Understanding China's Gen-Z Influencer Economy
In partnership with Highsnobiety, we've published a deep dive research report on China's Gen-Z influencer economy. Entitled "The New Key Opinion Leader is Here: Long Live the Cultural Opinion Leader" — the white paper evaluates how a new generation of Chinese key opinion leaders (KOLs) are growing up on a different set of platforms and changing the rules of influencer marketing.
We call them Cultural Opinion Leaders (COLs). Driven by Gen Z culture, COLs will set the tone going forward for how brands navigate influence in China and beyond.
RESEARCH OVERVIEW
While influencer marketing has become an increasingly core part of the luxury marketing playbook, in China it’s an imperative because of how important word of mouth is in driving credibility and sales. At an estimated size of $242 billion, Chinese influencers drive 10 times the size of social commerce (sales made on a social media platform or directly via an influencer) compared to the US. Given its contribution to global luxury spend, it is well documented that China is one of the most important and lucrative markets for luxury brands. And still, only few have found the right strategy in understanding how to engage consumers on a deeper cultural level. Many will opt for the help of the natives who carry the most influence among young consumers.
Often referred to as Key Opinion Leaders in China, the influence KOLs have when it comes to the marketing strategies of international and local companies in China carries more weight. Yet while most fashion brands continue to fall back on the same list of 50 or so KOLs that have grown large on platforms like Weibo and WeChat, a new generation of KOLs — driven by Gen Z culture in China — are growing up on a different set of platforms and changing the rules of the game as a result — we call them the Cultural Opinion Leader (COL).
This new generation of pioneering tastemakers — that we in Europe and the US often refer to as Cultural Pioneers — have a different cultural context, growing up in China after the ’90s, and correspondingly have a different set of underlying values and motivating factors that drive their interest in fashion and streetwear.
As a result, a different class of influential figures who do not fit the traditional mould of Key Opinion Leader are quickly becoming an important part of the ecosystem because of their ability to more deeply engage with, and speak to, a younger audience in a more authentic manner. Much like the Cultural Pioneer, this emerging class of opinion leaders, the COL, is defined by the authority and depth of the engagement they’ve accrued, and not always the scale of their reach.
“Most brands are too busy chasing after short-term numbers or copying each other to really innovate and get ahead of the curve. I've realized there are only so many established fashion KOLs that big brands typically work with. So if every brand is working with them, it becomes increasingly hard to differentiate.”
— Denni Hu
With this in mind, it will become vital for brands to update their influencer marketing strategy in China going forward. With data provided by research firm and social listening platform TD Reply, we’ve found that the engagement rates for the top 50 traditional fashion KOLs on Weibo, WeChat, and Douyin have consistently been stagnating or declining over the past 18 months. Additionally, nearly every expert we spoke to cited “influencer fatigue” as a very real concern — both on the client and talent side — broaching an urgent question around “what next” for the KOL economy, now that the COL has entered the space.
Through the insights Highsnobiety collected, in collaboration with Tony Wang from the consulting firm Office of Applied Strategy, it’s clear that there needs to be an entire revamp when it comes to how brands identify, work with, and employ COLs in China.
Similar to the Cultural Pioneer, the next generation of fashion COLs in China are likewise less interested in “vapid” markers of influence, and thus derive their credibility from their cultural authority around a specific topic. And much like the Cultural Pioneer, they are early adopters of newer social media, content, and commerce platforms, and show more interest in a broader mix of cultural topics outside of fashion.
METHODOLOGY
In order to explore the evolving rules of cultural credibility in China, we spoke with close to a dozen experts within the industry — from brand executives and industry experts to key opinion leaders themselves.
These discussions yielded qualitative insights that we further validated via TD Reply, through web analytics, search data, and social insights scraped from publicly available data on various technology platforms in China
Edison Chen
Edison Chen is a Canadian-born Hong Kong actor, singer, rapper, fashion designer, and entrepreneur. Chen is the co-founder of CLOT, a Hong Kong-based streetwear and fashion label.
