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IHAVEANIDEA.ORG > articles >  Did Anybody See a Big Red Dragon in the Room?

Did Anybody See a Big Red Dragon in the Room?

Posted on March 13, 2012 and read 2,365 times

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wilbert Did Anybody See a Big Red Dragon in the Room? Wilbert Kragten
Managing Director
BSUR Shanghai

China is hot and big. No matter which magazine, newspaper or interview you read, it’s obvious. The Middle Kingdom is back on the centre stage of the world and it’s going to sit here for while. Strictly speaking, China has always been a very large economy and out of the last 20 centuries, 19 times it was one of the largest. But history is something you learn at school and once politics and companies take over, you tend to get bucked down with that reality. Well, let me say it again and don’t be surprised: China is back and it’s big this time.

China is not an emerging market

Many companies and brands are now considering China as a new growth market. But let’s not think you can just roll into China with your brands. Do not treat China as an emerging market; an afterthought where you ship your existing portfolio to this country. In his book, ‘The end of Cheap China,’ Shaun Rein states that companies should make China an integral part of their corporate planning and product development. And he’s so right about this. Would you really think that a successful Chinese manager will drive his own car? Start by making the back seat a business seat and you are on the right track. Which is quite a profound change to the product development of a car. And if you get it right, the reward is… big. VW paid one of the largest bonuses to its employees in 2011.

The year of the Dragon

You’ve got to love the Chinese consumers for the positive thinking. In many ways other international consumers can learn a lot from them. In general, but especially this lucky year, Chinese consumers are very, very optimistic with a high consumer confidence. Which is the main driver behind any economical growth. In one of their reports, BCG – a consultancy firm – found that around two-thirds of Chinese consumers think they will earn more money next year compared to one-third in the USA and one-fourth of the French consumers. And with that money they will be buying more expensive products, so called “up-trading.” They even have an expression for it. ‘Shi,’ which means shining, showing how well off you are and it is one of the favorite pastimes of the generation Y. Ever seen a pink Porsche without heads being turned when it passes you on the street?

Fake versus Real

Another positive dynamic, which we see happening in China, is about fake versus real products. This trend is the reverse in Europe, I would say. Chinese consumers want the real stuff, now that they can afford it. These days when Chinese consumers travel, they are expected to (read: must) bring gifts back home, as gifting is still very substantial in Chinese culture. And they better bring the real stuff home as nothing else would do. Fair point – not everybody travels and it’s ok to buy a luxury handbag in Shanghai or Hong Kong, as long as it is genuine. But, it’s much better if you bring a bag from the Champs Elysees. Now, compare this to likes in Europe. One can buy the real stuff just around the corner, yet have a look at the numbers of foreigners shopping in the Chinese fake market here and buying their fake Louis Vitton or Gucci’s. Roll out the fake carpet.

The leap frog

Here’s something which is truly impressive in China: it’s called Taobao, and its an online portal for shops and yes, it’s also big. Taobao $40 bn turnover, 800 million products (!!) and 48,000 sold per minute (!!!) in 2010. For every shop there are least two to three representatives online available (read: a few millions). Taobao has built a brand that plays very well into the Chinese mindset. The key Chinese concerns when buying online are authenticity of the product, delivery, financial loss and quality, and Taobao has addressed this well. You go online, pick the best offer, talk to one of the representatives, delivery happens the next day (they are talking about an 8-hour delivery time nationwide – e.g roughly the same size as the USA), and you pay if you are satisfied. Well, I can vividly recall my personal experience in Europe with awful after-sale service and taking half a day off from work just to receive a parcel. And the best part is the company behind Taobao, it’s called Alibaba. Taobao is truly a consumer-centric brand with great success and if I’m not mistaken, around 80% of all transaction in China are happening on Taobao. Big?

The big dragon

So, China is big…and will be bigger. And to put things in perspective, let me finalize by giving you a few figures for your next network lunch (don’t we love to use the millions and billions to describe something we actually don’t understand or grasp)? Let me use a new ‘llion and that is 4.8 trillion, the estimated real consumption by of 2020 of Chinese consumers. That’s based upon today’s projections and hell do we know what ride we are going to get in the coming years. Basically, it means people get serious money and start to buy services, products and brands and buy into the world they aspire to live in. 400 million (1/3 of the population) were lifted out of poverty in the last decade and a proper middle class is appearing in the Middle Kingdom. And the new generation Y likes to spent their money, as opposed to the saving attitude in the previous generation. Not to mention Chinese consumers start traveling and in case you have missed the phenomenal GDP growth as you were stuck in corporate life, go outside and check the nearest luxury good shop and watch the profile of the customers. There is the China growth for you in real time. The world is rolling out the red carpet. And yes, it’s big.x




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