Brand fortunes on the rise in rural China

For decades the fast pace of development in China’s wealthy urban areas, such as Beijing or Shanghai, has supplied brands with not only a huge pool of customers but also plenty of competition. But consumers in these mega cities are now so constantly bombarded by advertising messages, primarily in the form of online ads thanks to the wide adoption of smart devices, that brands are being forced to look elsewhere for any chance of significant growth. 

Relatively untapped rural areas may just hold the answer to their prayers. According to a report by the Beijing-based government agency China Internet Network Information Center, the number of ‘netizens’ in rural areas is up 2.7 percent year-on-year and reached 201 million by the end of 2016.

Entertainment, including music and gaming, and instant messaging apps such as WeChat are the most cited reasons to use the internet. Online shopping and mobile payment still lack attraction, but this provides “great potential for ecommerce development”, according to the report.

The prospects for growth may also be bolstered by the results of a recent Nielsen study, which shows people in rural China and fourth-tier cities were most optimistic about job opportunities in Q4 of 2016, proving higher consumer confidence. 

The top Chinese ecommerce giants have already begun tapping into this. Alibaba, Suning and JD all started their rural reach projects back in 2014, with Alibaba launching “Rural Taobao”; Suning expanding its online-to-offline store Yi Gou; and JD initiating its ‘3F strategy’ — “factory-to-country, finance-to-country and farm-to-table”. 

In 2017, in fact, Suning plans to open a further thousand Yi Gou stores in China’s countryside, which is already home to 2,000 stores plus another 10,000 authorised franchisers. According to the company, these cover 450,000 villages and 2,000 counties, reaching over
20 million people.

For Suning, selling products in the countryside is only one element of its role: staff at Yi Gou stores are also teaching customers how to shop online.

“Customers showed great interest in learning online shopping at our stores,” a brand spokesperson says. “Years of internet expansion in rural China have yielded great potential for ecommerce development and Suning is well positioned in the rural sector for our future growth.” 

Suning cautions against typecasting people who live in these areas. “The stereotype of thinking that people in rural areas are too poor to afford good products or that they don’t desire good products is simply false. Our data showed exactly the opposite,” the spokesperson says. 

Among popular products in rural areas, Suning finds, are imported infant formulas and baby care — mostly bought by young mothers. Smart phones and home appliances, meanwhile, are the most popular items among rural men.

Vishal Bali, managing director of Nielsen China, agrees that rural shoppers shouldn’t be underestimated. Price is the primary concern for consumers in these areas, he says, but “we also observed consumers are willing to pay more
for quality”. 

While consumers in the big cities much prefer foreign brands, Bali continues, Chinese brands still enjoy dominance in rural areas and small cities. The reason, he says, is that people in these areas are not exposed to as many foreign brands as their urban counterparts due to the lack of internet access and few opportunities to travel abroad.

This is particularly evident when it comes to home appliance purchases. According to Blue Technology, a Beijing-based tech media that focuses on consumer electronics, Haier, Galanz and Midea — all domestic Chinese manufacturers — were among the most purchased brands in a surveyed village in Hebei province, Northeast China, in early 2016.

Suning’s rival JD has big investment plans in this product area for non-urban China in 2017. In early March, the brand announced that it will open 10,000 JD Bang chain stores, which focus on home appliances, in rural areas. To put this in context: by the end of 2016, JD had just 1,731 JD Bang stores in total.

When it comes to advertising products to people who live in the countryside, ecommerce companies like JD.com certainly have a big advantage. Of the various different types of online advertising, people across China tend to trust those run on big shopping sites and brands’ official sites the most. Overall, however, television is the most trusted way for brands to reach potential customers, according to GroupM. This presents a problem for companies with smaller budgets looking to reach potential clients in the countryside. 

Star appeal… engaging TV star, Liu Yan as brand ambassador proved highly successful for Lopal

Different stores have found different solutions, mostly based on what they sell. Nanjing-based engine lube producer Lopal, for instance, believes that a combination of social media and local distributor promotions serves
the purpose. 

