Why community engagement is important to your business

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By Mo Elleissy

Engaging with your community is about more than just consultation. It is an ongoing, explorative, and above all reciprocal endeavour. It will, if done right, create meaningful and trustful relationships between you and the communities in which you operate. 

The dangers of tokenism in the community engagement sector are very real. Everyone knows the feeling of filling out a survey, or ticking a few boxes on a form only to see no change, and no indication that they have been heard. 

For this reason we need to emphasise the importance of ‘closing the loop’. Letting your community know that you appreciate the time they took in engaging is one thing, but actively communicating back what they have said is much more effective. You are acknowledging, and validating their point of view, as well as opening up a dialogue. Not doing so can indicate a weak community engagement effort and foster cynicism, and cause feelings of scorn and distrust towards your organisation. 

One thing that is imperative from the participants of your community engagement effort and your organisation, is openness. For engagement to be successful, you may may need to alter your thinking, or methods of doing things, or maybe even alter your business practices to better suit your community. By demonstrating that you are truly open, the community will become more responsive as they will feel that their ideas and genuine relationship with you may result in something real. 

Having said this, there are a few things you can do to make your community engagement effort more successful and trouble-free. Firstly, among your team you need to agree on your overall goals and objectives. These can be a variety of different things but ultimately they will fall into one of three categories, or be a combination of relationship building, decision making or capacity building. 

Depending on what you want to do, you can choose from a variety of different engagement methods. These can be either online or face-to-face, or a combination of both depending on your objective and your intended audience .

Frame the conversation, and steer it in the way you want. When you open up the floor for discussion, make sure the discussion has certain guidelines. This will ensure that the topics you want discussed are addressed, and confirm that people who are there to simply argue only have a certain scope to work within.

We need to steer away from the idea that community engagement is a necessary evil with nothing to be gained. If done efficiently, you will create a community that is interested and better informed about your project, open to the idea of dialogue, but above all, they will have positive feelings towards your organisation knowing you've genuinely engaged them. 

Why do businesses take a stand on political issues?

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By Sharaf Khan

The ongoing same sex marriage campaign in Australia has again brought to light the question of the role of business in high-profile social issues. In March this year, more than 30 CEOs from companies including Qantas, ANZ, Commonwealth Bank, Telstra and Holden, signed a letter to Prime Minister Malcolm Turnbull in support of marriage equality[1]. But what prompts businesses to take a public stand on issues that may alienate their customers, staff or other stakeholders?
 
While the personal beliefs of business leaders may influence the specific causes that their organisations are activated on, what makes businesses different to individuals or to society generally, is their ultimate commitment to profitability. Therefore, for a business to make a decision to speak out publically on a political issue, there must be a business case for that action.
 
The first part of this business case relates to the nature of the cause. In recent years, progressive causes like marriage equality and climate change have become far more likely to attract corporate support than conservative issues[2]. Whether this is due to a shift towards progressive values in society or the increased importance of younger demographics is unclear. This has angered many conservative politicians, with Minister for Immigration and Border Protection, Peter Dutton claiming that business leaders should refrain from jamming their “politically correct views down our throat[3]”.
 
What we’ve seen in both the US and Australia, is a stronger push towards public endorsements when issues reach a high level of support amongst the general population[4]. Taking marriage equality as an example, most polling indicates that the majority of Australians are in favour of changing the Marriage Act[5], and this gives businesses confidence that coming out in favour of marriage equality will have a positive impact on their brand. It also enables an organisation to convey to its current and prospective staff that it cares about the same issues that they do.
 
While businesses will obviously want to maximise any benefit they can derive from supporting a particular cause, they also know that their silence can also have a negative impact. Deloitte Australia recently partnered with the Australian Human Rights Commission to publish a report entitled Missing out: The business case for customer diversity[6]. The report found that LGBTI customers were much more likely than the general population to judge a business on their reputation on diversity issues. A quarter of those surveyed in the report said that a business’ position on marriage equality would impact their purchasing decisions. This figured increased to over 40% for young people[7] .
 
While many senior business figures are undoubtedly passionate advocates for the social causes their organisations support, it is important to remember that these decisions are based overwhelmingly on building reputation, social capital and sales. For those in the community who campaign on these politically sensitive issues, the support of big business may be seen as welcome assistance. What we should be cognisant of is letting business dictate too much of what is on any government’s policy agenda. Without the motivation of profit, it is vital that citizens still lead action on social change to ensure that the full spectrum of issues receive attention, rather than just those that fit within the corporate values of large businesses.
 
[1] http://www.australianmarriageequality.org/open-letter-of-support/
[2] https://www.gsb.stanford.edu/insights/when-business-gets-political
[3] http://www.afr.com/business/big-business-backs-marriage-equality-campaign-20170315-guyrn4
[4] https://www.washingtonpost.com/news/wonk/wp/2015/06/26/why-companies-are-speaking-up-about-gay-marriage/?utm_term=.81ef002f2d6b
[5] https://www.theguardian.com/australia-news/2017/sep/19/marriage-equality-support-falls-but-yes-vote-still-leads-guardian-essential-poll
[6] https://www.humanrights.gov.au/sites/default/files/document/publication/20170227_Missingout_Customer%20Diversity.pdf
[7] https://theconversation.com/the-market-for-virtue-why-companies-like-qantas-are-campaigning-for-marriage-equality-82905

Will the Same Sex Marriage Postal Survey Cost the Government the Next Election?

By Sharaf Khan

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The marriage equality debate continues to dominate headlines following the Government’s announcement of the Australian Marriage Law Postal Survey. The decision to undertake this voluntary postal survey, to be conducted by the Australian Bureau of Statistics, came after the Government’s repeated failures to pass legislation on a plebiscite through the Senate. The postal survey has been heavily criticised as a waste of taxpayer money and for opening the door for a hurtful and derisory advocacy campaign against the LGBTIQ community.

While the validity of the Government’s decision to appropriate public funds and direct the ABS to undertake the postal survey was upheld by the High Court, the potential political ramifications of the Government’s actions are still to be seen.

Following the Government’s announcement of the postal survey, there has been a major public campaign to encourage people to update their enrolment details or enrol for the first time. This has been undertaken predominantly by the ‘Yes’ campaign and has focused on younger voters, particularly those that have never previously enrolled to vote. During the enrolment period (between 8 and 24 August), the Australian Electoral Commission experienced unprecedented interest with 933,592 transactions processed. This represents an approximately 26 per cent increase when compared to the close of rolls period before the 2016 federal election. 87 per cent of these transactions (812,225) were enrolment changes or updates and these were predominantly for electors aged 25-39. In addition, there were over 98,000 added to the roll of which 65,000 were aged 18-24.

Following the AEC’s 24 August deadline, there has been conjecture as to whether the increase in young voter registration as a direct result of the marriage equality postal survey, will adversely impact the Government at the next federal election. When you look at the numbers, it’s easy to see why. Historically, voters aged 18-34 are much more likely to vote for Labor or the Greens than voters aged over 35. While the vast majority of the 98,000 new electors aged 24 and under, statistics would suggest that by encouraging the activation of young people on an issue that matters to them, the Government has delivered more votes to their opponents. This sentiment was expressed by former Liberal leader John Hewson who described this phenomenon to Sky News as the “Theresa May affect” in reference to the recent British election where an unusually large number of young people voted for Labour.

With the Government continuing to trail Labor in the polls (47 to 53, two-party preferred), this appears to be a miscalculation on the part of the Prime Minister. There are current 28 Government seats that are held by a margin of 6 percent or less which suggest that they Government may be in trouble in some areas. However, without a geographical breakdown of the electorates in which these new voters reside, it is difficult to determine exactly what impact, if any, they could have on the outcome of an election. Despite this, an unfavourable result in the recent AEC electoral redistribution, coupled with an influx of new voters and continuing negative poll results, suggests that the Government is facing an uphill battle to retain power the next time Australia heads to the ballot box.  

Growing Pains: Who decides the rules of the game?

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By Tom Parker

Over the past month, there has been a visible increase in the Australian media reporting and commentating on the dislocation and unease of Chinese behaviour based on a different set of values and beliefs. 

This has included an article published by the Australian Financial Review warning Australian universities of the "red hot patriotism" being displayed by foreign students from China who are now the frontline in China’s ideological war given the growth in conflict between Australian academics and Beijing’s patriotic ideas on sovereignty as expressed through outraged Chinese international students.

In the same week, a convoy of European cars driven by cashed up Chinese protesters revved their engines outside the Indian Consulate in Sydney to make clear their concerns on the China-India border standoff. The drive-by was held on India’s Independence Day and featured a large car sticker suggesting that "Anyone who offends China will be killed”. 

This tasteless tagline comes from Wolf Warrior 2, China’s largest grossing film. 

