Well, we don’t know who started the rumor, but both sides deny that Hey Tea was ever going to acquire LELECHA. LELECHA said it is performing well and had no intention of being purchased. In fact, it is seeking another round of financing. While denying the acquisition rumors, LELECHA also announced it would open up to 140 stores before Chinese New Year in 2022.

On the other hand, Hey Tea, the big boss in the new tea or even the beverage industry in China, is valued at 60 billion RMB. The brand keeps expanding its business by opening more stores and discovering new growth areas, such as seltzer and bread. Recently, it just announced that it has become an investor in domestic coffee brand Seesaw.

About Seesaw

Seesaw is a coffee brand founded in 2012 in Shanghai. Currently, it has 33 stores located in Shanghai, Beijing, Shenzhen, Suzhou and Hangzhou. By the end of 2021, it plans to expand to over 100 stores.

Seesaw is different from other coffee houses as it is not making traditional coffee, instead, they are introducing creative coffee. Its drinks are still based on coffee, but they have other unexpected ingredients added, such as soda water, tea, juice and dried fruit. This is regarded as a new growing point for the brand.

Statistics show that from November 2020 to March 2021, the sales volume that those creative coffee contributed grew from 10% to 40%, and the number has surpassed 50% in May this year. The number of its repurchase rate is also very nice, 40%. Gen Z customers make up 17% of repeat consumers.

What Attracts Hey Tea To Invest In Seesaw and the Coffee Industry?

Of course, it is not comprehensive to summarize Seesaw’s success in a few bullet points, but I want to point out what differentiates it from its competitors, and some of the key things that Seesaw has done right.

Opening big offline stores

This reminds me of another coffee house that we’ve covered before, Manner Coffee. The brand is well-known for opening small stores in CBD, making it convenient for white collars to order first and pick up on their way to work.

Well, Seesaw has the opposite opinion on offline stores. It is making them big, many of which are over 200 square meters. The brand wants customers to sit inside the store and have conversations with either friends or colleagues. Big stores are also easier to catch people’s eyes.

Shaping stores as a workplace

While I was doing research and learned that Seesaw has a store at Réel (芮欧), a high-end shopping mall, I was a bit surprise and able to recall that while I was working nearby, I often saw people working in that store.

That’s what Seesaw wants to build, making its store a go-to place for white-collars or whoever working from home and wants to find a decent environment.

It also collaborates with WeWork to consolidate the ambition of shaping its stores as workplaces.

Introducing new business models

Big offline stores may not work in some places due to site limitation. On the other hand, smaller stores can save budgets on renting.

Seesaw opened its first mini store in Nanjing at the beginning of 2021. It is also exploring more sales channels such as the online channels, for example, ordering online and picking up at the store, and the takeaway business as well. Currently, over 60% of Seesaw’s orders are from online channels.

It is also very bold to try out a new mode that serving coffee during daytime and drinks/alcohol in the evening. I am not sure about this idea. After all, consumers come to Seesaw’s stores expecting coffee, not alcoholic beverages. If they want drinks, why don’t they go to bars or restaurants?

Coffee Craze in China

It seems that coffee has blended within Chinese consumers’ daily lives, and it is getting down to lower-tier cities as well.

The industry has gained so much attention that even Internet giants such as Tencent, ByteDance and Bilibili have invested in coffee brands.

Many other industries are joining the craze as well. Tong Ren Tang, a Chinese pharmaceutical company founded in 1669, introduced its coffee line! Sinopec, a Chinese oil and gas enterprise did the same thing. Luxury brands such as Louis Vuitton are joining as well.

Read more: 喜茶放弃乐乐茶却战略入股Seesaw，咖啡赛道就这么诱人吗？

The post Hey Tea Ventures Beyond Tea, Investing in Coffee Brand Seesaw appeared first on China Marketing Insights.

Luxury brands love him. Over the years he has collaborated with numerous brands including Dior, Cartier, Saint Laurent, and Jimmy Choo. He has even worked with many luxury brands to co-design his own limited-edition bags, including Strathberry, Givenchy, Burberry, Tod’s, Chloé, Montblanc and Qeelin. Every time, those bags were sold out within minutes.

What I admire about him is the fact that Mr. Bags started as a college student studying finance in NYC. But he had a great passion for bags, and he bravely chose to forge a career in a brand-new industry with no connection to his college major. He shared those bags as if he was introducing old friends to readers, and the hard work paid off when he was invited to fashion shows and met high-profile people in the fashion industry.  

How did I meet Mr. Bags? 

Recently I had an opportunity to meet Mr. Bags and see him talk about bags in person at an offline event held by entry-luxury brand Tory Burch. The news was announced on Mr. Bags’ WeChat Official Account, inviting followers who are based in Shanghai to attend the event.  

To join the event, interested followers had to leave a message on the account saying that they want to join the event and leave their WeChat ID. Later followers will receive a notification asking them to add a personal WeChat account.  

