As China gains the title of the largest consumer market — becoming the biggest consumers of cars and the second largest consumers of luxury goods — are foreign companies catering to the desires and demands of Chinese consumers? Will what the Chinese want determine what the rest of the world buys?
There are growing signs that goods are starting to be designed with the Chinese in mind as global consumer companies recognize that failure in China is no longer an option.
In the auto market, cars are being built to suit the preferences of Chinese tycoons. The new Buick LaCrosse luxury sedan has a back seat –extra legroom, extra controls for radio, heating and cooling– largely designed for Chinese entrepreneurs. “In China, the owner of a car such as a LaCrosse tends to be driven during the week. So he or she wants extra comfort in the back,” says a GM spokesman in Shanghai. “So when developing the new LaCrosse – which is sold in the US and China – we paid special attention to the back seat. Customers in the US will benefit from this.”
Premium brands are recognizing that Chinese consumers are increasingly demanding more for their money from foreign brands and are going downmarket to reach more Chinese consumers.
Clothing company, Levi Strauss chose to launch its new, less expensive jean brand, Denizen, in China “to woo the all-powerful Asian consumer.” This is the first time Levi has launched a global brand outside of the US. Denizen hopes to compete for emerging market consumers based on both price and fit. The Chinese with narrower hips, smaller bottoms and shorter legs, generally don’t fit American jeans well.
Sports brand Adidas announced it would launch products for the “affluent poor” in China and expand aggressively in smaller Chinese cities. Managing Director Christophe Bezu said: “In the near future, we want to bring our innovative products and the Adidas experience to more Chinese consumers. This is why we are planning to widen our product offering in lower-tiered Chinese cities. Even though we are a premium sports brand, we plan to offer competitively priced products to different segments of the market.”
China’s sports shoes market is projected to be 69 billion yuan (US$10 billion) by the end of 2010 and 297 billion yuan (US$43.7 billion) by 2020 according to industry analysts. So it’s no wonder even powerhouse sports brand Nike is launching lower-priced products across China, extending its focus beyond wealthy consumers. Nike hopes to dominant in China’s second- and third-tier cities.
Based on UBS Securities research, “sports shoes priced between 170 and 250 yuan (between US$25 and US$37) are best sellers in China’s second- and third-tier cities.”