These spot fires were framed by the chaos of Cambridge University Press (CUP) that played out over four days across the international media, where it had been revealed that China Quarterly, a leading journal on contemporary Chinese affairs had agreed to requests from Beijing to block readers in China from accessing sensitive articles. 

The decision, no doubt was made by CUP to continue to receive China’s party state approval and access to the Chinese academic market and international students. However, the negative international media attention and threat of academic protests coupled with reputational brand damage may have swayed Cambridge University Press to reject the request to remove contentious articles and restored them back online. 

The China Quarterly non-decision highlights the vexed issue of China’s influence and the complexity of engaging with China. 

In 2002, China scholar Perry Link penned an article that introduced The Anaconda in the Chandelier, where he likened Chinese censors to a dangerous snake coiled overhead resting in a fancy light fitting, where the snake sits silently and motionless. Perry suggested the snake doesn’t need to move as there is a constant silent message that makes you decide for yourself and ensure that the shadow overhead requires you make adjustments accordingly. 

In business, often the shadow appears as China’s economic ascendancy - where China may use its growing economic wealth, and the market access of opportunity to create the desired outcome or result. 

Chinese expatriate writer Ha Jin called this type of behaviour the Censor in the Mirror. 

At the Asia Society’s Australia 20th Anniversary Gala in Sydney last week, former Prime Minister John Howard declared that Australia should recommit to foreign investment as well as open trade provided Chinese investors knew and obeyed the existing rules around foreign investment. 

The rules of the game with China are changing and as China is creating a new form of multilateralism, one in which it sets the tone and defines the rules of the game. This includes the $1 trillion, transcontinental infrastructure One Belt, One Road Initiative, and the Asian Infrastructure Investment Bank, which started operation last year. 

These actions coupled with its eventual overtaking of America as the leading world economy  will displace Washington’s soft power in global institutions that helped espouse Western ideals of democracy, and free markets. 

The disputes and disquiet over maps, border stand offs, and ‘sensitive’ articles accessible online in China are the issues at the margin of a bigger theme around whose rules are we going to follow in the future and what are the consequences for Australia and our economy as China expands its economic and geopolitical influence. 

Australia, since white settlement has dealt with two economic superpowers that share Judean-Christian values, rule of law, and Westminster system of government. That may change, and from a business perspective, are our institutions aware and ready for a different set of rules? 

Global Times, a mouthpiece for China’s propaganda and often hawkish views suggested that the Cambridge University Press fiasco was a battle of values, suggesting ‘free discourse and academic freedom sat at the core of human society.' This is indeed reflective of the West’s strengths but when China becomes stronger, Global Times vowed ‘China will call the shots’. 

In a suggestion that Beijing is aware of the long game, the op-ed continued “The real issue is: whose principles better reflect the age in which we live? In this case it’s not true that ‘everyone is entitled to their own opinion”. This is about power play. Only time will tell who is in the right. 

In a twist, that highlights the complexity and absurdity of the current state of China engagement, the Chinese media, in a scene from Utopia mixed with Seinfeld, was banned from reporting Cambridge University Press’ non-ban of the initial ban. 

Perhaps some rules are meant to be broken. 
 

 

Peter Hertan joins Bastion S&GO

The man behind the majority of Victoria’s recent major investments in sports infrastructure and major events, Dr. Peter Hertan, has joined Bastion Strategic and Global Outcomes (S&GO) as a Special Counsel, further enhancing our experience in the infrastructure and sport sector.

Peter brings more than two decades experience in the Victorian bureaucracy including more than a decade as Deputy Secretary, Sport and Recreation and General Manager, Major Sporting Events.

During this time Peter successfully managed key state sport capital works programs including the MCG Northern Stand redevelopment ($450m), AAMI Park rectangular stadium ($257m) and over $600m of upgrades to tennis and entertainment facilities at Melbourne Park.  In addition Peter facilitated relationships across state, federal and territory government departments, delivered major events, orchestrated community development outcomes and furthered integrity in sport frameworks. 

Bastion S&GO CEO Sean Sammon said he was excited that Peter had chosen to join as Special Counsel to share his experience with Bastion S&GO and Bastion Collective clients.

“Peter has consistently been held up as an expert in the sport and infrastructure space.  His experience and history of success in delivering and enhancing sporting landmarks in Victoria speaks for itself. We are very lucky to have access to his expertise and experience,” Sean said. 

Bastion Collective Executive Chairman Fergus Watts said Peter’s appointment continued the Bastion Collective’s focus of bringing together experts.

“For the last six years Bastion Collective has focused on bringing together a team of the most passionate and influential experts in Australia.  Specialist expertise is what Bastion is all about and we couldn’t be more excited to have Peter join the team,” Fergus said. 

Peter said he was looking forward to sharing his experience as a Special Counsel at Bastion, having sat across the table from many of the Bastion directors in past roles. 

“I am looking forward to working with the Bastion team and their clients to help strengthen the collaboration between the private and public sector. I’ve always respected the way in which Bastion puts their clients first, and look forward to continuing to contribute to the evolution of Australian infrastructure and public policy from the private sector.”

As Special Counsel at Bastion S&GO, Peter will work with a select number of clients in the infrastructure and public policy space. In addition Peter will continue in his role as Director, Hertan Consulting. 

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China, China, China – The 3C Model

By Angus Street

The 3C Theory takes on many iterations in the corporate and business world. For an SME it can be a business planning analysis that looks at the company, competitor and customer. In the start-up world, it is a growth tool that integrates culture, capabilities and configuration to drive innovation.

Market pioneers such as Blackmores, A2 Milk, Freedom Foods, Jurlique, and Bridestowe Estate Lavender see opportunities first, bring more and better products successfully to market, and mitigate market ambiguity by orchestrating the incorporation of the following three elements of a China market expansion strategy:

1. CAPABILITIES
Capabilities are a feature, faculty or process that can be developed or improved. Capability is a collaborative process that can be deployed and through which individual competences can be applied and exploited. The relevant question for capability is not “who knows how?” but “How can we get done what we need to get done?” and “How easily is it to access, deploy or apply the competencies we need?”

A business should recognise that to succeed in China a business must look to transform its key processes into strategic capabilities that consistently provide superior value to the customer. It must create these capabilities by making strategic investments and it must establish an internal infrastructure that links together and transcends the traditional export sales business unit. 

If the business does not have the capabilities it should set about hiring, renting, partnering or acquiring before it decides to engage the China market.

2. CAPACITY
Capacity is the power to hold, receive or accommodate.  It’s about “amount” or “volume” and the relevant question related to capacity is “Do we have enough?” and, “What can we supply?”.

Anyone who has dipped their toe in the China market will have had or heard of discussions with large importers requested “10 containers a week”. What is revealed is that many businesses have developed unique processes and capabilities that have left their internal capacity very thin. They are constrained not only by their inability to get their employees skills and know-how to a level where it was needed to scale, but also by the investment it takes to introduce new systems and technology to increase capacity to meet market demands.

If capacity is an issue, use those constraints to your advantage. Perhaps creating a ‘limited edition’ product run will increase the desirability of your brand in a new market. While volume won’t be your market entry strategy, value may just create a competitive advantage that you didn't see.

3. CAPITAL
Capital is the cash, debt or equity needed to expand. Capital can be injected during times of growth, dipped into during times of crisis and build upon sustainability. The relevant questions is not just “how much do I need” but more, “what am I going to use it for” and “when do I expect to receive a payback”. 

It is the linchpin, the achilles heel and quite often the largest barrier to your China market strategy. Capital barriers are much more than just the investment in capabilities or the significant investments in fixed assets to increase capacity. There is also the high costs for regulatory certification, extensive research and development as well as marketing and advertising expenditure to attract eyeballs and build trust. 

While capital and the associated investment cost is what stops many businesses engaging China, it must also be seen as a double edged sword. If your business cracks this difficult barrier, then you are already ahead of the game.  

Keep in mind that entry into the China market is always in some way possible, even though it may be somewhat constrained to your initial visions of market share grandeur.  Start small, start with the capabilities and build a plan to address your business’s capacity and capital issues and remember, Bastion S&GO is able to help you build your 3C China strategy. 

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Australia's Golden Tickets: Countering Complacency

Australia is the lucky country. Even the national anthem highlights the rich deposits of natural resources with the lines “we've golden soil and wealth for toil” along with a prosaic prediction of the mining boom under the guise of “our land abounds in nature's gifts, of beauty rich and rare”.

However, has 26 years of consecutive annual economic growth, strong institutions and the ability to weather global financial challenges, made corporate Australia too “comfortable and relaxed” as foretold by John Howard in 1996?

A recent report by Deloitte Access for Chartered Accountants Australia and New Zealand, found almost two thirds of over 1,500 senior members of the business community believe free trade agreements have little or no impact or are uncertain about them.