The guest list selection process didn’t finish here. After adding Mr. Bags staff WeChat account, there was another round of selection by his employees. And finally, if you are selected, you will get a WeChat message from the account.  

Attending the Event

The event was held in Tory Burch’s flagship store at Jing’an Kerry Center, Shanghai. Guests were split into several groups with different color bracelets on their waists.  

At first, I wasn’t expecting Mr. Bags to interact with guests, but to my surprise, he was there, introducing Tory Burch’s bags one by one, with so much passion.  

And because there were so many guests, he had to speak again and again to each group, like teaching the same content to students three times or even more. To be honest, while he was recommending those bags, I started to learn the charm and appreciate them. Before the event, I hardly have any knowledge about Tory Burch.  

In addition to Mr. Bags, Tory Burch also invited a fashion stylist and models to present its products. If guests finished these two activities, they were welcomed to craft their exclusive notebooks with Tory Burch’s monogram on them.  

There was also a photo session with the chance to take a picture with Mr. Bags. What also impressed me a lot was that even after speaking and introducing the bags for a long time, he stood there and nicely took photos with anyone who wanted one. Some of the guests already met him before in other events and they were greeting Mr. Bags as if they were old friends.  

My Thoughts on the Event 

I quite enjoyed the event. First, it had Mr. Bags, a fashion icon in many people’s eyes. Second, the whole setting was comfortable and not aggressive. There were waiters standing everywhere to make sure guests can grab a drink or snacks whenever they want. And staff didn’t push you to buy anything. Even when you were browsing through products, they gave you time and space to appreciate them on your own.  

It is also a good case study for brands of how they can leverage KOL marketing. Offline events serve as a key bridge for both the KOL and the brand to reach followers/consumers. Even if an attendee didn’t buy anything during the event, the feeling that the brand and the KOL generated makes this experience memorable and they may develop a positive connotation with the brand and be more likely to purchase from it in the future. As I mentioned above, I didn’t know too much about Tory Burch prior to the event but Mr. Bags’ passion for the brand made in interested in its products. 

The post I Finally Met Top Fashion KOL Mr.Bags! appeared first on China Marketing Insights.

However, the rules for getting into the EP Club seem a bit like multi-level marketing, causing some people to poke fun at the brand. Let’s take a look. 

You need to help NIO sell 25 vehicles to join NIO EP Club

Recently, a salesperson at one of NIO’s stores shared that when a customer has purchases, repurchases, or recommends others to buy a NIO, that customer will get NIO points. When the points have reached a certain level, NIO will recommend the customer to enter the high-end EP Club. 

Doesn’t sound too complicated. However, the caveat is, just how many NIO vehicles does a customer needs to purchase or refer others to buy?

On July 22, a NIO spokesperson told media outlet Red Star Capital Bureau that, according to the data from February this year, current members of the EP Club on average have purchased/helped sell 25 NIO vehicles. The spokesperson went on to say that, “Some owners have sold and purchased more than 160 cars.”

Based on the average starting price of NIO at 400,000 yuan (62k USD), if the average car owner bought/sold 25 cars, then the average EP Club car owner has driven 10 million yuan (1.6 million USD) in sales for the company. In other words, if you want to enter the EP Club you have pay more than 10 million yuan to buy NIO vehicles or created more than 10 million yuan in revenue for NIO.

What are the benefits of joining this “high-end community”?

According to NIO’s official introduction of the club, members of the EP Club can enjoy EP9 (the company’s crown jewel race car) driving experience, get formula-E racing tickets, join overseas ‘study’ tours, and business resource sharing. However, many members believe that EP Club is more like a “tour group” of the wealthy and powerful.

In November last year, many social media influencers shared EP Club’s trip to Lijiang, in Yunnan Province. According to one blogger, in addition to club members, NIO also invited some media outlets to join the event.

After arriving in Lijiang, the members dressed in formal clothes to attend the dinner on the first day, watched some members perform and CEO Li Bin also attended the dinner.

The activity on the second day was to climb the Yulong Snow Mountain in the morning and in the afternoon, members did some activities in the ancient city of Lijiang. In the evening, they held a martial arts-themed cosplay (role playing). Li Bin also dressed up and took a group photo with the members.

According to the Blogger, members only need to buy their own plane tickets, while the hotel and event expenses are all covered by NIO.

A member of the club also published a video revealing more details about the EP Club’s trip to Lijiang, including staying in a five-star hotel with gorgeous view, an EP9 track day driving experience and an interview with the CEO Li Bin. In the video Li Bin said: “the EP Club is a gathering of NIO’s most die-hard users.” Notably, he said the word users, not fans.

Is the NIO EP Club worth it? 

NIO CEO Li Bin once bluntly said that buying NIO vehicles is not just buying a car, but “a ticket to a new lifestyle.” 

