The Dawn of a New Era in China

July 23 2015

Walking down a bustling commercial Shanghai street recently, I noticed a change on the faces of the local passers-by. Gone were there the expressions of smug complacency, of hysterical urgency, or any others that would suggest a colour on the fringe of the emotional palette. In their place, I detected hints of mild calmness, contentedness, and graciousness. This is the new face of China. 

Having lived in Australia and China, as well as having worked on the frontline of bilateral trade for the last two decades, I have observed the advancement of China and the social progression of the Chinese people.
For twenty years, the Chinese would work strenuously for a mere five dollars a day and viewed any foreign brand a luxury, ultimately rendering the image of China as “the factory of the world”. The Golden Decade of fast economic growth commenced in 2003 when the Chinese started paying unreasonably high prices for prestige, generally without any consideration for the financial repercussions, only to assert to the world that they were rich. 

The endless inflow of foreign investment, fast growth in export, and the ever-soaring property market fuelled a market strong in confidence and laden with cash. Today, China’s GDP is 15 times of that 20 years ago, and every major international brand is in China. 

Affluent Chinese shoppers are overexposed to brands, products and services from other countries. Consequently, the new rich are veterans in wealth and spending, and the 250 million-strong emerging middle classes of have grown from impulsive big brand devotees to sophisticated and aspirational consumers of quality goods and services. 

China’s luxury goods sales dropped by 11% in 2014, while its sales of imported food and beverage grew by over 30% during the same period1. Evidently, the Chinese are over the phase of showing off wealth by buying big brands, and now they have come to the more mature phase of buying quality products for the wellbeing of their families and themselves. China’s market is dawning upon a new era.

The changing and emerging needs of this new era means a new set of game rules and new opportunities for Australian exporters. 

Quality takes precedence over brand; customised products and services over standard products and services; channels with best prices are considered first; efficiency through a shorter supply chain (such as E-commerce) is necessary. 

Compared with giant, global competitors, Australian SMEs are in a better position to sell into China. They are nimble and flexible, they are fast and responsive to market needs, they are highly specialised in targeting niche markets, and they can manipulate E-commercial channels to cover multiple target markets with one product category. Chinese consumers are becoming more sophisticated - they do research and recognise Australian SMEs’ superiority in quality and capabilities to meet their exact needs.

The new era, however, also means new challenges for Australian exporters, especially SME exporters. Sophisticated Chinese consumers are becoming more selective with quality, speed of delivery, service, presentation of the products and value for money. In short, exporters must consider the following two questions: 

a)    To what extent does my product/service meet the Chinese consumers’ needs? 
b)    Am I employing the most efficient and cost effective channel to reach my end customers? 

The product/service that is most relevant to its target consumers’ needs, offered at a reasonable (not necessarily the most competitive) price and delivered in a timely manner wins. In China, winner takes all.

A common mistake some exporters make is they try to do everything and to be everywhere in China. They become generalists, who are stigmatised in Chinese consumer society.  Compared with specialists, generalists must put in extra effort for marginal advantages, while the highly skilful specialists take the apex of the market. Again the winner-takes-all rule can be seen here: the generalists lose.

In this new era, small and medium sized exporters have to be highly specialised, and must leverage the nimble nature of small business to service sophisticated Chinese customers. This era provides perfect opportunity for Australian exporters to take over from existing giants.
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By Sara Cheng, Senior Manager - China Practice, Australian Business Consulting & Solutions

Sara has over 20 years of experience in international trade and business consultancy both in China and Australia. She is also a widely-recognised speaker and writer on doing business with China, and co-authored the book Engaging China – The Realities for Australian Businesses. Sara has assisted over a hundred Australian companies, with various business models across a broad range of industry sectors, to successfully do business with China.

Contact Sara:
t: 1800 505 529
e: sara.cheng@australianbusiness.com.au
w: www.exportgrowth.com.au

1. 2014 China Luxury Products Study,  Wealth Quality Academy