Understanding China’s Big Spenders

on February 1 2012 | in Lifestyle Trends | by | with No Comments

Why are China’s big spenders so difficult to figure out?

In China, the only thing that may be more important than being rich is looking rich. There are two Chinas and the Chinese – particularly the middle class riding between them both – have developed a sense of urgency to distinguish themselves from the majority of the country’s population, which is still desperately poor. “China’s consumers represent an archipelago of wealth amid a sea of rural poverty,” says Arthur Kroeber, the editor of the Beijing-based China Economic Quarterly.

More than 77 percent of the country work the land or have menial jobs that allow them to buy little more than food and clothes. But it’s the middle class that represents a potential gold mine for global brands. But, before these brands can cash-in, they need to understand the consumers they’re selling to.

Most young Chinese who have migrated to the cities have come from somewhere less affluent, even if it was a smaller city rather than a rural farm, so the goods they buy serve as badges to show how far they’ve come.

“For Chinese consumers, Confucian group-think is important and at the moment they are still buying status to show that they have achieved things,” says Paul French, founder of the market research company Access Asia.

This popular group-think makes marketing tricky for Western fashion labels, designed to feed the West’s clamor to stand out. H&M, which now has 77 stores nationwide, and Zara, which has 250, do a roaring trade in the sort of safe basics — like black suits and white tops — young Chinese women love to wear. Unlike their nouveau riche counterparts in Russia, the Chinese don’t go in for zany individualism. “Not all brands are equal,” says French. “The Chinese don’t go for Versace. They don’t want the lemon shirt and the orange pants. No one wants to look like Elton John.”

The Chinese have deep-rooted cultural likes and dislikes. Companies have to adapt to local tastes and some have been defter and more nimble than others. High-end lingerie labels, for example, such as La Perla and Agent Provocateur, have failed to crack China. “Chinese women,” French explains, “don’t want to spend a fortune on something that only a man they’ve already snared is going to see.”

Other flops include the American home improvement store Home Depot, due to the fact that so few Chinese have garages and because hiring impoverished laborers is much more efficient than conducting lengthy do-it-yourself projects.  While the furniture brand Ikea has found success only by marketing its furniture as “affordable luxury” to the middle class and by heavily promoting its assembly service.

Gourmet food manufacturers have hit a snag, too. Dairy products, for example, are not popular, partly because they’ve historically been associated with nomadic people who lived on the fringes of China and were regarded as barbarians, and partly because many Chinese are lactose-intolerant. The American chain restaurant Kentucky Fried Chicken, however, has taken the country by storm with a menu that flouts rice porridge with spring onions. Cucumber-flavored Lays potato chips have also scored big for Pepsi Co.

The Chinese like a bargain as much as the rest of us, and young shoppers, while keen to prove they’re no longer poor, are also anxious not to appear brash. “There are a lot of people who don’t want a Louis Vuitton bag because they think it’s the kind of thing someone who owns a coal mine might buy,” says French. “They’re a bit more sophisticated.”

photo credit: li ming, numero china

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