Knowing More About Brands Chinese Expect Greater Choice
Internet, travel broadens perspective
When it comes to brands, Chinese consumers know more and expect more. Access to the Internet and international travel has widened their consideration set of available products, services and brands.
Mobile communications and word of mouth helped spread this knowledge throughout the country from the major urban centers like Shanghai, Beijing and Guangzhou to less prominent cities.
Chinese consumers have explored the brave new world of products from the West. They now want to mold it to fit more organically into the 5,000 years of Chinese history and culture, which preceded the last several decades of explosive industrial and technical expansion.
After years of climbing toward the middle class, the Chinese are going back to the future. A luxury logo must not only signal wealth, it should assure quality and craftsmanship. The ancient holidays are not just times for increased consumption, but also about restoring ancient meaning and ancestral connections.
These attitudinal and cultural shifts correspond with the slowdown in the rate of economic growth, a shift in national priorities and the declared intention of China's new national leadership to build a consumption-driven economy and rectify the negative impact of rapid development on the environment, product reliability and food safety. In addition:
Consumers are shifting from price consciousness to value consciousness, which will affect brands in all categories.
Luxury brands are becoming more differentiated as consumers regard luxury not simply for the status it implies, but also for the intrinsic craftsmanship.
China will create more Chinese products and brands, and not only in the categories associated with China, like traditional Chinese medicine. China is becoming much like other developed consumer societies where most people, with adequate shelter and enough to eat, seek higher meaning in their lives.
The difference—critical for brands—is that this development will happen in China in ways that are both the same and different from the West. It will be Chinese.
Last year, 70 million Chinese people (more than the population of France) traveled abroad. They returned with expanded knowledge of products and services and international brands. And, for many Chinese people, international travel yielded another important insight: The growing realization that China itself is capable of creating products and brands.
These developments will impact international brands in at least two ways: (1) Consumers will expect more variety; and (2) More Chinese brands will be able to satisfy this expectation. Chinese entrepreneurs have learned what's driving brands in other parts of the world. They can interpret those trends for China.
The animating impulse is less about imitation and more about adaptation. Knowledgeable Chinese consumers and entrepreneurs know what products are available and what they should cost. Chinese businesses are advantageously positioned to deliver branded products that are relevant and competitively priced for Chinese consumers.
It's not that Chinese consumers will lose desire for Western products, but Western provenance alone may not excite them. This new reality requires abandoning the old presumption: That the Chinese consumer has limited knowledge of product and brand; therefore suppliers need to offer only a limited selection.
Some international brands now view China as a second home market. They know not to downplay a brand's foreign heritage, but to modify the product so that it's appropriate for China and Chinese consumers. Hermès invested in a Chinese luxury home fashion brand called Shang Xia, and Estée Lauder launched Osiao as a Chinese-brand skin care product.
Word of mouth
The changing attitudes of Chinese consumers resulted not just from international travel, but also from the power of word of mouth and the rapidity with which opinions and impressions can be shared because of social networks and mobile.
Mobile surpassed all other devices last year as the gateway to the Internet. At this inflection point, Tencent's mobile app, with social networking and location utilities, rocketed in just two years past 300 million subscribers.
The closeness of Chinese families also influences the speed of communication. Young people and laborers, who migrate to coastal cities for work, share their impressions during regular phone calls with the families that remain in China's villages.
The Internet and mobile deliver greater awareness of brands to places where people have online access to products and services that may not be present in local physical stores, although that's changing as international retailers, like Walmart and Carrefour, open hypermarkets.
Until now, Chinese rather than international brands have generally enjoyed the advantage in these locations because they have greater understanding of the local distribution systems, which can be complex. But it's not always easy to ascertain whether consumers prefer Chinese or international brands because many international brands, in China for a long time, have deemphasized their origins.
The ability to talk fast and cheaply on mobile throughout China also is shaping public awareness of the nation's challenges. Going forward to the next stage in China's development requires simultaneously repairing the environmental damage caused by the last stage of fast growth, the degradation of air quality and food safety, and the related erosion of trust.