Hello BoF Professionals, welcome to our latest members-only briefing. China’s colossal size and dynamism makes it a top priority for any global business, but it remains opaque to many in the fashion industry. Leveraging our rare access and local knowledge, the BoF China team demystifies the Chinese market with weekly industry analysis and the wider socio-cultural context you need to sharpen your focus.
HONG KONG, China — Video games have ruined numerous romantic relationships, and are even blamed for lowering some men’s sex drives, but that didn’t stop Chow Sang Sang from launching jewellery inspired by them for Valentine’s Day.
The Hong Kong heritage jeweller’s new collection is based on Tencent’s free-to-play mobile game Honour of Kings (known in the west as Arena of Valor). The products, which range from $80-300, include an 18 karat rose gold pendant based on Wang Zhaojun (one of ancient China’s four legendary beauties) and a bracelet modelled on the fox spirit-concubine Daji.
The collaboration comes just weeks after cosmetics brand M.A.C. partnered with the same game, highlighting the potential for fashion and beauty brands to market to China’s female gamers.
While beauty brands have reached out to Chinese gamers before, they’ve often focused their efforts on male consumers. When the League of Legends World Championships came to China in 2017, L’Oréal Men sponsored Chinese e-sports outfit Team WE, and presented their “Six God Pack” of men’s personal care products to a live audience of over 470 million viewers.
But Chinese women are big gamers too. Honour of Kings is the highest grossing mobile game in the world, bringing in nearly $2 billion in 2018, with 95 percent of the spending coming from iOS users in China. More than half of its 200 million registered players are female, according to internet consultancy Jiguang, as are almost two thirds of fans who watched the Honour of Kings professional league on Weibo last year.
“The numbers are huge,” said Jonathan Smith, founder of Hot Pot Digital. “If you’ve got 100 million female players in China, then you can probably reckon a certain proportion of your audience is there.”
One reason for the game’s success among women is its spread through Tencent’s hugely popular social messaging apps WeChat and QQ. These apps also made it possible for brands engaged in social listening to identify an audience already intrigued by their products.
M.A.C. China approached Tencent to suggest a collaboration after noticing players were referencing their lipsticks during character customisation. The cosmetics brand then created five new shades of lipstick for players to wear in real life, each inspired by a different Honour of Kings heroine: Hua Mulan, Gongsun Li, Diao Chan, Da Qiao and Luna. The collection was then captured on the faces of female singers that starred in the hit reality show Produce 101, by fashion photographer Chen Man no less.
When the products went on sale across three different sales channels — M.A.C.’s China website, Tmall and a WeChat mini program — they quickly racked up 14,000 pre-orders. Some shades sold out in under an hour, and all five were gone in less than a day.
Twenty-five-year old Xin Ning began playing Honour of Kings during Spring Festival in 2017. Often playing as Diao Chan, she worked her way up “from a rookie to a god” and won a tournament held in Beijing’s Tongzhou district. “I’ve seen the M.A.C. lipsticks,” she said. “They look great. Honour of Kings girls certainly have to buy them!”
Xin’s excitement is testament to how connected she feels to the game, despite mobile games so often being derided as meaningless. But widespread meaning can come from anything that achieves a certain level of cultural ubiquity.
Smith recalls a certain shade of lipstick selling out around the world after a Chinese influencer gave it the name bean paste red. That name perfectly “positioned the product in Chinese culture, and it was a very desirable colour,” he said.
Chow Sang Sang and M.A.C.’s product collaborations are a significant step up from earlier efforts to leverage the popularity of games. In 2017, for instance, Japanese beauty brand Shu Uemura partnered with Nintendo to create packaging inspired by Super Mario Bros, while L’Orêal Paris created a gift box with designs drawn from Netease’s role-playing game Yin Yang Master.
But Is it on Brand?
For Chow Sang Sang, a millennial-centric collaboration is a push to breathe new life into the 85-year-old jeweller. With revenues slipping from$2.4 billion in 2015 to $2.1 billion in 2017, and their ranking in the Deloitte's Global Powers of Luxury Goods report dropping from 25 to 30 in 2018 — behind ninth-placed Chow Tai Fook and 16th-placed Tiffany & Co — it was clearly time to try something new.
