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China’s Super Consumers

What 1 Billion Customers Want and How to Sell it to Them

By Savio Chan and Michael Zakkour
  • Read in 12 minutes
  • Audio & text available
  • Contains 7 key ideas
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China’s Super Consumers by Savio Chan and Michael Zakkour
Synopsis

China’s Super Consumers (2014) is the definitive handbook for foreign companies who want to sell their products on the Chinese market. These blinks walk you through the opportunities and challenges in this vast and varied country and share valuable information about how to succeed in its unique business context.

Key idea 1 of 7

Retail opportunities are numerous in China, but dramatically different from their Western equivalents.

Over the past two decades, Chinese culture has transformed, and the country’s laws have changed along with it. This is big news for foreign firms, as legal structures in China used to hamper consumer culture.

These days, however, reforms have resulted in the rapid construction of new department stores and malls across the country. The current context presents a prime opportunity for foreign firms to sell their products.

But before your company dives into the Chinese market, it’s important to know about the significant ways that Chinese department stores differ from their Western counterparts.

First, Chinese department stores play the role of landlord to retail brands that rent space on a floor and design a miniature store for themselves in that space. By contrast, Western department stores are merchants who hold inventory and do their own merchandising. In the Chinese model, brands act as retailers, which presents a challenge for foreign companies lacking experience in this arena.

Second, the Western distinction between wholesale and retail isn’t the norm in China, since no corporate buyers exist in Chinese department stores. Rather, each brand is responsible for determining the product mix to order, delivery, merchandising and staffing.

When it comes to Chinese malls, the differences are more subtle but still important. For instance, unlike in the West, where brands and retailers in malls can remain in business despite poor performance, Chinese mall owners can terminate a lease if a retailer underperforms.

Not only that but unlike the typical two-level malls of the United States, Chinese malls usually have four to six levels, with the most expensive rents on the first floor and the least expensive on top. The difference is justifiable since foot traffic is dramatically lower on the top levels.

Finally, apparel, footwear and accessories tend to sell very well in Chinese malls, while electronics, bedding and home decor fall flat. The reason for this is that in China, malls have become centers of youth culture, just like in 1970s and 80s America. These young Chinese shoppers frequent malls to buy items like clothing that help them shape their identities.

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