Are exporters ready for the Chinese market?
Exporters to China need to learn the lessons of the evolving market in order to have success.
20 years ago, few people in China had private cars. 10 years ago, Chinese new money spent big on BMWs or Mercedes-Benzs while the Chinese middle class started buying their first cars. Today, the super rich in China drive Lamborghinis, Aston Martins, Paganis or Ferraris while more and more Chinese families are buying their 2nd or 3rd cars.
Well, we all know the Chinese are getting rich and picky, and they are not just spending big on cars. Louis Vuitton bags, the symbol of prestigious status in China 5 years ago, have now become popular accessories for young professionals while people with some more money are carrying Birkins around.
This looks like a perfect rosy picture of a booming market with a fast expanding consumer base which has an increasing personal wealth and strong aspiration for quality goods and services. Fully aware of the market potential in China, global suppliers swarmed into China in the past 2 decades for distribution channels to sell into China but many failed by making 2 mistakes.
First they failed to identify and keep themselves abreast with the changes of consumer needs and behaviour. They believed the Chinese market would absorb whatever they were able to supply as China was huge with diversified needs and lots of cash and Chinese consumers were less sophisticated. China is a fast growing market and so are Chinese consumers. As a matter of fact, with more overseas travel, more products on the shopping mall shelves and access to product and brand knowledge on the internet, Chinese consumers are becoming more picky. In the 1st tier cities and some affluent 2nd tier cities in China, the good days are gone when customers were happy to pay just for foreign brands. Hence, Louis Vuitton is setting up retail outlets in the 3rd tier cities in China, trying to fully capitalise on the remaining consumers’ aspiration for foreign branded products before it totally fades away.
Second, some businesses over-emphasised the importance of distribution channels and market promotion, but forgot the first of the 4 fundamental elements (Product, Price, Place/Distribution and Promotion) of product marketing. If suppliers do not recognise customers’ needs or do not tailor products/services based on their findings of such needs, they will not be able to market and sell to China as nobody will want the products.
Chinese customers may not be as sophisticated in foreign consumer goods and services but they are catching up quickly and they do have their own needs which are different from a foreign suppliers’ previously existing markets. For example, in the pleasure boat sector, a sun deck with an open spa and kitchen on a boat may not be as attractive a feature to a typical Chinese customer as a Karaoke room with indoor smoking facilities, a jewellery locker and a huge massage spa in the master bedroom. To sell to China, manufacturers have to do the long overdue homework and come back to the fundamentals of providing products/services based on target customers’ needs. This does not mean excluding the possibilities of guiding customers’ needs through market education.
More haste, less speed.
China’s economy is slowing down, and the expected national leadership change at the 18th National People’s Congress of P.R China later this year is delaying business decisions. This allows some time for exporters to reflect on their China strategy and develop a feasible plan so that they can build a stronger foothold in China and better seize the opportunities there.