Postcards from Xian

Greetings from Xian. The first time I visited this ancient city was 17 years ago. Coming back this second time, here’s what struck me from this trip (1) red bikes, yellow bikes, green bikes and bikes of all colours, (2) cleaner and more orderly and not just the toilets, (3) coffee vs. fried chicken – chalk up a win for Starbucks, (4) mobile technology is huge but there is a catch, (5) rise of the domestic brands – watch out Apple, (6) best and worst food experience of the trip.

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Greetings from Xian, China.

Background on Xian, China

Xian is located in the Shaanxi Province in China. Geographically, it is almost right smack in the middle of China, located around the same latitude as Shanghai and almost directly above Chengdu.

Historically, Xian was the capital of China during many of the early dynasties like the Qin and the Tang Dynasty. Back in the day, it used to be known as Chang’An. Today, Xian has a population of 8.7 million and according to our driver, its key industries are (1) aerospace and defence, (2) higher education and (3) tourism.

To most people, when they think of Xian, they think of the Terracotta Warriors from the tomb of Qin Shi Huang, the first emperor of China and founder of the Qin Dynasty.

What’s changed from 17 years ago?

This was my second time visiting Xian. The first time was about 17 years ago. I remember visiting the Terracotta Warriors but other than that the only other memory was the proliferation of internet cafes in the city centre.

Fast forwarding 17 years to 2017, here’s what struck me from this time around.

Red bikes, yellow bikes, green bikes and bikes of all colours

We previously wrote about China’s sharing economy. While we did not see any umbrella sharing schemes in Xian, we did see a ton of shared bicycles. There were green bikes, yellow bikes, orange bikes and silver and red bikes. On the positive side, the bikes were being used. People were scanning the QR code, unlocking bikes, riding them and then leaving them behind once they reached their destination. On the negative side, there is a lot of excess capacity. Competition is very intense and until one or two of these operators out-spend and out-live the others, I struggle to see how they would recoup their capital.

Cleaner and more orderly and not just the toilets

My second key impression was how much cleaner and more orderly Xian has become. In the past, when I visited some of China’s tier 2 cities, the two things that I dread the most were (i) visiting the smelly toilets and (ii) crossing the street. In many emerging markets, although there may be traffic lights, crossing the street is always an adventure. Drivers  never give way to pedestrians. This time, to my surprise, half of the cars actually slowed down when we crossed at the cross walk.

Secondly, the streets were a lot cleaner than I remember. There were many trash and recycle bins around town and they were being used for the most part. That said, there are some major hygiene issues (I’ve saved this for the ending) but China and Xian has come a long way.

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Guess where this was taken

Coffee Vs. Fried Chicken – Chalk up a win for Starbucks

Given our previous post on the fast food industry, we wanted to see how Starbucks and KFC were doing. By our rough count, Starbucks seems outnumbered KFC by a ratio of 5-to-3 in Xian. In total, I think we saw nine or 10 Starbucks and like six KFCs.

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Starbucks in Xian

As a coffee lover, my first thought is that Starbucks is still very under-penetrated. Granted, Xian is not going to be like a typical US city where there are Starbucks around every corner but for a city of 8.7 million to only have a handful of stores clearly shows that there is scope for a higher concentration.

This impression was corroborated by what I saw when I visited the local Starbucks one day around 5pm. The first thing I noticed was that every single table was full. Secondly, the price point for a Grande Black Coffee in Xian (Rmb 22) is only 10% lower than that of Hong Kong (HK$29). Given the difference in overall cost of living, this gap is remarkably small. Overall, I came away feeling more optimistic that China will be the future growth engine of Starbucks.

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Dicos – Local competitor to KFC

Mobile technology is huge in China but there is a catch

Ahead of this trip, we’ve heard and read about how China is evolving into a cashless society where everything can be paid for using your mobile phone. Unlike the West where credit cards dominate, in China, it is all about AliPay and WeChat Pay. We were eager to try this out but there’s a catch. You need to have a local bank account.

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As Hong Kong residents, it is possible to set up an account with AliPay HK or WeChat Pay but that account would only allow us to transact in Hong Kong dollars. Since we could not top up our account in Rmb, we were stuck paying for most things using good old fashion cash. Although this is a problem for foreigners, with 1.3bn consumers, the domestic opportunity is arguably already big enough.

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Delivering one of the many online shopping parcels

Rise of the domestic brands – Watch out Apple

There’s good news and bad news for Apple from our trip. The good news is that despite the early knocks against the iPhone 8, the phone is actually pretty good. Despite only having one lens, the camera was a marked improvement over the dual camera of the iPhone 7-Plus.

The bad news is that China’s domestic consumers don’t seem to care about Apple much. When we asked our guide about the upcoming launch of the iPhone X, his response was  “I’m more looking forward to the Huawei Mate 10”. Around town, we also noted many more ads and store fronts featuring Vivo and Oppo mobile phones.

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Hua Shan – Taken with iPhone 8

Best and worst food experience of the trip

To finish off this post, we share our best and worst food experience from Xian.

