Who are the Millennials? Why are we so important that Chinese Millennials? Millennials — people born in the historical period from 1980 to the year 2000, today it is 2 billion people in the world aged 18 to 37 years, of which only 75 million Americans, 410 million Indians and 400 million Chinese.
By 2020, the purchasing power of Millennials will exceed the purchasing power of generation X (post baby boomers born from 1960 to 1980’s). Millennials from young teenagers turned into the most active and the most important part of the population, they were the main consumers, distributors and users of modern technologies. In fact, it was a whale, and a growing market of technology companies, and therefore understanding this generation of consumers, its behaviours and values, it is very important when making investment decisions. They are the ideal customers standard marketing presentations: travel a lot, eat organic, drink crafty ale, sit in Instagram, I use Airbnb, Uber, WeWork from work, pay for the subscription media services, Spotify, Netflix, Amazon Prime.
For example, in 2011 sales of most major brands of Procter & Gamble, Unilever, PepsiCo, General Mills, grew on average by 7% per year, and from that time, despite the growth of the global economy and consumption, growth in sales of these brands was reduced, and in 2016, according to OC&C, the market dropped to a record low of $176 billion From 2011 to 2016 the big brands in the US lost 3% of the market ($22 billion per year) small private companies that was the first time in 50 years. And all probably because the Millennials are the main consumers and they, in turn, have their specific pattern of consumption which need to adapt the established mass-market brands: for example, according to Pew research, Millennials in developed markets, drink less alcohol and more follow a healthy diet than their parent’s generation at their age. They prefer authentic and local brands with its history addressed personally to him, rather than mass-market brands.
Ambassadors of new technologies
According to the Financial Times series of articles devoted to studies of Millennials, China is the leader both in the number of Internet-connected of Millennials in the world into a single market and the quickly-adapting market to new technologies. If earlier for inspiration and understanding of future trends, we mostly traveled to Silicon valley, we are now increasingly looking towards China, and on the basis of his experience of the simulated implementation of the innovation in other markets.
More than 90% of Millennials in China uses mobile payments as a primary method of payment for goods and services. Last year, the number of mobile payments in China exceeded the number of all payments through the payment system of Visa and Mastercard in the rest of the world. According to research by PwC, almost half of all electronic payments in the world in 2017 was held in China via Alipay (Ant Financial is Alibaba holdings) or WeChat (Tencent holdings). For comparison: via Paypal for all of 2017 there were payments in the amount of $451 billion is comparable with a monthly turnover of WeChat or Alipay in 2018.
China is a leader in the use of advanced technologies for payments, followed by India, Brazil and Australia. In the study by Ipsos, commissioned by the Chinese Tencent Holdings, said that the average of the surveyed Millennials carries in his pocket a cash amount equivalent to no more than $26, while those born in 1960 are $84. Against this background, in Beijing, many sellers of goods and services ceased to accept cash. And it’s not even trendy restaurants and simple street sellers of vegetables.
Young people even developed their own slang to communicate through payments. Given the characteristics of the Chinese language, the pronunciation of the sums out loud in tune with the following phrases: RMB (yuan) 52,0 sounds like “I love you”, and RMB 131,4 — “With you to the end of life.”
The next generation will be even more interesting: this postmillenial, Generation Z-consumers born after 2000 and have not seen a world without smartphones.
The Chinese market for technology companies is, in fact, a separate world with a stand-in American technology in the world. But in most cases, with a larger target audience. The exception is Facebook has 2 billion users, compared with 1 billion users, WeChat. If American technological world the largest whales to be FAANG (Facebook, Amazon, Apple, Netflix, Google), in the Chinese market was considered to be BAT (Baidu, Alibaba, Tencent). These three companies are the main investors in the Chinese market.
The yield on the securities market, Xiaomi is the debut of the Chinese equivalent of Apple. Ham received a valuation of $50 billion, while in 2014 they raised a venture round at a valuation of $45 billion Is significantly below the forecast estimate of $100-150 billion In the same time, the low score is primarily due to just the difference from Apple, because at the moment, the company’s revenue is 90% of smartphone sales with low margin and revenue from online services is not growing as planned.
In the near future, the technological world is preparing for three other Chinese mega-IPO:
1. Meituan Dianping — the service delivery and platform for discounts, which unites more than 320 million active users and 4 million stores in 2800 cities in China. Mix concepts Groupon, Yelp, and Uber Foodpanda Eats. Meituan Dianping has acquired the largest Chinese network of bike rental Mobike for $2.7 billion the company was founded in 2010. Its key investors are Tencent Holdings, Sequoia Capital, Booking Holdings (Booking.com). Capitalization, according to the latest round of financing, $30 billion In the next 12 months the company plans to hold an IPO at a valuation of $60 billion Competition it is Ele.me (capitalization of $9.5 billion), which also belongs to Alibaba Holdings.
2. Pinduoduo service grouping purchases through social networks and reducing the manufacturer of the goods and the buyer directly. Kind of Groupon created on the basis of Facebook, but with a Chinese accent — only with a very large role WeChat (Tencent Holdings). The company was created by former Google engineer less than three years ago, and the last venture round closed at $15 billion Now Pinduoduo already applied for IPO of $30 billion Key investors are Tencent Holdings, Sequoia Capital, Cathay Capital.
3. Ant Financial company, formerly known as Alipay, is a subsidiary of China’s Alibaba Group. A payment system with 870 million users — in fact, the equivalent of Paypal, as well as the largest China Fund, managing assets of $345 billion, Ant Financial has closed the last venture round of $14 billion with a total capitalization of $150 billion Profit in the last financial year (end March 2018) amounted to $1.4 billion, Ant Financial has been consolidated in the group in 2014, and key investors are Alibaba Group, Sequoia Capital, Wharton Alumni Angels, Carlyle Group and Temasek Holdings.
If You feel that the capitalization of these companies is extremely overpriced, let me remind you that this week the market cap of Amazon has exceeded $900 billion
To compare the order of numbers, let me also remind you that the current market capitalization of the two companies are holding on their balance sheets the majority of tangible assets (hydrocarbons) of the largest country in the world is $54 billion (Gazprom) and $67 billion (“Rosneft”).
Chinese lessons. As a Russian citizen to succeed in Asia