China. For most western consumers, the country in the East still remains very much a mystery. Up until the last decade, China appeared to the global stage much as it always had: a manufacturing and export country, a communist country, a country lacking a robust middle class. All of which, now, could be further from the truth.
China’s exploding consumer market
Late last year crowds gathered in Shanghai’s retail hub for Starbucks’ grand opening of the 30,000 square foot Shanghai Reserve Roastery — a store that takes up about half a football field in size and is the largest Starbucks in the world. In only one day, the Shanghai outlet became the company’s biggest revenue earner.
“We shattered every sales record in the history of the company,” said Howard Schultz, Starbucks chairman. With those results in mind, Starbucks has since planned to double the number of storefronts in China by 2022, from the current 3,200 to 6,000. That means an expansion of more than one store opening a day.
But Starbucks isn’t the only multinational corporation poised to heavily expand in the market, either. With 1.4 billion market consumers, The World Economic Forum predicts Chinese consumption will grow 6-7% in the next decade, nearly doubling its purchasing power. In an effort to bolster the presence of MNC’s in China’s big cities, namely Beijing and Shanghai, President Xi Jinping pledged early last week to open China’s growing consumer market wider.
“It is our sincere commitment to open the Chinese market,” Xi said in a speech to an audience that included a slew of foreign dignitaries. The Chinese president also promised to “stimulate the potential to increase imports,” including by cutting costs for importers and improving consumer spending power.
Growth opportunities drive investment in China
In a report published this week, The Trade Desk teamed up with Forbes to survey more than 200 Chief Marketing Officers in global companies with more than $500 million in annual revenues to gauge current business goals and metrics. According to the report, investment in China is among the top concerns.
“CMOs cite driving revenue as a top goal for marketing and they clearly see China as a big opportunity for growing their global customer base,” said Susan Vobejda, CMO, The Trade Desk.
With 772 million internet-connected consumers and a burgeoning middle class, it is no surprise that 80% of the CMO’s surveyed expect their investment in marketing to China to increase over the next 12-18 months.
“Through our launch of programmatic media buying in China, in partnership with the country’s leading media companies, The Trade Desk can connect multinational brands with millions of potential customers in the region,” Vobejda said.
Driving this growth is the increased access to broadband and high-speed internet.
“Online video monetization is starting to scale,” said Vivek Cuoto, Executive Director, Media Parters Asia. “Strong digital ecosystems are emerging, especially in China while telcos are also becoming important aggregators of video services in markets such as Australia, India, and Southeast Asia.”
Outlook for CMOs
According to the Trade Desk report, three of five companies currently include China in their global ad campaigns, and half the companies not yet focused on this market expect to invest there in the next one to three years. But, while the push to build market share in this Asian powerhouse is driven by the swing of global economic forces and the sheer size of the market (Figure 8 in the report), effective marketing is not always as easy to come by as in other geographic areas.
“Two factors in particular present challenges for organizations seeking to effectively include China in their global ad campaigns,” the report cites. “Political barriers and censorship (30%) and lack of media transparency (28%).”
A challenge, yes, but not one which is insurmountable. Companies are still attempting to enter the Chinese digital landscape in droves.
“A quarter are working with or actively seeking a marketing or advertising partner to expand there, while a third are working to build their capacity there in anticipation of a future presence in that market,” said Vobejda.
