2. Introduction / 3
Three Key Trends / 4
Trend #1: Luxury / 5
Interview: Lawrence Law / 7
Trend #2: ECommerce / 10
Interview: Daniel Zhang / 12
Trend #3: Brand China / 14
Interview: Zheng Wen / 16
About Jack / 19
/2China 2.0
What’s inside
3. /3China 2.0
Introduction
well. Almost 50 percent of Chinese enterprises
say they want their companies to be truly global
within 10 years.
Of course, there is more to the story. Economists
are talking about the possibility that the days of
consistent 10% year on year GDP growth are
ending, to be replaced by still strong—but not
historic—growth rates in the coming years.
Chinese enterprises face significant obstacles
going global, and marketers are targeting
beyond Tier 1 and Tier 2 cities within China as
the engine to ignite the next round of consumer-
driven economic growth.
Net-net: Today’s marketers need to understand
what’s happening in the Chinese market right
now and, more importantly, what’s coming next,
in order to be successful in China–and quite
possibly outside of China as well.
The story of China’s rapid growth and change is
not a new one.
But in case you’ve somehow missed it, here it is
in a nutshell: Chinese consumers have massive
spending power, and their wants and needs are
quickly evolving. Globalization and increasing
exposure to international travel are closing the
gap between East and West at a dramatic rate.
And yet, Chinese consumers expect goods,
services and experiences that are unique to their
specific cultural preferences.
This swift growth and constant change,
combined with an unprecedented number
of brands coming in and out of China, make
it tough to keep up, much less stay one step
ahead. But that’s precisely what leading brands
must do to stay relevant, on-point and top of
mind in this unique market.
So what’s China’s new story?
While the most successful international brands
operating in China have been around for a
decade or more, more competitors are entering
the market every day. And the homegrown
Chinese brands are looking to globalize, as
4. 3. China is the Ultimate Experience
Brand.
China is one of the world’s leading exporters,
and its next ambition is exporting not only goods
and services but Chinese culture as well. The
country is cultivating a creative industry, so be
on the look out for Chinese songs on the radio,
movies in the theater, and fashions on
the runway.
We had the honor of talking with three leading
figures at the heart of these trends (Lawrence
Law, General Manager of Johnnie Walker
House, Daniel Zhang, President of T-Mall,
and Zheng Wen, Director, Bureau for External
Cultural Relations, Ministry of Culture, PR China)
to hear firsthand from the people at the forefront
of building brands in and out of China.
Here’s the bottom line:
China is a mix of the old and the new, and a
land of near limitless opportunity for marketers.
Luxury experiences, ecommerce and redefining
“Made in China” will continue to dominate the
conversation in the coming years.
If you’ve already accounted for these dynamics,
it’s time to double down. And if you haven’t, the
clock is ticking.
We’d like to extend a very sincere thank you to
Lawrence Law, Daniel Zhang and Zheng Wen
for their time and insight.
Here’s to the future, and the next chapter in
China’s amazing journey.
Ben Taylor
President APAC
Here are the three key trends we see emerging
in China:
1. Experiences are the new luxury
goods in China.
China’s luxury market is thriving–and growing.
In this global world, however, Chinese
consumers are increasingly traveling overseas to
buy their luxury goods. This means that luxury
experiences in China are poised to become the
new luxury consumer goods. Urban household
income is expected to double between 2010
and 2020 , which will further fuel the luxury
experience fire.
2. Chinese consumers expect brands to
be as connected as they are.
China’s sheer size (and therefore distance to
specific shopping outlets), high mobile-device
penetration and cheap broadband make the
country a hotbed for ecommerce. There are an
estimated 240 million internet shoppers in the
country at present, and that number is increasing
every day.
/4China 2.0
Three Key Trends
1
2
5. /5China 2.0
Luxury is a key part of the China story. Today
China accounts for 12% of global demand
for luxury consumer goods, according to a
Goldman Sachs report released in December
2012. The same report predicts that by 2015
China will be the world’s largest luxury
consumer market, accounting for a staggering
29% global share .
But dollars saved or spent are not the sole mark
of luxury in China anymore. There is a burning
desire to experience the finer things in life, and
have new or unique experiences that “money
can’t buy”. It’s part of a greater aspiration to
align oneself with the upper echelon of power
players responsible for building China’s
new legacy.
