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China’s Baidu search data shows the death of luxury brands among mainland consumers is much exaggerated

The lead of Western brands over domestic offerings is widening, search data shows

PUBLISHED : Monday, 18 April, 2016, 2:29pm
UPDATED : Tuesday, 19 April, 2016, 2:45pm

What do Taobao, Mercedes and Nike all have in common?

The three ranked as the top searched brands by Chinese consumers on Baidu, China’s search engine equivalent to Google, according to a report by Bank of America Merrill Lynch (BAML).

“While we cannot say internet search frequency guarantees or even accurately reflects a brand’s strength or profitability, in our view, it does offer valuable insight into consumer interest and

brand mind share, and may be a leading indicator of future market-share moves,” said BAML analysts Luo Chen, Tina Long, Lucy Yu and Kevin Zhao.

Chinese consumers no longer are willing to switch to a new brand based on a cheap price or a special promotion
Daniel Zipser, a McKinsey partner

E-commerce players like Taobao and JD.com have consistently dominated Baidu’s searches, which accounts for 70 per cent of the web search queries in China, since 2012, BAML data showed.

There were more than 1.7 million hits per day for Taobao and JD.com combined in the first quarter of 2016, compared to Mercedes’ 44,000 and Nike’s 35,000.

United States fast food chain KFC was the top searched brand in 2010 with 14,621 hits per day, when BAML debuted their quarterly report, followed by luxury retailer Louis Vuitton and Pizza Hut.

More than half of the total Baidu searches were made via a mobile device, the report said.

The trend is a testament to how the internet has changed Chinese consumer’s shopping habits over the years.

There are 688 million internet users in China with a total penetration rate of 50.3 per cent of its population across the nation, according to official statistics from the China Internet Network Information Centre.

China is also the world’s largest e-commerce market, generating revenue of nearly 4 trillion yuan (HK$4.79 trillion) last year, according to the 2016 China Consumer Report by consulting firm McKinsey.

“I remember 10 years before, when we talked about consumers shopping for cars, they normally go to a street full of dealerships from different brands, and they will walk into every dealership...and they can be influenced a lot by the sales [representative],” said Gong Fang, a McKinsey partner and one of the report’s authors.

“But today, before the consumers even walk into a dealership, they already researched online and then decided on two or three models they would consider before they go to dealership.”

International, foreign brands still take the lead in Baidu searches for premium categories such as luxury goods, cars, and cosmetics, while local brands top categories like home appliances, electronic retailers and food and drink staples, according to the BAML report.

The findings are also echoed in the McKinsey report which said that Chinese consumers increasingly focus their spending on premium over mass products.

Around half of 10,000 consumers surveyed across China said they “seek the best and most expensive product”, which researchers said was a “significant increase” over previous years.

The McKinsey report also highlighted that more Chinese consumers are becoming loyal to a shortlist of brands, with less than 30 per cent being open to considering a brand outside their favourites last year, compared to 40 per cent in 2011.

In terms or search hits, sportswear brand Nike has seen a 17 per cent quarterly rise while Adidas saw a 10 per cent jump, according to the BAML report, widening the gap with other brands. Domestic players in comparison, have seen a declining trend and trail far behind with only a few thousand searches.

“We see large brands becoming more successful and growing their shares, at the same time, new entrants and [small brands] are having an increasingly hard time to succeed in China,” said Daniel Zipser, a McKinsey partner.

“Chinese consumers no longer are willing to switch to a new brand based on a cheap price or a special promotion.”

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