Seeing the Future of Japanese Marketing Through China's "New Consumption"

<Table of Contents>

▼Learning from China's Speed and Trial-and-Error

▼What is China's "New Consumption"?

▼What Was the Rise and Fall of Unmanned Convenience Stores?

▼Beyond Giant E-Commerce Malls and Live Commerce?

▼Moving Beyond "Just Making Things"

▼Essentially "High-Altitude Training"

Learning from China's Speed and Trial-and-Error

What will future marketing trends look like? What truly leads to success?

This time, we'll explore topics every marketer wants to know about, approaching them through the lens of China's "New Consumption."

While the Chinese market differs from Japan in many aspects—platforms, regulations, etc.—the underlying trend of technology influencing consumer behavior is fundamentally the same. A key characteristic of the Chinese market is its rapid pace of change. Diverse technologies, services, and concepts are tested everywhere, with successes and failures repeated constantly. Therefore, a concept you plan to test in Japan might already have been tried and proven somewhere in the Chinese market.

By analyzing the rise and fall of concepts in the Chinese market, can we avoid investing in dead-end ideas? From this perspective too, I believe it's a crucial approach.

This time, Hajime Yamamoto of Dentsu Inc. Global Business Center interviewed Naoki Fujii of Dentsu McGarryBowen China. Fujii, who has long been involved in marketing in China and published the book " New Consumption: Value Creation in the New Era Enabled by Digital " (President Inc.) last year, shared his insights on China's "New Consumption."

What is China's "New Consumption"?

Yamamoto: First, please tell us about China's "New Consumption." What kind of phenomenon is it?

Fujii: "New Consumption" is a trending term in Chinese consumer culture. Since it's a simple phrase, interpretations vary, but I explain it as a phenomenon where two elements intersect: "attitudes and values toward consumption," which evolve with societal development stages, and "methods of consumption" enabled by technology.

In Japan, "experience-based consumption" and "enhancing customer experience" have been discussed for some time now. You could think of it as the evolution of those concepts driven by the latest digital technology.

What was the rise and fall of unmanned convenience stores?

Yamamoto: Before the pandemic, China's unmanned convenience stores became a hot topic in Japan. I recall many marketers traveling en masse to Shenzhen for inspections. What happened to these unmanned stores afterward?

Fujii: To be precise, unmanned convenience stores are part of a "labor-saving" initiative aimed at reducing labor costs by cutting cashiers and space, while improving sales efficiency. They combine various technologies—not just the easily imaginable cashless systems, but also sensors and cameras for inventory management and checking customer entry/exit.

While they combine traditional retail with cutting-edge technology, the famous unmanned convenience store companies that became a hot topic in China for a time, despite having attention-grabbing gimmicks and technology symbolized by their clever naming, lacked fundamental retail business experience. Consequently, the trend didn't last long.

However, the rising labor costs driving labor-saving initiatives are a common challenge across developed nations, and China's technological level isn't exceptionally high compared to others. Today, solutions like Amazon Go in the US and TOUCH TO GO in Japan operate labor-saving systems tailored to their respective national environments.

Yamamoto: What lessons can we learn from the rise and fall of unmanned convenience stores?

Fujii: These solutions aren't exclusive to China. However, the term "unmanned convenience store" became widely known in Japan as a "China-originated" concept because there were people willing to invest in it despite its imperfections and lack of experience, and those who procured the technology quickly turned it into a viable business.

While we shouldn't stereotype too much, I do observe in daily life that Chinese consumers excel at flashy, quick actions, yet struggle with steadily building up modest, sustained efforts. These unmanned convenience stores seem like a clear example of that national character. China has experienced tremendous change in the past. You could say it became rational to constantly change tactics and introduce new things.

However, with economic growth stabilizing and society settling down, the focus must now shift toward more sustainable business models. Many also believe there is much to learn from neighboring Japan. And needless to say, we can learn a great deal from their boldness and approach to new technologies. In that sense, it might sound ironic, but the unmanned convenience store craze—which couldn't succeed based "only" on the things China is often praised for, like technology and implementation speed—made me think that the methods of Japanese companies, often labeled as old-fashioned or slow, might actually be in demand in China going forward.

Beyond E-commerce Giants and Live Commerce?

Yamamoto: Due to the impact of the pandemic, live commerce is gaining attention in Japan too. What's the current situation in China?