In addition, China’s luxury market has become
noticeably more crowded, leading to a more
discerning class of consumers who are looking
more and more to a brand’s experience to drive
their choice.
TREND #1:
Luxury
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6. /6China 2.0
TREND #1:
Luxury
All of this is to say that experiences are the
new luxury goods in China.
This experience-hungry backdrop creates the
perfect setting for Johnnie Walker House,
which has four locations worldwide. One is
located in the brand’s native Scotland and
another is newly opened in Seoul. The other
two? Shanghai and Beijing.
Parent company Diageo says Johnnie Walker
House is a response to the demand from
Chinese consumers for in-depth knowledge
of whiskey. These ultra-premium, ultra-lux
complexes feature a bar, museum, retail outlet
and members-only club for an elite
200 patrons.
Perks of membership include private whiskey
vaults, “whiskey-inspired” dining prepared
by an in-house chef and access to the master
blender (with whom you can create a
personalized blend for only RMB 800,000/
US$128,000).
Since the House began operating in Shanghai
2011, Diageo says sales of ultra-premium
Johnnie Walker whiskey in China increased
by 64 percent year-on-year.
Clearly this luxury experience is resonating
with the people who matter.
7. Interview #1
Lawrence Law
General Manager, Johnnie Walker House
advertising here in 1938, and in 1956 we
became the world’s best-selling blended
Scotch whiskey.
Today we are widely distributed in China and
are starting to close the gap as being defined as
black label to being defined as a mega brand.
The brand clearly has a long and rich history.
How does that history resonate with consumers
here in China?
We built the House for two main reasons:
1. To elevate the brand in China, and
2. To bring to life 200 years of heritage and
craftsmanship
We’ve also created special commemorative
editions for the first time, primarily for China.
These editions (1910, 1938 and 1956) are
How is marketing Johnnie Walker in
China different than in the rest of
the world?
China is a fast-paced, emerging economy in
which people are still chasing their dreams.
Our challenge is to make “Keep Walking”
relevant to them. We do this by allowing
consumers to discover what “Keep Walking”
means to them, rather than defining it
prescriptively for them. Keep Walking is a
mantra about how you live your life – in China
or elsewhere.
Our biggest challenge and opportunity is that
the category itself (blended Scotch whiskey)
is relatively unknown, though that is rapidly
changing. We were first shipped to China from
Scotland in 1910, but whiskey only started to get
popular here about 10 years ago. We started
related to historical events and resonate well in
the marketplace.
Do consumers want to be educated
about whiskey? Or do they just want
to drink “the best”?
Both. Johnnie Walker is a very proud,
responsible brand. We have the responsibility to
share the heritage and how to enjoy it.
We provide consumers with the flavors they
enjoy, and the ability to understand and talk
about what they are experiencing. It’s not just
about showing, but knowing. When we share
our heritage craftsmanship with consumers, we
also give people the right tools and notes so that
they can pass it on to friends.
/7China 2.0
8. /8China 2.0
We have created many ways for people to
experience the brand, including through live
events (for both our premium and ultra-premium
segments) and online.
What is the brand experience like for
the entry-level premium segment?
The entry-level premium segment is growing
quickly as younger people join the franchise.
We reach this group by creating high-energy
brand experiences and communications around
assets like our music platform and bartenders.
From a social media perspective, we ask these
consumers to engage with us – they submit their
ideas and we can view them online.
Is your familiarity strong?
China is a big place. But in Tier One, yes, we
have very high awareness.
Are you focused on engaging
consumers in Tier One, or are you
expanding to Tiers Two and Three?
We want to get into emerging cities, but we’ve
made a strategic decision to focus on Tiers One
and Two right now.
Tell us about the Johnnie Walker
brand experience.
Overall we want to be an aspirational brand.
As people change their lifestyle, or move on
to a different life stage, they look for new
experiences. They try new things. We want
people to aspire to drink ultra-premium Scotch.
What about for the ultra-premium
market?
Experiences are more personal in ultra-
premium market (3000 RMB and more).
We employ more one-to-one marketing and
relationship marketing techniques in this
market.
Our ultra-premium segment appreciates
scotch in a high-end, luxury setting, so we
use the Johnnie Walker House to reach them.