Much of the M.A.C. campaign’s success can be explained by the game’s popularity among a key demographic for beauty and fashion brands—18 to 24-year-olds. But that’s also an important demographic for many other categories. Over 100 brands have now partnered with Honour of Kings in China, including Mobike, Didi and McDonald’s. A game with such broad appeal seems suitable for these mass market brands, but does it fit with high end fashion and beauty?
“M.A.C. is fairly youthful, fairly playful. It’s not a massive stretch for them to play in that space, but at the same time they’re a premium product,” Smith said. “There’s a perception that gaming locks you away in a dark room, and you’re not necessarily going to be the most socially adept individual if you spend hours of your life a day gaming, rather than socialising. I think it’s a struggle to connect those two worlds meaningfully.”
The Chinese government would no doubt agree. It has repeatedly constrained gamers, first by banning gaming consoles from 2000-2014, and more recently by refusing to grant licenses to new games. The People’s Liberation Army newspaper the PLA Daily has twice warned that its soldiers are so addicted to Honour of Kings that it’s affecting the army’s battle readiness, while the People’s Daily has described it as “digital heroin.”
Nevertheless, gaming remains huge in Asia, which was responsible for 62 of the top 100 grossing mobile games of 2018 and two thirds of mobile game revenue worldwide. And Honour of Kings looks set to find an even bigger audience after it was announced that it will shortly come to the Nintendo Switch.
Given how big mobile games have become in China, Smith said, “I think it’s great that global brands are looking at this as an opportunity. It’s a good example of localising not just your content to market but actually localising your strategy.”
FASHION & BEAUTY
Zara Responds to Uglification Claims
On February 15, Inditex-owned Spanish fast fashion giant Zara released its new beauty campaign featuring Chinese model Jingwen Li with a face full of freckles. Considering eastern beauty standards prefer flawless (and freckle-less) porcelain skin, the post was soon criticised by netizens saying the images were demeaning to Chinese beauty, while other commentators praised the campaign for its natural and modern aesthetic. Zara later responded, stating that the photos had not been retouched and that the model was chosen by its Spanish headquarters, furthermore denying that it purported to ‘uglify’ Jingwen. Finally, the company stated that the images were aimed to market to the global market, full of varying beauty standards. The topic —which translates to “Zara responds to uglification claims” — went viral on Weibo, having been viewed over 220 million times and mentioned over 16,000 times within 24 hours. Top comments on Weibo praised the campaign, stating that its natural aesthetic was more high-fashion and unique, while other netizens criticised those who found the images offensive — an illustration of the friction between new and old beauty standards in China. (Weibo)
For NYFW’s Home-Grown Talents, the Sky’s the Limit
Design inspiration from China’s hottest brands didn’t stop at street level at New York Fashion Week. Showing at Tmall China Day on February 13 was Peacebird Mens, who collaborated with Sesame Street and artists Trevor Andrew and Reilly (also known as Gucci Ghost and Hey Reilly) to craft its interpretation of “Youth Made China”: at times grunge and rebellious yet streetwear-adjacent, accented with Andrew’s signature graffiti and a mishmash of tartan, camo and leather. The previous day, sportswear giant Li Ning explored a mountain-climbing aesthetic on its runway: fluorescent piping updated tailored suit jackets, and colour-blocked separates in desert hues were layered over plaid. Another China Day alum, Chenpeng reimagined his flagship voluminous silhouettes in down and fur with playful pastels, inspired by the Himalayan region. Lastly on NPC’s China Day runway, the brand’s ‘moon landing’ themed collection featured no less than five design collaborations, with Beijing’s Palace Museum, Phantaci, AnB Brand, the Mad Hatcher and Umamiism, as futuristic silhouettes and athletic separates in fluro hues made a case for space-age streetwear. (BoF China)
Why Chinese Women are Saying ‘No’ to Diamonds…
…From men, that is. In China, there’s a growing class of wealthy independent women who would rather buy diamonds and jewellery for themselves. According to a survey by diamond group DeBeers, self-funded purchases made up about a third of all diamond pieces acquired. It’s a matter of taste — Crystal Zhang, 32, deems her boyfriends’ glitzy gifts “nice but a bit dull,” — and also goes to show the booming spending power of the country’s working women. Yet in spite of the move toward self-purchase, Chinese women are still paid less. A 2018 survey by ‘China’s Linkedin’ Zhaopin indicated that the country’s women earn 22 percent less than their male counterparts. As a result, retailers are responding with a higher volume of affordable yet bold and playful designs, and an increasing number of female jewellers are rising to the challenge, in order to respond to growing demand. (SCMP)