From very early on, Li Bin learned from the success of Starbucks that no matter how advanced the Internet is and how developed e-commerce is, people’s inner demand for social interaction will not decrease, and they are willing to pay for services beyond the functionality of the product.

Another aspect of this is the people in this group are either wealthy or well-connected. So, for some, this group isn’t just a “tour group” – it is more like a Country Club. The only difference is Country Club is a lot cheaper.

The resources from social connections formed at the EP Club may allow some to gain more wealth and connections, so the 10 million yuan may be well worth it. 

But some netizens have reacted unfavorably to information about the club, saying that NIO is not an EV manufacturer but a multi-level marketing (MLM) company. Others have said it seems like a high-end social networking company where the membership fee is cars. 

But this isn’t the first time NIO has been called an MLM company, the brand has been dealing with this nickname for several years now due to its ongoing referral incentives and the natural passion its owners have for their vehicles. NIO’s response? “These types of rumors exist, mainly because people don’t have a deep enough understanding of our brand.” 

The post Will NIO’s Newest Marketing Tactic, the NIO EP Club, Help or Hurt its Brand Image? appeared first on China Marketing Insights.

Movie-Goer Demographics are Changing

Based on statistics from Cat Eye Movie (猫眼电影), in 2018, there were already signs that post-00s don’t visit cinemas as often as the other generations. Statistics show that, among Chinese people who went to cinemas during summer holidays from 2016 to 2018, the percentage of people who over 35 is increasing, yet the percentage of people who below age 24 is decreasing.

In 2019, the average age of this cinema visitors reached 29 for the first time, and people who between the ages of 30-34 became the main consumer group.

2020 was not an ordinary year for anything, including cinemas. After the lockdown from January to March ended, people flooded to cinemas because they finally could. During last year’s summer holiday, the percentage of movie goers below 24 increased from 29.5% in 2019 to 39.4%. But that’s it. In the following National Holiday and the Spring Festival, there was no rise in the number of post-00s visiting cinemas.

The average age of cinema visitors from 2017 to 2019 were 28.25, 28.73 and 29.18. Though in 2020, the number decreased to 28.8, but that’s only because the end of lockdown made people want to go out and partake in lots of activities.

Why Cinemas Lost Their Charm for Chinese Post-00s?

Post-00s have different ways to fill their leisure time

According to a survey by Qi’e Zhiku (企鹅智库), when post-00s and post-05s were asked what they liked to do in their free time, the top six were online chatting, browsing web pages, watching videos, playing mobile games, shopping (both online and offline) and doing sports. None of them was watching movies in cinemas.

The lockdown also changed people’s habits of watching movies, especially for Chinese post-00s, who have known the Internet since they were born. Being unable to visit cinemas, the young generation started sourcing movies at home. Watching them online costs way less than visiting cinemas, either in terms of movie tickets or peripheral costs generated from this small trip.

Consumers have fewer options for international movies

Because of Covid, many international movies such as Marvel and DC’s movies are postponed until 2022.

Though the quality of domestic movies is getting better, young people are more attracted to international ones. And that’s why if the movie is not super popular or buzzed-about on social media, they won’t go to cinemas to kill time.

Chinese Post-00s Prefer Escape Rooms and Murder Mystery Games

We’ve talked about escape rooms. They serve as a way for young people to escape reality. Post-00s especially like horror-themed rooms as these are better to distract them from daily pressure. Because they are very scary, many people also use it as a way to test their significant other.

Other than escape rooms, murder mystery games are also very popular among young people. In this game, players will be given a script in which at least one person is murdered. Every player is assigned with a character and the goal is to find out who is/are the murderers.

Other than these, spas, gaming, kitten cafes, trampoline centers, haunted houses and home parties are popular entertainment activities among post-00s.  

Read more: 电影院失去00后

The post Chinese Post-00s Youth Don’t Visit Cinemas appeared first on China Marketing Insights.

Sounds familiar right? Not long ago something similar happened with the Xinjiang cotton scandal. Every year brands get caught up in scandals. But with the correct response, it doesn’t have to mean the end of their China journey.

Coach is one of those brands. It took the slow road, but it has survived and found its way back from the scandal. Recently it held a large-scale show in Shanghai which helped the brand generate lots of buzz on social media. Though Coach still has a long way to reach its previous peak performance in China, it seems like the brand is getting there.

What happened to Coach in China in 2019?

The scandal started from Versace defining Taiwan, Hong Kong and Macao as individual countries on a T-shirt. Following it, many other brands such as Coach, Givenchy were discovered to have the same issue.

People were outraged and those brands’ ambassadors were busy distancing themselves from brands by announcing the termination of their contracts. A key reason why Coach was severely influenced was the cancellation of contracts by its two ambassadors: Liu Wen (刘雯) and Guan Xiaotong (关晓彤). Both of them are top celebrities and their actions drive massive amounts of attention and traffic.  Under the comment area of Coach’s apology announcement on Weibo, many people were asking the brand to get out of China and stop earning money from Chinese consumers. The future of Coach seemed dark back then.