We also hold mentoring dinners in secondary
cities that attract an ultra-premium audience--
an older crowd that is experienced with spirits
and has higher spending power.
We view digital as an amplifying tool for
ultra-premium events. These events are not
famous unless people know about them, and
digital truly has the ability to do that.
9. /9China 2.0
This fits in nicely with our premiumization
strategy--moving consumers from 12 year-old
Black Label to the more ultra-premium Scotch
whiskeys. We want people to hear about it and
think “I wish I could have been there.” rather
than, “I can go there!” or “Let’s go there now.”
We’re creating a sense of envy, but we have
to be careful because we don’t want to turn
consumers off.
Tell us more about how the Johnnie
Walker House fits into your brand
experience plan.
The Johnnie Walker House is for ultra-premium
customers, which means that the general public
doesn’t generally interact with it. The public is
occasionally invited to specific events at Johnnie
Walker House Beijing, but it is still
quite restricted.
Right now we cater to the tip of the iceberg,
but we want to start widening the reach. The
next step is to allow premium, occasional luxury
consumers to enjoy the Johnnie Walker House
as well.
10. /10China 2.0
China is poised to become the world’s biggest
online marketplace in the next few years.
In fact, China’s Ministry of Industry and
Information Technology has laid out plans
to drive the online shopping industry to 18
trillion yuan ($2.86 trillion USD) by 2015. (For
reference, the US forecast for this same period
is $84 billion USD).
According to its Ecommerce 12th Five-Year
Plan (2011-2015) report, the staggering goal
is possible due to rapidly developing mobile
Internet, cross-border trade, and growth in the
online payment industry.
Add in the meteoric growth of the middle class
and the spread of government-subsidized, high-
speed Internet access and you have the “perfect
storm” of ecommerce.
TREND #2:
ECommerce
4
11. /11China 2.0
TREND #2:
ECommerce
Net-net? By 2015, ecommerce could account
for almost 10% of all retail sales in China.
Ecommerce is here to stay in China and
manufacturers and retailers hoping to have a
presence in the country need to do so online
as well. Currently the market is dominated
by consumer-to-consumer (C2C) selling, but
business-to-consumer (B2C) market is quickly
gaining ground.
There is no shortage of ecommerce sites
competing in China (latest counts show around
2,000), but, Alibaba-owned TMall is the clear
market leader in B2C sites, with almost 50%
market share.
TMall began as an offshoot of Taobao.com
(an iconic C2C site), but has grown into the
“Amazon of China”--a B2C platform where
shoppers can buy pretty much anything, from
Lamborghinis to electronics to fashion.
In the world’s fastest-growing sector of the
fastest-growing market, TMall is the one to
watch.
5
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12. Interview #2
Daniel Zhang
President, T-Mall
How is creating an online retail brand
in China different than an offline one?
An online brand is not limited by physical
locations and therefore allows more people to
engage with it.
Another advantage of an online brand is its
potential to build brand advocates. Online
communication platforms inherently facilitate
interaction between people, and allow brands to
build value and volume among consumers in a
more effective and efficient way.
Have Chinese consumers embraced
online shopping?
Compared to many other markets, Chinese
consumers have generally shown a stronger
demand for online shopping.
Tmall.com was founded in 2008.
How was the brand perceived then
versus now?
At first, the general public didn’t understand
the difference between Tmall.com and Taobao.
com. We were seen as part of Taobao.com,
the famous C2C platform, or as an attempt by
Taobao.com to enter the B2C market.
However, as time went by and consumers
discovered and accepted new ways to shop,
their demand for online shopping grew. At the
same time, we launched a series of marketing
campaigns to build the Tmall brand. Consumers
became familiar with Tmall.com’s unique brand
positioning and differentiation from other online
shopping platforms.
There are various reasons for this demand.
First, it is still a challenge for traditional brands
to maintain consistency in such a vast and
dynamic country. To achieve the same brand
coverage rate as in other countries, they have to
invest money and resources, adding pressure to
companies’ capital and management.
Online shopping is also more convenient and
consistent and often preferred by consumers.
