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What one key business indicator is telling us about China’s consumer recovery

People eat at a restaurant in Beijing on May 26, 2023.

Jade Gao | AFP | Getty Images

BEIJING — Chinese businesses are spending cautiously on advertising this year as domestic consumption is expected to linger for some time.

Several Chinese internet giants saw marketing revenue increase in the first three months of 2023, but did not Alibaba, the largest of them all in dollar value. That’s year-over-year.

Brands remain cautious ahead of this month’s 618 Shopping Festival.

“With 618, brands will generally try, of course, but it’s a little more tired than it used to be,” said Ashley Dudalenok, founder of Chinese marketing consultancy Chozan.

“We know it will cost the exact same amount to bring a customer into your store today as it does in 2021, but customers will spend about 30 percent less money in your store,” she said. rice field.

The median disposable income of urban residents in the first quarter was China was officially 12,175 CNY ($1,739), an increase of 3.9% over the previous year. Education, health care and travel were the top three categories of planned spending. central bank survey found.

“The general consensus in the industry is that 2024 will be the year of growth and recovery,” said Dudalenok. “Let’s get out of the recession in 2023 and stay connected with our platforms and our customers,” she said.

Ad agencies are also spending just to experiment with search engines, Dudalenok said. Baidu and Microsoft’s Bing are both work together new generative artificial intelligence technology.

Commitment to Affordability

Since the COVID-19 pandemic, slowing economic growth and uncertainty over future earnings have weighed on Chinese consumer spending. Without national economic stimulus, Retail sales recovered modestly in the first four months of the year. May statistics are due to be released on June 15.

Dave Shi, principal at Oliver Wyman, a consulting firm focused on China’s retail sector, said Chinese consumers are looking to buy better quality products and get more value this year. said there is.

By promoting product functionality and affordability around the 618 Shopping Festival, domestic cosmetics brands are increasing their market share compared to international brands, he said.

Asked Tuesday about the outlook for Chinese consumers this year, a representative for JD Retail said growth could be bumpy.

As online shopping trends change, businesses are also seeing different results across platforms.

Oliver Wyman’s Xie said brands are keen to spend more on ByteDance’s Douyin, likely depriving ad spend from Alibaba’s Taobao and Tmall’s e-commerce platforms.

ByteDance is private and does not often disclose detailed numbers.

Among the major US-listed Chinese internet platforms are: pinduoduo Revenue from ad sales in the first quarter recorded the largest year-over-year increase. The company operates a group-buying app known for its bargain discounts. This growth is probably a sign that locals are unwilling to pay big bucks.

“A lot of people around me use Pinduoduo,” said Sun Hao, a partner at Beijing-based Good Idea Growth Network. NestleP&G, and Tmall among others.

He also noted that the Little Red Book app’s users tend to be mothers and office workers in cities with spending power, which is why the app is growing “massively.” This app is not listed.

But Sun said he felt many brands missed their first-quarter earnings targets and that overall advertising budgets were shrinking, especially in traditional media.

And when brands are spending on Douyin, the return on investment per dollar of advertising is lower, he said.

offline or abroad

The end of China’s draconian coronavirus measures and the pandemic itself have undoubtedly boosted travel and in-person events.Travel booking site Trip.com announced that it doubled its spending on sales and marketing to 1.8 billion yuan ($256 million) in the first quarter.

for AichiiNicknamed China’s ‘Netflix’, branding director Kelly Shi said offline marketing has become more important as foot traffic has rebounded since China’s economic reopening. The company has used billboards and interactive experiences to promote its content.

According to the release, IQiyi’s selling, general and administrative expenses rose 48% year-on-year to 1.1 billion yuan in the first quarter, “mainly due to increased marketing spending.”

Read more about China from CNBC Pro

Slowing growth in China’s domestic market has prompted more domestic consumer companies to look abroad, in some cases to acquire or merge with other brands.

Thanks in large part to its strategy, the China-based consumer products company has outperformed its Asia-Pacific peers over the past decade, according to a Bain & Company report released in late May. International sales grew the fastest.

Philip Leong, Asia-Pacific M&A business leader at Shanghai-based Bain, said he expects China’s offshore deal activity to pick up further in the next six to 18 months.

For many China-based companies, the current strategy is to acquire brands so that they can benefit from both foreign markets and China, he said.

