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China: Go To Make Money, Not Just Products.

By Dan Harris and Steve Dickinson

Got an email yesterday from Shaun Rein, a leading expert in China markets and marketing. Shaun's email described an article he wrote for Business Week based in large part on a survey recently conducted by Shaun's Shanghai based company, China Market Research Group. The article is entitled "China's Rising Retail Market: Chinese youth intend to spend "considerably more" in 2008 than they did in 2007. Multinationals had better start thinking young," and Shaun's email summarizes it as follows:

While retail sales are plummeting in the US, sales in China are continuing to boom, driven by optimistic shoppers largely shielded from the global economic malaise. China as a market to sell into rather than a place to source cheap products from has become a major engine for growth for even the largest companies worldwide. But there are changing demographics and needs by Chinese consumers that make it necessary for global companies to understand their core target markets' needs and motivations and deliver the products and services they desire. Key takeaways of our research: 1) Target markets are often younger in China than elsewhere with Chinese youth as a major driver for growth in China's retail sales. Understanding what they want and what channels to sell and market to them is key. Digital and mobile phone marketing is becoming more important and mainstream -- it cannot be viewed as a cheap alternative for marketing but a critical component of brand building and marketing communication. 2) No more lazy localization -- it is critical for companies to bring the right products and marketing message to China, simply bringing what worked in other countries to China does not work. Developing a China strategy is key. Companies need to rethink their brand strategy like YUM brands has done with Pizza Hut in China to huge success or else flounder in China as Wal-Mart has done. 3) Marketing messages/ campaigns must relate to Chinese consumers. The failure of Motorola to do that by utilizing funky Hong Kong models rather than what Chinese youth aspire to be like. The opposite tack was employed by Adidas with their Olympic campaign. 4) The importance of delivering the right in-store ambiance and culture for your target market is becoming more and more important as Chinese middle class consumers are becoming far more demanding in service wants.

Though I do not believe China will be immune from a US recession (if one occurs), I do think there has been a tremendous shift in thinking regarding China on the part of American and European companies. Certainly, this is what I am seeing among those companies coming to my law firm for legal assistance in getting into China. Two years ago, the overwhelming majority of these companies were seeking entrance into China strictly to manufacture there. Now, it is the rare company that also does not plan on conducting research or design or sales there as well, or even exclusively. China's metamorphosis from factory to the world to a prime market has begun. Do you agree?

Full post as published by China Law Blog on April 03, 2008 (boomark / email).