Delving into the Chinese Mindset – What are the analyst reports missing? (Part 1 of 2)

China is a growing marketplace with many complexities. The understanding that China is a continuously evolving, and increasingly important, country both politically and economically has come to represent an entire generation of thought and values that paint China as both a land of opportunities and contradictions.

Recent industry reports paint China as a global marketplace that is full of opportunities. With A.T. Kearney’s “Online Retail: The New Frontier for International Expansion”, China is listed at the top of a list of 10 countries with the highest potential for big-eCommerce growth. According to BCG’s “China’s Digital Generations 3.0: The Online Empire” – China possesses a potential for $420 billion in online sales by 2015. Additional reports from the American Chamber of Business in Shanghai further reinforce the fact that China is a land of growth and opportunities for both domestic and international businesses selling products and services to both individuals and companies alike.

With all this media and intellectual coverage, most of us would agree that China is a fantastic market to tap and grow within. However, these same reports simply gloss over the contradictions and possible obstacles that exist when MNCs and other businesses operate within the country. I recently attended the 2012 China Internet Research Conference, where the discussion focused on the profound growth of Internet usage within rural China, the power of China’s government within Internet governance, and the role of the Internet within social communities. The obstacles facing a fast-growth oriented China include: the continual growth of a community of Internet users that are less affluent, and less educated; the importance of communicating and establishing trust via home-grown social networks and platforms such as Sina Weibo (新浪微博) that are grabbing a near monopolistic share of the user base, the inherent risks of government censorship, and the creation of a uniquely separate societal understanding of Chinese behavior.

So what does this all mean? As most reports would indicate, China has a very large consumer income differential that would split most consumers into the wealthy, the middle-class, and the poor. Most, if not all, western brands focus upon influencing the purchasing decisions of the wealthy based upon their understanding of the brand’s heritage, while at the same time focusing on a need to preserve the Chinese sociological concept of face. Subsequently, with the lower middle-class to the less affluent focusing on price/value comparisons as the primary diffentiator, it leaves many international brands relying upon the expansion of an online middle class in order to tap into the projected online growth. Here is where many things breakdown, as the online middle-class represent an entirely separate social entity from the wealthy, where a brand’s perceived value can be based both upon both heritage to a representation of moral values, and price comparison. Where a brand must not only consider the implications a marketing plan has on the perception of the product, but also on how the product and company relate to Chinese society.

One comment

  1. Pingback: Delving into the Chinese Mindset – What are the analyst reports missing? (Part 2 of 2) « P/O/V | Acquity Group Blog

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