Blackmores CEO Christine Holgate, who also chairs the Australia-ASEAN Council Board, often chides corporate Australia for investing more in New Zealand than in the rest of Asian combined.

“Why would you do that when the Australia and NZ economy only adds up to 2 per cent of the world’s economy and …..35 per cent of global growth is coming from China,” Holgate stated at the State of the Nation address in 2016 for the Committee for Economic Development of Australia.

It is a fair point. Why?

Traditionally, Australia’s top three destinations (USA, UK, NZ) for outbound foreign direct investment taken together account for more than 45 per cent of the total outward FDI stock and are all English speaking.

The next highest is Singapore and then PNG, both countries who speak English, reinforcing the notion that when it comes to setting up off-shore, Australian business prefer to stay within their linguistic and cultural comfort zone.

Pragmatically, Australian boards and executive teams base their offshore engagement on legal frameworks, ease of doing business, contacts, and ability to repatriate funds. In many Asian countries, business decisions are based on relationships and networks rather than business models and sound economic principles of supply and demand. Business in Australia is also governed by short termism, where long term growth that dilutes dividends or threatens quick and easy returns is routinely dismissed as too hard or not a priority.

In that context, China is a difficult country to make concrete strategies if there is uncertainty about the veracity of its economic data. Famously, Mao’s failed mass industrialisation initiative, the Great Leap Forward led to millions starving to death based on exaggerated production and crop yields. Recently, the People’s Daily reported that Liaoning province in China’s north-east had been fabricating its economic data over a 3-year period from 2011. In one instance, a Liaoning county had overstated its fiscal revenues by a staggering 127 percent in 2013.

Traditionally, Australia has been caught between its history and its geography. The bi-partisan Asian Century white paper and the Business Alliance for Asia Literacy signed in 2009 by the Business Council of Australia, major corporations and Australian Industry Group sought to pivot education and business towards Asia.

While these initiatives reflect corporate Australia’s maturity, the results are disappointing with former trade minister Andrew Robb suggesting in December 2016 that while Australia had benefited from Asia’s growing middle class “our cultural awareness is meagre, language skills are largely non-existent, and our investment levels in the region embarrassing”.

Robb said that “we trade with the region but in large part we don’t engage with the region”.

The former trade minister’s frustration stems from a historic 18 months that sealed free trade agreements (FTA) with China, Japan and South Korea, and calls by the Abbott government that it was open for business.

It seems that while the doors were opened, no one knew how to walk through to effectively engage or attract investment.

However, some elements of corporate Australia are looking to the government to assist in market access, especially in agriculture, where the proposed ‘dining boom’ and food bowl of Asia’ seems like rhetoric with only 5 fresh items (dairy, beef, table grapes, citrus and nectarines) available for sale in China.

Despite the finger pointing, the reality is that with 70% of Australia’s GDP attributed to the service economy, it is this sector that needs to get out and benefit from the terms negotiated by Australia, especially in China as currently it only accounts for 17% of exports.

The China Australia Free Trade Agreement (ChAFTA) provides new or significantly improved market access commitments for Australia’s service sector not included in any of China's previous FTAs (except Hong Kong and Macau). This is further enhanced by Australia securing a Most-Favoured Nation (MFN) clause, meaning that Australia's competitive position will be protected in the future if China extends any more beneficial treatment to other trade partners across a wide range of services including education, engineering, environmental, and tourism.

The complacency of corporate Australia toward FTAs must be countered by the competitive advantage they offer. 

In addition, despite a benign two-day Sino-US summit in Florida, where President Trump’s previous hardline stance on China failed to materialise, the prospect of a world where Trump promises to tear apart existing economic agreements, the ChAFTA becomes a golden ticket for Australian industry to leap frog American competitors, who will be handicapped by Trump pandering to US protectionists. 

Australia has also been seen by international markets as a base and bridge into Asia. Canadian dairy giant Saputo made it clear when acquiring Warrnambool Cheese and Butter that this investment was a strategic springboard to capitalize on China’s growing middle class where dairy consumption has increased by 7.5%.

If Trump creates an economic Cold War with China, Australia will benefit through becoming a Checkpoint Charlie for parallel exports and covert channels for investment. Australia’s establishment as unofficial broker also plays well into Chinese cultural ideas of financial counter insurgency.

However, despite the structural and competitive advantages through FTAs and Trump’s potential economic isolationism, corporate Australia needs to use its golden tickets and not just trade but engage with Asia otherwise like former Singaporean Prime Minster Lee Kuan Yew warned, it will be left out and become the “white trash of Asia”.

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Plugged in: Over half of Chinese consumers shop on mobile

By Doris Li

According to the 2017 Total Retail Report released by PwC last week, China has not only become the world’s largest e-commerce market, but is still harbouring huge potential for continued growth across various sectors. Food, luxury and sports products are segments that are predicted to see breakthrough growth opportunities in the China market. Mature product categories including fashion, beauty and cosmetics, and electronic products will experience continuous expansion and rapid revenue increase in all Chinese cities outside Tier 1 locations such as Beijing and Shanghai. 

E-commerce, particularly mobile commerce, is playing a huge role in China’s retail market. The frequency of purchases on mobiles has reached parity with purchases offline. According to the research, approximately  52% of Chinese consumers shop through mobile devices on a weekly or daily basis, a much higher figure than the global average of 14%. This is reinforced with 79% of Chinese consumers buying products via mobiles at least once every month. 

For brands and retailers who are planning to take products to this massive market, there are a few things to know before beginning the journey. 

The O2O model
O2O (Online to Offline) has almost become a compulsory option for new brands entering into the China market. With a large and diverse number of e-commerce platforms in China, global retailers and brands have unprecedented access to Chinese consumers through online distribution channels and stores. Furthermore, the online marketing and sales model provides businesses with access to valuable consumer insights to inform their offline store strategies in China, such as their location, purchasing power and frequency.

While O2O traditionally means ‘online to offline’, in China, it is equally important to focus on the other way around with offline to online. While 40% of consumers prefer to interact with brands in store, there is an increasing number of consumers who interact with brands online. 63% of Chinese consumers follow brands on WeChat after a good offline experience, providing marketers a great opportunity to re-engage with them and build a sustainable relationship.

Personalised digital marketing
E-commerce sites and social media are the key channels for Chinese consumers to search for product information, as 61% of Chinese consumers start product searches at Tmall while 70% of Chinese consumers use social networks as a source of inspiration for purchases. Influencers and celebrities are still playing an enormous role in product endorsement with 29% Chinese consumers using social media to see what brands or products influencers and celebrities endorse. The growth of livestreaming and wanghong (网红, ‘online influencers’) has driven this trend even further and provided another avenue for mobile and social engagement in China.

Meanwhile, Chinese consumers are more attracted to personalised marketing as 31% of them are more willing to see ads that they can relate to, almost double the global average. In order to get Chinese consumers’ attention, it is crucial for retailers to understand the target audience - their interests, their values, preferred language - and tailor messages through different marketing channels. 

Big data
Another growing trend in China’s retail market is the use of big data. China has shown great improvement in data management and has started to build a new digital marketing ecosystem, with significant development in third party data monitoring platforms. These platforms allow retailers to analyse their target customers, achieve accurate marketing and personalise their marketing content to target specific audience segments. All retailers should consider how they can use new technologies to communicate more personal, trustworthy and meaningful messages to their consumers. 

China’s retail market is transforming faster than ever before and leading the global retailing trend towards mobile commerce. How foreign brands adapt their strategies in and outside of China to satisfy consumer preference will dictate how they thrive or survive. 
 

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The Colour of Money: Sport as diplomacy as the AFL arrives in China 

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By Tom Parker 

Australia’s bilateral relationship with China is largely viewed through a tight lens of economic rationalism. Like globalisation, the relationship is often judged by the effectiveness of, and efficiency in securing economic outcomes such as market access, free trade agreements and terms of trade. 

But diplomacy is messy. Australia must balance its economic relationship with China and its strategic relationship with the United States in a world where geopolitics has been replaced by geoeconomics - a term coined by Edward Luttwak as the “grammar of commerce but the logic of war” or the way in which governments influence and advance national interests by leveraging their economic influence. 

Recent events in the disputed South China Sea, China’s growing soft power and influence as well as the nation’s importance in Australia, highlights the tension of this conflicting two track policy position. Is it possible to advance Australia fairly in a regional environment where it has no major strategic influence? How do we broaden our bilateral relationship beyond business? 

Sport may be the answer. 

Sport speaks a universal language of hope, despair and courage. It provides nations with a benchmark for success on a world stage, a de facto foreign policy that provides international bragging rights to domestic audiences.
                    
Australia loves sport.
                    
Sporting success provides this new world nation with a ready-made narrative of rivalries, villains and national heroes that other countries have created through myths, martyrs and conflict. 
                