One of the best foods that we tried was the Rou Jiaomo (肉夾饃). This is kind of like a Chinese hamburger. It can be filled with either beef, lamb or pork. It was delicious and only costs about Rmb 8. Definitely worth trying.

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Rou Jiamo – Chinese Burger

I’m a big fan of lamb and also a big fan of barbecue. So when you put them together in the form of roast lamb skewers, this combination is hard to beat. It was delicious, juicy and fragrant. It was really enjoyable until….(HEALTH WARNING: You might not want to read on if you have a weak stomach).

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Lamb skewers

I finished it and after walking down a couple of streets, I saw a lady rummaging through the trash and recovering the used sticks.

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Source: Piccsy

Aaargghhh....I guess the cleanliness and orderly part has not reached everyone yet.

 

 

 

 

 

 

Care to share some toilet paper?

A short funny story for a Friday afternoon. After the amusing stories about umbrella sharing, this week, I bring you toilet paper. No, toilet paper sharing is not the latest fad in China. Instead, this story is about how facial recognition is changing toilet paper usage in China. Happy Friday!

A short funny one for a Friday afternoon.

For those that have been following my blog, I have been quite amused by some of the “silly” ideas that have popped up in China’s sharing economy. I had written about “Care to share an umbrella?” and “Care to return an umbrella?”

Well, this week I bring to you toilet paper.

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No, there isn’t an app for people to share toilet paper but there is a machine in China’s toilet which regulate how toilet paper is dispensed in public toilets.

How many squares is fair?

This story is from today’s HKEJ. For those of you that have visited China and had to go to the bathroom, you would have noticed that the way that toilet paper is dispensed is a bit different.

Rather than putting a roll within each stall, they have a central dispenser outside near where you wash hands. So, if you need to use the toilet, you take a few or a lot of squares and then go and do your business inside the stalls.

The problem was that some individuals took too many squares. Rather than taking what they needed, they just grab a lot, perhaps to save for later or use somewhere else.

In order to combat against wastage and improper use, someone came up with a technological solution – Facial recognition.

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Image from cnn.com

In order to obtain toilet paper from the central dispenser, you need to look into the facial recognition camera. At that point, the machine will spit out a few squares for your use. However, let’s say you’ve eaten something bad and need a few more squares. In that case, you’ll have to hold it for nine minutes longer as the machine knows you have just taken some toilet paper and won’t dispense more to the same person until nine minutes have passed.

Did it work?

Yes. According to the story, the city government found that on average the number of toilet paper rolls used declined from 6-8 rolls to about 3 rolls.

Now, if someone can do a similar tally to see if the usage of hand soap has also seen a corresponding increase, that would be fun. Hope you’re not reading this as you are eating.

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Happy Friday!

 

Care to return an umbrella?

About a month ago, we wrote about the latest fad in China, umbrella sharing. Today, the Chinese press provided an update on how that venture has gone. I’m not making this stuff up.

About a month or so ago, I wrote about the latest fad in China’s shared economy – Sharing umbrellas (link here).

There’s been an update. According to the Hong Kong Economic Journal, one of these umbrella sharing companies started operations in April and had rolled out its sharing service in 12 cities including Beijing, Shanghai, Nanjing and Guangzhou. It invested in 300,000 umbrellas with a “no fixed-base” approach. At Rmb60 per umbrella, its initial outlay was Rmb18mn.

Under this system, the umbrellas have a lock on it and in order to use it, you have to pay a Rmb19 deposit and would be charged 50 cents for every 30 minutes of usage. Once the deposit is paid, the renter would receive a four digit code to unlock the umbrella. This is how many of the bike sharing systems are set up.

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That was the theory. In the real world, what wound up happening was that after a few months, most of the umbrellas have disappeared, rendering the initial Rmb18mn a complete loss.

The real winner? The umbrella makers

Normally, one would have thought that a Rmb18mn loss would have kicked some sense into investors but in the current easy money environment where profits don’t matter, the company is doubling down. The umbrella sharing start-up is now saying that the real money is in advertising. You see, there are eight sides to an umbrella and surely someone would be willing to give them money so that they can advertise some dot-com venture on the umbrella. That’s not the end, The company’s ambition have grown, it is now targeting to buy another 30mn umbrellas (i.e. stepping up its initial investment 100x), some with night glow feature and some with a GPS so that they will at least know where the umbrellas have gone.

I imagine that the GPS will show many of the umbrellas in the closest dumpster.

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Postcards from London

Greetings from London! We have just spent two weeks vacationing in London. It seems like everyone had the same idea and chose the UK for their summer holidays. According to stats from VisitBritain, in the first four months of 2017, visitor arrivals are up 11% while spending is up 14%. In addition, in this post, we share some of our new economy impressions on car services, shared accommodation and cord cutting.

Greetings from Sunny London!

For some strange reason, I’ve always been very fortunate with getting great weather whenever I visit London. During this recent trip, it only rained for one out of the 14 days that we were there. And as you can see from the various photos, we are talking about clear blue skies and the need for 50+ SPF sunscreen.

Although I have been to London many times on business before, this was our first family vacation there in like 20 years ago.

In keeping with our Postcard series (e.g. Tokyo and Causeway Bay), here are some takeaways from this trip.