In fact, the company has just finished an advertising project called ‘U Mayi’, a platform it built in the widely used social media app WeChat. Using this platform, Lopal distributors have been able to open online stores to sell Lopal products to local clients, the majority of whom are private auto repair service providers.

WeChat is one of the most-used apps in China, according to GroupM. In Tier-3 and Tier-4 cities, people spent an average of 1.9 hours a day on the app in 2016, almost the same as their counterparts in second and first tier cities.

“The popularity of WeChat provides us an efficient way to reach our clients in rural areas,” says Lopal marketing director Chen Xiaoxing. He adds that the company is scheduled to complete another ecommerce programme, also within WeChat, this summer, which will allow local repair service providers to sell Lopal products to the end customers.

“Rural China is certainly a very important market for us as we have observed more local people are buying cargo vans,” Chen said. “It is a great opportunity.” Unlike in big cities, where 4S auto service shops — authorised by multinational brands such as Shell and Mobil — have the most consumer sway, in rural areas private repair shops have the power to decide which brands they want to offer to clients, and these shop owners often prefer Chinese brands.

As another means of attracting customers, Lopal this year signed up Chinese celebrity singer and actress Liu Yan to be its brand ambassador. “Our target is Chinese men. And as a man, no matter in cities or villages, who doesn’t like Liu Yan?” Chen jokes. 

Lopal is not the only company counting on celebrities to woo rural customers. Beijing-based machinery manufacturer SANY Heavy Industry, whose products include tractors and excavators, has taken an even more creative approach; it hired the head of a village in an area it wanted to promote its work to be the brand ambassador. 

“It’s a smart move because the trust between the brand and customers was built instantly,” said Wen Weihong, president of Henan province-based Zhengzhou Horizon Media, one of China’s major advertising agencies with a focus on small cities and rural areas. The agency’s clients include Midea, Coca-Cola and China Mobile.

Wen says that consumer behaviour in these areas is very much driven by herd mentality. “They see a trusted village head using a SANY product, they would like to follow suit.”

In more remote rural areas where people have few distractions on roads, outdoor advertising remains dominant, says Wen. This is starting to change, however, thanks to growing numbers of smartphone users.

“We have clearly observed the growing popularity of interactive outdoor advertising in small cities and rural areas, and people really like it,” Wen says.

His company recently helped a client build a platform inside an advertising billboard that allowed people nearby to get gifts and lucky draws through the ‘Shake’ function in WeChat. 

“People like the idea of getting something for free by just shaking their phones,” Wen says. QR codes, meanwhile, which are often used by interactive advertising in big cities, aren’t as popular in the countryside, he adds. “QR code-style interaction requires an internet connection which could be unavailable in some areas. Also, the action of shaking phone itself is something entertaining.

“I’d say there will be more interactive advertising in rural areas in the future. But non-interactive billboards still have their place.” 

The huge potential for marketing in rural China has also been attracting non-FMCG companies such as the French pharma giant Sanofi, which in October 2015 partnered with Beijing-based Jiankang Zhi Lu (meaning ‘healthy way’), a company that runs the platform — yihu.com — to enable patients to make appointments with their preferred doctors online. 

The two firms jointly launched Kang Sai, an online platform aiming to help doctors in rural China better communicate, monitor and manage patients with chronic diseases such as diabetes and cardiovascular diseases, which are part of Sanofi’s core business. The platform also offers educational programmes to train local doctors. Sanofi China general manager Jean-Christophe Pointeau says in a statement that Kang Sai allows Sanofi to use its rich experiences in disease management to “serve doctors and patients in rural China.”

But no matter which industry the brand is from, Horizon’s Wen suggests companies should bear in mind that urban audiences are innately different from rural ones — with their own preferences and customs. “Make sure you use the most simple, local -friendly language, and don’t forget to give away small gifts and lucky draws.”