With the rapid rise of China’s economy has come a new class of “super consumers” who are ready to assert themselves the way American consumers have over the last century. Already there are more than 500 million online shoppers in China and some 1.5 million millionaires in a country of over 1.2 billion people. This huge population—four times the size of the United States—presents an enormous opportunity for foreign companies, but the long history of China and a language and culture so different from those in Western nations present many pitfalls as well. As Savio Chan and Michael Zakkour explain in China’s Super Consumers, newcomers to the market must take the time to understand Chinese history and culture and the special challenges of doing business in China.
The authors provide the following tips on doing business in China:
- Companies that want to succeed in China need to understand its historical culture. Group harmony matters more than individual liberty. Networks of trusted family and friends are so important that Chinese spend a good deal of energy maintaining these networks. Relationships are more complex and agreements more contingent than in the West. Even the language favors nuance and ambiguity over directness.
- In the last decade, the Chinese consumer has been on a meteoric rise with rapid urbanization and growing disposable incomes. This new wealth, together with the sheer size of the country, has made the Chinese consumer a global force. In addition to the mainland Chinese market, there is a huge demand for the products, services, and experiences Chinese overseas travelers want to buy.
- Retail channels, supply chains, and marketing in China differ somewhat from those in the West, even when they appear outwardly similar. However, China’s distribution infrastructure does not yet match that in the West. Retail channels tend to be single brand and can be expensive to sustain. Therefore, e-commerce is highly attractive and a low-risk path to entry. For luxury goods, Chinese buyers expect to see flagship stores.
- China is not really a single market–it is an amalgamation of markets that are defined both geographically and by customer type. Businesses must understand the need to customize their offerings and approaches to serving each of these markets differently.
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