  • (1) Cheaper currency really drawing in the tourists – Tourist arrivals up 11%, spending up 14%
  • (2) New economy experiences – Impressions on Uber, AirBnB and cord cutting

Cheaper currency => Tourist arrivals up 11%, spending up 14%

Chatting with family and friends, it seems like everyone is heading to London this summer. Although we didn’t ask why they were vacationing in London this year, I suspect the cheaper Sterling probably had something to do with the decision.

In order to find some data to back up this gut feel, this was what I found from the VisitBritain website. In the first four months of 2017, the number of visits is up 11% YTD and the total amount of Spending is up 14% YTD to £6.2bn. On a rolling twelve month basis (from May 2016 to Apr 2017), the number of arrivals and the total spend are up 6% and 5%. Both are at the highest levels on record.

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Source: http://www.visitbritain.org

As to be expected, the increase in arrivals was mostly driven by higher tourist arrivals. Those travelling to Britain for holidays were up 26% in 4M 2017  while those visiting friends and relatives were also up 7%. Conversely, given the uncertainty caused by Brexit, the number of business travellers decreased by 4% in 4M 2017.

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Among the various regions, the cheaper currency appears to draw those from the furthest away. Travellers from EU countries only grew 7% in 4M17, North American visitors rose by 16% while those from the Rest of the World was up a whopping 24%.

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Since the visitor data is only released 7 weeks after the end of each month, it would be interesting to see if our impression of strong tourist arrivals is born out for the summer holiday months (June-August).

Implication – UK retailers may surprise on the upside.

New economy experiences – Impressions on Uber, AirBnB and cord cutting

One of the other key notables from this trip is our first time trying AirBnB. Although we had known about AirBnB for some time, in the past, we had always shied away from it for family vacations. I always had this recurrent worry that we would show up with kids in tow only to find accommodation cancelled at the last minute.

Well this time, we gave it a try. To a large extent, this decision was driven by costs. London hotels prices are outrageous. With AirBnB, we were able to cut our hotel bill by 50%.

Are we sold on AirBnB? I’m not sure. While the savings are substantial, every member of our family was very happy when we transited back to the hotel at the end of the first week. We are not talking about a fancy hotel like a Four Seasons but just a solid 4-star hotel. So what did we like and what did we not like about the AirBnB experience?

  • Pros – Savings. Get to see and experience a nice residential neighbourhood. Full working kitchen. Access to washing machine.
  • Cons – You have to really scrutinize the specs. Our assumption that the place will have a TV and A/C was wrong. Cleanliness – it was tidy and neat but it just did not feel as clean as a hotel. We all wished for disposable slippers. The neighbours – As the flat is being used by all sorts of people, we could feel some grumbles directed from our neighbours partly due to the previous occupiers’ behaviour.

Incidentally, during our stay, I read an article that AirBnB is readying a Premium Tier to try to attract higher paying travellers who prefer the amenities guaranteed by fancy hotels (Bloomberg article here). This point definitely resonated with us but I can’t help but wonder what is the right price point for this service. If the savings for this Premium Tier is just 25%, would it be enough to draw higher paying travellers from hotels? I’m not sure.

Ubers, car services and taxis

Relative to AirBnB, I am more sold on Uber. For one, the commitment level is much lower. If one were unfortunate enough to get a bad driver or a bad car, you just have to suffer through the car ride. Rather than being on the hook for thousands of dollars, we’re only talking about tens of dollars.

During our stay, in addition to Ubers, we also rode on taxis and/or booked a car service when possible. From a cost perspective, I was surprised that the cheapest option was actually the car service. Taxi’s were the most expensive option, especially since we usually ran into traffic and what was supposed to be a 15-20 minute ride often took twice the amount of time. Comparing the three, if it costs £20 for the cab ride, the car service would cost £11 while the Uber would be slightly more expensive at about £12. Using another example of a trip to Heathrow, the car service costs £48 whereas a taxi would have cost around £70.

In terms of ease of use, the car service’s app is very similar to that of Uber. You can also track your driver and settle all payments through the app. The only draw back is that it needs a longer lead time (around  20-45 mins) if you want your car. Whereas for Uber, you can usually find a car that is just minutes away.

Implication – If Uber and AirBnB were both to list, I think I would be more positive on Uber than AirBnB.

Cord cutting and unbundling

The last takeaway from our London vacation is “cord-cutting”. Since our AirBnB flat did not come with a television, so for one week, we did away with traditional television. Instead, since the flat had wifi, our family turned to their respective iPhones and iPads for entertainment during those early morning jet-lag hours.

The conclusion is that one really does not need the traditional cable subscription. YouTube and the other streaming service offer more than enough entertainment. Even if one were to be seriously addicted to sports or some premium TV shows, it may be more cost-effective to get a subscription to Netflix or get an NBA/NFL league pass. Rather than spending HK$580/month on a Sports/Entertainment bundle where one only watches 2-3 channels, it makes much more sense to unbundle and pay for what you want.

Implication – Cut cable TV subscription.

To finish this Postcard, I like this quote from our visit to the Harry Potter Warner Brothers Studio Tour – “No story lives unless someone wants to listen.”

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