China is at a crucial point in development. We write on understanding Chinese consumers and retailers in shared values, the economy and key demographics.
Economists are divided on China. Some pick up on rising debt levels and low inflation rates, which can reflect low consumption. Others argue that Chinese consumers are ‘still kicking’, pointing to high market performance across sectors such as automobiles and electronics, and global industries such as entertainment and fast food investing heavily in the People’s Republic.
One thing remains clear: China’s rapid transformation over the past 10 years is unparalleled, unprecedented and momentous. Wealth and income have enjoyed fast improvement, consumer spending has more than doubled, and China is on its way to becoming the largest global exporter. The opening up of the economy has led to a sustained change with ripple effects felt across the globe. And expansion is projected to continue as capital increases alongside expanding technology and steady urbanisation.
Jeffrey Towson, author of Amazon bestseller ‘The One Hour China Book’, argues that the landscape is still veering toward growth. Interviewed on a podcast by Chinese online marketplace Alibaba, Towson highlights three indicative projections for 2025 China: 1 billion urban dwellers, 250 million middle-class families, and 75 million Chinese graduates. He describes how an influx of talent will stimulate innovation and further growth, and how consumerism will only rise thanks to Chinese culture.
It is a concept well-outlined by Forbes who last year profiled cultural factors driving Chinese consumerism; namely the expression of ‘self’ achieved through products, including opulent taste, unique self-expression and an unashamed self-regard. This is evidenced in the commercial success of 2016’s Single’s Day, where in 24 hours Alibaba saw record-breaking sales of $17.8 billion, a figure that exceeded Brazil’s total e-commerce sales for that year.
But typically foreign brands, alien to China’s idiosyncrasies, have found it difficult to tap into the psyche of the Chinese consumer. A prominent dragon motif at a recent Victoria’s Secret show was branded “a superficial understanding of Chinese culture” in a blatant attempt to woo Chinese consumers. And eBay, who entered China in 2004, never could recognise the concept of ‘Guanxi’, which in business emphasises the importance of personal relationships in delivering excellent service.
It’s clear that foreign businesses shouldn’t hope to expand into the Chinese market without a tailored strategy, paying close attention to cultural and legal guidelines to selling in China. Towson outlines specific demographics and financial segments that have potential to be key in driving Chinese consumerism if they are caught at the right ‘take-off points’, referring to a point of income growth where luxuries suddenly become affordable to masses of consumers, generating instant explosion in sales. It is in this phenomenon that the global ripple effect becomes palpable worldwide, as it has previously affected availability of items from avocados to coconut oil.
In terms of specific demographics in China Towson suggests aiming products at mothers, who typically control spending of the family unit to a much greater extent than is seen in the western world. He points out also that Chinese mothers, whom he dubs “super-consumers”, have great sensitivity to certain factors, including food safety, as China has experienced problems with food safety scandals. The author also names sports consumers as a market influencer, asserting that in China sports fans have a level of enthusiasm that overshadows that seen in Germany, Brazil, or the UK for example.
The main thing not to underestimate, Towson says, is the power of the internet in China today. “All consumers are online now,” he observes, including the prolific Chinese mother; thus the enormous middle-class demographic that China embodies is unique because it is both wealthy and tech-savvy. And this market is keeping up with technology; currently there are over 1.3 billion mobile users in China, and as Towson affirms an average Chinese consumer might pay for products with a mobile phone over 50 times a month, compared to western countries where mobile payment is just starting to take off.
The internet, as it turns out, is an entirely different landscape in China. Chinese consumers are great users of online chatrooms, games and an overwhelming variety of online shopping sites. As Towson notes, e-commerce in China has actually overtaken traditional physical retail which is still coming into its industry. Shopping sites owned just by e-commerce giant Alibaba are 5 of the top 20 most-visited sites in China, showing the extent of the nationwide trend to shop online. Where commercial space is expensive, and convenience and thrift a priority for consumers, e-commerce has revolutionised Chinese shopping habits, and it seems likely that entrepreneurs like Jack Ma will continue to enjoy success.
And China’s numerous factories and production facilities provide easy retail opportunities for many aspiring merchants, in a country with great extremes in wealth. However, as competing merchants cut corners to increase profits, the incessant competition has had a knock-on effect on product quality. It is for this reason that food safety has been often compromised in China, but other dangerous products have been seized, too, including dangerous technology products such as phone chargers and even fake and unregulated adult toys. Counterfeit items can maximise on profits and for this reason they are rife on websites like Alibaba, with reports that 67% of items on Taobao are fake.
If you have spotted a counterfeit item on Taobao it is important to submit a removal request, in order to discourage this dangerous practice and promote a standard for products and merchants to meet, which will decrease class extremes and support consumer wellbeing. To ensure that the Chinese economy continues to grow, it is vital to recognise how retailers and consumers in China are operating. By understanding market trends, and how Chinese values and culture can impact business, a positive change can be enacted. If you are a brand owner, take advantage of our free eBook on selecting the brand protection solution that's right for your needs.