Online consumption in China is growing rapidly,
especially among the young generation, also
known as the Internet generation. In the most
developed “Tier One Cities” (Beijing, Shanghai,
Guangzhou and Shenzhen), the percentage of
the Internet population that shops online is over
40 percent. We believe the shift toward online
shopping will continue to spread quickly.
/12China 2.0
13. Where do you want TMall to be in
five years?
A Tmall.com where there is something for
everyone – that is our goal! We currently have
500,000,000 members; they are our greatest
asset. We want to be a great platform for these
members to communicate with each other and
the world.
The Chinese ecommerce market has huge
potential, and I think it will reach a brand
new level in the next three to five years. Tmall.
com will lead the way in the industry, offering
customized information and products for
shoppers. We will continue to provide an
excellent experience for both businesses and
shoppers, acting as a bridge between the two.
What advice do you have for
international ecommerce brands
entering the Chinese market?
They need to understand the Chinese consumers’
culture and shopping habits first. Once they truly
understand the local consumers they can take
the next step of entering the market.
Can you share any case studies of
luxury brands doing ecommerce right
in China?
We don’t see many successful luxury shopping
websites out there right now.
I think luxury goods are very unique. Their
brands are inherently attached to a great
shopping experience, and the current
ecommerce platforms don’t provide that same
exclusive experience and treatment. Luxury
ecommerce still has a long way to go in China.
/13China 2.0
14. /14China 2.0
The most populous country in the world has
come into its own as the major superpower
of the East and the world’s second largest
economy. This rapid economic expansion has
been fueled mainly by exports, which currently
constitute 30% of its GDP.
The next frontier? Exporting Chinese
culture itself.
In February, President Hu Jintao announced
that his government was investing heavily in
homegrown, exportable cultural programming.
The authorities know that selling the world on
Chinese culture is critical to solidifying China’s
global position, and they are committing real
resources to making it happen.
TREND #3:
Brand China
8
15. /15China 2.0
TREND #3:
Brand China
They are hoping to build Brand China through
international dialogue, cultural exchange, and
creative output. And they are
making headway.
Consider that
• Investment in the Confucius Institute, centers
that teach Chinese language and culture,
continues to grow. At last count there were
858 Confucius Institute facilities worldwide,
including 81 in the US.
• Relativity Media recently created a $100
million fund and partnership with Chinese
film companies.
• 80,000 students graduated from Chinese
art schools in 2010 (up 15 times from 10
years ago).
• The number of Chinese patent applications
has soared past those of the US in
recent years.
China’s leaders know that the country’s
economic future depends on its ability to
nurture the creative industry. Of course, unique
barriers like the firewall, bureaucracy and
indifference for intellectual property
won’t make things easy.
But by the end of the decade, there is a
good chance you’ll be singing Chinese songs,
watching Chinese movies and buying products
not only made, but invented, in China.
This is the country that gave us paper,
gunpowder and math, after all. All eyes
are on them to see what they do next.
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10
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12
16. Interview #3
Zheng Wen
Director, Bureau for External Cultural Relations
Ministry of Culture, PR China
decided to build up acrobatics as one of China’s
national cultural icons.
The “Think UK” program by the Ministry of
Culture in U.K., the “Cool Japan” program
by the Cultural Department of Japan, and
promotional activities by the French Art Action
Commission have given us inspiration for the
implementation of this program.
Tell us about an event celebrating
Chinese culture that was particularly
remarkable.
First of all we need to define “culture.” Behind
the surface of every culture appearance is
the richness of a whole civilization. To us,
written language is the core of our civilization,
especially Chinese characters. They are a kind
of art unto themselves. So we planned a global
tour to promote the Chinese written language.
What are your duties as director of the
Bureau for External Cultural Relations?
Currently, my main duties are to promote the
international marketing of the Chinese cultural
industry and to enhance the image of Chinese
culture on the international stage. We are also
working on a long-term plan to build a brand for
our national culture.
What does “building a brand for our
national culture” mean to you?
China’s Ministry of Culture has already begun
building cultural programs as independent
brands to market them internationally. Many
countries have cultural icons of their own,
such as the movie industry in the U.S. or
the animation industry in Japan. When we
considered China’s heritage and its present-day
situation in China, as well the aspects of Chinese
culture that are known around the world, we
During the tour, we found that people were
passionate and curious about Chinese culture.