Australia has a competitive international sporting profile that includes international participation, domestic competitions, and hosting major sporting events. In 2015, Julie Bishop, the Australian Minister for Foreign Affairs, launched the Federal Government’s Sports Diplomacy Program. The program was designed to “reach broader audiences than traditional diplomacy activities allow” and to “inform, engage and influence key demographics, particularly youth, emerging leaders and women and girls.”

Last year, China released a five-year sports development plan that aims to build their domestic sports industry to over RMB¥3 trillion (AU$620 billion) or 1% of GDP by 2020. The plan includes a comprehensive strategy to boost Chinese football capabilities with 7,000 pitches, 20,000 academies, 500 public fitness centers in counties and 15,000 fitness facilities in villages and towns, 10,000 multi-functional playing grounds averaging 1.8 square kilometers of sporting space for each town by 2020. Alongside football, basketball and volleyball rounded out the plan’s “three big balls” that seeks better placements and qualifications in international tournaments for both men’s and women’s teams. This ambitious plan has been reinforced by private Chinese business, who have heavily invested in global football brands such as Manchester City, and paid astronomical transfer fees to entice international players into the Chinese Super League, which has also received record broadcast revenue. 

Port Adelaide fans at Jiangwan Stadium, Shanghai

Port Adelaide fans at Jiangwan Stadium, Shanghai

China clearly has the demand, as articulated by the government, and Australia can supply the expertise and knowledge transfer through sports diplomacy that could deepen our bilateral relations and provide leverage within the context of geoeconomics. 

Port Adelaide fans on their way to the game

Port Adelaide fans on their way to the game

An example of sports diplomacy was on display last weekend in Shanghai when the AFL hosted Port Adelaide and Gold Coast in the very first in-season game for premiership points at Jiangwan Stadium. The match highlighted Australia’s capabilities in delivering an off-shore event that attracted over 10,000 people to attend the game in a retro-fitted art deco facility with less than 12 months of preparation. Despite only 2-3,000 local Chinese attending, the fact that 5,000 South Australians travelled over, many for their first visit to China, highlights the opportunity for people to people exchanges through sport. 

The whole enterprise was also the result of a formal sports diplomacy through the Government of South Australia and Port Adelaide Football Club, who organised visiting Chinese delegations to be hosted at Adelaide Oval games. Mr Gui Guojie, Shanghai CRED CEO, who at the time was bidding on the S.Kidman & Co asset, was so impressed by the game that he later provided a multi-year, multi-million dollar sponsorship to the club. 

The partnership was announced as part of the 2016 Australia Week with Prime Minister Malcolm Turnbull in Shanghai, where the idea of a game was first formally raised. Although Shanghai CRED’s initial Kidman approach was blocked by the Foreign Investment Review Board, Gui Guojie subsequently provided a 25% stake in a joint venture with Gina Rinehart's Hancock Prospecting successful bid. Both Guo and Rinehart were at the match on Sunday. The fact that Guo is politically well connected and is a member of the Shanghai committee of the People’s Political Consultative Conference (CPPCC), highlights that the AFL game was a clear result of sports diplomacy. Guo echoed this during the 2016 sponsorship announcement when he said “This partnership will promote and share the beauty of AFL in China and will enlighten and enrich our sporting culture” and “this moment will be firmly framed in the sport's history of our country”. 

Port Adelaide invested heavily in the China exercise with 35 non-football staff travelling over and organising three corporate areas and a trade expo outside the ground as well as travel packages, local tours, and gala dinners. This effort resulted in an additional 12 new partners, many from China or from Australia seeking to engage with the China market, and this provides comfort for the AFL and the Australian public who view our China relationship by economic outcomes. 

The South Australian Premier led a 200 strong trade delegation, the Victorian Trade Minister brought food and wine exporters, and the Queensland government sponsored the match. Private companies brought Chinese clients and contacts to watch the game, and it was used as intended to become a bridge to showcase a unique Australian cultural product that showcases resilience, mateship and creativity. 

Sport was used to normalise the Sino-American relations through Ping Pong diplomacy and perhaps, AFL will lead the opportunity for Australia to engage and benefit from China’s demand for content and increased capabilities through sports diplomacy. 

Tom Parker attended the match and provided some preliminary advice to the AFL on stadium selection in Shanghai. He was the AFL’s consultant for the exhibition match between Melbourne and Brisbane at the same venue as part of the 2010 Shanghai World Expo. 

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Setting up shop: Unpacking Chinese investment in Australia’s commercial real estate market

Last week, KPMG in collaboration with The University of Sydney released their annual report Demystifying Chinese Investment in Australia, examining and quantifying Chinese outbound direct investment (ODI) in Australia. Globally, Australia remains the second largest recipient of Chinese ODI since 2007, behind only the United States. Unsurprisingly, commercial real estate is still Australia’s largest sector for Chinese investment at 36% of total ODI value. 

Arguably, nobody understands the industry better than Mark Wizel, National Director at CBRE Melbourne, Australia’s largest commercial real estate group and a global leader in real estate services. Since 2009, Wizel has transacted over AU$11 billion in commercial property sales. 

China Insiders sat down with Mark this week to talk about the latest findings and provide a behind-the-scenes look into the stats and facts of Chinese investment in Australian commercial real estate. 

1) What is Australian commercial real estate’s biggest barrier for continued growth in Chinese investment?

Firstly, Australia cannot rely on its intrinsic relationship with China as a safety blanket for continued interest and growth in investment. The industry’s greatest challenge is ensuring that Australian commercial real estate remains competitive and attractive, particularly as the increasingly savvy and knowledgeable Chinese consumers discover more and more markets around the world such as South America and parts of Europe. 

Secondly, we need to look at a range of things with the priority macro area for review being tax and from a technical point of view to ensure our capital cities are more accessible and user-friendly in terms of planning frameworks. 

2) Why does New South Wales, considered the ‘priority investment state’, receive the predominant share of Chinese investment in commercial real estate? Is it a matter of availability, interest, or both? 

While New South Wales will continue to attract strong interest from Chinese buyers, the figures are somewhat skewed towards NSW. If considered in isolation, the average ‘deal size’ of commercial real estate transactions in New South Wales will, generally speaking, always be far greater than Australia’s other capital cities. For example, the average Sydney CBD development site transacts for approximately AU$80 million. Comparatively, Melbourne CBD sites sit at approximately AU$34 million. 

Anecdotally, migration growth and major Chinese corporations such as Alibaba, CITIC Group, AIA (Hong Kong), setting up headquarters in Melbourne is testament to Chinese commitment and affinity for the city, and will contribute greatly to ensuring sustained long-term investment in Melbourne. Melbourne also benefits greatly from being home to the oldest established diaspora of Chinese population, which is best understood from the historic perspective of the Victorian Gold Rush and Melbourne’s Chinatown, the first Chinatown established in the Southern Hemisphere and world’s second, behind only San Francisco. 

3) Since 2009, CBRE has completed an estimated total of approximately AU$9 billion worth of transactions with Chinese buyers and you have built arguably one of Australia’s strongest commercial real estate sales teams. How important is relationship building, or guanxi, in managing Chinese clients? 

A strong, personable foundation is key to developing meaningful and long-term relationships with Chinese clients. Transparency, respect and taking a long term view are the three pillars of building relationships and managing Chinese clients. There is such appeal for people to want to do ‘quick deals’ in this space yet almost always this will result in tricky dealing with Chinese buyers. When I was younger I never knew what my parents meant about not being able to buy experience, now I fully understand and am just pleased that our team is on the experienced side of the ledger when it comes to Chinese investment and dealing with Chinese buyers.

4) What are the differences in Chinese and Australian mentalities when it comes to negotiation and making purchasing decisions? 

The major difference is around the purpose and drivers of the two buyer groups. Despite a reputation for paying strong prices to secure assets, Chinese buys are actually quite risk averse. There is always different ways that buyers see opportunities. For example, if a Chinese group buys an asset at 5 per cent, local bidders may think that it was expensive but that same buyer may be accustomed to buying comparable assets in Hong Kong or China on yields of 3.5%. This mentality, combined with the well-known long-term investment outlook of Chinese buyers, demonstrates why Chinese buyers are such an active player in our market. 

5) There is a belief that as ‘trophy assets are being held onto tightly’ across major Australian cities, Chinese investors will begin to turn to tourism infrastructure and retail assets. Do you agree that commercial property availability is decreasing or 'drying up'? 

Our current supply relates more to the fact that many locally based owners of such assets simply are not motivated to sell assets due to the very low cost of debt at present. This will change overtime and as the cycle evolves. We believe that when these trophy assets across commercial office, retail and hospitality do become available, there will be a wide range of Chinese buyers who will strongly contest to secure the property. There is also no doubt that tourism is right on the radar for Chinese buyers as it is for local owners and local buyers. To think that only 4% of the Chinese population has a passport yet the tourist visitors to Australia from China last year was over 1 million, it is scary to think how lucrative this part of our sector could be in years to come.

