Celeste

I think one of the great branding messages that we’ve seen recently with regard to China is a Japanese skincare brand trying to challenge the status quo of the unmarried woman.

 

A success story: Japanese skincare brand SK-II in China

 

Manuela

That’s the luxury Japanese skincare brand called SK-II. The particularity with China’s skincare market is that it is very big: China controls over 60% of the total luxury skincare market in Asia. But it’s incredibly competitive, not just from big international brands that consider China as a key market focus for them, but also from up-and-coming home grown brands as well. And so SK-II, in order to capture more market share, did some research that showed that there was a lot of pressure for women to marry before 27. And this was a major cause of stress in their lives. The stress came from the stigma that if a woman didn’t marry before that age, she was considered damaged goods or leftover woman. The brand used the idea of marriage markets, which is where parents leave personal ads to try and find partners for their children, and using that they interviewed real women that they found to share their personal story as “a leftover woman”. The campaign was hugely successful, because it resonated so well with its target audience. It grew the SK-II brand from a 1 billion USD brand before the campaign to a 1.4 billion USD brand after the campaign (as measured in global sales). And they also followed this up with another more recent marketing campaign, which centered around the pressure that women face when going home for Chinese New Year. This was a 2020 campaign presented in the form of a documentary and it’s just such a great example of how a brand continues to demonstrate that it understands its target audience and is bold enough to tackle big cultural issues, but with respect and sensitivity.

 

Celeste

Cultural sensitivity is critical in Japan too, as it still has a very traditional, patriarchal society. To help with female empowerment, in 2012 Prime Minister Shinzo Abe launched Womenomics a movement called ‘let women shine’. And the aim was to close the labor shortage that the country was experiencing, and to attempt to close the gender gap at the same time. As a result of these initiatives, more women are entering or re–entering the workforce after having children. And this has resulted directly in male dominated businesses having to rethink how to cater to women’s consumer mindsets, because they realized they were missing out on opportunities to generate revenue. So what does the modern Japanese woman want? Conversely to stereotypes, it’s not so much something that looks nice or something that feels nice. It’s about results. It’s about being practical and convenient. A really good case study for this was the automobile brand Daihatsu. Their initial car models were cars aesthetically designed for women, in pink colours with attractive dashboards that had a lot of different lights and that look really nice. But what they found when they did their consumer research is that women didn’t really care about what color their car was, what they really cared about was how fast they would be able to park it, what safety features the car had, and how easy it was to slip in and out of it. Brands in Japan have started to rethink about how to cater products to women and had to rethink about their marketing messages and packaging around the product.

 

Manuela

I love that: it’s such a great example of a brand that had over-simplified their target audience. One of the key things for a brand to be successful in both Japan and China is this more in-depth understanding of consumer segments and recognition that things are changing. And when you’re marketing to women, you’re marketing to individuals and that women think quite practically, and there’s a lot of other considerations that brands need to think about to be able to really resonate with that audience.

 

Celeste

One of the other distinctions I think that we can really draw between China and Japan is that Japan has a lot of its own brands, and they’re very respected and there are no concerns for the quality that you’re getting from those brands, such as Uniqlo or Muji. The success of SK-II which you mentioned earlier shows that Chinese consumers are very willing to shop international brands, and it’s only recently that the China market has started to produce its own skincare luxury items.

 

Manuela

A great example of a domestic skincare brand that has achieved success is Chando. They identified that there was an opportunity to create that emotional connection with women, by looking at what women are concerned about and what their values are, and leveraging those principles in marketing campaigns, such as campaigns surrounding natural beauty or aging fearlessly. Brands coming into China really have to be very proactive in understanding the market and using all of these insights of consumer trends in their marketing strategies to make a difference.

 

Consider the Silver Market: A key consumer segment with good purchasing power

 

Celeste

Yes. And another key consumer segment at play that brands need to consider if looking to tap into these markets is actually the silver market. The silver market are the seniors. It’s especially important in Japan, which has one of the biggest senior population in the world with very long longevity. And that consumer segment actually has really good purchasing power. Companies that want to target this segment both in Japan and China must change their offering: it is a really big market to consider. Studies have found that the wants of the elderly are usually not that far off from the preceding generation. So in terms of taking care of oneself, wearing makeup, going to gym, dating, dining, these are all things that this segment of the population is doing as well. It just needs to be adapted to their needs. One Japanese cosmetics brand has taken the simple but effective step of making fonts bigger on its skincare bottles.

 

Manuela

It’s so interesting because the example you’ve just given shows that brands don’t need to think so innovatively, in order to be able to cater for the silver generation. It can be really simple steps that they can do to change their packaging or their messaging or the ability of the products to tap into this consumer segment. And I think there’s a lot of similarities between China and Japan here in the sense that China’s silver generation is one of the fastest growing consumer segments. expected to reach 35% of the population by 2050. And similar to Japan, it’s one of the groups with the most disposable income to spend. When it comes to the differences between both markets, the Chinese Silver Generation is much more comfortable with modern technology and open to embracing new digital experiences. There are opportunities for brands to differentiate themselves: and in return brands can expect to be rewarded with more brand loyalty when compared to Generation Z or Millennials. Celeste, could you share a little bit on how the silver generation in Japan responds to modern marketing campaigns

 

Celeste

Well, actually, Japan is one of the countries that has the largest newspaper circulation in the world, where newspapers are read more by the older generation. So newspaper ads are still very relevant for brands looking to tap into this segment. When it comes to e-commerce, the older generation in Japan values reassurance when purchasing and they’re not as comfortable with technology as their China counterparts are, preferring to order from catalogues, in-store or asking your children to order for you! ‘Phygital’, the blend between physical and digital experiences, helps to bridge the gap between browsing online and purchasing offline. For example, having chat bots or bots in the stores helping with finding what you’re looking for, it’s still having that reassurance that you are in a store and that there’s a physical person that is going to be here to help you. Japan is 94% urban while China is around 60% urban. One of the smart things that brands have started to do is actually use convenience stores as ways to distribute their products. So in Japan, the most popular convenience stores don’t just sell food or drinks, you can actually find books, medicine and even pick up your online orders! So that’s something that brands such as Uniqlo have been using more and more because the convenience stores in Japan are everywhere. So even if you live in a smaller city or even if you don’t have a car, or if you have low mobility, it’s a convenient way for brands to reach their target shoppers.