Leaf Greener
Leaf Greener is the former senior fashion editor of Elle China. She currently operates as a consultant, cultural opinion leader, and also publishes the WeChat mobile magazine Leaf in collaboration with creative agency 2x4.
Charlie Gu
Charlie Gu is a digital marketing strategist and the founder of Kollective Influence, an agency consulting for brands on China e-commerce and KOL marketing.
Denni Hu
Denni Hu is a Senior Editor at Vogue Business China. Prior to that, she worked for the Business of Fashion on research and analysis for the publication on the Chinese market.
Johnney Liu
Johnney Liu is the co-founder of the China-based brand management and consulting firm CounterCultureClub, which localizes international sports and streetwear brands in China.
Hazel Meng
Hazel Meng is a fashion cultural opinion leader (@榛果大王), with over 1.5M followers on Weibo.
Bohan Qiu
Bohan Qiu is the founder of creative and communications agency BOH PROJECT, based in Shanghai, focusing on brand building and creative direction for international and local brands in the APAC region.
Sensen Lii
Sensen Lii is the founder and designer of WINDOWSEN, a fashion brand known for its futuristic design aesthetic. Lii studied at the Royal Academy of Fine Arts Antwerp and launched his first ready-to-wear collection in Shanghai in 2021.
Emily Sly
Emily Sly is the VP of Global Marketing at Crocs. She oversees all integrated marketing, including go-to market strategy, product and brand storytelling, brand digital media, PR, and social media.
Tianwei Zhang
Tianwei Zhang is the China Markets editor at WWD, based out of London.
Rui Zhou
Rui Zhou is a fashion designer based between Shanghai and New York. She was one of the 2021 LVMH Prize finalists and is the founder of the label Rui.
QUICK PRIMER ON CHINA'S INFLUENCER ECONOMY
Social commerce is booming in China, and has been for the better part of the past decade, driven in part by the influence of KOLs. In 2020, Chinese social commerce reached $242 billion, representing 11.6 percent of all e-commerce sales. And with 357 million people (or a third of the country’s population) having shopped through a social channel at least once in 2020, social commerce in China is as commonplace an activity as IRL shopping is (Source: McKinsey 2019; eMarketer, 2020).
But there’s a paradox to it all. While business is good for the influencer economy in China — with international brands pouring record levels of cash into influencer marketing to gain traction in the mainland — there’s also a measurable, growing level of fatigue with traditional KOLs.
Engagement rates of the top fashion KOLs on traditional social media platforms in China have been stagnating or declining over the past few years. Brands, marketing experts, and influencers alike cite influencer fatigue as a major concern.
However, there’s strong engagement to be found across emerging Chinese tech platforms like Little Red Book, Bilibili, and Poizon. How can we be seeing such high levels of engagement and fatigue at the same time? That answer lies in the rise of an emerging class of influencers that have yet to be tapped effectively by brands, whom we will identify and chart in the coming pages.
A Quick Primer on KOL Marketing
The success of the KOL in China, up until now, is due in part to the sheer scale of the country [1]; the accelerated adoption of mobile devices [2]; the proliferation of digital communication apps with integrated social commerce [3]; and its collectivist culture where word of mouth from trusted sources is more valued [4].
[1] For comparison, in 2019, there were only 300 million Internet users in the US, compared to 855 million in China. Online sales in China generated $1.5 trillion in 2019, more than the next top 10 markets combined (Source: McKinsey 2019).
[2] In many ways, China’s accelerated technology adoption and development is a result of it skipping an entire generation of technology, allowing it to now effectively be several years ahead of the rest of the world when it comes to messaging apps and social commerce. Due to cost, availability, and infrastructure, many Chinese netizens first connected to the Internet through a smartphone instead of a computer — especially in rural regions of the country. China directly transitioned into a mobile-first country. As a result, it’s no surprise that it leads the world in mobile technology adoption and smartphone ownership (Source: Deloitte 2018).