Coach’s performance after the scandal

Social media engagement on Weibo

I choose Weibo as the subject to monitor Coach’s social media engagement. First, the platform is one of Coach’s official channels to present its brand image and announce big events. Second, Weibo’s statistics (including numbers of likes, comments and reposts) are more transparent compared with WeChat,

The data excludes posts involving celebrities and KOLs, as the engagement numbers usually go extremely high for those posts. Here is the average engagement prior to the scandal: 

And here is the average engagement after the scandal:

You can see from these two charts that Coach’s social media engagement fell dramatically after the scandal. People were reluctant to have interactions with the brand when it first started to post content again.

Sales performance after the scandal

From lack of social media engagement, it appears Coach might not survive from the scandal. However, after parent company Tapestry released its financial report of 2020, it seemed as if the effects weren’t as serious as they looked. The report shows that Greater China achieved $600.8 million in sales, accounting for 17% of Coach’s total sales. If we look at the percentage of Greater China’s contribution in 2019 and 2018, which were 18%, it didn’t make great difference.

Coach’s bags have also frequently shown up in top fashion KOLs’ posts. The event that it held on June 3 grabbed lots of attention. It seems that people have let go of the scandal back in 2019. How does Coach manage to do so?

How Coach Earned Back the Love of Consumers in China

The first Weibo post after the scandal

After its official apology on August  12, Coach didn’t post anything on its Weibo account and went silent on social media for two months.

The first post after the scandal was not until November 6, 2019. The post announced Coach’s participation in the second China International Import Expo. This is not some usual exhibition but a national-level expo, being recognized by the Chinese government.

By showing up at the Expo, Coach was delivering the message to Chinese consumers that it was making efforts to fix its mistakes and it has gained official approval to join such a government-run event.

We don’t want anything bad happens to brands. But if your brand happens to get caught up in any scandals, do keep quiet for a while. Nike hasn’t posted anything on its Weibo account since March 12, after the Xinjiang Cotton scandal, same with Calvin Klein and H&M.

Do the politically right thing

Besides the second China International Import Expo, Coach also participated in the third Expo in 2020. This shows Coach’s sincerity to please Chinese consumers and do the politically right thing in China.

Other than the Expo, when COVID first hit Wuhan in early 2020, Coach immediately donated 1 million RMB to the city. In the comments area on Weibo, people were saying Coach reacted fast and was being generous.

Celebrity and KOL strategies

After the two ambassadors terminated their collaboration with Coach, it would need to find a new one. This would be achieved once things cooled down and celebrities were willing to work with the brand again. The new ambassador it picked is Yang Zi (杨紫). She is a child star who became famous from a household TV series called Home With Kids (家有儿女). In recent years she has shed the child-star image and played the lead role in numerous romantic dramas. Yang has 57 million followers on Weibo and it is fair to say almost every young person knows her.

Before officially announcing Yang Zi as its ambassador, Coach had been interacting with her by having her appear in video clips. So on August 31, 2020, when Coach announced the collaboration, Yang’s fans were cheering up for her and the post gained 182k likes so far.

Other than Yang, Coach also actively worked with other celebrities and KOLs, including Ding Yusi (丁禹兮), Chen Yuqi (陈钰琪) and Dong Youlin (董又霖). You may find those names sound unfamiliar. And yes, they are not as famous as Liu Wen, Guan Xiaotong or Yang Zi. I think it’s not because Coach doesn’t have the budget to work with higher-level celebrities. It’s because the brand wants to be low-key for now instead of working with some big names and drawing lots of traffic all of a sudden. The brand wants to grow and recover steadily. It is playing a safe card.

Offline presence is necessary

If you follow the timeline of the Coach scandal, you will find the brand was a little bit lucky. The scandal happened in August, 2019. Coach kept silent for 2 months on social media, and then in early 2020, COVID hit the country and offline stores and events were shut down. Everything offline didn’t restart until March.

So during this period when Coach should be low-key and had better not hold any offline events, every other brand was doing the same thing because of COVID restrictions.

Even after COVID restrictions loosened, Coach stayed fairly quiet and it wasn’t until December 2020 that Coach held a big offline event. I believe December could be some people’s happiest month, as it has Christmas, and it is the end of past and a fresh start of a new beginning. Coach picked a good timing, when hate and negative voices of its past scandal might be less.

What it did for the event was to have 400 drones with lights create images of Coach’s bags and its iconic dinosaurs cartoon. The brand was wishing everyone a good holiday. The location that it chose was at The Bund, Shanghai, which is the most representative spot either in Shanghai or in China.

If The Bund event has somehow brought Coach back to the center of the stage, the following one publicly tells Chinese consumers that Coach has made its way back and it is doing better than ever.

