How China’s Super Consumers Can Help Your Business Grow
In the not-so-distant future, middle class people in China and other developing economies will approach the standard of living of average Americans. Meanwhile, for many Americans, the average lifestyle will decline, as automation and globalization replace middle-class jobs—unless more of us find new sources of income.
That is creating a lot of fear. The percentage of Americans who see China’s economic power as a critical threat to U.S. interests has dipped to from 52% in 2014 to 40% this year, according to Gallup–but that’s still a large percentage.
It is hard for any one individual to influence massive global trends so why not make them work in your favor by turning Chinese consumers into your customers? In China, McKinsey and Co. has found that while 82% of the urban population only earned enough to cover basic needs in 2010, that demographic group will shrink to 36% in 2020. As these folks enter the middle class, the share of “mainstream” consumers with some disposable income in urban areas will rise from 6% to 51%, McKinsey found. And affluent consumers will increase from 2% of the urban population to 6%. Given that China’s urban population will hit 328 million by 2020, according to McKinsey, we’re talking about a lot of consumers. The affluent urban consumers will total about 21 million households or 60 million people.
So how do you tap into this market? It does take some prep work but it is possible for even for a tiny business to pull it off–sometimes without leaving the U.S., according to Michael Zakkour, co-author with Savio Chan, of China’s Super Consumers: What 1 Billion Customers Want and How To Sell It To Them.
To find out how readers can make the most of fast-growing opportunities in China, I recently spoke with Zakkour, who is a principal at the global business consulting firm Tompkins International, where he leads the China/APAC practice and makes frequent trips to check out business opportunities in person for his clients. Chan is president and CEO of US China Partners Inc., a consulting and advisory firm that helps organizations design and implement strategies to target China’s consumers.
New Path for Trade: Selling in China
Like many American businesses fighting to keep their prices competitive, Vision Quest Lighting turned to China about six years ago. It now imports about a sixth of the two dozen to three dozen parts required to make its lighting fixtures from there. Recently, however, the Long Island company began to see China in a different light: as a sales target. The growing economy of the world’s most populous nation made it ripe for Vision Quest’s architectural lighting fixtures, many custom-made for hotel and restaurant chains like Hilton and KFC.
When one such client, a clothing retailer, ordered 1,500 lights for five stores, Vision Quest’s chief executive, Larry Lieberman, decided it made sense to start manufacturing lights in China. Other American clients, he reasoned, would no doubt begin placing similar orders as their chains sought to capitalize on the world’s fastest-growing consumer market. And with high-quality products from the West coveted in China, Mr. Lieberman also imagined his products on display in Chinese showrooms.
And yet, selling goods in China is not easy. Mr. Lieberman made the 1,500 lights only to see them gather dust in a warehouse in Guangzhou for more than four weeks because he had not yet established a local enterprise approved to process sales.
“The customer couldn’t pick up the goods because we were still trying to set up something so they could buy them correctly and pay the right tax,” he said.