The following analysys has been published on Business Week and arranged by Shuan Rein.
We'd want to suggest focusing attention on this particular topic because it's interesting to notice the continous tendency of chinese market to the attractive business direction showed by Dr. Rein.
The optimistic atmosphere that characterized chinese market in 2007, seems to be particulary in favour of retail market. And we have to admit that for the first part of this year too, it has been true. We can find clear demonstrations of such tendency looking for exemple on these field:
- Electronics retailers (boom consumption of LCD TV and mobile phone)
- Digital market (entertainment and shopping services on web)
- Fashion and Luxury Brands
China, however, is a retail market on the rise. In 2007 China posted 17% growth in retail spending. Electronics retailers Guomei and Suning posted record numbers, and both paint positive pictures for the future as Chinese consumers continue to buy LCD TVs from LG Electronics and mobile phones from Nokia (NOK).
Much of this continued growth is fueled by Chinese under the age of 32. My firm, the China Market Research Group (CMR), conducted in-depth interviews with 500 Chinese between the ages of 22 and 32 in 10 cities to gauge whether fears of a global slowdown would influence their shopping habits. The answer was a resounding no. A full 90% of interviewees said they expected to “spend considerably more” in 2008 than they did in 2007, and the vast majority was “very optimistic” about salary potential in the next two years, with the majority expecting salary increases of 10% to 25% in next year.
No More Lazy Localization
As selling to Chinese consumers becomes more important to multinationals’ bottom lines, the key to winning in China is to understand the needs and motivations of Chinese youth. Many multinationals find their core target market in China is much younger than in other countries. Companies, therefore, need to rethink the products they introduce to China, the sales channels they use, and the marketing-communication strategies they employ. It is no longer acceptable to take what worked elsewhere and transfer it here. China is too important a market for such lazy localization.
Companies must develop winning strategies that capture the hearts, minds, and wallets of Chinese youth. Our interviews suggest they are influenced by different advertising media than older generations. While older generations are still influenced by TV ads more than any other medium, Chinese young people turn more and more to the Internet to learn about products and to shop.
More than 70% of the young people we interviewed said they use search engines such as Baidu (BIDU) to find out more about products. They are also more likely to trust product recommendations on a stranger’s blog than from salespeople in stores or traditional advertising. As one 23-year-old in Wuhan told us, “I like to first read blogs of people who post about items I want to buy. If they give a thumbs up, I am more willing to buy. I do not trust salespeople because they push the brands they represent and get a commission on a sale. They will say and do anything to get me to buy something.”
Focus Marketing on the Right Sites
The Chinese youth we interviewed say they’re less influenced by TV. Respondents said they watch “very little” TV. Instead, they watch pirated DVDs or surf the Web. Chinese youth in cities like Shanghai and Beijing spend almost 20 hours a week online, while American young people spend only about 12 hours.Digital marketing plays a critical role in China and most companies should allocate more than the 5% to 10% they do in the U.S. Right now, most foreign companies’ efforts have focused on Internet advertising. In the near future, mobile-phone advertising will become critical as the number of mobile-phone users in China grows to 600 million by the end of 2008, well over 50% of the world total.
The Razr Phenomenon
Another key to winning the hearts and wallets of Chinese youth is launching marketing campaigns to which they can relate. Due to its popularity, the mobile-phone market should be a great one for global players like Motorola (MOT). However, Motorola made the mistake of failing to relate well to Chinese youth in its marketing messages and have thus lost ground to rivals such as Samsung Electronics.
When the popular Razr was first released in China, it was an instant hit, helping to revive a brand image that in recent years had become stale and identified with old people. The Razr’s sleek design was pivotal in recapturing the coveted Chinese youth market where consumers change cell phones every nine to 12 months, as opposed to consumers in other countries who upgrade every 18 to 24 months.
Chinese youth switch phones so often in part due to the weight placed on the mobile phone as a status symbol. For young Chinese who cannot afford to purchase a house or a car, a fashionable cell phone is the next best opportunity to showcase one’s status. Motorola created an opportunity by offering a sleek phone that Chinese youth considered an aspiration buy.
Better Basic Service
Consumers want to be able to touch products and compare different brands directly rather than being limited to looking at products from behind a counter. The stores that have benefited the most from this are foreign retailers such asCarrefour that have come in and not only specialized based on Chinese needs and preferences, but also adopted a higher level of basic service than what can be found in typical big-box retail stores.
Chinese youth are playing a critical role in the fortunes of multinationals, not just in China, but globally. This trend will continue as Chinese youth get wealthier and wealthier. In order to succeed in China and develop winning strategies, foreign companies must understand the motivations, wants, and behaviors of Chinese youth.
Shaun Rein is the founder and managing director of the China Market Research Group (CMR), a market intelligence firm that helps companies make smarter decisions in China.
More information and sections of this paper on the following link