Mark Wizel - CBRE Melbourne, National Director
Mark Wizel is highly revered in the industry for his knowledge of capital flows from Asia and his innate ability to discover and deal with mainland Chinese buyers that has seen him build an exceptional CBRE Commercial Agency Sales team. A regular media commentator, Mark has built his sales experience from the days of selling sheepskin products with his father at Melbourne’s Queen Victoria Market to building a team of high performers that deliver exceptional results for his clients. 

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Chaos in the Kingdom of Bicycles

By Tom Parker

I first arrived in Beijing 25 years ago, on a bright December day and made the journey from the brown, low roofed Capital Airport to my Univeristy along a narrow two lane road. Located on the south eastern fringe, the roads were full of weird and wonderful vehicles that looked more like inventions from Thunderbirds than road worthy craft. Trolley buses, motorcycle utes, glass covered tri-shaws and the odd donkey competed with the ubiquitous yellow ‘breadloaf vans’ (面包车) and mini buses with spruikers shouting stops through a megaphone like a race caller at a country meet. A few private cars were visible but Beijing’s broad avenues belonged to bicycles. 

The flat streets of China’s capital were filled with black Flying Pigeons made in Tianjin with a steel frame and big wheels, fixed gears, and low hung handlebars. Heavy to turn and as nimble as a tank, these bikes took a while to get going but maintained a cruising speed that made riding effortless and enjoyable. The joy of joining in a pod of bicycles like a school of fish made you invincible, and gave you greater combined carriage that made buses stop or pedestrians wait until you had passed. 

Part of the three ‘must haves’ that bestowed social status for every family, the bike disappeared as China’s consumption changed and aspirations moved away from bicycles, watches and sewing machines to the modern ‘must haves’ of money, apartments and cars. This shift in conspicuous consumption was highlighted by a comment by a female contestant on China’s popular dating show If You Are the One? (非诚勿扰) when she suggested that she would “rather cry in a BMW than laugh on the back of a bicycle”. 

Aside from automobile aspirations along with increased wealth, bicycles were replaced by efficient metro systems with Beijing building over 100 kilometres of underground railway in seven years in the lead up to the Olympic Games. Shanghai now has the largest mass rapid transit system in the world with over 588 kilometres of tracks and 364 stations. Added to this is cheap taxis with flexible payment systems and ride-sharing app Didi Chuxing that acquired Uber’s exhausted China enterprise, means that there are multiple options available than just the humble bicycle. 

However, over the last six months through tech backed investors, the bicycle has been revitalised as dockless bike sharing has become serious business. Uber for bikes? Maybe. But instead of getting dinked with mints, these bikes are found through GPS and after registering a deposit of between 99RMB - 299RMB depending on your app, you scan a QR code, use bluetooth or WeChat to unlock your bike and you pay as you pedal for 0.5RMB to 2RMB per hour. 

Disruption is a buzzword that is overused and rarely understood but the bike sharing phenomenon is changing Chinese city streets. Like most countries, China had clunky shared bikes that were parked, locked and docked that were mainly used by domestic tourists or international brands seeking a new form of outdoor advertising. The ability to be dock free through inbuilt GPS, and incredibly low rental prices, means people are using these bikes to replace the office walk from the metro station or the local restaurant to home. Just like couriers in China, these bikes are built for the final kilometre of the user’s journey. 

This free-range convenience also breeds disrespect with bicycles being discarded like junk food wrappers littering the streets with some district governments using their hired goons chengguan (城管) or by-law enforcement officers to remove them or stack them in popular locations outside metro stations. Chinese social media circulates images of mass bicycle abandonments during public holidays and festivals at tourist sites as more people engage in this ‘disruptive’ technology. 

The two main bike sharing apps, Ofo and Mobike can be distinguished by their colours, yellow (Ofo) and white (Mobike) as well as their tech investors. Mobike is backed by Tencent Holdings, parent of WeChat, China’s most used app that is more like an ecosystem. WeChat includes a wallet function that enables users to pay for trains, movie tickets and purchase anything using WePay with Mobike added to the wallet, it opens up 890 million active WeChat users to their bikes.  

Not to be outdone, Ofo’s bike sharing service is backed by Didi Chuxing, which announced that it was adding the ability to hire bikes to its app that has 400 million users across 400 Chinese cities so that customers can now hail taxis, private cars, and bicycles. There are already 3 million bright yellow Ofo bikes across 50 Chinese cities with international expansion underway in London and Singapore with another 18 countries targeted by the end of the year. Didi Chuxing is backed by Jack Ma’s Alibaba and both bike sharing companies have managed to convince investors to collectively contribute over $US1 billion. But aside from disrupting people’s travel patterns and city sidewalks, can these bike sharing apps make money?

Many international venture capitalists clearly don’t care as they seem to suffer from FOMO - Fear of Missing Out with Warburg Pincus LLC, Matrix Partners, Citic Private Equity Funds Management Co., Macrolink Group, Sequoia Capital Operations LLC, and Singapore’s Temasek Holdings betting on the benefits of bike sharing. 

Unlike Lyft or Uber, Ofo and Mobike have to buy and distribute bikes as well as develop and maintain the back end technologies, marketing and payment systems. The overheads for inventory are high and they need to replace or repair as well as ensure there are enough bikes on hand for peak periods as you can’t suddenly add more bikes if there is a surge of demand due to weather or major events. Also, the low rental cost and lack of loyalty means that it will take a while before Ofo and Mobike start seeing returns let alone investors recouping their initial capital. It must also be remembered that if these guys are the Uber for bicycles then it’s worth pointing out that Uber is still not a profitable business. 

While Ofo, Mobike and the 30 other bike sharing apps continue to disrupt and fight for market share, they provide greater choice for consumers and may become another marker in China’s consumption cycle, but I treasure the days of Flying Pigeons when the only rideshare was in a noisy minibus or yellow box microvan that looked like a loaf of bread.
 

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WeChat opens its door to target Chinese migrants and tourists in Australia

By Doris Li

Tencent has been working on WeChat Moments ads for a couple of years now. If you are not familiar with WeChat Moments, think of Facebook Timeline and you will get the idea. While Facebook Timeline has been flooded with sponsored ads causing user complaints, Tencent has been careful to keep its ‘user friendly’ promise and not turn WeChat into a commercial playground. 

Tencent’s initial strategy was to ‘set the barrier high’ to prevent the platform from being completely overridden by advertisers competing for space. When WeChat Moments ads first launched in January 2015, the minimum spend was RMB¥5 million (approximately AU$965,000) so it was no surprise that only global brands such as BMW, Coca Cola and Vivo Mobile could afford ad placement on WeChat Moments and justify the spend for only one day of advertising. 

In August 2015, Tencent reduced the spend of WeChat Moments advertising to RMB¥200,000 (approximately AU$38,500) and again in 2016 to RMB¥50,000 (around AU$9,500), opening up opportunities for a much wider scope of brands. According to Tencent, its online advertising revenue reached USD$1.2 billion (AUD$1.59 billion)  in the fourth quarter last year, up 45% from the previous year. Advertising on WeChat Moments was one source of growth with the number of advertisers more than doubling since November last year.

Thanks to Tencent’s massive amount of user data, WeChat Moments ads are able to accurately target consumers based on demographic, interests, behaviours, consumption level and even ‘user environment’ which recognises user’s device type and price, operating system, location, weather status and the way they connect to the internet. Historically, these segmentation capabilities have not been available for advertisers to target Australian-based WeChat users as the market is ‘too small’. 

However, according to our inside source, Tencent has confirmed plans to roll out geo-targeting tools to Australian-based WeChat users which means advertisers can target Chinese residents and travellers in Australia through advertising on Moments. This means Australia is now one of the 16 overseas countries and regions outside of Mainland China that Tencent has opened its Moment ads to, alongside Hong Kong, Macau, Taiwan, Japan, Korea, Malaysia, Singapore, Thailand, Germany, France, United Kingdom, Italy, United States, Canada and New Zealand.

Here is what we think it means for your business. 

Who are you able to reach?
Based on IP information, Tencent are able to target WeChat users who have registered their accounts in Mainland China, wherever they are located in the world. This means that while advertisers are able to reach Chinese WeChat users in Australia, such as new migrants or international students, advertisers will not have access to Chinese WeChat users who have registered their account in Australia, such as Australian-born Chinese or Chinese individuals living in Australia prior to WeChat’s launch in 2011. The upside is advertisers minimise the risk of spending marketing budget on showing Chinese advertisements to Australian WeChat users. 

The Chinese audience you could reach will mainly be new migrants, students and travellers who happen to be in Australia when your ads goes out. The audience can be further segmented based on the age (between 5-60), marriage status, education level and the device they use.

