[2015] We Covered How 15 Industries Courted the Young. Who Won Their Attention This Year?

李会娜 · 2016-01-04 · English translation

IKEA, Uniqlo, Nike, Gucci, BMW, Marriott, iQiyi, SOHO China, Taikoo Li, Microsoft, Amorepacific, Wagas

Life is getting harder for big companies of the traditional kind.

It is harder still for the multinationals that once led their industries. They are caught two ways. The internet, and the mobile internet above all, is breaking up their traditional sales channels. And young consumers want products and services that these companies cannot make sense of.

With this in mind, QDaily ran a series of reports on the youth market. It covered 15 industries: fast fashion, luxury goods, sportswear, traditional department stores, real estate, food and beverage, hotels, cars, cosmetics, TV dramas, video streaming sites, home furnishings, fast-moving consumer goods, mobile phones and software. In all, the series touched more than 150 major companies (not an even 10 per industry).

These industries have three things in common:

1) Their markets have strong traditions and established, successful leaders.

2) Their supply chains are mature and complete, and the profits along them still go to the companies that make the products and services.

3) Their products and services will not be replaced any time soon.

What they also share is a problem: the future.

According to the China Consumer Trends Report recently published by Boston Consulting Group (BCG), China's consumer market will grow by half by 2020, to US$6.5 trillion. Over the next five years it will add US$2.3 trillion.

And 65% of that growth will come from people born in the 1980s, 1990s and 2000s.

Today, 15-to-35-year-olds make up 40% of China's urban population aged 15 to 70. By 2020 that share will reach 46%, and their share of consumption will rise from 45% to 53%.

These post-80s and post-90s consumers grew up as China opened up and its economy boomed. They never knew the hardship of scarcity. Richer than their parents, they want to spend more and can afford to, and they have a bigger appetite for premium products and services such as healthy food and travel. Better educated and more widely exposed to the world, they are also more sophisticated consumers.

BCG forecasts that their spending power will grow by an average of 14% a year, twice as fast as the previous generation's.

So luxury brands that long looked down on e-commerce have started to come down to earth. Department stores, unwilling to become mere fitting rooms for online shoppers, are rushing to accept Alipay and WeChat Pay. Sportswear brands have entered a "technology" race. Hotels, jolted by Airbnb, have launched wildly imaginative marketing. Carmakers talk everywhere about demand for personalized options. And TV dramas have dropped domestic squabbles; the screen is now full of otaku, gay and BL themes...

Worried about future revenue and markets, companies often adopt strategies aimed at the future and at young people, covering product, marketing, design, sales channels and more. Some of these strategies may be right. Others may be the blind men and the elephant, groping without a clue.

We tried to read each industry's youth "status" from a different angle. We asked, for example, "If sportswear brands were IT companies, how would they score?" because sportswear brands increasingly stress their technology, and the resulting story read more like a product review. To answer the question "Is the department store business really as doomed as everyone thinks?" we did fieldwork and talked with 30 people connected to the industry.

In the youth market, every industry has its losers, and some players that are doing quite nicely.

Judging by strategy, marketing, reputation and, most important, market influence, we have drawn up this list of "2015 Youth-Market Companies of the Year."

We picked these 12 companies because we believe they understood young consumers better than other traditional companies did. The list does not map one-to-one onto the 15 industries we covered.

Home furnishings: IKEA

It could only be IKEA. For years IKEA has been young people's first choice for furniture, and for its huge range of household goods. In China it is still growing, and as it opens stores in second-tier cities, more and more young people are becoming its customers.

In fiscal 2015 its China sales rose more than 18% to a record 10.5 billion yuan. Membership grew 42% to 13.5 million, and visits to its website reached 53 million, up 52.5% from 2014. So far, at least, no brand in the industry comes close to being a rival.

The problem IKEA itself thinks it must solve is how to raise the average age of its customers. It names this goal almost every year.

Fast fashion: Uniqlo

Of the four big fast-fashion brands (Uniqlo, H&M, Zara and Gap), Uniqlo is the one people mock as having the least design sense. Yet on the strength of its basics it has stubbornly held its ground in China's youth market.

Over the past year Uniqlo's Greater China sales rose as much as 46% year on year, the most of the big four, and it also has the most stores. It always makes Tmall's must-buy list for Singles' Day (Double 11), and this year, as expected, it ranked first in apparel sales.

It has always read fashion trends well. On the athleisure wave it has even put Nike on guard. Whether it is playing with technology or with marketing, young people like it. In 2015 it also brought its sister brand GU to China.

Sportswear: Nike

If sportswear brands were IT companies, Nike would be the geekiest.

Its website, online store, app and smart hardware all score about the highest for ease of use and convenience. On every social platform, including Facebook, Instagram and Weibo, Nike has more followers than any other sportswear brand. Its e-commerce numbers are striking too: revenue from its own website alone grew as much as 50% in the last fiscal quarter.

Its push for technology in its products, its marketing strength and an unprecedented fitness boom have let Nike keep its lead in an increasingly crowded sportswear market. With the Rio Olympics coming in 2016, its luck should hold.

Incidentally, its share price has risen 30% over the past 12 months.

Luxury goods: Gucci

Luxury brands, long aloof, have started learning to come down to earth and look friendly. Since last year the industry's most powerful companies have all begun a new round of changes: cutting prices and selling online.

Gucci's story is more dramatic. Alessandro Michele, appointed creative director in a crisis, shed the brand's stuffy image and sent sexy, girlish looks down the runway, full of lace, sheer fabrics and prints. Soon fashion editors and bloggers were turning up in the front row in identical outfits and shoes, so often that "Gucci rules the front row" became one of the fashion world's big stories of 2015.

