A walk down neon-enhanced Nanjing East Road in Shanghai can produce more than a few insights into the state of consumerism in China.

First, it’s clear that all foreigners are in continuous need of bags, shoes and DVDs. How we manage to run out of these things so quickly remains a bit of a mystery.

More importantly, the new urban Chinese love to shop, love a good brand name, and clearly don’t mind fighting the sea of people to get in some ‘retail therapy.’

Indeed, according to AmCham Shanghai’s most recent issue of Insight magazine, annual retail sales in China are set to pass 10 trillion yuan soon, though it isn’t so evenly distributed thanks to Shanghai, Beijing, and Shenzhen’s economic dominance.

While governments and business leaders love to tout these huge numbers to inspire awe and of course, more investment, the real future growth for retailers lies in the lower ‘x-tier’ cities where the market varies wildly and is currently much more focused on local brands and products.

Due to the mass migration of an estimated 350 million more people to the cities by 2025, opportunities for foreign companies to reach the urban middle class abound especially in secondary tiers, and are not bound by the levels of market saturation that first-tier cities are experiencing.

Here are some of the important tips from the article on hacking it in any number of China’s hundreds of cities with a population over one million you’ve never heard of:

• The younger generation is the one leading much of the market growth. This isn’t the West where the retirees rule the discretionary spending game, as well as the golf course. Many graduates here find themselves with salaries far above what their parents ever saw. Marketing young isn’t just hip, it’s crucial.
• Both branding and education strategies must be employed to meet the needs of such a vast and diverse nation. Consumers may need to be educated to what your product even is, let alone stands for.
• Control is key. Studies show that companies that can control the whole process of exactly how and where consumers get their products tend to find themselves well positioned for future success. If Beijing and Shanghai were hard, wait until the x-tier fun begins.
• And don’t forget that talent shortage. No article on China business would be complete without mentioning this key issue that still plagues foreign and local businesses alike. The new dynamic of executives being promoted too quickly can seriously hamper the vision and positive future growth of the company. Investments in turnover reduction need to be in place to lessen the effects.

While it is clear from Nanjing East road that more affluent customers don’t mind paying extra for that hip foreign brand, it’s not enough to sit back and rest on your laurels quite yet.

Deloitte Research executive Ira Kalish explains in the article, “While foreign retailers have many advantages, including modern systems, vast experience and deep pockets, the risk exists that local players will become much better and will do so with help from the government.”

Related:

• Beijing’s West Side Gets Hip Retail Makeover

    Channel: Local Wisdom     |