The Enormous Chinese Gamer Market Defined

Chinese Gamers

The sheer size of the gamer market in China is staggering.  And it’s growing:  In total it grew 7% from 2014 to 2015 while mobile players grew 12.5% during the same period.  NewZoo, an analyst company, claims the revenues from gamers has surpassed $22 billion and, in doing so, has surpassed the US to lead the world.   They also say that games “such as FIFA Online 3 can attract well over 500,000 peak concurrent users from China.”

The most popular categories include: puzzles, chess, racing games, MMORPGs (massively multiplayer online role-playing games) such as World of Warcraft and MOBAs (massive online battle arenas) like League of Legends.  Source: Game Look

Buying on your Behalf

Delivery

This blog has written about the interest in Western products by Chinese consumers that is partly due to an intrigue with products from outside and partly because of local product deficiencies.  Regardless of the motivation, the desire to buy from the West has created a booming business in the US.  Into the breach have come many transplanted Chinese people act as intermediaries for folks at home.  This new business is called daigou, which translates roughly to “buying on your behalf.”

Scenario:  A cadre of people in the US, could be a student or a young mother at home, chat with friends in China who want to buy something.  The student buys it here and ships it to their friend in China.  Some of these at-home brokers make a living performing this service.  The business has gotten big enough that shipping companies specializing in sending products to China have grown up to support these entrepreneurs after the living room gets too crowded.

Lesson: Advertising to the Chinese consumer may have the effect of sending them to a chat room and to someone here who acts as their broker. It still results in sales and brand building.  Source: LA Times

And Retail Spending Continues…

Monthly Sales Growth - Feb16

Thus far, the adjustments in China’s economy have had little effect on the retail spending.  Each month since June 2014 has seen an upward tick compared to the prior month based on an “aggregated measure of sales of retail goods and services.”  The government has announced job cuts in mining and manufacturing, but they come with income supports that should maintain spending for essentials among those affected.  Source: Trading Economics; National Bureau of Statistics of China

Economic Growth Depends on the China’s Urban Workers

Tiers of Consumers

Goldman Sachs analysis breaks down Chinese consumers into four categories.  We all hear about China’s super wealthy who populate the Movers and Shakers tier.  But the promise of growth, according to this analysis and common sense “will come from two key groups—the white-collar ‘Urban Middle’, and the blue-collar ‘Urban Mass’.”  They are the folks buying all those smartphones.  Not surprising, the total working population and the smartphone subscriber population are roughly the same.  Source: Goldman Sachs

Remarkable Growth

Carrier Data - Feb16

There are indicators, such as these carrier data, that run counter to the standard commentary about the declining Chinese economy.  Tracking the last three months makes the point.  December saw 21.1 million new smartphone subscribers, January added another 24.4 million and February made yet another jump by 26.6 million.  That is over 70 million new smartphone subscriptions in three months against an average for the 12 months back to March 2014 of 18.4 million per month.  Just as economic news out of China has been getting worse, the 3G/4G phone conversion process is having a bit of a pop – adding more and more people to the mobile advertising pool.   Source: China Mobile, China Telecom, China Unicom.

China’s Future Consumer Spending

Retail Sales jan-feb2016

Growth in retail sales for the first two months of the year tell an interesting story if you look below the surface at the split between urban, rural and online.  The vast majority of sales still come from the well developed urban areas in spite of the push by many companies, such as Alibaba, to reach out to the hinterland.  Rural sales are tiny by comparison to urban sales, but the growth is stronger because the need is greater.  The continued effort to cover China’s lower-tier areas the more pent-up demand residing there will be the fuel for future consumer growth.  And online sales, especially mobile, continue to make purchasing easier.  Source: InsideRetail.Asia

Decline Chinese Style

Bank verses bank

In a report that paints a sour outlook for China, the BBC sights production growth of 5.4% – the worst since 2008 – as a negative.  While it is not what it had been, it is still growth that virtually every other economy in the world would treasure.  It goes on to describe the 10.2% growth in retail sales for the first two months of the 2016 as a disappointment because it was below analyst expectations of 10.9%.

Battle of the economists:

Zhou Hao, an economist at Commerzbank said, “The overall growth profile remains still gloomy.”

Zhou Xiaochuan, governor of the People’s Bank of China, said, “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy.”  Source: BBC.com

Hollywood and China are One Step Closer

Huayi Bros

Chinese film production company, Huayi Brothers, is making a serious move into animation.  They are joining with Hollywood veterans, Joe Aguilar, a former producer at both DreamWorks Animation and 20th Century Fox, who will lead the company’s animation unit.  Aguilar will be aided by Markus Manninen, the unit’s art director.  All of this is a response to the growing Chinese film market and the position of the US in it.  More films with Chinese actors and themes will be seen in the West and more films will be at least partially produced in China because of this relationship.  Source: NewsDaily

Xiaomi Sales Miss in Otherwise Strong Market

Xiaomi Sales

Last year we did several blogs about the amazing rise of Xiaomi.  In 2014 they sold 61 million of their inexpensive smartphones and projected another 100 million units for 2015.  They didn’t make it.  Instead they sold 70 million, an improvement over the prior year, but when you have promised big things and under-perform, it looks bad.

Mark Tanner of China Skinny explains Xiaomi’s apparent softness as the result of three factors.  First is a slowness to update their marketing approach.  “Xiaomi’s flash sale gags had lost their novelty factor with China’s consumers.”  Second, Chinese consumer have been trading up to more expensive phones, many of them Apple’s iPhone.  Our monthly carrier data confirms that China has been a replacement market well back into last year.  Third, Xiaomi lacks a bricks and mortar presence.  Their online-only sales strategy creates a distance between the brand and its customers.   The moral is that online sales can take you so far…then you need to complete the circle.  Source: China Skinny

Bricks and Mortar Live

Adidas China

China is Adidas’ number two market and it is the leading women’s sportswear brand in China.  The company is making a push to be the overall number one.  They are doing it with plans to open 3,000 new stores in China by 2020.  Spurred on by 18% growth in their 9,000 existing stores, the brand’s expansion continues in lower-tier cities, a strategy we have noted before in this blog.  Parallel to the growing middle-class has be a growing interest in sports like soccer and running.  That is the trend Adidas is riding into the future.  Source: USA Today