It has been many years since a luxury brand captured the imagination and the wallets of the fashion crowd like this.

Food and beverage: Wagas

Over the past year, high-end restaurants were still going through a painful transition, and Chinese and Western fast food were no longer young people's favorites; both were frowning. Wagas, a Western-style casual café chain, was thriving. It has become a near-standard tenant in the popular shopping districts that have opened in the past year or two, a sign of its standing.

Wagas taps into the current demand for healthy eating, with an inventive menu that keeps feeling fresh. Its Nordic design and black color scheme give it an upscale feel. By serving light dishes and fuller meals at different times of day, it lets young people walk in at any hour, and it suits dates, business talks and ordinary meals alike.

On every point that draws young people, it has struck just the right balance.

Cosmetics: Amorepacific

There is no denying it: Korean cosmetics are taking over from Europe and America in setting global makeup trends, and Amorepacific, South Korea's largest cosmetics group, deserves much of the credit.

Its greatest skill is making something out of nothing: creating new demand. It also launches new products remarkably fast. By the time the big Western brands began chasing the cushion-compact trend Amorepacific had started, it had already upgraded its own several times.

It is good at marketing and buzz, too. Compared with the earnest approach of Western brands, Amorepacific knows better what excites young people.

In 2014 China brought in 10% of Amorepacific's global revenue. Its target for 2020 is 28%.

Real estate: SOHO China

Over the past year Pan Shiyi's name has been tied to the startup boom rather than to his planking. SOHO 3Q became a star project by attracting hot companies such as Xiaohongshu, Meituan and Uber.

SOHO 3Q rode the co-working wave. Even Pan himself has said that property developers used to give little thought to young people's needs, and that now everyone is trying to work out what kind of living and working spaces young people actually want.

While the whole property industry worships "internet thinking" blindly, it is good to see a move toward letting real estate be real estate and housing be housing. SOHO is a fine example of a company that has begun to run its spaces seriously.

Hotels: Marriott

Of all the "creative" things hotels did over the past year to please young people, Marriott did the most.

Rooftop picnics, all-night club events, a tie-up with Netflix and Alipay payments were all Marriott's attempts to give young guests a personalized stay. It was also among the first hotel groups to build a mobile app and lay out a digital strategy.

Its revenue for the first three quarters of 2015 was US$10.78 billion, the highest of any upscale hotel group. Its biggest prize last year may have been buying Starwood for US$12.2 billion, which took it past 1 million rooms at a stroke and ahead of InterContinental and Hilton, which had both ranked in the top three with a little over 700,000 rooms each. Starwood's W Hotels brand is a valuable asset with young travelers.

Shopping centers: Taikoo Li

Sino-Ocean Taikoo Li Chengdu set out to "reshape a city center with one shopping center," and it has delivered, though with help from its neighbor, IFS. Because IFS focuses more on luxury brands, Sino-Ocean Taikoo Li feels friendlier to young people.

Its low-rise buildings of dark gray, Chinese-style brick and tile set it apart from other shopping malls. Its spaces are organized around the "fast" and "slow" rhythms of shopping, so luxury and fast fashion sit side by side, mixed in with bookstores, independent designers, restaurants and other lifestyle brands.

What Taikoo Li really solves is how young people today want to shop offline.

Software: Microsoft

After years of clinging to Windows, Microsoft had by a few years ago lost touch with mobile entirely; people thought of its products only when they sat down at a computer to work.

New CEO Satya Nadella changed its direction. First he made Office free for iPhone and Android users, and in 2015 its market share passed that of Google Docs, a rival with a five-year head start. Then in 2015 Microsoft bought well-reviewed mobile tools such as Acompli, Sunrise and Wunderlist, and relaunched the Outlook app on the basis of what it had acquired.

Then there is Xiaoice, the chatbot that recruited Milk Tea as a product manager and became famous for her spat with WeChat. Like it or not, this robot dressed up as a 17-year-old girl has become the AI software that talks with more humans than any other in the world, reaching more people every day than the science-fiction film Her imagined.

Video streaming: iQiyi

iQiyi saw early that TV stations and the internet pull variety shows in different directions. It came up with the "web-only variety show," made purely for young people online, and dropped the strategy of co-producing with TV.

U Can U BB (《奇葩说》), a variety show it produced itself and launched at the end of 2014, became the most successful online program of 2015. Both its content and its style play up "youth," and it drew a large audience of post-90s viewers. Season two had 620 million views, and the first two seasons together more than 1.1 billion.

Meanwhile the web drama The Lost Tomb, made on a budget of tens of millions of yuan per episode, tried releasing by season and has drawn more than 2.8 billion views in total.

Thanks to The Lost Tomb, Chronicles of Shushan (《蜀山战纪》) and other shows, iQiyi's paying subscribers surged in 2015, passing 10 million as of December 1.

Car brands: BMW

BMW was the first car brand to try WeChat Moments ads, setting an example for luxury carmakers, which have always been cautious about new channels. Its emphasis on "performance" also appeals to young buyers.

Audi, BMW and Mercedes-Benz were still the top three luxury brands in 2015. But Audi slipped in both sales and reputation; BMW kept growing from a high base; and by growth rate, Mercedes-Benz actually did best. Yet according to a Roland Berger survey, BMW buyers skew more toward young and middle-aged high-income men, and the brand is also more popular with young women, while Mercedes-Benz buyers tend to be older.

Infiniti and Cadillac, also growing fast, remain niche players.