In this week’s episode of After Hours, WPIC Co-Founder and CEO Jacob Cooke speaks to Todd Embley about the pace of China’s consumption recovery and Meituan’s introduction of a livestreaming feature.
Check out the discussion above. You can also read the edited transcript below.
Todd Embley:
Hi everyone, Todd Embley here and welcome to another edition of the negotiation after hours. This is a new video series where we speak to WPIC marketing technologies, co-founder and CEO, Jacob Cook on the top consumer tech and business stories from China and APAC.
Jacob is joining us from WPIC’s Vancouver offices today. Jacob, welcome.
Jacob Cooke:
Thanks Todd.
Todd Embley:
So to start, I saw that last week you released a lengthy article diving into China’s post-pandemic consumption recovery and the trends that you saw in the first half of 2023.
Why don’t you tell us more about that article?
Jacob Cooke:
Yeah, this is a big story.
The thesis of that article is that due to China’s ongoing consumption recovery, the China market presents the world’s biggest opportunity for growth for consumer brands.
Pretty bold statement, but the most viable part of the recovery has been the services sector roaring back in China. Shopping, dining out, and leisure activities are up big now. Anyone on the ground can see that and the data really backs it up — May Day holiday, Dragon Boat Festival, record numbers of trips, restaurant sales in 2023 are up 20% YoY. So, big numbers coming from the services sector.
It has extended to retail too.
According to the latest GDP data release, online retail sales in the first six months are up 13.1%. That’s incredible! Those are really good numbers. That’s backed up not only by the numbers that we see at WPIC, but also some of the other numbers that big corporations have released. For e..g., Lululemon China has a 79% increase in revenue in the first quarter — incredible numbers. Nike’s China revenue up 25% too, as well in the last quarter. Uniqlo just announced 40%.
When you look at companies like Nike CEO and Uniqlo CFO, they very clearly said that the consumer is back and that’s just providing more and more data points that’s backing up exactly what we’re saying.
We’re in the business of helping brands achieve growth so we want that narrative out there.
Todd Embley:
Okay, devil’s advocate.
I’m gonna push back slightly because the recent numbers that were portrayed in the international media were not looking good.
What do you have to say about that?
Jacob Cooke:
I think obviously there are economic headwinds. We’re not denying that. A negative narrative has emerged around consumption that ww think is really lacking a bit of nuance.
Overall, retail sales are actually growing month-over-month, but not at the rate that people expected when restrictions were lifted, because we really didn’t get big stimulus checks over here in China.
So I think some of those analysis and those comparisons to markets that did get big stimulus checks, the rebound has seemed weak. But if you dig a little bit deeper, you see that consumption has been weaker on some bigger ticket items, like automobiles or property related categories like furniture and big appliances which used to fit out new buildings and when retail sales are down, those are natural places.
But if you look at almost every other consumer sector — apparel, accessories, beauty, FMCG, outdoor pet, packaged food — we’re all seeing very rapid growth in those sectors. And I think that’s, again, why we’ve seen the Nike CEO, the Uniqlo CFO, and so many other big global consumer brand executives saying that their firm’s estimation China consumption is strong. And that translates directly to why retail sales were up 13.1% in the first half of the year.
It seems wrong to describe that as demand is weak when we’re seeing numbers like that.
Todd Embley:
Okay. Jake, thank you very much. That’s a great breakdown.
Moving away from the macro, we want to touch on Meituan’s introduction of live streaming.
So I want to get your thought on that. But for those outside China, an understanding of what Meituan is: it’s a market leader in local life services — think a combination of Uber Eats and Yelp.
So your thoughts on the introduction of livestreaming for them.
Jacob Cooke:
Yeah, it’s a fascinating trend.
So what we’re seeing first off is that live-form video content is king for young Chinese. They’re glued to this type of content and actually the age groups are ever expanding.
Douyin, the Chinese version of TikTok has become a major e-commerce player because it’s 750 million DAE, daily average users who are captivated by the content that’s coming out on that platform.
Making the step to commerce there was a really small integration — look at how the whole industry followed that. This led Alibaba to respond by making big investments in content, specifically livestreaming and live-form video, which became the new battleground.
Now, Douyin is expanding into local delivery service using the same idea, potentially even moving into Meituan. So in response now — where you’re up to — Meituan has introduced livestreaming functions.
According to company data, Starbucks and Haidilao, a really big hot pot chain in China, have actually seen huge sales increases from using this feature, with some promising numbers coming on the early days.
But I’m somewhat doubtful that users will turn to Meituan for entertainment the same way people turn to Douyin for entertainment. However, users also like livestreams for gathering information and interacting with merchants. And Meituan does sort of have strangleholds on certain service sectors.
So, this could be an effective strategy for people to learn about deals and special offers that people are offering and maybe help their actual consumers and daily average users participate more in more different categories than not normally shopping in.
Todd Embley:
Okay, awesome. Thanks very much, Jake. Thanks everyone for listening. That’s The Negotiation After Hours for this week and we’ll see you all next week.
Jacob Cooke:
Thanks Todd.