How can you reach them?
In Mainland China, brands can run WeChat Moments ads in a variety of formats, including text, images, slideshows, full-screen videos, embedded videos and 360-degree panoramas. And there is no limit set on the number of formats that brands are allowed to use in one ad. Unfortunately, not all of the formats have been applied to the Australian market yet. Currently, Australian advertisers only have the option of image or video ads (6 seconds or 15 seconds), however the ads can be linked to an HTML5 web page with more brand information and further consumer engagement.

How much will it cost?
It is not cheap, but not scary either! Moments ads charges on CPM (cost per thousand, or the price of 1000 impressions), meaning that your budget can be used up within a day or up to three weeks, depending on how many people you are trying to reach and how quickly you want to reach them.

Talk to us to understand your expected spend on WeChat Moments ads and how to utilise Moments ads to best reach the Chinese market. For more information about WeChat Moments advertising, please contact Doris Li via doris.li@bastionsgo.com.au. 

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Love Me - I'm the Customer

By Angus Street

In my recent article, Shaky building blocks can become China cornerstones, I talked about the importance of having a social, digital and local engagement strategy as part of your China expansion blueprint.
 
With all the hype around Chinese social media channels, Weibo and WeChat, and the Chinese digital giants, Tmall and JD.com, businesses often overlook the most important consumer base right here at home. That is, Chinese-Australian or Chinese migrants with a powerful network of friends and relatives at home in China. 

Word-of-mouth is heralded as a primary decision-making factor in the Chinese customer’s purchasing journey, and our local Chinese diaspora is arguably the greatest channel for this. Brands often don't realise that our local Chinese community hold immense power, sometimes even more than social media and traditional advertising, and are the key first step and channel to accessing the China market. 
 
This misjudgement has been the undoing of many Australian companies. Just look at the disappointing results of Blackmores and Bega’s infant formula and milk powder, which launched in Mainland China without first establishing its position in the Australian market. 

While the consumer in China should be the ultimate objective of your overarching blueprint, from a local perspective there are a few simple changes that every business should consider adopting. 
 
Create Chinese language signage
The single biggest barrier for any Australian business seeking to engage with potential Chinese customers is the language barrier. It is also Chinese consumers’ greatest concern. Start the relationship off on the right foot by spending a few dollars creating Mandarin signage, information brochures and price lists. Hire bilingual sales staff who can communicate with customers in Mandarin. Being able to communicate in their native language allows customers to feel more comfortable and affords them a greater understanding of the product, thus increasing the probability of purchasing.

Showcase your brand story
Chinese shoppers worry about the quality of the goods they buy, particularly cosmetics and healthcare products that are unique or not easy to find in China. Address this by creating a Chinese language story that talks through the manufacturing process, puts a face to your Australian ingredient suppliers and steps the customer through why your product is uniquely Australian.

Provide a tangible brand experience
Chinese consumers are placing increasing value on experiencing the product rather than just the transaction process. To cater for these experiential desires, develop a ‘create, test, trial’ in-store activity. Everything from perfume or skincare making, a tailored embroidery service for fashion garments or a virtual reality offering. To take it one step further and link the brand story to a brand experience, look to create something that is exclusive and unique.  Some great examples include gourmet dining, wine tasting, farm visits or collaborations with iconic Australian events or tourist destinations.
 
Comfort and convenience
At the pointy end of the purchase look to invest in ways to streamline the deal. Integrating Chinese specific Point of Sale (POS) machines, that accept Alipay, WePay & Union Pay, will make the transactions as seamless as possible. You can then look to take it one step further and offer something memorable, such as free gift wrapping or an additional gift with purchase.
 
Maintain an aura of exclusivity
Brand fatigue has crept in among some Chinese consumers, causing them to turn away from brands which have lost their exclusivity and prestige. Brands such as Louis Vuitton, which exploded in popularity among China’s middle-class during the early 2000s and has inspired mass produced counterfeits, has more recently been dubbed a ‘brand for secretaries’ as China’s luxury consumers seek more exclusive and elite items from luxury brands such as Hermes and Chanel. While this is a trend seen primarily in the luxury consumer market, it creates an opportunity for niche brands that offer bespoke and boutique products as a point of difference to big brand luxury. 
 
The Deloitte Millennial Survey 2017 suggested that your business is likely to be 60% more profitable by putting the customer at the centre of your decision making. The steps outlined above are just the start of how to test, learn and segment your product and service to the local Chinese market. The starting point of any local Chinese engagement strategy is to show the ‘love’ to the consumer. So get in touch with us to help craft your integrated approach to attract and retain loyal Chinese customers.

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One Step Beyond: Building Australia’s Chinese tourist capabilities

By Jessie Zhang

Outbound tourists are China’s most powerful export right now. Australia’s environment – clean, green and pristine – has historically sold itself, but the Chinese market is becoming more complex and we need to be more competitive. China has become Australia’s most valuable tourism market in terms of both total spend and visitor nights. In 2015, over one million Chinese tourists landed on our shores, accumulating a total spend of AU$8.3 billion. By 2020, 234 million outbound Chinese travellers are expected to spend over AU$558 billion across the world. By 2020, Australia modestly hopes to attract 1.6 million Chinese tourists.

The ‘tour package’ tourists are giving way to a new breed of Chinese travellers who steer well clear of the flag-bearing group tours we’re accustomed to seeing at the Sydney Opera House and marching down to Phillip Island.These FIT (Free and Independent) travellers have the desire and financial means to explore Australia beyond the busy cities on our eastern seaboard, and they demand unique and authentic experiences, and. They want bragging rights on WeChat. They want to give their friends an opportunity to ask ‘wow, where is that?’.
 
The ‘off the beaten track’ travel mentality is different in the Western and Chinese mind. As Westerners, we are conditioned to believe that the more inconvenient an experience, the more authentic it is. Many of us believe that a restaurant that does not offer an English menu will serve more authentic food and a destination requiring two flights, a bus and bumpy car ride is more exotic, the lack of a crowd meaning you’ve found something special.  While these anecdotal assumptions often ring true, the Chinese view things differently. They are not quite willing to throw away the safety net of a Chinese-language menu, a nonstop flight, and the comfort of a crowd, albeit a small one. In fact, the Chinese often describe an empty place as leng qing or cold and lonely. 

While the trial 10-year frequent traveller visitor visa is an invaluable initiative, there are further important introductions that must be collectively implemented by the tourism industry across our nation’s key destinations – Chinese-language collateral, Mandarin-speaking staff, aviation and overland access, and of course, free Wi-Fi are part of, what I believe, is the Basic Package. 

The Northern Territory is a spectacular example of why we need this Basic Package. My mother and I travelled to Uluru in March. She is a prolific WeChat user with more contacts in her network than I have Facebook friends and Instagram followers combined. I wanted to visit Uluru because I’m 24 with a bottomless travel bucket list. Mum wanted to go because none of her friends had been before, and it would make for great WeChat content. Ironically, the greatest culture shock upon arriving at Ayers Rock Resort in Yulara, was the fact that over the course of the week, we appeared to be two of only a handful of Chinese, or East Asian people there. The kiosk inside the information centre for Chinese-language tours was rarely manned, and when we did bump into one of their vans at Kata Tjuta, there was only three guests on board. 

The first series of photos that Mum uploaded to her WeChat Moments generated the anticipated ooh’s and ahh’s, but it was the repeated questions and comments regarding the logistics of travelling there, getting around and communication that demonstrates practicality is still one of the greatest drivers and predictors of Chinese travel habits. No direct flights from Mainland China, coupled with relatively high cost of a domestic flights to Alice Springs, Darwin or Uluru, compared to that of Northern Queensland or Western Australia, means that the Northern Territory has some big structural issues to overcome to increase their much-deserved market share. 

Maldives is an example of a destination reaping the rewards of the Chinese tourism boom and maximizing the opportunities being offered by this lucrative market. Renowned for its unspoilt beaches and luxurious resorts, the Maldives offers the Basic Package - the convenience of direct flights, visa-free entry, UnionPay banking, and now, all 55 five-star hotels in the Maldives employ Mandarin-speaking staff. Many local shops and restaurants have also begun accepting payments in renminbi, and in 2015, the small island welcomed almost half a million Chinese tourists. 

Greater investment in the tourism sector is essential in building productive capacity and driving long term profitability, innovation and growth. Australian tourism ministers have indicated their commitment to collaborating with the industry to support the development of the essential infrastructure required to cope with the expected demand. To put this into perspective, Australia needs 16 new five-star hotels a year if it is to keep up with the increase in inbound tourists over the next few years. Of course, the Basic Package is not an overnight checklist, but in this Australia - China Year of Tourism, it provides a benchmark of where we need to be to wholeheartedly capture and leverage the Chinese tourism market. 
 

