Chinese Consumers Looked Up in October

Cpnsumer Confidence -Oct-18

After a couple months of downward movement, China’s Consumer Confidence Index turned back up.  Likely the down turn in prior months was a reflection of the atmospheric noise around trade and the uptick is a reflection of countervailing noise around expectations for November’s Singles Day, which turned out to be a great success.  The mindset of the Chinese consumer is paramount to the stability of China’s economy.  Sources:; Nat’l Bureau of Statistics, China

Online/Offline Retail Integration Marches On

Online Consumption

A couple years ago Jack Ma Chairman of Alibaba coined the phrase “New Retail” to refer to the seamless integration of online and offline retail with logistics that would allow consumer to buy what they want, when they want and where they want.  He described the end of purity – pure e-commerce and pure bricks and mortar retail.

In a survey of Chinese consumers by interested parties, Walmart, Tencent and JD Daojia, 67% of respondents said they actively use services that deliver goods from local offline stores.  Ma’s vision appears to have been accurate.

In the US there are integrated online/offline services like Stop & Shop’s Peapod that deliver fresh groceries, an app called GrubHub that delivers food ordered online from restaurants and clothiers like Jos. A Bank that have integrated online sales with in-store sales pick-up.  The purity model tends to be fading – look for Fresh Direct to find a storefront partner at some point.

Meanwhile, these data show that with all the talk of online consumption, there is a long future growth line before parody is reached between on- and offline sales in both the US and China.  Source: Enterprise Times

Notes on the Brand Safety Mine Field

IAB Bakers Dozen

An IAB white paper outlines thirteen topics with which advertisers might want to avoid association.  At the website level the list is relatively easy to avoid.  Sites that promote hate speech, terrorism or pornography can be put on a blacklist. Easy enough.  The problem occurs when a legitimate site like The New York Times is covering those subjects as news. The broad blacklist strategy would eliminate a legitimate news operation.  Hence the complication.

The strategy has to be a more refined blacklist – whitelist combination to keep in the legitimate whilst keeping out the other. To better manage your brand’s safety, you’ll have to get contextual.  The context within the site is as important as the overall site, which requires inclusion of an extensive keyword or topic blacklist – whitelist strategy.  Source: MemeBurn

You Ain’t Seen Nothin’ Yet

Singles Day REcord

November 11th was Singles Day in China.  This was the 10th year of a commercially contrived holiday that rolls the West’s Black Friday and Christmas into one, 24-hour, glutinous shopping day.  Every year it breaks the record set by the prior year and this year was no different.  The 27% year-over-year increase puts to rest the current notion that trade concerns might be affecting the Chinese consumer.  Not so, as the gains are attributable to the continuing growth of the middle class and the even deeper penetration of mobile purchasing into the Chinese way of life.

And look for the escalation to continue far into the future.  According to a forecast by the Organization for Economic Co-operation and Development (OECD), “China’s middle class will almost triple from 300 million to 850 million by 2030″ setting up double digit growth for many Singles Days to come.  Source: Retail Dive

China’s Manufacturers Hang onto the Positive

Manufacturing Sector PMI Oct-18

China’s manufacturing sector remained marginally positive in October as it skates around the 50 mark for the second month in a row. May of 2017 was the last time in the past two years that the PMI was under-water at 49.6.

Zhengheng Zhong, director of macroeconomic analysis at CEBM Group commented, “Overall, expansion across the manufacturing sector was still weak. China’s economy has not seen obvious improvement.”  Source: Markit Economics

Challenges to Bringing Programmatic In-House

In-house Tram

To build an in-house agency a widget company will have to commit to entering a new business – advertising.  That commitment includes recruiting and training advertising talent from management to buyers to analysts.  Next the company will need to connect with a demand-side-platform, which comes at a price – 10-15% of the spend if you use a self-serve provider or as much a $20,000, if you license a bidder. Once the data begins to amass a data management platform will be required. It’s cost will scale in relation to the amount of data collected.  And its functionality will require supplementary data from second- and third-party sources.   More money.  Then there is the ad stack, the cost of running an auction and the associated tech fees. Soon it’s real money.  Still want to bring it inside?

Note that with all this talk about the costs of bringing programmatic buying in-house there are in-housers who claim to have shifted lots of budget from agency costs to advertising spend. So there.  One final question for the would-be in-houser; is the internal team building, ongoing training and detail management of the technology worth the savings rather than sticking to your knitting?  Source: Digiday

The Winning Argument for Selling into China

Cross Border eComm Pentration

This graph shows that imported goods sold into China via e-commerce grew more than six times in the four years from 2014 through 2017.  Uber-example: In that period, Alibaba’s Tmall Global, the cross-border e-commerce site, “introduced nearly 19,000 overseas brands in 3,900 categories from 75 countries…more than 80 percent of which entered China for the first time.”

Gao Hongbing, president of AliResearch, said, “China is becoming one of the largest consumer markets in the world, and this huge consumer market is still opening up. On the one hand, China’s tax cuts on imported consumer goods are increasing, on the other hand, China’s policy continues to encourage cross-border import e-commerce and other new forms of business,”

In spite of the current economic noise, Yu Min, head of the secretariat of ICC China, sees the long term future when he says, “Despite the impact on the multilateral trading system and rising unilateralism and protectionism, economic globalization is still an irreversible trend in the current environment.”

Blatant Plug: Mobile advertising in support of a Chinese selling effort is key to success.

Sources: China Daily; eCommerce study by China Chamber of International Commerce, Deloitte and AliResearch

Brands and Agencies Bring Their Own Strengths to Programmatic

Challenges for Agrencis -Brands

Data from Dun & Bradstreet’s 2019 Data-Driven Marketing and Advertising Outlook illuminates the strengths and weaknesses of brands verses agencies as the two interacting forces adjust to the new programmatic advertising universe.  Brands know their target audience better than agencies, which are once-removed, but the agencies are clear leaders in data manipulation. These data bear on the ongoing in-house / out-of-house debate in an environment where 61% of the study’s respondents say their programmatic spending will be going up in the near term.

Anudit Vikram, SVP of Audience Solutions for Dun & Bradstreet makes the point, “While buying media programmatically has become the norm, B2B companies are still struggling with how to accurately target, measure and optimize those ads across platforms and channels…Whether you are a brand or an agency, efficiency in executing campaigns is intimately dependent on understanding and activating data and generating actionable insights.”

Since When is 6.5% Growth a Bad Thing?

Chinas GDP Q318

It’s a bad news – good news situation in China.  The bad news is that GDP for the third quarter of 2018 is lower than any quarter since the global financial crisis of 2009.  The good news is that the decline is to 6.5%.   Any Western economy would be considered over-heated if it was growing that fast. The US Federal Reserve would be raising interest rates every month to counter the inflationary threat. But this is China where 6.5% growth is slow.  The causes for the slow down are theorized to be the trade tensions with the US and excess borrowing by local governments. Sources: Trading Economics; National Bureau of Statistics, China

Non-Manufacturing Sector Delivers a Positive 3.1% Swing

Service Sector Oct-18

The outlook based on October’s survey of 400 non-manufacturing companies takes a positive jump well above the 13-month average of 52.8.  This is true, in spite of the inflation and consumer price numbers that have come out of the government in recent weeks.  This sector’s strong 3.1% turn shows that China’s economy is affected, but not overwhelmed, by the trade tensions that exist. Source: Markit Economics