Chinese New Year: What we can all learn from China in the Year of the Fire Rooster
This last week of January and the first week of February marks Chinese New Year, called the ‘Spring Festival’ in China. Many millions of Chinese people travel back to their families in the provinces to celebrate the festival, the most important holiday in the Chinese calendar. Starting from 28 January, celebrations will continue for around two weeks to welcome in the Year of the Rooster. Chinese New Year is based on the ancient lunar calendar, which means it changes each year.
In Chinese astrology, each zodiac year is not just associated with an animal sign, but also one of five elements: Gold (Metal), Wood, Water, Fire or Earth. Both the zodiac sign and the element shape the astrology of the year. For example, 2017 is a Fire Rooster year. The celebrations end on the day of the full moon (Feb 11), with a Lantern Festival, where red lanterns are hung in homes and temples.
Chinese people believe that what happens at New Year influences your fortunes in the year ahead. Indeed, I would argue that understanding China offers us all an insight to what is going to happen globally within technology and travel in 2017 and beyond. Let’s examine six important trends as we seek to learn from China…
The Future of Mobile: China, like many other developing markets, did not follow the pattern in the West of going from travel agent to PC to laptop to smartphone as their channel to book travel. Many consumers just went straight to the smartphone and have never engaged directly with a website. The Chinese technology industry — particularly mobile — has pulled ahead of what we see in the West. Handsets such as Xiaomi and Huawei have fantastic build quality, amazing performance, great storage, long battery life and look great. And this is before we start talking about the Apps that are available. Any visitor to China will immediately be struck with the ubiquity of the smartphone to the Chinese consumer. You think you thought Westerners are addicted to their phones? Wait till you visit Shanghai or Beijing: you will see that Chinese people live their life through their mobile phone.
Chinese consumers are on smartphones at least two hours a day, Internet users in China reached 668 million in June 2015 and 549 million of those users, almost 90 percent, accessed the Internet on a mobile device. In other words, the number of Internet users in China is more than twice the population of the US and almost the population of Europe, and most of those individuals are walking around with a smartphone. But, this has barely started: the total number of Internet users represents less than half of China’s population of over 1.3 billion.
The question asked in the West is – what is our strategy for mobile? In China – mobile is the strategy.
The Future of Social: If you have not heard of WeChat, download it immediately. WeChat had 768 million daily users in 2016. That is 35% year-on-year growth. 50% of WeChat users are on the App for 90 minutes a day, and typically send around 80 messages. What is WeChat? Think of WhatsApp, mixed with Facebook and Twitter. And throw in Skype and Facetime. WeChat’s roots extend back to its original hit, the QQ instant-messaging program launched by Tencent.
The rise of WeChat is inextricably linked with the rise of the QR code – a technology that has long been under-utilised in the West. QR code (Quick Response Code) is a type of two dimensional barcode that consists of square dots arranged in a grid on a white background and which can be read by an imaging device such as a mobile phone camera or a scanner. In China, the QR code has become the magic sauce of mobile commerce largely as a result of the success of WeChat.
Given the success enjoyed by WeChat through the use of QR codes, all the major internet giants in China such as Alibaba, Baidu and Sina Weibo have added a built-in QR code reader to their own Apps to easily connect their users to additional services and content via any mobile device, anytime, anywhere.
But WeChat is much more powerful than just gaming or chatting. It is also disrupting CRM and Email. WeChat enables businesses to register as an Official Account of which there are now more than 8 million such accounts. Followers who scan the QR code of the business, either from the website of the business or at a physical location, can then ‘follow’ the business through the Official Account without the need to sign-up through yet another registration form. Therefore, think about how much less friction is involved in using Official Account Apps for services such as hospital pre-registrations, visa applications or credit card services. A WeChat Official Account also allows a business to perform outbound marketing to its followers with up to four promotional messages per month (via text, audio or video).
What is so significant about the above activities? The answer is that WeChat has become a ‘CRM’ platform that controls the intermediation between businesses and consumers through owning and managing user profiles. It is so simple but so powerful.
The Future of eCommerce: Mobile is ubiquitous in China, a way of life, not only a medium of communication. Brands are not just purveyors of products and services, but as partners helping consumers with daily living. Most Chinese companies have recognised this, and build their advertising and marketing, social communication, shopping, purchasing, and payment programmes around mobile.
Mobile has become an integral part of everyday life for Chinese consumers. On mobile, they talk, text, shop, order food, hail taxis, book travel, trade stocks, pay for products and services, deposit money into their bank or transfer money. About half of all e-commerce in China happens on mobile compared to just over a fifth in the US and around a third in the UK.
As a result, China is now entering the next phase of e-commerce – digital shopping is the norm for Chinese consumers. The e-commerce paradigm has shifted to brands and platforms that offer a complete brand experience rather than a narrow focus on sales and as a result, many Chinese brands are doing things that are yet to be seen in the West, integrating experiences across all touch-points and channels to create a seamless and immersive experience, often leveraging VR and 3D imaging to build continuous engagement along the entire consumer journey.
