What an incredibly popular Lunar New Year’s gift tells us about China’s economy

Enough for the whole family.
Enough for the whole family.
Image: Tmall
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This year’s top Lunar New Year gift pack on China’s massive e-commerce website Tmall is a “Three Squirrels” brand nut assortment, which has racked up more than 150,000 sales.  A boxed set of seven packs of pecans and hazelnuts, decorated with a cartoon squirrel riding a horse, it weighs nearly 1,700 grams, or almost four pounds.

Aside from a propensity for delicious nuts, what can Three Squirrels tell us about China?

Online entrepreneurship is alive and well in China. Startup Anhui Three Squirrels Electronic Commerce just introduced the Three Squirrels brand online in 2012. Within less than three months, it was a runaway online hit, and it was Tmall’s best nut seller last year. Overall, online gift purchases this New Year are up 48% from last year, according to Yihaodian.

While China’s banking system continues to prop up bloated state companies, to the detriment of private enterprise, there are other sources of capital out there. In July of last year, Anhui Three Squirrels attracted a $1.5 million investment from US venture firm IDG Capital, followed by another $6 million from Capital Today Group, a Shanghai private equity investor.

Austerity drives aren’t just for the government: An official crackdown on ostentatious government spending has cut sales of everything from baijiu liquor to luxury cars in China this year. Online shopping promotional events like Yihaodian’s New Year Gourmet Street and Tmall’s Laba New Year Products Festival feature steep discounts for food, beverages and electronics, sometimes as much as 70% off. The Three Squirrels nut pack is reduced from 315 yuan to 159 yuan ($26).

Chinese consumers love the cuteness. Three Squirrels now has 480,000 followers on T-mall, which contributed 87% of its sales last year. That’s largely thanks to the brand’s carefully cultivated “cute” image, which includes referring to customers as “master” and purchases as “adoptions.”