On June 3, 2021, Coach invited top celebrities and KOLs to its Coach Winter Collection show in Shanghai. The brand designed its show place as a drive-in cinema with a vintage vibe. Celebrity attendees were diverse. There were top ones such as Yang Zi, Chinese singer Xiao Jingteng (萧敬腾) and Chinese actor Zhong Hanliang (钟汉良). Idols who become well-known to the public such because of those contestant show such as Liu Xiening (刘些宁) were also invited. In terms of KOLs, Coach mostly invited top ones such as Mr. Bag and AnnyFan.

Because of the amount of celebrities and KOLs that Coach invited and the brand’s promotion, the event drew lots of attention on social media. The tag #Coach秀场直击 (#Coach Winter Collection Broadcast) has more than 100 million views so far. Coach itself keeps posting images from the event on its official channels. KOLs who have attended the event also posted related content to further promote the show and the brand.

Our Thoughts

Well, ideally your brand doesn’t have a scandal. Though everything has two sides, and a scandal might boost your brand’s influence, in the end, it is more likely to bring negative impacts than loyal customers.

If your brand does get involved in a scandal, especially political ones which are more sensitive here in China, the first thing is always to SINCERELY apologize. Don’t just do it because you need it, such as the official apology made by Dolce & Gabbana’s founders, which worsened the situation instead.

The second thing is to keep silent. On one hand this gives your brand time to restructure and plan out next moves, and it also fades either the scandal or the brand for a while. As time goes by, with the massive amounts of information they take in every day, consumers are likely to forget the scandal.

If you strictly follow these two steps, it is likely the scandal will eventually pass.

The post China Marketing Case Study: How Coach Won Back Consumers After a Scandal appeared first on China Marketing Insights.

Etude House, Innisfree, LANEIGE, FANCL, The Body Shop and Benefit were household names in the China market, which makes it surprising to hear that they are scaling down and being forgotten by Chinese consumers.

What led to the decline of these brands?

Solely relying on hero products

Let’s take Benefit Cosmetics as an example. At first, Benefit smartly positioned itself as a master in eyebrow products. Its hero products include eyebrow pencils, eyebrow powder, eyebrow gel etc. Its offline stores used to provide shaping-eyebrow service.

But the thing is, Benefit seemed to stop making the effort to create and promote other products, and it is solely relying on its eyebrow products. Without new products, it becomes really hard to capture consumers’ attention, especially in China where consumers love trying out new things and local brands are churning out new products every week.

Threats from the fast development of Chinese beauty brands

What makes things worse is that, while Benefit Cosmetics’ eyebrow products maintain a slightly higher price, many Chinese brands are taking over the market with better cost performance. Florasis, Colorkey and Little Ondine have all launched eyebrow-related products. Their quality is not bad, yet their prices are very threatening for Benefit. 

The rise of domestic brands also threatens the survival of many South Korean beauty brands. Those brands were popular about 7-8 years ago when Korean dramas were prevalent in China. They had large range of SKUs and frequent launching pace, and they were fashionable and affordable.

But after the downturn in Korea-China relations, Korean dramas were no longer able to air on Chinese streaming platforms, and these brands lost their main point of influence. What’s more, with the improving quality of domestic beauty brands’ products and their down-to-earth prices, South Korean beauty brands have been gradually losing their advantage.

Pointing out ingredients is not enough

Chinese consumers are becoming really picky. When they are buying skincare products, they not only want to know the ingredients but also know what skin issues those ingredients are tackling and what effects will they bring.

A bad example here is Jurlique. It promotes itself as a natural and organic brand, and most of its ingredients are coming from plants. The point is good which appeals to Clean Beauty, a prevalent beauty concept in the industry. However, without telling consumers what those plant based ingredients do, how exactly they benefit the skin, Jurlique is making useless communication. People want to know what problem those ingredients will solve.

According to Tmall’s statistics in 2019, most searched skincare keywords were moisturizing, brightening, acne removing, recovering and anti-aging. These are directions that skincare brands can consider focusing on.

Celebrities might not be able to save those brands

Though Benefit and Innisfree once worked with celebrities to boost their attention, the results were weak. Indeed, collaborations with celebrities can drive sales but that’s not a persuasive reason for consumers nowadays. Consumers want to see the effect of those products and celebrities can only act as a platform to tell brands’ stories.

Read more: 这些曾经风靡中国市场的美妆品牌，怎么都走到了关店自救这一步？

The post Benefit Cosmetics, Jurlique and Other International Beauty Brands Struggling in China appeared first on China Marketing Insights.

Inspired by mythology from the Tang and Song dynasties, Duanmu founder Qi Tian (祁天)  uses ancient Tang Dynasty-style wood inlaying techniques – up to thousands of wooden parts can go into the making of just one bag.

Prices typically range from 5k to 40k RMB but the brand also makes special pieces. For example, one piece sold at a Christie’s auction in Hong Kong in 2019 went for 137,500 RMB ($21,375 USD).