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What does WeChat Index mean to business?

By Doris Li

According to the latest report from Tencent, WeChat’s monthly active users reached 889 million in Q4 2016. However, given that WeChat is a relatively closed communications circle, it has been challenging for marketers to monitor the trends on the platform. With WeChat being a dominant social media channel in China, measuring trends and data on this huge network could bring valuable insights to brands and businesses keen on the China market.  

The situation is now changing with the launch of WeChat Index, an integrated search and browsing behaviour data tool on WeChat that will show the latest trend on the platform for the past 7, 30, or up to 90 days. It provides a social listening tool that most WeChat marketers have been longing for.
 
To use the function, users can either search for ‘微信指数’ (WeChat Index) in WeChat to locate the search browser and then enter the keyword to see the trend, or type ‘微信指数 + Keyword’ to get the result directly. Like most of WeChat’s business-related functions, users need to be able to type Chinese to use it.
 
The purpose of the WeChat Index, as explained in one of Tencent’s media statements, is to ‘help individuals, companies, and governments to understand the real-time social issues, incidents, and public topics that internet users pay the most attention to. It will also help companies to make marketing and advertising decisions, and monitor the effects by analyzing users’ interests.’
 
As one of the largest content distribution platforms in China, Tencent/WeChat holds a huge amount of data which makes WeChat Index a valuable tool for marketers to identify the latest social trends to ride on and create popular topics as well as understand the influence lever of key opinion leaders. However, we won’t get too excited just yet as WeChat Index still has its limitations.

Unclear assessment
While WeChat index is based on the data generated from search queries within WeChat, articles on official accounts and articles shared on personal WeChat Moments, the algorithm used to perform the calculation is still unknown. So it is not clear what the index number refers to exactly, which may leave WeChat Index as a questionable tool to provide actionable insights.
 
Meanwhile, the search keywords are still limited. Only the common keywords are listed in WeChat trend, and many keywords can not yet be found in WeChat Index. Along with some politically sensitive keywords, data for other terms is restricted for no reason. Ambiguity and contradictions are also prevalent across WeChat Index.  

Less targeted
Compared with China’s biggest search engine Baidu index, WeChat Index lacks an ability to customize for time periods, locations and user demographics. Although Tencent has collected comprehensive data from users across different social platforms under the company, it is surprising that WeChat Index still doesn’t have the ability to segment the target audience and identify key trends within any geographical distribution. And unlike search engines, WeChat Index doesn’t allow various combinations of keywords, so essentially, it is only good for getting a general idea on certain popular keywords and trends within the network. 
 
Data fraud
Data fraud has long been an issue on China’s internet which has created a special profession called ‘water army’ (水军): a group of Internet ghostwriters paid to post online comments with particular content or fake clicks to increase social article views and likes. The issue is not new to WeChat with it being revealed last year that some official accounts had found means to manipulate the number of views of their articles. he unknowns of the algorithm of WeChat Index may cause an increase in the ‘water army’.

Despite of the restrictions of WeChat Index at the moment, it is certainly a good start for WeChat to expand the commercial value the platform. It offers marketers a new KPI tool to measure the success of their Chinese social media campaigns.

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Shaky building blocks can become China cornerstones

By Angus Street

KPMG’s China Outlook report has forecast that by 2018 Chinese digital consumers will be spending nearly $1.5 trillion Australian dollars online, and Goldman Sachs predicts that Chinese online sales are tipped to reach AU$2 trillion by 2020.

It is obvious that there is a huge untapped market for Australian companies to sell goods and services to Chinese consumers. However, we also know that the China market is notoriously complex and difficult to navigate. 

Despite the complexity of the market, this is one opportunity worth pursuing. Businesses seeking to tackle the market should break down the opportunity into three channels: social, digital and local.

SOCIAL

  • Get social: Set up a WeChat account. Wechat is the world’s most influential social media network and has transformed the way in which over 855 million people communicate with friends and family, interact with brands and influencers as well as purchase goods and services.
  • Be interactive: Chinese consumers need to be entertained whilst you are educating them on your brand and product. Use videos, virtual reality, music, graphics, emojis, gifs and games to make campaigns fun, interactive and shareworthy. 
  • Stay strategic: Made in Australia is one of your brands greatest associations. To gain legitimacy and build trust, connect your Australian products directly with the Chinese consumer. Talk to the natural, organic or clean ingredients, showcase your supply chain and create a voice that is personal to your brand. 

DIGITAL

  • Coexist online: As Chinese consumers spend more time connected online than any country, the evolution of social media into an ecosystem of ecommerce platforms was inevitable. Map out your customer touchpoints, look to integrate and leverage your digital footprint because driving people through your sales funnel is now more complicated.
  • Go Solo: Adopt a two-pronged approach to selling online. Set up your own ecommerce capabilities to stand out from the crowd. It is also important that you play on the China marketplaces (Tmall, JD.com, VIP.com) to take advantage of their reach. Most importantly, going solo allows you to own the relationship with the consumer and create a unique interaction that no other brand can.

LOCAL

  • The Experience: China’s markets are perhaps the most dynamic – even frenetic - on the planet. Consumers now demand a seamless brand experience. Look to create unique brand experiences for Chinese tourists, engage the local Australian communities and offer something unique to attract the growing student market.
  • Social integration: Creating offline activities to offer the complete brand experience for Chinese consumers will only be worth the investment if you use these activations to acquire new followers on your social and digital channels. This requires more than just putting your WeChat QR code everywhere.
  • Payment Gateways: Don’t let the transaction be the hurdle that trips up the sale. You have done all the hard work getting the shopper in the door, made the experience as personal and culturally sensitive as you can but you don't offer Wepay, Unionpay or Alipay at your POS machine. Such a coach killer.

Keep in mind, there is an interplay between these channels that requires a business to balance its risk and reward appetite. With the right partners, a team with the desired skills as well as a passion to adopt a test, learn, evolve methods you don't have to waste time searching for building blocks. 

Use Bastion S&GO’s cornerstones to just start. Start with a destination in mind, start with questions, start with excitement. Start where you are, with what you have and because this opportunity is being looked at by every Western brand in the world.
 

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Fake it until you make it: Post-Truth Products

By Tom Parker

Last Wednesday marked World Consumer Rights Day (国际消费者权益日), an international observance that is not widely recognised in Australia but is celebrated in China as 3.15 (三幺五) for the date it falls in March.  

The day also has its own CCTV show conveniently named ‘315’ that names and shames domestic and international brands in a tabloid format that trades on customer complaints, malfunctions and misleading marketing. Perceived as a news breaker, the 315 program has claimed high profile corporate scalps such as Apple, McDonald’s, and Jaguar Land Rover, who were forced to recall more than 36,000 (SUVs) after complaints over gearboxes were aired in the 2015. 

The increased focus on consumer protection in a market socialist country reflects the nation’s current dependence on commerce for social harmony. It is a far cry from the early days of economic reform in the 1990s when most complaints were met with mei ban fa (没办法), meaning ‘there is no choice’.  It’s the Chinese expression of ‘get lost because this problem can’t be solved and you won’t win” or if said with menace, the Angel’s iconic refrain ‘No Way, Get F#%ked, F#%k Off!’

The groundswell of consumer protection is matched by significant changes in China’s Consumer Rights Law in 2014 that increased penalties for fraud and false advertising and in the case of counterfeiting shifts the onus of proof away from the consumer to the retailer to prove their innocence for 6 months after sale. 

In 2015, Paris-based Kering SA, owners of luxury brands Gucci and Yves Saint Laurent sued  Chinese e-commerce giant Alibaba for promoting the sale of counterfeit goods. A US judge threw out the case but in China, Alibaba, whose domestic e-commerce Taobao platform has been blacklisted by the US Office of the Trade Representative as a notorious market for knock offs, would need to prove their innocence.

Earlier this month, Alibaba’s Jack Ma, in a well timed post on Weibo during the annual plenary sessions of the National People’s Congress in Beijing, suggested that China’s lawmakers should solve the current ambiguous counterfeiting laws with stiffer laws, enforcement and penalties. 

“There is a lot of bark around stopping counterfeits, but no bite,” Ma said in calling for the government to attack counterfeiters with a coordinated campaign as they did with the nation’s drink drivers. 

But can Jack Ma teach an old dog new tricks? The question of ‘authenticity’ in China has a very unique cultural background that can be difficult to translate or explain in a Western context. 

In the West, authenticity lies in originality of an idea, concept, product or place. It is deeply rooted in the combination of history and aesthetics that places an innate value system on authorship. Traditional Chinese culture believed everything has a precedent but was open to reproduction and replication with the value not in the event, space or creation but in the concept. 

