I love you. Have a Hello Kitty music player.

The move by Sanrio to license Hello Kitty MP3 sales at a convenience store raises two important questions. First, does this herald the entrance of convenience stores into the consumer electronics marketplace? Kedi says that should the promotion prove successful, it would introduce other products geared at young, successful consumers. There is at least one Shanghai chain - FamilyMart - whose parent in Taiwan sells computers and TVs at its outlets on the island, so a move in that direction is not inconceivable. But Shanghai's appliance trade association is more skeptical about the stores' ability to handle things like warranty service. Simple electronics - MP3/4 players - maybe.

Second, and I may be displaying my own warped understanding of romance here, but are there really 1000 people for whom the perfect Valentine's Day gift is a 358-yuan MP3 in the shape of a cartoon character? I do have to admit, however, that making users tickle the cat's feet to change the volume is inspired.

Pepsi vs. small retailers

Supermarkets in Yantai, Shandong, employed 2.5 liter bottles of Pepsi as loss leaders as a means of tempting customers into their stores during the Spring Festival shopping rush. Normally 5.6 yuan, just above supply costs of 5.52 yuan, one supermarket lowered its advertised price to 4.9 yuan, causing a competitor to drop to 4.8. The supermarkets' supply contract with Pepsi prohibits this kind of price slashing - stores are not allowed to sell below cost - because it wreaks havoc on the company's distribution network: wholesalers buying from supermarkets and things of that nature.

Turns out this is not anything unusual; apparently it's just one of the hazards of doing business in China. Stores take a gamble that Pepsi won't punish them too hard, and all Pepsi does is halt supplies for a short time.

Other major brands often find themselves in similar situations. Moutai liquor has enough brand cachet to prop up retail prices, and China Business says that Coke periodically has to cut off supplies to no less than Carrefour when the store tries to pull something like this.

KLM connects to Chengdu

In a move that will certainly be welcomed by European backpackers headed for Tibet, KLM will start flying from Amsterdam to Chengdu in May of this year. Passengers will be able to fly non-stop from Sichuan to Europe twice a week starting on 28 May. This is the first move by a European or American carrier to open a route to a second-tier Chinese city; Singapore Airlines has had the jump on carriers from those two continents for a while. International airlines are reportedly champing at the bit as they wait for China's domestic airline sector to be deregulated. Could this move to open routes in smaller cities be the start of some strategic jockeying for position?

EZPod: When you need a SNDA button on your remote.

Shanda spends 20 million RMB pushing a remote control

Shanda promoted its new EZPod entertainment system in a 20 million yuan TV ad campaign over the Spring Festival holiday season. Continuing the recent trend of web companies advertising on TV, Shanda ran spots on CCTV 1 & 2, Shanghai Oriental, and Hunan Cable pushing the "broadband remote control." The spending came after rumors that Shanda CEO Chen Tianqiao would sell off his interest in Sina to raise cash for his struggling company, and more recent rumors put Shanda's available cash at 2 billion yuan. That should be enough to cover the multimillion-dollar ad blitz that Shanda is planning using to promote the EZPod and related products this year.

Also in the news this week:

• Uncertainty over how electric bike regulations will be implemented by China's urban governments has resulted in an unstable market with a 60% rate of attrition among manufacturers. With little more than 200 square meters and 20 employees required to set up an assembly facility, no-name brands wink in and out of existence, leaving customers with nowhere to turn for warranty service.
• Relief from price increases in Shanghai's real estate market may turn into a drop of up to 40% if the government doesn't take action. Only 30% of developers have confidence in the market this year.
• Online advertising was a 3.1 billion yuan market in 2005. It accounted for 2.3% of the entire ad sector; search-engine placed ads by firms like Baidu and Google increased their market share.

These summaries were collected from the The China Perspective, which covers major business news and trends in the China marketplace.