The Lure of Smaller Chinese Cities

 

This blog has written that the next wave of growth in the Chinese economy is likely to come from third and fourth tier cities. There were stories about how Alibaba, and their competitor JD.com, where building infrastructure to better service those areas. Combined with tax incentives from the government there is good reason for many young people to stay in smaller cities in the West and North. The jobs may pay less, but the rents and commuting cost are also less. Together smaller cities can make for a slower paced, more tranquil life.

Data in this graph shows that the deficit in income between smaller cities and their bigger brothers is projected to decrease over the next dozen years, which will tend to feed the trend.

“While investors perceive larger cities as offering the most important consumer base, we believe that lower-tier cities will be bigger, wealthier and more eager to spend, and could contribute two-thirds of incremental growth in national private consumption toward 2030,” said Robin Xing, Morgan Stanley’s chief China economist, in a research report.  Source: xinhuanet.com

Time Counts

After studying the subject long and hard, Scott Knoll, CEO of Integral Ad Science makes the point “that shifting the focus from impressions to time-based metrics can make a real impact for advertisers. Exposure time directly impacts the effectiveness of campaigns.”

If that’s the case, where’s the data? They show clearly that viewing time for both video and mobile is longer than for display. It’s also notable that video gets a longer view than mobile and that “consumers spend 42.4 percent more time viewing mobile display ads than desktop display.” These observations suggest that strategists would benefit from an adjustment in their spending allocations.   Source: MarTech Today

In China, Mobile’s the Thing

Data from several sources define a core difference between Chinese consumers and the rest of us. Chinese consumers really enjoy their online shopping experience and they do more of it online or on their mobile phones than the rest of us.

Another difference is seen in their response to purchases. Peter Stein, global CEO of Razorfish, notes “that 75% of Chinese Internet users post online feedback on their purchases at least once a month, compared with less than 20% in the U.S.” Also, the Chinese do 90% of their shopping in stores housed in vast online malls like Tmall, as compared to Westerners who tend to shop on stand-alone sites by established brands or resellers.  Source: Multichannelmerchant.com

Manufacturer’s Look Downward

 

As key underlying indicators respond to negative trade conditions – slowing new orders and falling exports – September’s Manufacturer’s PMI drops to 50, its lowest point in sixteen months. This compares to its recent high of 51.6 back in February 2018. The sequential decline in confidence since then is evident through the third quarter as output growth and buying activity slowed and employment rates dropped. Though “both output charges and input costs expanded at slower rates [they still] indicated that upward pressure on industrial product prices remained.”  Source: Markit Economics

Smirnoff in Six Seconds

Watching the last game of an otherwise very good Yankee season wasn’t enjoyable because they were losing from the beginning. Both pitching and hitting under-performed, but that’s not the point. It was the consciously placed six second commercial featuring Ted Danson hawking Smirnoff Vodka. He looks off camera and says to the director, “What do you mean we only have 6-seconds?” Then he turns abruptly to the camera to pitch the product only to be chopped at 6-seconds before the message was finished.

Significance: We have written about the latest data suggesting that six-second, front-rolling ads leading into video content have become the newest digital best practice. And here it was jumping the shark into an old media TV ad even before it has been fully integrated into digital video marketing. It is part of a campaign of 6 and 15 seconds spots from Smirnoff.  Great stuff.  Source: BidWin Analysis

Alibaba’s Breakout Strategy

Recently, we’ve been writing about how the next stage of Chinese growth will be coming from business expansion into the rest of the world. Projected revenue for Alibaba, one of China’s two giants, quantifies that future. The company divides itself into two segments. One is retail sales moving through its online malls like Tmall.com and the other is wholesale, which was the starting point for the company that runs through Alibaba.com. Together, the projected revenue is expected to grow more than 100% between 2018 and 2020. That’s because the company has been on the acquisition circuit buying up international retailer, Lazada, giving it access to 560 million international customers, and global logistics company, Cainiao, to help it move things around.   Source: Forbes

AI: Already an Accepted Business Reality

 

A recent survey in Europe by Cogant points to the place seen for AI at this early stage. AI has already become a future reality for a vast majority of executives and most them have reasonable expectations for what it can contribute to their organizations. What goes unsaid is whether they are also thinking that AI will replace current staff as it performs “routine activities.”

Our adventure into AI centers on writing aids; using AI to search, organize and summarize subjects for developing new content – editorial, online and social. Source: eConsultancy

Inflation Moves Up with Little Effect on Consumers, Yet

The five month trend of slowly rising inflation continued in August. The inflationary drivers were from categories with direct impact on Chinese consumers: food, clothing, rent, fuel & utilities, education, culture & recreation. While the increases are notable they are also incremental, suggesting that they may have little immediate effect on purchasing patterns. Meanwhile, the government’s target inflation for 2018 is 3% while the average since January – including the February spike – is only 1.9%, leaving lots of room.   Source: Trading Economics; National Bureau of Statistics, China

Sunshine for Digital Advertising

The total advertising market is projected to reach $207 billion this year – a record in spite of a decline in traditional advertising, according to Magna forecasts. Digital advertising’s growth drives the overall increase. And mobile is central to digital’s growth. Of the internal drivers behind the digital advertising’s growth, the newer social media and video, including connected video, lead while the older search sector’s growth, though spectacular in any other context, is projected to be an unimpressive 18% here.  Source: Marketingland.com

Measuring Future Importance to the World Economy of China’s Imports

Based on projections from HSBC’s Annual Navigator Report, China’s imports are expected to grow at an average of 8% per year to over $5 trillion through 2030, a 178.3% increase. There may be higher growth rates elsewhere in the world, but only India is in any way comparable, but that’s only because of population. While India may have a competitive or even higher future growth rate, its starting point matches China from decades ago. Hence, with or without tariff wars, it is China’s game for the foreseeable future.  Sources: Statistica; South China Morning Post