Multinationals Hope Domestic Consumption, Inland Movement Will Counterbalance Drop In Exports
CNN reports today on the hopes of many western investors and CEOs for the rise of the Chinese consumer to help lift up the sluggish global economy. With slowly-increasing consumption rates in a country still highly populated by savers rather than spenders, redoubled efforts by western and Japanese companies to retain and expand their customer base shows that they understand that the Chinese market — with its vast potential but cut-throat competition — is critical for their global strategy.
“The dream of China is the life preserver many multinational corporations are clinging to, not without some reason,” writes Kevin Voigt, who points out that the recent Shanghai Auto Show proved that world automakers simply cannot go forward without a strong, flexible, and localized China strategy. As consumption drops in previously-solid markets like North America and Japan, everyone depends on the Chinese consumer to pick up the slack…for both. This is no small feat, and requires intensive marketing and branding efforts, even for well-established brands. Here, incentive and domestic growth are key. China’s 1Q growth slowed to roughly 6% — exceptional by current world standards, but short of their 8% target — and without growth that translates to real-world benefits for consumers (rising wages, inflation under control, commodities prices staying in check) they simply will not spring for their first Audi A4, Louis Vuitton handbag, or Apple laptop. Instead, they’ll choose the Geely sedan, the JNBY purse, and the Founder laptop — good for domestic companies, very bad for everyone else. That’s why marketing has taken a new, localized, intensified urgency. Going back to Shanghai, the auto industry seems to exemplify, perhaps better than any other, the critical nature of the Chinese consumer forgoing his reluctance to spend his hard-earned money:
While the Big Three from Detroit are fighting for their lives, China has more than 100 domestic car makers competing with multinational carmaker to get a piece of the growing Chinese car market. For the first quarter of the year, 2.7 million cars were sold in China — besting U.S. sales of 2.2 million for the first time to become the world’s largest car market.
The automobile industry’s hopes for China are emblematic for nearly every industry in the world. A Nielsen consumer confidence index shows Chinese consumers are more optimistic than most consumers elsewhere, rating 89 points compared to the global average of 77.
While CNN contends that this does not translate to the China market being without its problems — and it has many, from unemployment to inflation to (still) consumer reluctance to spend — for companies who take the time to adequately localize, understand the lay of the land and the cultural aspects of convincing Chinese consumers that your product is worth the price and is superior in both pedigree and quality to its domestic competitors, the payoff can be both sustainable and sizable.
By simply rushing into the Chinese market and using the same strategy you’re using in North America or Europe, you’re not going to make any headway, and, most likely, you’re going to taint your brand in that market for the long term.