Ad spend in China typically peaks in three phases—starting from the Lunar New Year at the beginning of the year, to 618, the 18-day shopping festival on JD.com in June, until it climaxes around the Singles Day sales that fall on 11 November, according to Totem’s 2018 Social Trends Report.
But in a section titled Double 11 Hangover, the study calls into question the kind of returns advertisers can expect from the huge amount of investment in bargain hunters. Chris Baker, managing director of Hong Kong-based social media agency Totem, said smaller brands rely on Singles Day even more, with 50% of their sales in a year coming from the festival, and they usually end up spending a huge chunk of their budget before and during Singles Day.
“The challenge that I see for brands is competing for attention during the most expensive time of the year,” Baker told Campaign Asia-Pacific. His concern was not unsubstantiated as he pointed out that Singles Day was much more about selling at high volume with very low margins. “Brands start out with high prices but over the course of the year, prices are coming down until the big Singles Day," Baker said. "If they spend all of their budgets on Singles Day, the brand quality and values start to erode."
As the lack of brand-building could be explained by the promotional price-driven communications during Singles Day, Baker agreed that the majority of spending is focused on search while social media is mainly responsible for driving traffic to the sales sites.
“I suppose there can be some spillover effects but if you are trying to do image-based communications at an extremely busy time that’s going to be a problem…it’s very cluttered," he said. "For the most part, I don’t think there is going to be spillover to other periods in the year." He believed that mid-tier brands appear to be most affected by the Double 11 hangover since the luxury brands historically do not overspend during the festival.
Meanwhile, Gareth Ellen, China COO and regional strategy director at Geometry Global, suggested that consumers are looking for brands and products that they already know rather than seeing Double 11 as a time for discovery.
“The fact that 618 is perhaps seen as the lesser of the two (shopping festivals) could give opportunity to some category leaders to cement their position on the platform (JD.com) by dominating at this time versus being diluted on 11.11,” he said. “My overall feeling is that these events will normalise over time as shopper interest diminishes and brands seek more sustaining approaches to driving sales all year round.”
Competing for eyeballs
Brands are also facing heated competition on social media due to stalling growth of follower numbers on their official channels. Data from Newrank.cn shows that although the number of official accounts ballooned by 250% to 20 million between 2015 and 2017, reading rates fell from 15% in 2015 to 5% in 2017. Totem also conducted a survey to explore factors that influence users to share brand posts.
Elsewhere, Weibo is constricting organic reach, putting pressure on brands to spend on paid social by increasing the variety of promoted post units. In addition, brands using influencers to promote their products on Weibo are required to book them through the platform’s Wei-task booking system or risk having their posts blocked.
The low reading rate comes as little surprise since each brand post is not directly pushed to social media users, especially for brands who uses WeChat’s subscription accounts. Nevertheless, Durex and Coca-Cola are among the few brands that are known for their highly shareable content.
“I think we are at this stage where the honeymoon for WeChat accounts is over,” said Baker. “It’s hard to tell by looking at the accounts what the true engagement is. The issue with WeChat is that it’s more of a CRM system than a place to create real engagement."
Baker suggested part of the blame lies with WeChat's templated structure, which restricts the creativity of content. “A lot of Chinese brands are pushing agencies to produce 500-word stories…200 words is not enough. There’s the issue of quantity over quality,” said Baker.
At the same time, WeChat has introduced the mini app and brand zone features to diversify platform offerings for brands. But that may leave brands with a different kind of dilemma if all of the audience’s attention is turned to the mini programme. “If I am a brand and have spent millions of RMBs over the last five years to build up the audience on my official accounts, I am going to be upset,” said Baker.
“It’s a must-do thing for brands to make an effort to do something on mini programmes, because they can recapture some interest and link it back with the official accounts. The brand zone feature is a nice change, it may allow people to find brands more easily, that is great, but at the end of the day people are following brands because they have strong incentives to do that,” he added.
For companies that have a wide portfolio of brands, however, choosing the right channel for the right brands remains more crucial. “Certain channels don’t make sense for certain categories. Social engagement for a soy sauce brand is low, its ecommerce sales are also low, it’s a very different consumer profile,” said James Lee, integrated media director at Kraft Heinz. “Snacks are skewed a lot towards younger consumers and also a lot more commoditised. In that kind of marketplace, you need to create more channels on social to create breakthrough."
At the end of the day, Baker said, brands have to get their basics right on major platforms such as WeChat and Weibo simple because the audiences are there. “They can create a burst of awareness on Douyin and Kuaishou and some other channels. People may spend more time on news media apps, and fashion and entertainment are the categories that are going to have more success in these new channels, but those are more like cherries on the top. They are not going to be the fundamental channels."
The bigger competition is instead Tmall, where a bigger growth is taking place in terms of follower numbers that brands can hold on to, said Baker. “Social channels can’t hold on to the followers, they view your content and then move on, unlike on Tmall where you can have a continuous relationship with them."