The mystery of China’s big spenders(2)
“With your purchases you want to tell people that you’ve urbanised, [that] you have a flat, a car, a husband or wife. And you can’t afford to blow [this image] by wearing the wrong tie. It’s not like you’d get a bit of gentle ribbing from your colleagues. It’s social suicide,” says French.
But how do Western brands become products that give Chinese consumers the “face” they aspire to? It’s not as simple as sticking on a hefty price tag. Though this sometimes works. The American beer Pabst Blue Ribbon, which has a distinctly blue collar reputation at home, was successfully launched in China as a luxury product, costing 20 times the US price.
Generally, though, the Chinese have deep-rooted cultural likes and dislikes. Companies have to adapt to local tastes and some have been defter and more nimble than others. High-end lingerie labels, for example, such as La Perla and Agent Provocateur, have failed to crack China. “Chinese women,” French explains, “don’t want to spend a fortune on something that only a man they’ve already snared is going to see.” With 124 men to every 100 women, women don’t feel they have to put on a vamp act to find a partner.
The Home Depot, America’s version of B&Q, has been another notable failure. Few Chinese people have garages in which to store tools, and with armies of impoverished labourers willing to do your house up for a song, DIY has little appeal for China’s aspirational middle classes. At the beginning of 2011, Home Depot closed its last shop in Beijing and now has only seven of its 12 original stores on the Chinese mainland. Ikea, on the other hand, has been a success but only by branding its furniture as “affordable luxury” because high import tariffs when it first entered the market pushed its prices up. The brand also played down the DIY element and promoted its “assembly service”.
Some gourmet food manufacturers, as well, face a near-impossible task in China. Dairy products, for example, are not popular, partly because they’ve historically been associated with nomadic people who lived on the fringes of China and were regarded as barbarians, and partly because many Chinese are lactose-intolerant. Some Chinese in the north eat yogurt and a growing number of parents now feed milk to their children, but most Chinese find the smell of cheese unbearable and are as likely to tuck into a slice of stilton as Western diners are to order a portion of chicken’s feet. If they want to win customers, food manufacturers have to tailor their products to the Chinese palate.
One retailer that has enjoyed conspicuous success is Kentucky Fried Chicken. In the US, KFC is overshadowed by McDonald’s but, in China, KFC has nearly 3,500 restaurants – more than three times as many as its rival – and opens a new branch, on average, every day. But the menu is not one that Colonel Sanders would recognise; one favourite breakfast is a rice porridge with spring onions known as congee.
Meanwhile, Pepsi Co, which produces Lays potato chips, noticed that sales in China were slipping in the summer, and created a range of cool flavours like cucumber, which the Chinese favour in hot months, as well as regional specialities like “numb and spicy” for crisp-eaters in Sichuan.
In the coming decade, understanding Chinese consumers is going to be crucial for both multinational companies and overseas tourist destinations. Resorts all over the world are seeing an increasing number of customers from China.
But the Chinese are also finding more Western-style hospitality on their own shores. Marriot recently opened a Ritz-Carlton resort in Sanya, a tropical island off China’s south coast, and plans to open one hotel a month for the next three years. The American hotel giant Starwood is also expanding at a furious rate.
Simon Cooper, the managing director of Marriot Asia-Pacific, describes China as “an incredible market” and the driver of the company’s Asian growth. It doesn’t hurt that China now has 960,000 multimillionaires who take holidays in Sanya (when they’re not holidaying in France, America or Australia), play golf (their favourite pastime) and gamble up to 500,000 yuan (£51,000) on a hole.
Car sales are also booming. The rich are buying Rolls-Royces (sales of which rose by 800 per cent in 2010) and other ostentatious vehicles, like the Hummer H2, and the car market as a whole is now gigantic. More cars are sold in China than anywhere else in the world, including the US; 13.5 million last year compared with the US’s 11.6 million.
But there is a darker story of insecurity behind much of China’s frenetic shopping. Many people bought cars during the outbreak of SARS – an acute respiratory illness which struck down hundreds of healthy Chinese in 2004 – just so they could avoid breathing in germs on public transport. Other health scandals – from melamine in baby milk to lead contamination – have also encouraged consumers to pay a premium for “trusted” Western brands.
And it should never be forgotten that frugality is still deeply ingrained within the Chinese DNA. Chinese people, on average, save well over a third of their income, in large part because the safety nets that Western consumers take for granted, from medical care to pension schemes, don’t exist. You get ill, you’d better have the money to pay a doctor to get better.
The Chinese like a bargain as much as the rest of us, and young shoppers, while keen to prove they’re no longer poor, are also anxious not to appear brash. “There are a lot of people who don’t want a Louis Vuitton bag because they think it’s the kind of thing someone who owns a coal mine might buy,” says French. “They’re a bit more sophisticated.”
Taylor Yang, a 28-year-old marketing consultant, typifies this new, discerning shopper. “I go to H&M and I pore over Chaobao, China’s eBay,” she says. Instead of luxury brands, Taylor prefers to spend her money on travelling. She spent a month in America last year and has been to Indonesia and the Philippines. And anyway, as a sophisticated consumer, she already knows she can pick up the best handbags much cheaper overseas.