Fujii: Live commerce has already become just another ordinary sales channel, like in-store sales. To put it another way, it's not something done as an event-like "We're doing live commerce tonight!" but rather something conducted daily, nightly, at fixed times.

Accordingly, rather than frequently inviting external famous influencers (often called "KOLs" in China), companies increasingly rely on their own resources during normal times. They collaborate with these influencers mainly for special sales events requiring promotion or large-scale sales. I hear examples of companies setting up internal streaming studios and building in-house production teams.

Yamamoto: I hear the world of top influencers is also undergoing drastic changes.

Fujii: Just like in Japan, influencers are in an industry where trends come and go very quickly. Last year and the year before, people generating billions in sales through live commerce were huge topics. However, due to the impact of the in-house production trend mentioned earlier, as well as scandals, it feels like things have paused for a moment. Looking at the entertainment industry as a whole, enforcement against tax evasion and similar issues has become extremely strict since last year, making it feel like a year with fewer major topics.

Moving Beyond "Just Making Things"

Yamamoto: Within the new consumption trends, the very definition of what a manufacturer is is changing, isn't it?

Fujii: In an affluent society overflowing with products, countless items merely offering functional solutions to problems flood the market. Standing out in this environment is incredibly difficult. While relentless R&D to deliver overwhelming functionality remains essential, manufacturers must also cultivate a stronger mindset focused on selling experiences. Products and their functions are crucial components of the experience, but they are not the whole picture.

To avoid misunderstanding, I want to state clearly that I believe the opinion that products have become unimportant is mistaken. If you neglect the core value of product functionality and chase shallow "branding," you'll end up being quickly weeded out, like unmanned convenience stores.

However, it's fair to say that manufacturers' roles are becoming more significant, shifting from "making things" to creating more complex and substantial "experiences." If we continue solely "making things," we risk losing business initiative and being relegated to merely receiving work from others.

It's like "ultra-high altitude training."

Yamamoto: Finally, could you share what makes marketing in the Chinese market so interesting?

Fujii: China is simply a massive market where new things emerge at a high frequency. While it feels calmer compared to its peak, new apps and brands still appear and disappear almost monthly.

When you go overseas, whether in business or daily life, you strongly reappreciate the merits of Japan's completed and mature society (laughs). However, the dynamism of the Chinese market, fueled by the belief that "hard work always pays off," is something hard to find in Japan. It's a huge appeal to truly feel that life holds various possibilities, rather than settling for a small "this is probably my limit" mindset.

On the other hand, it's also true that China's business environment is extremely challenging for Japanese people. Especially when considering China as a market, understanding Chinese sensibilities and cultural habits to effectively "sell" is paramount, but unfortunately, this is difficult for Japanese people. Often, Japanese technology or products no longer hold an overwhelming advantage, so we constantly question the value we can provide as we work each day.

Furthermore, while things have settled down considerably, business practices are still quite "free" compared to Japanese norms. These "free" companies become our competitors. While staying compliant with laws and regulations is a given, Japanese companies must also contend with the handicap of being foreign-owned enterprises. We must strategize to win the competition by any means necessary.

My boss calls this "ultra-high altitude training." While it's true that constantly questioning "why we do things" and "how we do them" – rather than relying on "because it's precedent" or "because someone said so" – is a significant burden, it's also an environment that accelerates personal growth. This isn't just about individual development; it hones and toughens the very constitution of companies that must increasingly earn revenue outside Japan.

That said, it's not all tough talk. Living in China, you encounter respect for Japanese brands, products, and people everywhere. There's still ample room to develop business in China's enormous market by effectively incorporating these elements. Dentsu Inc. takes pride in being a pioneer among Japanese companies expanding into China, having experienced the full spectrum of Chinese business challenges. "How should Japanese companies expand their business in today's China?" While this is no simple task, we remain committed to supporting the endeavors of Japanese companies.

Yamamoto: In today's rapidly changing global market environment, the importance of swiftly implementing marketing tailored to each country's specific conditions has grown significantly. In that sense, today reaffirmed the effectiveness of continuously monitoring the Chinese market, where high-speed PDCA cycles are repeated, and feeding the insights gained back into Japan, Asia, and other markets. Thank you.

If you enjoyed this article, you might also like:
・It's Not Too Late! An Introduction to China Inbound & Cross-Border E-Commerce
・Hints for Reaching China's Youth: Post-COVID Changes in Chinese Consumer Behavior
・Hints for Reaching China's Youth: "Tie-Up Trends" and "Future Approaches"