At the moment, the brand has 4 stores in Beijing and Shanghai. It just opened the Shanghai store in Grand Gateway 66 in February. Its neighbours are LV, Chanel and other high-end luxury brands. In fact, it is the only Chinese brand on the floor with all the major international luxury brands.

A Trained Architect, How Did Duanmu Founder Qi Tian End Up Making Bags?

Born in 1983 in Beijing, Qi studied architecture at Tsinghua University and the University of Pennsylvania. But it was his hobby of collecting that inspired him to launch Duanmu in 2011. When he first started the brand, he wasn’t creating bags, he was creating boxes to store antiques. He had discovered that many collectors in China were housing their valuable collectables in regular boxes.

In a recent interview he shared, “People packed museum-quality pieces, worth tens of millions of yuan, into whatever was available, such as a shoebox or a moon cake box.”

But the demand wasn’t as high as he expected. And he also felt that his creations were just being hidden away for no one to see. He wanted to create something more visible.

In 2016, Qi found that the wooden boxes he was creating could be changed into handbags. One week after he had the idea, Qi created the first Duanmu bag and decided to solely focus on the handbag business.

A Reputation for High Quality Craftsmanship

Qi treats his products like a work of art. The patterns on all of his products, from the eye of a horse to the hairs of a deer or a rabbit, are created with Tang-Dynasty-style wood inlaying techniques, which have an accuracy to the nearest 0.1 mm.

For one of his floral-patterned bags, it takes 15 pieces of wood to make a flower with six petals-each as big as a thumbnail. The finished bag consists of 758 pieces of inlaid wood, and it has been through 22 technological processes, with 194 sub-processes.

He deliberately chooses not use printing or painting, which would be less costly and quicker to produce.

Duanmu Bags Design Inspiration

As mentioned, the brand’s designs are inspired by mythology from the Tang and Song dynasties. This choice is very intentional.

Qi has shared that, while many Western brands are exploring and beginning to incorporate Chinese aesthetics, they tend to approach it from a surface level, embellishing symbolic elements of dragons and phoenixes.

Qi feels that there is so much more to be explored about Chinese society. Duanmu’s collections feature a variety of motifs based on traditional Chinese culture, some deriving from ancient practical utensils, some from ancient bricks and stones, and others from Dunhuang murals. They also incorporate incorporate Chinese fairy tales and mythology.

Maintaining Strict Control Over Entire Production Process

Qi Tian knows a key thing that will differentiate his products from domestic handbag brands and even international luxury brands is the quality. Even as the brand has grown, he has maintained strict quality control.

Except for hardware fitting, Qi and his team handle the entire production process, from sourcing raw materials, to crafting bags and to decorating and assembling. Qi also personally selected all the craftsmen that work for him to ensure an outstanding team.  

Duanmu is Deliberately Expanding Slowly

In terms of expanding, Duanmu keeps a steady and low-key speed. Every year, it opens one to two stores in first or second tier cities. The pace is decided by the Duanmu’s manufacturing capacity and the ability to provide excellent service at those offline stores.

At the beginning, Duanmu actually went a bit overboard with its sales process. Duanmu’s sales associates told long stories of the brand to customers who visited its stores. From the positioning of a brand, to the craftsmanship involved in the production process, and even the aesthetics that Duanmu was delivering, the entire introduction took up to two hours! While some customers loved listening to stories, some simply wanted a bag and not to feel like they were getting a museum tour.

Based on feedback from customers, Duanmu quickly adjusted its approach. Sales associates now only share topics that interest each customer, instead of sharing everything.  

Duanmu is Very Selective When Choosing Offline Store Locations

Duanmu believes the location of its first store in a city is important, as it will drive consumers’ first impression of the brand. For this reason, Duanmu only chooses luxury shopping malls in first tier cities to locate its stores at the moment.

It is also worth noticing that its offline stores are decorated in an ancient China theme. Qi wants to create stores that are half for shopping and half a museum or art gallery. Qi believes that this is the best way to present Duanmu’s ancient China culture to its customers.

Read more: 与Hermès、lv、CHANEL重奢同场拍卖，一只包袋售价4w人民币，中国本土品牌「端木良锦」如何做到的？

The post Chinese Luxury Brand Duanmu Creating Bags Often Compared with Hermès appeared first on China Marketing Insights.

Impact of the Pandemic

Haidilao claims the drop in retained profits from 2.3 billion to 300 million was due to dining restrictions from the COVID pandemic around the world. 

Within China, the dining industry was heavily affected by the quarantine period at the beginning of 2020. At that time, Haidilao didn’t open its stores for over 40 days. During this tough period, it changed its focus to the takeaway business. Because of this, takeout orders drove 718 million RMB of the company’s revenue in 2020, a 60% increase compared with 2019. The contribution was still very small though at 2.5% of its total revenue in 2020.