TECH & INNOVATION
Indian Lawmakers Call for Douyin Ban
Due to concerns about “sexually explicit material” surfacing on short video platform Douyin (known also as TikTok), India’s lawmakers are calling for the country’s government to take action against the app. Though Douyin itself is based in China, it is rapidly expanding abroad and already has a 20 million-strong active Indian user base. In addition to sexually explicit content — that lawmakers such as Thamimum Ansari argue is leading to “cultural degradation” — the extremely popular Douyin has also been embroiled in Indian news about cyberbullying and suicide, as well as global concerns about anti-semitic and racist content. Ansari has told the Economic Times that if the app isn’t banned in the country, his team would follow up to seek tighter regulations. (The Verge)
Alibaba Bets On Bilibili
It was announced on February 14 that retail giant Alibaba has taken an 8 percent stake in Chinese video platform Bilibili through its C2C e-commerce marketplace Taobao. Nasdaq-listed since last March, Bilibili is one of China’s favourite platforms devoted to video sharing and anime entertainment. Its chief executive and chairman Chen Rui has stated his hopes that the move will leverage Taobao’s impressive user base to boost traffic on the platform. Importantly, last year Taobao launched Lu Ke, its own standalone short video platform geared towards the marketplace’s merchants, which has yet to make a splash amid fierce competition in the same sector. User-generated video content is booming, as short video platforms such as Douyin and Kuaishou look to increase their share of average mobile screen time, and it’s clear that the medium will play an increasingly important role across Alibaba’s channels. (Techcrunch)
The Black Market of WeChat Accounts
As China’s favourite super app’s monthly active user count nears 550 million, the platform is bound to attract some wrongdoers. There’s been a surge in the buying and selling of WeChat user accounts, which is expressly prohibited according to Tencent’s software licensing and user agreement. The prices for the accounts vary according to whether they are registered with the registrant’s own name, as well as how old they are, which affects whether two-step authentication is required to sign in; ‘real name’ accounts registered two years ago are going for 228 yuan (around $34). According to Huanqiu, these accounts are being bought to create fake engagement with content, but buyers are also using them to gamble and undertake other banned transactions that they don’t want associated with their own personal identity, as registrants have to provide personal information when signing up. And though misuse by a single account doesn’t break the bank, a growing number of people are purchasing more accounts and changing between them, so as to avoid raising alarms on WeChat’s system. This is undeniably one of many reasons why China’s social media platforms are increasingly filled with inauthentic activity yet equally difficult to police, as the line between real and fake accounts is blurred. (Huanqiu)
CONSUMER & RETAIL
Do Influencers Earn More in China?
Let’s do the math. According to WalktheChat, Instagram influencers outside China with a follower counts exceeding 1 million typically charge between $1,000 to $5,000 per post, while Youtubers with the same number of subscribers could earn $50,000 to $200,000 per year. Meanwhile, the Chinese influencer ecosystem is much more centred around brand collaborations as opposed to affiliate links, due in part to a lack of cost per click/cost per impression-friendly platforms in the country. Brands that work with Chinese influencers can expect a typical WeChat influencer campaign to cost around 1 yuan ($0.15) per view, but because top Chinese influencers tend to have large teams for support, they can roll out up to 15 projects a month. Influencer Gogoboi, estimated to have around 8 million WeChat followers, earns up to $9 million annually on the platform alone — and other platforms such as Douyin and Weibo are also lucrative revenue channels. Furthermore, there’s the popular ‘direct sales’ platforms which allow them to curate e-commerce boutiques where they can organise campaigns and pricing without handling logistics. Ultimately, according to WalktheChat, it’s clear that Chinese influencers earn more than their western counterparts, due to the local e-commerce ecosystem being deeply entwined with social media, diverse revenue streams, and larger teams. (WalktheChat)
V-Day Takeaways: Flowers, Young Love and Cash