[3] China has developed a mobile apps ecosystem that leads the rest of the world by several years, from mobile payments and messaging to social commerce. Key to this acceleration is the cashless consumer economy and infrastructure based on mobile payments. Mobile payments in China (including peer-to-peer transactions) swelled from $12.8 trillion in 2017 to $41 trillion in 2020 (Source: SCMP, 2018; Brookings Institute, 2020).
[4] It’s practically table stakes at this point to underscore the importance of word of mouth recommendations in China, with some studies finding that word of mouth is almost twice as important for Chinese consumers compared to their American and European counterparts (Source: HBR, 2010).
Especially when it comes to luxury fashion in China, KOLs play a key role in the consumer ecosystem in part because they fill a gap in the media landscape that has historically been fulfilled by editors.
As Tianwei Zhang, a Market Editor from WWD put it: “Chinese influencers are irreplaceable,” because they also function as fashion journalists. Historically, Chinese state media did not cover fashion in the same way that western newspapers like The New York Times, the Guardian, or Le Monde do, each having a dedicated fashion and style section — therefore legitimizing and creating a class of fashion editors that also functioned as traditional tastemakers and industry gatekeepers. Because China's fashion media ecosystem never got the same headstart it had in the West, traditional fashion media in China had to vye to establish its credibility in parallel to the rise of KOLs who gained popularity through platforms like Weibo, WeChat, and Little Red Book [5].
[5] For example, while Vogue US had 118 years before the existence of Instagram to establish its fashion authority within the market (1892 to 2010), Vogue China only had a four-year head start before the rise of Weibo (2005 to 2009).
So, if generating cultural credibility is especially critical to success in China, how do brands get it right? After years of taking a Western-centric playbook and localizing it for the Chinese market, brands are finally starting to understand that this isn’t the optimal approach to building influence in the market.
“China is ahead of the world when it comes to KOL marketing. We’re actually looking at China as the testing ground for pioneering new business models. For example, when you think about live streaming, influencers have been doing a lot of that in China. We think livestream shopping will pick up in the West and we’re using China as a roadmap for how to leverage it as a channel.”
— Emily Sly, VP of Marketing, Crocs
In many ways, China is years ahead of the game — some of the brands we’ve spoken to are now understanding that China is ground-zero for predicting the shifts in digital technology and social commerce that will eventually also stick in the West.
“In some ways, you can think of a KOL post akin to a billboard on 5th Avenue in New York.”
–Tianwei Zhang
China’s accelerated development has allowed it to entirely skip over Western cultural and technological conventions, which renders applying a Western marketing template ineffective at understanding the continued trajectory of China’s influence-driven economy.
INFLUENCER FATIGUE IS REAL
However, what contributed to the rise of the KOL economy is also precisely why we’re seeing KOL fatigue set in. KOLs have become so mainstream so fast, with commercial pressure forcing brands and influencers alike to stick to the same bland content and marketing formats.
Afraid of missing the gold rush, brands and influencers alike lacked the appetite for experimentation and authenticity: resulting in the prevalence of generic and cookie cutter KOL content today.
“We are doing the same thing again and again. Luxury brands tend to be highly conventional, so I get excited when I see brands with a different point of view working with different people.”
— Hazel Meng, Fashion KOL
From a broader vantage point, we are also seeing traditional KOL marketing drive less engagement [6] over time on an aggregate, data-driven level. When we indexed the engagement rates of the top 50 traditional KOLs over the past 18 months, we found either stagnating or declining engagement rates for Weibo, WeChat, and Douyin.
[6] Engagement rate is calculated as a weighted total number of interactions of content per total number of followers. As each platform has its own ER formula, there are different ranges in engagement rate results.
WeChat engagement has been consistently flat, with month-over-month engagement closely following the trendline at a very slight negative slope.
Meanwhile, Weibo — while having a similarly stagnant trendline as WeChat — had more volatility, with the three-month period from May to July 2020 seeing a massive uptick in engagement.
TikTok has been declining steadily month over month, reflecting the most consistent loss in engagement of all three platforms with our index.
