Daily Insights

China 2020 in Review

By: Sarah Xu | Jan 13, 2021

2020 has been a tumultuous year for the world economy. But as the first country to encounter COVID-19 and one of the quickest to tame it, China has emerged even more important to global business than before. Despite looming geopolitical risks, global brands invested in this market in new and innovative ways. As Western countries focus on recovery, they can look to China for a glance into the future of marketing in a post-COVID world.

1. China Recovers From COVID

China quickly emerged from lockdown and life returned to normal. By early April, brands began promoting offline stores again and by September, domestic travel showed strong signs of recovery to pre-COVID levels. This year’s Double 11, a key shopping holiday, was another indicator of recovery as it generated a record-breaking 115 billion USD in sales, with platforms Tmall and JD experiencing 26% and 32% growth respectively from the year prior.

China has become especially important for the luxury industry. Wealthy consumers are spending more on goods to compensate for lockdown and the lack of traveling, a trend that analysts call “revenge spending.” As offline traffic returned to normal, luxury brands continued to use limited-time pop-ups and exhibitions to show off new collections and attract young consumers. Brands like Prada, Valentino, Fendi, and Harry Winston started promoting exhibitions and pop-ups. In October, Louis Vuitton chose Wuhan as the first city for its See LV exhibition. The brand invited its ambassador Zhu Yilong, a Wuhan native, to the event and promoted the exhibition on social media, including RED and Douyin. This choice of location shows not only Louis Vuitton’s expansion into China beyond tier 1 cities but was also yet another symbol of the country’s recovery from the pandemic.

2. Brands Moved Online During Lockdown

When China went into lockdown in February, brands were quick to adapt. Many of these strategies were later adopted around the world as more countries followed into lockdown.  Luxury brands turned to livestreaming fashion shows in lieu of live audiences. Restaurants provided educational content via livestream – turning kitchens into studios and teaching viewers how to cook while also promoting takeout and frozen food offerings. Other industries like real estate and auto also livestreamed to replace in-person interactions and sustain sales. Activewear brands like Nike thrived with the increased demand for at-home workouts. For its Air Max Day in March, Nike livestreamed a concert with pop idols, rappers, and comedians in lieu of an offline party. Although China has since emerged from lockdown, brands continue to invest heavily in livestreaming, partnering with top KOLs during major shopping holidays like Double 11 and fashion brands livestreaming fashion shows. Businesses operating in China were fast to adapt, laying the groundwork for their American and European branches. Walmart, Chipotle, Nestle, Estée Lauder, and many more have also adopted shoppable livestreams and integrated commerce on platforms like TikTok, Instagram, and Twitter. 

3. Luxury’s Continuing Shift to Asia

Even before the pandemic, Asia had been an increasingly important market for global luxury players, and mainland China’s quick recovery has only reinforced this. Reports from major luxury houses this year show that while profits from the rest of the world declined sharply, sales in China increased (often by double digits) in otherwise dismal earnings reports. In fact, mainland China is estimated to be the only luxury market in the world to grow in 2020, and at a breakneck 45 percent rate. Previously, Chinese consumers often purchased abroad to take advantage of the lack of import duties, but with international travel at a standstill, the repatriation of that spending to China helped account for growth in the region. 

As a result, luxury brands have been quick to adopt more Chinese e-commerce channels to meet domestic demand. This year alone, more than a dozen brands in Gartner’s 2020 Luxury Digital IQ Index launched Tmall stores, driving up total adoption to 63% of brands. Luxury automakers like BMW and Tesla have also recently launched on Tmall. Additionally, several luxury brands including Chanel, Burberry, and Shiseido, are opening stores in domestic terminals in airports for the first time. The Chinese government has further encouraged domestic spend by expanding duty-free shopping quotas. The Haitang Bay Duty Free Shop in Sanya, a popular shopping and travel destination, set a new industry sales record of 5 billion yuan (771 million USD) this past summer.