 

Manuela 

So despite the differences between how the silver generation make purchases in Japan and in China, there are some commonalities between the two groups, mainly that they represent a huge opportunity for brands looking to expand in China.

 

COVID-19’s impact on both Chinese and Japanese market

 

Celeste

This concludes our overview about key consumer segments in both China and Japan. To finish up, we can look at how COVID-19 has impacted consumer behaviour in both countries. There has been a lot of news features on how the Tokyo Olympics have been postponed to 2021. But other underlying trends have been happening in China too. How do you think COVID has affected purchases?

 

Manuela

We have definitely seen a shift in Chinese consumer concerns since COVID. One of the key things that has emerged is a rebalance of priorities. Chinese consumers traditionally have been trying to balance competing identities. How can I be a good career person? How can I be a good family member? What we’ve been seeing since COVID, which happened in China at a time where a lot of people had gone home for Chinese New Year so they were back in their hometown spending time with family, is that Chinese consumers have experienced a re–shift in these priorities. The key values that are emerging now are relationships and looking after family and health. That’s really interesting, because we expect that this will be impacting how consumers research products and brands and where they decide to allocate their money. What does that translate to for brands looking to target China? Brands will need to think about how they can provide solutions for these key parties. As an example, how can brands make it easier for Chinese consumers to make healthier, more informed choices for themselves and their family?

 

Celeste

I think it’s interesting that you’re saying that because obviously in Japan as well, there’s been a refocus on future and family. So for a fun fact, online dating has spiked as people are more comfortable being online and meeting online. Some surveys have even found that eating online on the first date is more successful than an in-person meeting! Another interesting trend that we’ve been seeing in Japan is a peak of people buying homecare products. Cooking pots and microwave ovens have actually had a record 42% year-on-year growth since March of last year, where the purchase of those items had been falling for 40 years because in Japan it’s very much of culture of eating outside of your home. I think we’re also seeing in a way people taking care of themselves, of each other, and of their family. Finally, another trend we’ve been seeing in apparel, is the rise of second hand apparel purchases, for video-conference friendly clothing. It’s not a new idea to buy reused items. It’s just another trend that we’ve been seeing and that’s going to continue to grow going forward because it also goes hand in hand with people more concerned about sustainability.

 

Manuela

We’re witnessing that in China as well post–COVID. China is one of the first markets to really exit the pandemic and the social distancing restrictions, and we are seeing that consumers are still in the mindset of being more rational and conservative when it comes to their spending. Big second hand resellers, like Vestiaire collective, or even Chinese start–ups like Plum, have reported an increase in users, presumably because Chinese consumers are becoming more careful with their spending in this current climate. Second hand selling isn’t just restricted to designated platforms. It’s also been an increasing trend on live streaming platforms, which is already a big trend in itself in China among consumers. Video apps and live-streaming apps, such as Douyin, are being increasingly used to resell pre-owned luxury items.

 

Celeste

Live streaming isn’t just popular for the luxury sector, it’s even used for everyday category products, such as food items like potatoes at the market. Live streaming in China had experienced a big spike as well, as during COVID sellers were live streaming their fresh products on the market, for people at home to buy at online stores. It’s quite a fun fact that you can watch your potatoes in live stream and then have them delivered!

 

Manuela

That is one of the great trends to come out of the COVID crisis! But again, it just goes to show that consumers are looking for solutions. And if brands can provide those solutions, they’re in a good place to generate revenue from consumers like that. On that note, I think we can conclude our insight into the consumer trends that are changing post-COVID for both China and Japan. To summarize the key takeaways from this second episode of Digital Disrupted, we can say that both markets have unique cultural norms, which means that simply transplanting international brand strategies and expecting them to work, won’t work. Both markets are extremely competitive, and both require tailored market strategies to be able to penetrate and capture market share. Many brands do go wrong in China and in Japan, because they fail to connect with local culture. And you only have to look at the big brands like KFC or Starbucks to see how they are adapting their local menus or their local offering to tastes and expectations.

 

Celeste

In our introduction, we mentioned that Starbucks had successfully gained market share in Japan and if you step into a Starbucks there, you’ll notice how the menu has been adapted to reflect local customs and drink preferences, such as Sakura latte. And another great example of a successful brand adapting its menus is KFC, which has doubled the market share in China than McDonald’s. The reason for that is their ability to adapt to the local culture and integrate local tastes – for example, one of their most sold items is actually their shrimp burger, which only exists in China. The point is that international brands can be successful in both of those markets provided that they do listen to consumer wants and needs.

 

Manuela

Thank you for listening to Digital Disrupted. It’s been a pleasure to be your hosts and you can find more great insights on our website at www.imanagesystems.com/insights

 

Celeste

Are you a brand looking to drive a successful strategy in Asia? Get in touch with us at [email protected] for more information.