Summarize this content to 100 words People eat at a restaurant in Beijing on May 26, 2023.Jade Gao | AFP | Getty ImagesBEIJING — Chinese businesses are spending cautiously on advertising this year as domestic consumption is expected to linger for some time.Several Chinese internet giants saw marketing revenue increase in the first three months of 2023, but did not Alibaba, the largest of them all in dollar value. That’s year-over-year.Brands remain cautious ahead of this month’s 618 Shopping Festival.“With 618, brands will generally try, of course, but it’s a little more tired than it used to be,” said Ashley Dudalenok, founder of Chinese marketing consultancy Chozan.“We know it will cost the exact same amount to bring a customer into your store today as it does in 2021, but customers will spend about 30 percent less money in your store,” she said. rice field.The median disposable income of urban residents in the first quarter was China was officially 12,175 CNY ($1,739), an increase of 3.9% over the previous year. Education, health care and travel were the top three categories of planned spending. central bank survey found.“The general consensus in the industry is that 2024 will be the year of growth and recovery,” said Dudalenok. “Let’s get out of the recession in 2023 and stay connected with our platforms and our customers,” she said.Ad agencies are also spending just to experiment with search engines, Dudalenok said. Baidu and Microsoft’s Bing are both work together new generative artificial intelligence technology.Commitment to AffordabilitySince the COVID-19 pandemic, slowing economic growth and uncertainty over future earnings have weighed on Chinese consumer spending. Without national economic stimulus, Retail sales recovered modestly in the first four months of the year. May statistics are due to be released on June 15.Dave Shi, principal at Oliver Wyman, a consulting firm focused on China’s retail sector, said Chinese consumers are looking to buy better quality products and get more value this year. said there is.By promoting product functionality and affordability around the 618 Shopping Festival, domestic cosmetics brands are increasing their market share compared to international brands, he said.Asked Tuesday about the outlook for Chinese consumers this year, a representative for JD Retail said growth could be bumpy. As online shopping trends change, businesses are also seeing different results across platforms.Oliver Wyman’s Xie said brands are keen to spend more on ByteDance’s Douyin, likely depriving ad spend from Alibaba’s Taobao and Tmall’s e-commerce platforms.ByteDance is private and does not often disclose detailed numbers.Among the major US-listed Chinese internet platforms are: pinduoduo Revenue from ad sales in the first quarter recorded the largest year-over-year increase. The company operates a group-buying app known for its bargain discounts. This growth is probably a sign that locals are unwilling to pay big bucks.“A lot of people around me use Pinduoduo,” said Sun Hao, a partner at Beijing-based Good Idea Growth Network. NestleP&G, and Tmall among others.He also noted that the Little Red Book app’s users tend to be mothers and office workers in cities with spending power, which is why the app is growing “massively.” This app is not listed.But Sun said he felt many brands missed their first-quarter earnings targets and that overall advertising budgets were shrinking, especially in traditional media.And when brands are spending on Douyin, the return on investment per dollar of advertising is lower, he said.offline or abroadThe end of China’s draconian coronavirus measures and the pandemic itself have undoubtedly boosted travel and in-person events.Travel booking site Trip.com announced that it doubled its spending on sales and marketing to 1.8 billion yuan ($256 million) in the first quarter.for AichiiNicknamed China’s ‘Netflix’, branding director Kelly Shi said offline marketing has become more important as foot traffic has rebounded since China’s economic reopening. The company has used billboards and interactive experiences to promote its content.According to the release, IQiyi’s selling, general and administrative expenses rose 48% year-on-year to 1.1 billion yuan in the first quarter, “mainly due to increased marketing spending.”Read more about China from CNBC ProSlowing growth in China’s domestic market has prompted more domestic consumer companies to look abroad, in some cases to acquire or merge with other brands.Thanks in large part to its strategy, the China-based consumer products company has outperformed its Asia-Pacific peers over the past decade, according to a Bain & Company report released in late May. International sales grew the fastest.Philip Leong, Asia-Pacific M&A business leader at Shanghai-based Bain, said he expects China’s offshore deal activity to pick up further in the next six to 18 months.For many China-based companies, the current strategy is to acquire brands so that they can benefit from both foreign markets and China, he said.
https://www.cnbc.com/2023/06/12/ad-sales-in-china-are-pointing-to-a-soft-recovery-for-the-consumer.html What one key business indicator is telling us about China’s consumer recovery

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