I remember being in Bulgaria and, just as the
event was ending, a local staffer asked me
to write his Chinese name on rice paper as a
souvenir. When I lifted my brush, other visitors
and staff spontaneously formed a long queue
behind him, all wanting to get their Chinese
names on rice paper. We had to continue
writing names until we ran out of the rice paper.
Of course the most impressive example was
the Beijing Olympics Opening Ceremonies
on August 8, 2008. It was a ceremony that
celebrated Chinese culture’s first step onto
the world stage. The opening and closing
ceremonies became a global symbol of Chinese
history, culture and civilization told through a
visual language.
/16China 2.0
17. /17China 2.0
But I think the impact of the Beijing Olympics has
exceeded this normal cycle. Our hope is to take
full advantage of the recognition we received
and maintain our momentum with
international investors.
How is the cultural industry changing
as China modernizes?
Cultural marketing is an important part of our
country’s transformation as a whole. One of
the ways we are enhancing our cultural image
is by gradually moving from the traditional
government planning and investment model to
a commercial model.
Many countries have cultivated creative
industries that contribute appreciably to their
national economy. In the U.S., 50 percent of
the G.D.P. comes from the creative industry; in
France, 12 percent; in the U.K. eight percent.
China is currently at 2.8 percent.
How did the Beijing Olympics Games
impact the world’s image of
Chinese culture?
Our image was greatly enhanced through the
Beijing Games. That moment was not just the
opening ceremony of a sporting event – it had
a much greater cultural significance.
Over four billion people around the world
watched as we showcased the modern China.
An amazing visual journey of Chinese culture
was brought to life through a combination of
art and technology. The successful hosting of
the Games gave athletes, event organizers and
audiences around the world a completely new
perception of China.
Generally speaking, the host city tends to
enjoy a four-year cycle in terms of the Games’
economic and cultural impact.
Our goal is to build the creative industry into a
backbone of our national economy, specifically
to increase our creative industry revenue to five
percent of our G.D.P.
How do you measure success?
We can measure our effectiveness in terms
of cultural experience. When you walk down
the street, are there Chinese products in the
store windows? Are there Chinese shows in the
theaters? Do the latest fashions feature Chinese
materials like porcelain and silk?
Currently, American culture is the most widely
disseminated in the world. Comparably, the
dissemination of Chinese culture is still at a
relatively preliminary stage.
One of the factors in this disparity is language.
Chinese culture needs to undergo translation
before it can be understood in western markets,
18. /18China 2.0
Footnotes:
1. McKinsey, Meet the Chinese consumer of 2020, Evolving economic
profiles will continue to be the most important trend shaping the market.
March 2012
2. BizReport, Report: Why retailers need to be aware of Chinese
shoppers, March 01, 2013
3. Worldwatch Institute, Luxury Spending: China’s Affluent Entering
“Enjoy Now” Phase of Consumption
4. China Daily, E-commerce to make even bigger gains, March 28, 2012
5. Boston Consulting Group
6. Source: ATKearney, China’s E-Commerce Market:
The Logistics Challenge
7. Mashable, Ecommerce in China: How the World’s Biggest Market
Buys Online
8. TradingEconomics.Com
9. The Daily Beast, China’s Next Big Export: Creativity and Culture.
Nov 22, 2012
10. The Hollywood Reporter, Relativity Media Launches Strategic
Partnership in China, Aug 14, 2011
11. The Daily Beast, China’s Next Big Export: Creativity and Culture
12. Reuters, Chinese Inventors Take Patent Crown From US, Dec 11, 2012
physical resources. We are confident that we
can create a cultural image and industry that
rivals the best in the world. As China’s deputy
foreign minister, Fu Ying, said “China is ready
to embrace the world and integrate into
the world.”
and that translation process can diminish the
content and impact of the original message.
That being said, I still believe that Chinese
culture has a bright future on the international
stage. As mentioned, the Olympic Games was
a great example of how Chinese culture can
visually intrigue international audiences. The
best measurement for cultural dissemination and
adoption is the supply and demand of
the market.
In your mind, how does China want
to be seen in front of the world?
China is an important part of the global
economy as well as a rapidly developing power
in Asia. Enhancing and deepening China’s
recognition throughout the world will require
a long-term investment of money, people and