In China, it appears that every festival is, or is fast becoming, an excuse to shop. A day before Valentine’s Day, Alibaba-owned Taobao rolled out its flower gifting service across China. According to data released since, China’s second tier cities — a bracket including the likes of Chengdu and Xian — matched the purchasing power of tier one resident consumers over the romantic holiday, while this year's Valentine's Day flower orders soared 69 percent. According to a survey by Tencent, China’s “Post-95” generation is helming festival spending, and though only 4.48 percent of “Post-95” couples didn’t spend any money to celebrate, over 10 percent of consumers used loan services to pay for gifts and meals. But when it comes to receiving gifts, we know our own tastes best: When women were asked whether they’d prefer a gift or cash in the form of a red packet, nearly 30 percent of them preferred the latter, followed by luxury bags and jewels. (Ebrun)
Hypebeast Drops Latest Figures
Recently released figures from Hypebeast reveal that the Hong Kong-based streetwear media and e-commerce business’s revenues rose 67.5 percent to HKD $487 million (around $62 million) in the nine months ending December 31, 2018, with an 18.6 percent increase in net profits to reach HKD $49.9 million (around $63.6 million). According to the report, Hypebeast’s media business accounted for 62 percent of its revenues, whereas e-commerce took up a 36 percent share, and the number of orders was up 55.5 percent year-on-year. For the year ahead, Hypebeast has stated its aim to penetrate deeper into the US, China and Southeast Asia, as well as strengthen its offline retail efforts — last year, it launched its first brick-and-mortar store in its native Hong Kong, and will open its next store in New York City next year. (Ladymax)
POLITICS, ECONOMY, SOCIETY
Trade Talks Resume in Washington
Negotiations between China and the US resumed yesterday, with a goal to end the ongoing tariff war and reach a long-awaited deal. Last Friday's talks ended fruitlessly, though President Trump has hinted at the possibility of extending the March 1 deadline — previously marked for increasing tariffs to 25 percent from 10 percent on $200 billion in Chinese goods — by 60 days. However, pushing back the deadline would require Washington and Beijing to ink a deal addressing how China manages foreign trade and its alleged abuse of intellectual property rights, while Beijing aims to have current tariffs removed altogether. It will be no easy task: China and the US have already imposed tariffs on over $360 billion in trade, with implications rippling across industries and financial markets worldwide.(Economic Times, Bloomberg)
Sweden’s Ambassador to China Embroiled in Bookseller Bargain
Sweden’s ambassador to China Anna Lindstedt has been sent back to Stockholm to be investigated, after accusations arose that she was orchestrating meetings between Angela Gui (the daughter of jailed Chinese-born Swedish citizen and bookseller Gui Minhai) and businessmen claiming they could secure his release. Gui, who has called for her father’s freedom since his arrest in 2017 while en route to Beijing, claims in a post on blogging platform Medium that Lindstedt contacted her in January and invited her to Sweden to oversee a “new approach” to securing her father’s release. At the time of his release, her father was accompanied by Swedish diplomats to see a medical specialist. In her blog post, Gui details the bizarre negotiations that occurred between herself and a few businessmen that she had assumed were organised by Sweden’s foreign ministry, during which she was threatened to cooperate or never see her father again. As it turns out, the Swedish foreign ministry had no knowledge of the events, or that Lindstedt was even in the country, and confirmed on February 14 that Lindstedt was being investigated for her involvement in the events. (The Guardian)
Zhang Yimou Film Skips Berlin Amid Censorship Speculation
At the Berlin Film Festival, early buzz around the latest offering by leading Chinese director Zhang Yimou — behind ‘The House of Flying Daggers” and “To Live,” among others — has turned into outrage at home, since the film was pulled from the schedule by the film’s producers “due to technical difficulties.” Many are speculating that the movie, entitled “One Second,” was withdrawn due to its depiction of China’s cultural revolution, and insiders claim that regulators reneged on their approvals of the release due to sensitive material portrayed in the production. This isn’t Zhang’s first censorship spat — his 1994 masterpiece “To Live,” a tragedy about the cultural revolution, was banned despite taking home awards from Cannes — but the news has still attracted over 160 million views on Weibo. Speculators are criticising the government, which has admitted that the cultural revolution was a mistake, for nonetheless censoring artistic depictions of the dark period in Chinese history. (SCMP)
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