While that is part of the problem, there is more at play. 

Haidilao Opened 530 New Stores in 2020

It is fair to say that over the 2-3 years Haidilao’s rate of expansion has been similar to new beverage stores such as Hey Tea and Nayuki Tea. Haidilao keeps opening new restaurants.

Despite COVID’s effect on the economy, Haidilao opened 530 new stores globally in 2020. This is in comparison to 198 new stores in 2018 and 302 in 2019. Currently, it has 1,205 restaurants in Mainland China. On average, it opened 1.49 new stores every day over the past year.

It is also fair to say the majority of Haidilao’s revenue in 2020 came from its new stores. It seems that Haidilao is using its new stores to boost income. According to Guosen Securities (国信证券), a Chinese state-owned financial services company, Haidilao can expect to max out at around 2,100 to 3,000 stores domestically.

Expanding May Not Save Haidilao From Its Backward Performance

As consumers, we can see there are more and more Haidilao stores. But behind this prosperity, there are issues bubbling up inside the hotpot giant.

First, the table turnover rate is decreasing. In 2020, the rate dropped from 4.8 times to 3.5 times. Well, the good news is, the average amount per order was increased to 110.1 RMB, which was 4.66% growth YoY. 

The other issue is its growing staff costs. Over the past year, Haidilao’s number of employees broke 130k. Its staff costs, including salary, bonus and allowance reached 9.6 billion RMB. This accounted for 33.8% of its total expenditures, 3.72% higher than 2019. 

But then again, Haidilao is well-known for its detailed customer service and for treating its employees well. In the third quarter of 2020, it raised its frontline employees’ salary by 200 to 1,600 RMB. The average employee annual salary was 73.8k, which is far better than other restaurant brands.

Another reason why Haidilao didn’t benefit as much as it expected from its expansion was its budget and spending on opening new stores. Founder of Haidilao Zhang Yong (张勇) said in a forum in 2020 that: “I suggest you don’t learn from Haidilao, as we still have tons of issues to solve.”

Read more: 一年新开544家店，就算是海底捞也受不住啊

The post Chinese Hotpot Giant Haidilao Expanding Too Quickly appeared first on China Marketing Insights.

Actually, Pop Mart was founded way back in 2010. At first, it only sold toys from the Hong Kong brand LOG-ON or from the Japan Loft, and it didn’t have its own IP. Things lasted like this until 2016, when it was inspired by a Japanese IP toy Sonny Angel and decided to start working with artists to create its own IP.  Pop Mart got the right to sell the Molly IP. Since then, the brand went viral. 

Despite COVID, 2020 was a very strong year for Pop Mart, capped off by an IPO in Hong Kong in December. Let’s look at some of the key takeaways from the report:

Earnings

Annual revenue was 2.51 billion RMB, 49.3% growth YoY, and they sold over 50 million toys. 

The adjusted net profit for 2020 was 590 million RMB. For comparison, 2017- 2019 profits were 1.56M RMB, 99.5M RMB and 451M RMB respectively.  

Diversification of Top IPs

Sales from top IPs are becoming more diversified and healthy. Why does this matter? Because Molly, Pop Mart’s top IP, used to contribute over a quarter of the company’s revenue. From the brand’s IPO prospectus, from 2017 to 2019, Molly generated 41M RMB, 214M RMB and 456M RMB respectively for Pop Mart, accounting for 25.9%, 41.6% and 27.1% of the company’s total revenue. 

This year, revenue from Molly has dropped to 14.2%. Following Molly are Dimoo (12.5%), Pucky (11.9%), and The Monsters (8.1%). The remaining 53.3% of sales comes from all other IPs. 

Other noteworthy IP stats: 

The “Day in the Life of Molly” collection that launched in August 2020 was a top seller, bringing in over 100 million RMB. 

Brand-new IP Skullpanda is off to a strong start. The first collection sold over 276,000 toys the first day. 

New IPs created through Pop Mart’s Pop Design Center brought in 100 million RMB. 

Online v.s Offline Sales Channels

Pop Mart now has a total of 187 offline stores, 76 of which were newly added in 2020, and a total of 1,351 Pop Mart vending machines, 526 of which were newly added in 2020. Offline sales increased 34.6% YoY.

Online sales reached 950 million RMB, making up 37.9% of total sales, up 76.5% YoY. 

During the 2020 Singles Day shopping festival , Pop Mart’s Tmall flagship store did 142 million RMB in sales, becoming the first company in the toy category on Tmall to break 100 million during 11.11.

International Expansion: 

Pop Mart is now selling in over 20 countries and regions. International sales increased 176% YoY. The first overseas store opened in Korea in September and since then they have opened several more including just recently launching its first store in Canada. 

Members: 

Pop Mart has 7.4 million registered members. 5.2 million of them were newly registered in 2020, an increase of 236% YoY. Sales from members make up 88.8% of total sales, an increase of 9.9% YoY. 