This index of top influencers is important given international fashion brands tend to work with the same set of Key Opinion Leaders, season after season. Both in part because these traditional fashion KOLs are the equivalent of magazine editors, but also because brands have generally not been taking as many risks, investing in younger and more emerging KOL talent.
This influencer fatigue underscores the importance for brands to begin identifying and tapping into the next generation of KOLs, many of whom are not as active on traditional platforms like Weibo and WeChat.
“The next generation of social media in China will focus less on how popular you are and more on how good your content is.”
–Bohan Qiu
We are amidst a seismic generational shift that has major implications for the future of commerce in China. The next generation of Chinese consumers, born after the ’90s, are the economic growth engine for the luxury fashion industry, making them a prime audience for brands (and thus KOLs) in the coming decades.
One of the key patterns that emerged from our interviews around influencer fatigue was the desire — especially from younger, Gen Z interviewees — to connect and build community on a deeper level. They are looking for influencers to have a meaningful point of view.
“I’ve always found the term ‘Key Opinion Leader’ strange, because many fashion KOLs aren’t really giving an opinion, a lot of them are just selling a face or fame… that’s not really a point of view. Those kinds of KOLs are just ‘selfie influencers,’ and they get boring quickly.”
— Leaf Greener
“ It gets less exciting. Because of how entrenched the current class of traditional fashion KOLs are, it’s hard for younger influencers to break in.”
— Denni Hu, Vogue Business China Senior Editor
INTRODUCING THE CULTURAL OPINION LEADER
While millennials in China represent the largest annual spend per capita on luxury goods at ¥41,000 RMB compared to Gen Z’s ¥25,000 RMB (or $6,350 vs $3,870), Gen Z consumers are already on par with their Gen X counterparts, and they’re only getting started. The majority of Gen Z consumers in China have only started purchasing luxury fashion in the past year (Source: McKinsey 2020).
The next generation of KOLs will reflect the shifting values of China’s Gen Z consumer. Because of their focus on driving dialogue and creative engagement, we’re calling this new class of influencers the Cultural Opinion Leader (COL).
For a Gen Z cultural consumer, Chinese culture is part of global culture. They are less interested in showing an aspirational and manicured representation of their lifestyle, and more driven by fostering community around specific topics, niches, and aesthetics that interest them.
“I believe the next generation of KOLs in China are going to create culture — combining domestic and international references online and then translating it into something of their own making. It’s now finally coming back to the community and building it. ”
— Edison Chen
Based on our conversations with influencers, brand executives, and other industry experts, here are some key attributes that characterize differences between the two groups.
For a pre-’90s consumer, China’s status as a rapidly modernizing superpower in the making came along with negative stereotypes. “Made in China” was seen as being of lower quality and new-to-wealth Chinese tourists were stereotyped as being crude and uncultured. And because China was perceived as being a copycat economy with no meaningful contemporary cultural output at the time, fashion KOLs focused on creating the perception of aspiration by using Western luxury brands as levers of credibility and status.
This is no longer the case for a post-’90s consumer. Gen Z have grown up with China as a de facto global superpower, and a tech industry that is three to five years ahead of the world. There’s a growing creative scene, and it’s not slowing down for anyone. Coupled with a strong sense of national pride and identity, Chinese Gen Z are interested not in chasing after global culture and luxury, but being an active participant in driving it forward.
“How Gen Z perceives things is totally different: they view Angel Chen and Marine Serre as in the same category. Our generation wants to support local brands more than the previous generation. We grew up not having this sharp contrast where Made in China means worse quality.”
– Bohan Qiu, Founder of Boh Project
Case in point: There’s a trend that’s gained traction over the past year or two called “guochao” or “China Chic,” in which Chinese consumers prefer shopping local brands over their international equivalents. This trend is specifically driven by a younger generation of consumers in their late-teens or 20s, and includes a demand for domestic luxury and fashion goods. This marks a significant shift in older generations, where “Made in China” was seen as being for goods of a cheaper, lower quality nature. (Source: Nikkei, 2021)
“I have a lot of national pride. I love to see brands engage with Chinese culture and audiences in a tasteful way. I don’t like it when they force something on us. I don't like it when brands take a symbol and slap it on product, like the phoenix on a bag. That’s what a non-Chinese designer thinks we want.
