Thursday, August 25, 2011

Shut up and shop, patriotism in China - Paul French

Paul French
Being a patriot in China has become much easier, now the government focuses on increasing domestic consumption, writes retail analyst Paul French in The Telegraph. "All they have to do now is shop, shut up and then go shop some more." Paul French looks at the 240 million Chinese that constitute the 'middle class':
Now £5,000 to £10,000 [euro 6,000-12,000] wouldn't make a family-of-three very middle class in the UK but of course life is a bit cheaper in China – for instance, the average Shanghai subway fare is about 35p and the last time a ticket on the London Underground cost that much British Leyland was at full production and the idea that a bunch of guys from Nanjing would buy Rover would have seen you committed as clearly delusional. Similarly, food and petrol prices are subsidised – the best-selling packet of cigarettes in Shanghai costs 45p for 20 – and there's cheaper if you want them. I gave up smoking a year ago and have saved the princely sum of £150.[euro 170] Urban white-collar wages have risen fast – the average office worker in Shanghai who received the average annual pay rise every year for the past seven years has doubled their wealth. A not uncommon phenomenon. In the same time the local taxi fare has gone up 10p – imagine earning exactly twice what you earned in 2005 but cab fares had only risen by 10p – you would, literally, be quids in and could go on a shopping binge. Which is exactly what urban white-collar middle-class Chinese punters have done, by the tens of millions. All this, of course, has been to the benefit of many, too many to name really – Tesco, Ikea, H&M, Zara, Burberry, Apple and on and on. It is not a guaranteed pot of gold at the eastern end of the rainbow, though – China is competitive both in terms of price and winning the customer. Marketing costs are higher than most brands expect and mall rental prices, department store commission rates and shop staff wages are all rising. And you need to have the right product for the Chinese shopper. Despite what some retailers apparently think the Chinese won't buy just anything. Don't believe me? Ask M&S what they're going to do with all those unsold 42in waist Blue Harbour slacks or those 38DD cup bras. They've not been flying of the shelves, to be frank. And, looking ahead, there's no reason to think the end is anywhere close to nigh for Western brands and retailers in China who have got the right product. So far Chinese manufacturers and brands have unanimously opted for the cheap-and-cheerful route to market rather than the investment in the quality and design necessary to build stronger high-end brands with longevity and the ability to compete with the European and American names. This has so far been as true of the market for trainers as for luxury handbags. In a go-go economy, with everyone chasing the fast buck, longer-term commitment to the skills, technical as well as design, required to seriously move up the fashion creativity curve to become desirable brands just doesn't seem important to many local players. Chinese middle-class aspiration will, for the foreseeable future, equal buying desirable foreign brands.
More in The Telegraph Paul French is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.
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