The Forbidden City in Beijing is a classic example of China’s approach to authenticity. It has been destroyed and rebuilt many times over the past 500 years in line with dynastic change, but its central symbolic sense of place as the ‘mandate of heaven’ remains untouched. While international tourists bemoan recent coats of paints, hoping to see the buildings as they were left by the Last Emperor, locals understand that the renovations do not diminish the authenticity of this important imperial relic.
                       
More recently, China like Taobao, has been seen as the site of the counterfeit, the illegitimate and the inauthentic where Western values of ‘authenticity’ are being challenged by China’s perceived lack of care and respect for originality. This sense of difference is amplified through representations of the ‘other’ that reveal perceived deception and cunning that run counter to Western traits of analysis and objective evaluation. 

Copycat culture in China has been made even more ambiguous by the official acceptance of shan zhai (山寨) or counterfeit chic. Literally meaning ‘mountain stronghold’ this term was appropriated from Cantonese, where it was used to refer to low-quality homemade products that were produced in remote areas of Hong Kong during the 1950s away from the long arm of the law. This concept of pirate enterprises was transferred to entrepreneurial Shenzhen industrialists, who produced low cost versions of mobile phones in the early 2000s. 

At the end of 2008, CCTV legitimised the concept of shan zhai culture as the first mainstream mention of this disruptive practice. As Callum Smith notes in his excellent essay for The China Story, shan zai culture has produced an estimated 150 million handsets with a street value of USD$40 billion and sustaining 200,000 jobs.
                    
Smith argues that these handsets with clumsy but subtle variations on brand names, such as ‘NOKLA’ instead of Nokia and ‘Samsang’ instead of Samsung, have played a pivotal role in accelerating the number of mobile phone subscriptions in China, which rose from 270 million in 2003 to 1.2 billion in 2013. The affordability created access to an aspirational lifestyle that may explain why the government has not yet cracked down on counterfeits as it provides a cheap policy solution for the Construction of a Harmonious Society (构建和谐社会).                     

The prevalence of shan zhai also allows for a hierarchy of consumption and social division through ‘authenticity’ of branding making the original more valuable and desirable. As a result Taobao becomes the delivery method to buy and sell this inventive counter-culture that has created a shadow class of imitations from consumer electronics, food, cigarettes, and even U.S. military hardware, to Apple and IKEA products. 

The protection of consumer rights against false advertising and shaming international brands for false claims while shan zhai counterfeiters are celebrated as corporate Robin Hoods means that China is a multi-layered market that requires deep understanding to navigate and succeed. 

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We Three Kings: Understanding China’s Online Influencers

By Doris Li

“How much will it cost to engage a Chinese influencer to promote my products or services?” This is a question I am often asked, and my answer is always the same. It’s a scary amount. 

Like Western online influencers, the cost of engaging Chinese online influencers is dependant on their area of interest and audience size. It generally ranges from $500 to over $10,000 for a single WeChat or Weibo post. Inviting an influencer to take part in a photoshoot or specific curated content or to live stream an event will cost even more with a starting price of around $50,000. 
 
Before we start talking money, it might be helpful to understand China’s three key categories of online influencers.
 
Wang Hong
 
Wang hong (网红) is another new Chinese word that means ‘Internet Celebrity’ that is coined by bringing together 网 (internet) 红 (popular) and refers to Chinese internet personalities who gain viral popularity, usually due to their good looks or sense of humour.
 
There are different levels of Wang Hong, from real-life celebrities including movie stars, singers and Olympic winners, to someone who is more approachable, such as a Taobao store owner or a live streamer with a pretty face. One thing to be aware of is that Wang Hong are not the same as online influencers. Despite the huge number of followers, not all of Wang Hong have what the Chinese netizen calls ‘the trait to get searched’ (热搜体质); meaning the ability to get onto the daily top search list on China’s social media. So don’t be surprised that an attractive e-commerce store owner may get your brand more attention than a two-time Grand Slam winner.
 
Differing from traditional online influencers (or bloggers as we once called them) who usually have expertise in certain areas and produce content for specific topics, such as fashion, beauty, F&B or travel, Wang Hong don’t necessarily need to produce specialised content. For the ones known for their looks, well-polished selfies are the main content they need to generate to draw followers; while those that are popular for their humour work on their content. 

Self-media
 
Self-media, or zi mei ti (自媒体) in Chinese, is a term popularised in the WeChat era. This group is similar to the traditional bloggers that we are familiar with, except that WeChat is their key channel to generate content. This group of influencers usually has specific knowledge in certain areas and spend time creating quality content.
 
Self-media operators sometimes can cross over and also become Wang Hong, which often happens among those specialising in fashion, beauty and entertainment industries. It is less likely for those who are good at writing on business and political issues, unless they are extremely good looking or funny.
 
Marketing account
 
A marketing account, known as ying xiao hao (营销号), refers to influential WeChat or Weibo accounts who have significant follower base. A marketing account is similar to self-media from the content production perspective,  the key difference being that they are usually managed by a professional team rather than an individual.
 
The Australia-based Chinese online influencers we usually talk about fall into this category. While marketing accounts in China usually specialise in different industries and areas, the ones in Australia tend to cover more general topics as the Chinese community here is relatively small. However, with the the growing number and spending power of Australian Chinese, we definitely see the potential for more specialised marketing accounts to be established in Australia.
 
The power of China’s online influencers is phenomenal. Brands are fascinated by the stories of those who have achieved enormous sales in China through influencer engagement. But meanwhile, everyone is worried about the amount of money they need to spend to build their brands and get a return. My suggestion is simple – start with a lower level influencer or use ones at your doorstep, right here in Australia. 

 

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Keeping the faith: Is money too tight (to mention)?

By Jessie Zhang

Over the last year, China and Australia have both exercised intentions for tighter controls on Chinese outbound capital investment into Australia.
 
The falling renminbi has prompted the Chinese government to enforce tighter regulations on outbound capital flow, meaning overseas investment of more than US$10 billion will be embargoed, and mergers and acquisitions valued at more than US$1 billion will be scrutinized if considered outside the investor’s core business activities. To support these regulatory changes, Beijing has further required SAFE, its central administrative agency for governing foreign exchange market activities, to enforce a US$50,000 limit on outbound transfers and a contractual agreement that the money not be used to purchase foreign assets including property, securities, and insurance.
 
Despite anecdotal commentary, this is not a hit against foreign investment but rather a strategic move by Beijing to curb increasing debt levels and an expanding housing market bubble that are predicted to pose significant short-term economic risks to the nation. China has cut its projected growth rates from 7 per cent to 6.5 per cent in response to sensitive market conditions resulting in its slowest growth rate since 1990.
 
The announcement of these new restrictions has caused concern among some Australian developers and the property industry who have benefited greatly from recent Chinese investment. But on closer inspection, these proposed restrictions are not so intimidating, and actually mirror amended foreign real estate investment conditions in Australia. 

In June 2016, NAB became the last of the big four Australian banks to tighten lending to non-resident investors following Westpac and ANZ with the Commonwealth Bank never really pursuing off-shore lending opportunities.

The Australian Prudential Regulation Authority, backed by the Reserve Bank, has been putting pressure on banks since late 2015 to curb the growth in investor lending in general, fearing a housing bubble in Sydney and Melbourne, and unsustainable price increases, especially for the inner city apartment market. 

Yet despite the increasing number of barriers, investment from Chinese state-owned enterprises and privately-owned companies won’t slow. According to Mark Wizel, National Director at CBRE Australia and based in Melbourne, believes the increasing uncertainty surrounding China’s economic outlook and forecasted devaluation of the renminbi is pushing groups to secure assets and position capital with a view towards the medium term. Wizel says that  “Australia provides a stable and dependable foundation for outbound investment strategies for Chinese investors with 25 years of consistent year-on-year growth since 1990-91, and is home to Melbourne, the world’s most liveable city for six years in a row”. Whilst Sydney and Brisbane have both attracted strong interest from Chinese investors and developers, Wizel notes that Melbourne has had a three year head start on the other states due to the deeper links spanning close to 100 years that Australia’s second biggest city has held with China.
 
Furthermore, Chinese investment into Australia has historically been driven by a small number of ‘mega deals’. To put this into perspective, one of the biggest Chinese investors that Australia has received is the New Hope Group, who invested AU$200 million and declared an intention to invest a further AU$1 billion, by 2020. Similarly, Songcheng Performance Development has purchased land for $55 million for the development of an AU$600 million Gold Coast theme park, and Wanda’s purchase of Hoyts was estimated to sit at approximately AU$900 million. 

Despite regulatory changes, industry experts predict that Chinese outbound investment intentions will remain strong through 2017. Mark Wizel suggests “investment activity could potentially slow as deal processes are lengthened, particularly for larger sized deals”. However, Australia will continue to see new Chinese buyers entering the market given that 75% of all commercial property transactions closed by his firm across the back half of 2016 in Melbourne were from mainland Chinese buyers.
 

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