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What China's Consumers Can Teach Us

From MSN Money.

"China's boom may very well conceal an artificially inflated economy that falls back to Earth sooner or later. But whether you agree or disagree with its policies, China is becoming too influential to ignore -- and so are its consumers. Keep in mind, consumerism as we know it in the West is practically brand new in China. Yet that's why it's interesting to watch how the Chinese approach the kind of materialism that has clearly gotten the West into trouble."

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"And, for now, most Chinese consumers are still uncorrupted by easy credit, must-have marketing and other double-edged attributes of affluent societies. While they have their own values and cultural touch points, Chinese consumers today are also similar to Americans in the 1950s and '60s: somewhat naïve and probably too trusting, yet buoyant, proud and fueled by optimism.

So how do they shop? Some Chinese habits are quite familiar. They research products on the Internet and pay a lot of attention to word-of-mouth recommendations. But they're also careful and deliberate about spending, which is why McKinsey says they're "among the world's most pragmatic consumers."

No Black Friday or Cyber Monday for them! I bet they don't have half the "holidays" we do--days designed by marketing departments like Hallmark and others just to get us to go out and buy something to celebrate with. I bet they don't have a Mother's Day, a Valentine's Day, a St. Patrick's Day, a Halloween, a President's Day, an Easter, a Labor Day (they could probably use one of those), a Secretary's Day, or any other greeting-card-fueled day that drives us to shop.

"Chinese consumers don't gorge on debt. China's financial system isn't yet geared to consumers, and credit is a lot harder to get than it is in the West. Yet even as it becomes available to higher-income consumers, they're not biting. "Consumers elsewhere tend to trade up as they get wealthier," according to the McKinsey report. "Some start relying on credit, often spending more than they can afford. Not in China. Consumers there remain very concerned about financial stability and spend within their means." It will be interesting to see if Chinese consumers retain that discipline as their nation gets wealthier. They seem to be off to a good start.

If they "trade up" to more expensive goods, they also "trade down" on other things to help pay for the indulgence. McKinsey's survey found that in three-quarters of urban households, Chinese consumers said they had traded up in at least one product category -- buying a more expensive product or brand than they used to buy. But the majority of those people also spent less on other products to finance the upgrades. Many white-collar men spent more on restaurant meals, for instance, often to impress clients or business colleagues. But most of those big spenders also cut back on things like personal-care products or snacks to balance out the spending. More than 80% of trade-up demand for higher-quality clothing and shoes came from working-class people trying to craft a more impressive professional image -- and they, too, gave up a variety of other things to pay for it. Such tradeoffs might seem like an obvious choice -- except we all know how hard it can be to give up even small luxuries once we've gotten used to them.

They budget first and buy second (or don't buy at all). McKinsey reports that the typical Chinese family determines how much it can afford to spend, then lists the things it wants to buy, and finally holds a "beauty contest" to determine which products on the wish list are most appealing. Those are the ones they buy.
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Many Americans budget just as carefully, but far too many of us buy extra stuff anyway, because we feel entitled to it or it just makes us feel better.

It's second nature in America to push a cart through the aisles of Target or Home Depot, filling it with little things we never intended to buy or even thought of before we got to the store.

They spend months researching purchases. Many Chinese families in the market for a computer spend three to six months deciding which model to buy, visiting a store four or five times to check out the offerings. Other big-ticket items get just as much scrutiny, and Chinese shoppers also deliberate carefully over everyday things like food, drinks and health and beauty items. Many shopping trips, in fact, are just for research, with nobody actually buying anything. Western-style marketers, no doubt, will work hard to make Chinese shoppers less careful and more impulsive -- and McKinsey does in fact report that "emotional" purchases are on the rise. The race is on to see if we become more like them, or persuade them to become more like us."

In other words, THEY'RE FRUGAL just like we used to be, and need to be again. When their citizens are buying brand new Buicks for cash, you know they got it goin' on!

Posted by Cute at 9:58 PM

Labels: financial (non-tax), social issues