Events: 

In 2020, Pop Mart hosted the Shanghai International Pop Toys Exhibition with over 100,000 people in attendance, over 500 toy designers and 300 toy brands.

In November they also organized the first ever pop toy industry conference and published a report pop toy industry trends white paper. 

Why is Popmart so popular? 

So you’ve seen the great stats from the report, but why is Pop Mart so popular? 

People love collecting things and Pop Mart satisfies this need. And it does it with excitement by using blind boxes. This means that all toys in a series will come in the same box and consumers won’t know which toy they got until they open the box. 

Pop Mart is also an expert at creating scarcity. For every new series of toys that comes out, there is always a mystery toy that consumers have about a 1/140 chance of getting. Because they are so rare, people can resell them on second hand platform Xianyu (咸鱼) for nearly 40X the original price, for example it could be sold at 2,350 RMB and its original price is only 59 RMB.

Compared with other entertainment activities, buying Pop Mart toys is a low-cost, happy thing for people, especially young people who suffer from work-related stress and anxiety. They are so happy to embrace the uncertainty and excitement of opening. These toys can also be photographed and images can be shared to social media.

Check out our unboxing video to feel the excitement: 

Consumer Demographics

According to Frost & Sullivan research, 95% of blind box consumers are aged between 15 – 40, and they tend to have higher consumption ability. 

This is starting to shift though. A report from Alibaba shared that during this year’s Spring Festival, many consumers in their 40s and 50s purchased bind box toys for the first time, choosing items from Chinese zodiac collection as New Year’s gifts. 

Areas for Improvement

Pop Mart clearly identified the risk of too much reliance on the Molly IP and worked hard this past year to improve that. The other thing is, the company doesn’t tell good stories of its IPs. Stories can give vitality and personality for IPs and make people feel more attachment to them or interest in them.

Read more: 

深度｜上市首日暴涨的“泡泡玛特”，给时尚品牌带来什么机会？

财报 | POP MART 2020年度成绩单

The post Key Takeaways from Chinese Toy Maker Pop Mart’s Annual Report appeared first on China Marketing Insights.

While this is kind of nice… you don’t have to deal with surly wait staff and you can take your time ordering, there are some downsides. 

Sometimes, the restaurant has poor signal so you have to call the waiter again to ask him/her the Wifi password. After trying one to two times, you still can’t correctly type the long and complicated password so you hand your cellphone to the waiter and let him/her type the password for you.

And if you happen to get a WeChat message during the ordering process and accidentally hit the notification and go back to the WeChat home page, on most occasions, you’ll have to redo the order all over again. 

What does this sound like to you? It kind of seems just like the same process you would go through when you order takeout at home or at the office, except the fact that you are sitting in the restaurant and you can save a few RMB on delivery fee by eating there.

After you’ve ordered, you click “place the order”, and you will be guided to a page where it asks you to open the access to your WeChat account or ask you to register as a member of the store, or to follow the Official Account in order for the order to be fully placed. 

Several days after, when you think someone has texted you on WeChat, you find out it’s the new article published by the restaurant’s Official Account that you were forced to follow when ordering food.

The use of QR codes to order was already pretty common in restaurants around China prior to Covid, but now it seems like it’s everywhere. 

At first, diners welcomed the idea of being able to place the order themselves – especially during the height of Covid, it could decrease contact with other people, thereby decreasing the spread of the virus. But as the threat of Covid declined, many people started thinking, why am I still paying the service fee that is added into the price of the dishes, when I’m really not getting much service and I’m being forced to give away my personal data or follow this account? 

The Good Side

Despite these annoyances, it is definitely beneficial for restaurants and streamlines the ordering process. It also means that diners can’t get angry at the wait staff for forgetting a dish or ordering the wrong thing – now they can only blame themselves. 

In China, we love paying for lunch or dinner for friends, so this method also avoids “arguing” with your friends over who will pay the order today, you can do it on phones! 

Our Take

For me, I prefer to order on my own with QR codes. Waiters don’t have to stand there waiting for me while I decide what to get. And I often think I want one dish and then see something else and change my mind, so it’s kind of annoying to have them take my order and then have to keep asking them to change it. 

The thing I don’t like though is that, most of the time, I have to follow the restaurant’s Official Account to place the order, and I then start receiving the notifications. I already have so many messages on WeChat, I don’t need messages coming in from every restaurant I go to. 

This is something brands should keep in mind, no matter if they are restaurant brands, or any other type of brand in China. While you want to leverage QR codes to drive traffic to your WeChat mini programs and Official Account, ideally don’t make it mandatory for the user to follow your account in order to do something, because then they might start to associate annoying, unwanted notifications with your brand, and they will likely unfollow it very quickly. 

Read more: 扫码点餐，是怎么让我们失去选择权的？

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