4. China as a Testing Ground for Experiential Stores

Another indicator of the shift to Asia, brands in various industries are launching more experiential smart stores in the region — often before comparable stores in the West. The beauty industry has adopted advanced features into its stores, but activewear brands are catching up. In July, Nike opened its first Nike Rise store in Guangzhou, accompanied with the launch of Nike Experiences on its app to connect users with other members in the city. The store also offers a personalization bar with designs from city sports teams, real-time inventory updates, and item requests through barcode scan. The auto industry is also taking advantage of upgrading stores, with brands like Mercedes-Benz, BMW, and Maserati offering restaurant experiences and personalized recommendations, often prioritizing opening such stores in China before the United States. Similarly, Burberry opened its first smart store in Shenzhen this past summer. Users can accrue “social currency” by scanning QR codes on items in the store, posting pictures on social media, and using the brand’s WeChat mini program. High earners can unlock an exclusive Trench Room dedicated to the brand’s hero product and secret menu items in its café.  

5. Brands Flock to Gaming

China is the world’s largest video game market and a number of industries are working with e-gamers to compete for the attention of Gen Z consumers. MAC first collaborated with mobile game Honor of Kings, which boasts 100 million daily active users, in 2019. The collection sold out within 24 hours and MAC expanded the 2020 collection globally after selling out again. Activewear brands have taken note, as Nike featured League of Legend gamers Uzi and Zoom at a fitness camp in an entertaining promotional video and Adidas collaborated with mobile game Honor of Kings. Among luxury brands, Louis Vuitton collaborated with League of Legends to release a new collection and promoted on Bilibili, a video platform with a loyal gamer base. Dior similarly announced League of Legends gamer JackeyLove as a “Friend of the Brand” to promote its collaboration with Air Jordan. More recently, Burberry announced in November that it is working with Tencent to bring its products into Honor of Kings. Even restaurants are targeting gamers, as Tim Hortons also partnered with Tencent to open a new e-sports cafe in Shanghai in November. The cafe would feature themed food and drinks, gaming chairs, fast Wi-Fi, fast charging ports, and future offline events for gamers to meet. 

6. The WeChat and Tik Tok Ban That Never Was

Perhaps the highest profile headline that made its way into Western media was President Trump’s pair of executive orders in August banning Chinese social apps TikTok and WeChat over national security concerns. TikTok was a fast-growing social media phenomenon around the world, and for many Chinese citizens, a symbol of the country’s growing competitiveness in Silicon Valley’s ballgame. WeChat is nearly ubiquitous in China, reaching beyond communications to offer blogs, commerce, customer service, and digital payments within its ecosystem. Until the orders were clarified in October, global enterprises were uncertain whether they could continue to operate these services even within China. Ultimately, U.S. Appeals Courts have repeatedly rejected requests to ban WeChat. TikTok, however, may still be forced to spin off its global operations into a new firm owned in part by US giants Oracle and Walmart.  For now, at least, both apps have avoided an outright ban. However, as one of its final acts, in January 2021, the Trump administration banned eight Chinese apps including mobile payment apps AliPay and WeChatPay. These two, especially, are nearly ubiquitous in China, and Chinese immigrants in America use them to send and receive payments back to family members. The ban could affect companies catering to Chinese tourists once international travel resumes. 

Chinese tourists collectively spend billions of dollars in the U.S. every year, far more than the average international tourist, and they primarily rely on mobile payment apps. Currently, retailers such as Farfetch, Walgreens, Neiman Marcus, and luxury brands such as Gucci, Louis Vuitton, Hermes, and Prada all have stores in major cities that accept Alipay. The travel industry has already been hurt by the trade war, and this virus and ban will further hinder recovery. The ban does not take effect until after Biden takes office and his team has promised to review this order; the ban will likely face similar legal challenges as the proposed TikTok and WeChat bans.