We appreciate when brands have a deeper understanding. For example, I’ve really been in love with Prada for the past few years… They are in the unique position of having supported the restoration of a historical building in Shanghai called Rong Zhai. All their events are in the house, involving a blend of fashion, cinema, and art.”
— Hazel Meng
As a broad generalization, these generational shifts also track the evolution of Chinese fashion designers. This trajectory reflects and emphasizes the COL’s desire to be part of a global cultural community.
With Tier 1 luxury fashion growth more or less capped, the key cities for fashion and streetwear brands will now come from Tier 2 and beyond cities. As a corollary, creative culture coming from those cities will also be important to keep an eye out for, especially as a growing wave of COLs already are and will be coming from those cities.
“When we looked at the expansion plans for CLOT and our other creative projects, we found ourselves increasingly attracted to second tier cities and beyond… Like the rose that grew from concrete, I think these locations are where on-the-ground local culture will be strongest and we’ll find future talent to nurture and help support.”
— Edison Chen
While brands typically focus their KOL activations in Tier 1 cities, savvy houses like Louis Vuitton understand that activating consumers and opinion leaders in Tier 2 cities is key to growth and continued relevance — such as with their Wuhan art exhibition “See LV” in Fall of 2020.
“Louis Vuitton is one of the rare brands that knows how to engage with the Chinese market, and has sensitivity when dealing with Chinese culture. They did their first post-pandemic activation in Wuhan, with an exhibition called ‘See LV.’ It was so well received; the message it sent really meant a lot to us. Even a lot of my friends who don’t care about fashion were talking about it online. It said to us ‘Wuhan is back on the map, and it’s not just the site of the virus.’ Not surprisingly, I heard that Vuitton sold extremely well during Chinese New Year in the Wuhan store. It was tastefully done and it’s really what luxury should stand for.”
— Hazel Meng, Fashion KOL
COLs are also active on different platforms. While traditional fashion KOLs are best known for their presence on apps like Weibo and WeChat, COLs are more active on platforms like Little Red Book and Bilibili. Unsurprisingly, when looking at the age distribution of users on various Chinese tech platforms, Little Red Book and Bilibili have the largest percentage of under 24 users at 48 percent and 76 percent, respectively (Source: TD Reply, 2021).
While Weibo isn’t going away anytime soon (much like Facebook in the West), for COLs, the general consensus is that it’s less and less relevant for actually connecting with friends and following influencers, and more a general source of news (especially for celebrity gossip).
Whereas KOL marketing in China traditionally was about finding the largest lowest common denominator to drive influence at scale, COLs are more interested in depth and quality of discussion and engagement. Rather than being driven by it, fashion is one of many creative interests that speak to a broader passion for culture. According to Bilibili itself, the top Gen Z interests for its users include a broad spectrum of verticals: fashion, lifestyle, video games, entertainment, anime, and tech.
According to Tianwei Zhang, KOL marketing in China is 4-5x more expensive than in the West for comparable results. With this being the case, brands have not only a long-term growth imperative to start identifying and working with COLs, but also a cost incentive to build relationships earlier on.
In the following chapter, we outline the key strategies brands should employ to do so.
“Authenticity is more and more important. As we KOLs get more clients, we have to be more selective. I don’t want to seem like a rolodex, I want to build longer term relationships. Fans also have the option to be more selective with their KOLs nowadays, so they want influencers that really match their interests. It goes both ways.”
— Hazel Meng
Please reach out to info@officeofappliedstrategy.com for the rest of the report. In addition to more details on the above excerpt, the white paper contains additional sections on:
— Common Misconceptions Around Influencer Marketing in China
— How To Engage The Cultural Opinion Leader
— Platform Deep Dive on Chinese Gen-Z Growth Platforms (including Little Red Book and Bilibili)