The Future of Payment: Every time the WeChat App is downloaded onto a mobile phone, so too is an embedded QR code reader which can facilitate a whole range of O2O (Offline to Online) services from scanning posters in subway stations, to joining social networks and for making payments. WeChat supports payment and money transfer, which allows their users to perform peer-to-peer transfer and electronic bill payment. With WeChat Pay plus an Official Account, a business can accept payment from a customer through the use of a QR code. The customer uses their WeChat Pay App to create a QR code detailing the required payment and the business simply scans the mobile phone QR image to complete the transaction. Think about how powerful this model is when you apply it to small retailers or street vendors who use their WeChat QR code reader on their mobile phones, instead of a dedicated Point of Sale terminal. And think about how the use of digital technology in this instance has substantially broadened the market for WeChat by providing convenience and a method of cashless transactions.
The Future of Travel: China is becoming the largest source market for international travel. China overtook the US as the largest source market in 2014. The income growth and expansion of China’s middle class makes long-haul travel more achievable. The rapid expansion of airlines such as Hainan Airlines on the international stage makes the Chinese traveller more accessible. Already, Chinese travellers are ranked among the top spenders on a per-trip basis. Their preferences are rapidly shifting towards long-haul travel, higher cost accommodation and upscale shopping. Cities are the primary attraction for Chinese outbound travellers. Nearly 92% of total Chinese outbound travel spending is received by major global cities.
This has ramifications for hotels and retailers welcoming Chinese tourists: nearly all Chinese travel brands, and indeed, Western travel brands with services to China already enable their customers to transact through WeChat; the user simply scans the brand’s QR code and then follows the brand. To book a flight, simply go to the airline App within WeChat. To receive customer service, again use WeChat to send a voice or text message to an agent in a call centre detailing your request. What about when you arrive into your hotel room? Simply scan the unique QR code in the room and use the in-room App on your mobile phone to control the temperature, the lighting or room service payable through WeChat Pay.
At the other end of the scale is the need for airlines to cope with the increase in future travel. Boeing are forecasting, over the next 20 years, a general market need for over 39,600 airplanes valued at more than $5.9 trillion, with 38% of this in Asia – the majority in China. Think of the impact of this demand on the need for pilots, training, and inflight crew and aviation fuel. It’s mind boggling!
The Future of Competition: Edward Tse’s book China’s Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business, gives us a glimpse into how Chinese companies are “Competing on the Edge”; itself a reference to a book of the late 1990’s by Brown and Eisenhardt that proposes that IT businesses oscillate between order and chaos, with change occurring in unprecedented and unpredictable ways, barriers between previously unrelated industries erased, and hyper-competition leading to the fast rise and fall of companies. As a result, they argued that – to succeed – businesses had three principal vectors:
First, advantage can only be temporary. To succeed, companies must continuously generate new sources of advantage, and view change as the key source of new opportunities for growth.
Second,because advantage is temporary, strategy will have to be emergent, and defy simple generalisations. Companies must always consider a broad array of options, with resulting actions and overall direction being only semi-coherent. Plans should always be shifting in accordance with the opportunities.
Third, reinvention is the heart of all of a company’s activities. Businesses will have to constantly change how they operate, and efficiency will count for less than the ability to generate and test new ideas.
Brown and Eisenhardt also suggest that businesses should gain maximum benefit from existing products by extending offerings to new market segments – a process called “stretching out the past” – using existing strengths to launch new products and to test the market.
Almost all of China’s leading entrepreneurial companies exemplify these three trends, because China’s markets are at multiple stages of development. This means constantly iterating and launching new products aimed at the immediate future. No five year plan or decision making by committee – or never ending discussion of IRR and DCF models!
Future of Entrepreneurship: Alibaba, founded by Jack Ma, dominates e-commerce and electronic payments in China, and its $25 billion IPO in 2014 was the largest ever. Its various sites account for around 80 per cent of e-commerce in China, and are worth more than those of eBay and Amazon combined. Pony Ma’s Tencent dominates messaging (WeChat). Robin Li’s Baidu (the equivalent of Google in the West) accounts for over 60% of Chinese search engine activity. Together, these three companies are sometimes referred to as the ‘BAT’ companies. Ren Zhengfei’s Huawai is the world’s leading manufacturer of mobile and fixed-line telecom network equipment, competing against Ericsson and Cisco. Lei Jun’s smartphone company Xiaomi is taking on Apple and Samsung. These individuals have built up these huge businesses through the power of their personality in a viciously competitive environment.
In summary, although the Chinese market appears to be so different to the West, it is just further along. China therefore gives us a glimpse into the future with its diverse strategies, reiteration and reinvention, a balance between systems, rules and chaos, and a mind-set against being locked into outdated competitive models. Sounds like something we can all learn from for 2017 and beyond.
So, ‘Happiness and Prosperity’ to you for the Year of the Fire Rooster. Or if you want to practice your Chinese Mandarin, 恭喜发财 (pronounced gong-sshee faa-tseye), or Cantonese, 恭喜發財 (pronounced gong-hey faa-choi)