To an extremely interesting talk at the Hong Kong Trade Development Council in London. Guest speaker is Janet De Silva, CEO of retail consultancy Retail China.
At any such event, you get the big numbers first. Janet’s are awesome. By 2017, China will be home to 661 cities with a significant middle-class population. In the long run, China will be the world’s largest middle-class consumer market. As McKinsey puts it: "the emergence of China as a consuming middle class is expected to have greater impact on global markets than China as a producer of goods."
Retail China helps brands crack the Chinese marketplace, so De Silva is well placed to offer insight to UK companies alert to this huge opportunity.
First truth: the people with money are young. The majority of China’s new millionaires are under 35, having made fortunes from property, technology and the like. As Deng Xiao Ping put it back in 1985 when he opened the floodgates to state-controlled capitalism, a few people will need to get very rich for the masses to follow.
These nouveau riche desire all the material goods you’d expect: fashion, home furnishings (many are new homeowners), cars etc. Some of the highest consumer spending growth is on eating out and alcohol (champagne, in particular, is a favourite tipple for the modern Chinese consumer).
This new spending generation is not experienced in shopping, says De Silva. After all, their parents will never have hauled them around shopping malls on a Saturday morning. So, says De Silva, "an educational component is an important part of the retail experience." Hence the fondness for close attention from shop assistants. One brand that De Silva is helping to launch in China – men’s clothing and accessories line, Cold Method – explicitly offers advice for consumers on how to put together their outfits.
Retail China has also advised Melco China Resorts on breaking into China. Today, after four years of research and relationship-building, Melco is about to embark on building its first five mountain skiing resorts, hopeful that China’s new-found passion for the piste – in 2000, there were 200,000 active skiers in China; in 2006, there were six million – will yield huge business success. Currrently, the equipment and infrastructure at the average Chinese ski resort is apparently pretty basic.
A young consumer base also requires smart marketing. Print and billboards aren’t cool enough for the modern Chinese. De Silva told the extraordinary story of Nokia’s viral video campaign that depicted the Tibetan monk who believed he’d invented hip-hop. It’s uncomfortably patronising, but worth watching as an example of how a phone became a Chinese style statement (the clip is said to have had three million clicks).
Presumably many of the buyers will have been parents and grandparents. As De Silva explained, no-one got fired in China for selling to kids. As a result of the one-child policy, the country’s children are a pampered lot. For many world-renowned luxury brands operating in China, the most important VIPs are the under-14s.
So, in summary of a fascinating talk:
The new, big-spending Chinese consumers are young They’re recent homeowners (therefore interested in speciality furnishings etc) They’re interested in brands (but lack experience in purchasing them) They (and their kids) are probably a bit spoilt Alcohol and eating out are new, exciting experiences Other lifestyle interests might include yoga, sports etc Anti-ageing products are huge in China (male and female grooming products, too) Travel is a growing interest (hence growth in swimwear!) Volkswagen used to be the automatic car of choice, but the others are fighting back.
For more on Retail China, click here.
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