Understanding the Chinese consumers' desire to Trade Up and Stand Apart

We’ve been interrogating China a lot over the past few weeks…. looking at both how the West views it as an opportunity as well how the domestic Chinese market is evolving.

 

Looking in - there has been a lot of analysis and talk around China’s economic growth ‘rebound’ – alongside what looks like an over exaggeration of companies returning home from Asia, or re-landing manufacture back home or into cheaper Western manufacturing centres.

It’s probably a good thing that people seem to have walked away from viewing China as either the saviour of Asia or of the world, and while there is a lot of scepticism about the growth prospects for China, we don’t see any of the respected sources predicting a hard landing. For investors, the big talk is about growth and expansion potential in China’s Tier 3 and 4 cities. While not as obviously dynamic or ‘brand advanced’ as the Tier 1 and 2 cities, they still represent truly huge markets for both domestic and international brands. The skill is going to be choosing the right timing – ahead of the wave or riding it - and a willingness to deliver products truly appropriate to these culturally different regions.

From within - the Chinese consumer continues to rapidly evolve. Certainly the appetite for authentic luxury brands by the truly affluent shows no sign of abating – but with over one million multi $ millionaires in PRC, why would it? But the watchword is, as ever, authenticity. Brand owners like LVMH are putting their biggest bucks, best people and best ideas into China – and that’s the key to their continued success.

 

The emerging middle class – the Sugar Generation – are using their rapidly growing disposable income and with that becoming extremely brand and quality savvy. While they no doubt like to show off brand logos in ways that Western eyes may see as immature, they are far from naïve. Brands are not bought into at any price or without consumers first appreciating the story or culture of the brand. Much of their knowledge is informed by a blogosphere awash with brand commentary and insight – not a new phenomenon, but one the Chinese have grasped with a fervent enthusiasm; some fashion bloggers have 10m+ regular followers.

The opportunity and challenge for premium Western brands considering entry or looking to develop their offer is their ability to understand the Chinese consumers’ desire to ‘Trade Up and Stand Apart’. JS