Forget the high-end Teslas, although there are plenty of them. These are BYD and other midrange brand cars not available in Australia. There are enough of them on the road to reach the critical mass that is able to suppress the once dominant background noise of vehicles.
It’s a signal of change in consumer habits that is also reflected with the online shopping giant JDcom. I visited their Beijing headquarters and over lunch, vice-president for strategy Li explained the shift in shopping preferences.
Covid has seen a change in the age profile of users. Now almost half of users are 26-35 years old. Then there is another substantial group in the 36-45 age bracket. They are looking for a different combination of goods and services.
JDCom is innovating to meet these changing consumer preferences. JDCom sees the next wave of growth in tier 3 and tier 4 cities in China. It’s also a clue for others who are looking to expand or enter the China market. When I left JDcom city we drove past multiple clusters of cranes, 10 or more to a construction project. The skyline was not dominated by them in the same way as it was pre-covid but nor was it a skeletal graveyard of a dying economy. Wenzhou, Hangzhou and Shanghai provided a similar sight, with cranes dominating the skyline as new buildings continued to rise.
The idea that the China economy is teetering on the edge of collapse is very much an American pipedream. In fact, the withdrawal of American and, to some extent, European business is opening opportunities for others, such as NT businesses, to move into an economy expanding at 5 percent a year.
When considering business expansion in China, remember that the Chinese customer counts. They will not gratefully accept your product or service just because it has a foreign premium. The product or service must be good for purpose, and it must be packaged and presented in a way appropriate for the customer base.
There are three essential features for NT company success in China.
First are businesses offering status and value on products or services. It is very difficult to compete on price in China, so the field of competition must be different. The NT can offer unique and healthy products. Chinese consumers are very statusconscious but the nature of status is changing. Many
Chinese are willing to pay more for goods or experiences that give face and enhance their social status, because this delivers social value beyond the price paid. The challenge for NT business is to tap into this social value.
Second, and increasingly important, are brands the Chinese trust. This is particularly in the food sector where food safety is always an important issue. Will this food harm my health? is an important question that requires a definitive answer.
This is an area of significant change with the use of blockchain-enabled QR codes. These provide incontrovertible proof of provenance. It proves that a product is not a substitute and that it has not been tampered with. Territory food exporters need to develop this blockchain process as a way of improving their competitiveness in the China market.
This digital advance means that meat from Inner Mongolia can sell at the same price as premium beef from Australia. It’s estimated that up to 40 percent of meat sold as Australian beef in China is a low-quality substitute.
QR blockchain certification eliminates this problem. QR blockchain certification confirms the health supplement contents in the plastic bottle have not been tampered with or substituted. Blockchain tracking is an easy way of building instant trust for an unknown NT brand or product. NT suppliers need to adopt these standards.
The third element of success is foreign businesses that understand it is a mistake to treat China as a single consumer entity. Tastes in Shanghai are very different to tastes in Beijing or Xi’an. Many Chinese cities are the population size of small countries and viable markets just by themselves. China is a collection of different regional markets. Each has its own consumer habits and preferences. Superficially the malls may look similar, but the retail and consumer patterns are different.
Our focus on Beijing and Shanghai is understandable, but it is also important to remember the so-called second tier cities, such as Dalian, Nanjing, Changsha, Wehzhou and others, which have populations of about five to six million. JDCom is moving into these markets and that’s a guide to strategy that NT exporters can learn from.
China is a hyper-competitive market and companies that choose to play only on the basis of price will fail. Future success depends on adopting a diversity of China regional strategies.