International Law

How To Win Over The Chinese Consumer. What Happens In The Store May Not Stay In The Store.

By Dan

This post was written by Stephanie Henry, a Harris & Moure legal assistant.

In a Harvard Business Review blog post, entitled, China's In-Store Wars, Max Magni and Yuval Atsmon contend that to win over the Chinese consumer, you need to get in on the ground floor – literally:

As many as 45% of Chinese consumers make purchase decisions in real time....while '56% of Chinese consumers told us that the information they get at retail outlets is essential to make up their minds. Compare this percentage to the only 41% of Chinese consumers who credit television advertising with the same value. These results mean that your retail marketing strategy must account for the influence won or lost on store floors.

Magni and Atsomn advocate using the following four strategies to boost China retail sales and to win over the Chinese consumer: 

1. Prioritize.  Covering more of the Chinese market will not necessarily translate into winning more consumers; it could just leave you overextended and financially strained. Magni and Atsmon cite to Unilever's China success and call for initially focusing on key outlets: 

Many multinational companies, seeking to grow rapidly in the Chinese market, stretch budgets (and supply chains) to cover the large and fragmented retail landscape quickly, and, consequently, distribution costs soon get out of hand. In fact, three years ago, Unilever decided to re-focus its attention and resources on key outlets such as hypermarkets, supermarkets, and smaller stores in high-traffic neighborhoods where it could sell large volumes or high-margin products. Only after it attained scale did Unilever expand aggressively into smaller outlets This tactic allowed the multinational giant to compete better with its well-established archrival in China, Procter & Gamble.

2. Pay for shelf space.  To win prime placement on store shelves, you have to be willing to incentivize shop owners. Magni and Atsmon talk approvingly of Kangshifu, a company that offers store owners 'better financial terms if they display only its coolers and umbrellas' and gives store owners two cases of bottled water – at no charge- in return for better shelf placement.

3. Offer a consistent retail experience. 'Chinese consumers say they greatly trust brands that have standard in-store displays.' Coca –Cola and Cadbury are two primary examples of companies that have mastered this. Both maintain strict controls over their products and displays in all outlets and by doing so they boost consumer trust and increase brand recognition. 

4. Use in-store promoters.  In-store promoters provide a surprising boost to sales. The post cites  one instance in which the presence of an in-store promoter increased sales nearly 40%. The store manager who saw this jump in sales credited the event to 'the propensity of Chinese consumers to make up their minds just before making purchases.' Magni and Atsmon note that, 'since labor is still relatively cheap in China, the use of in-store promoters is also-cost effective.'

What does your company do to win over the Chinese consumer? What works and what does not?

Full post as published by China Law Blog on September 03, 2010 (boomark / email).