International managers in China have to acknowledge some unpleasant facts. The global economy has ratcheted down. We’re not likely to see overseas demand return to 2007 levels for a very long time – if ever. The hottest markets in China are no longer in the glittering showrooms of super-luxury international brands. The real action will be in the boring suburbs and 3rd tier cities – and the buyers will be the REAL Chinese middle class who probably don’t care much if Tiger Woods and Pierce Bronson are sporting the same watch or driving the same car. They will be spending their limited disposable income on their kids’ education, their parents’ health care and their family vacations.

For international managers the challenges are significant – and not everyone will survive. We have to shake off the fantasy that once the economy recovers everything will ‘get back to normal’. In 2010, normal will be new - and potentially difficult.

This week I rode Shanghai’s Line 1 subway to the terminal stop – a non-descript suburban area called XinZhuang. There is not much there to excite most international managers – just mile after mile of apartment complexes and retail shops. It’s 30 minutes from the flashy towers of central Shanghai that Time and CNN represent as the old ‘New China’ – and it represents the REAL future for international marketers. My Chinese friend told me that in her housing development alone, there were 2 kindergartens – and they were both very expensive because demand was so high. The place is packed with genuine middle-class Chinese earning in the neighborhood of rmb 10,000 – 30,000 per month. These folks aren’t buying Porches or Rolexes, but they aren’t stuffing money under the mattress, either. They are real spenders – but only when they see real value.

Our challenge is to find new methods and models for accessing these long-overlooked communities of ‘normal’ Chinese consumers. Their numbers are huge, but their income is modest. If international marketers can’t find ways to access China’s mass market, then they will become irrelevant. That means forming new types of partnerships with local retailers and focusing on value. Family-oriented services are in – prestige brands are out.

Middle class Chinese consumers are indeed aspirational – but their aspirations aren’t the same as YOUR aspirations. They want to be admired for taking care of their families, educating their kids and being part of their local community. Now take a look at your product or service and ask yourself some tough question – Would a regular Chinese family know what to do with your product? Is your customer service department set up to handle real Chinese buyers? Are regular Chinese consumers comfortable walking into your business or meeting with your sales people?

If you have built a brand that intimidates or confuses the sub-rmb30,000/month set, then you may be positioning yourself right out of the most important market of 2010 and beyond.

This entry was posted on Thursday, April 30th, 2009 at 7:52 am and is filed under Managing in China, Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.