I recently read an article in The Atlantic magazine talking about anthropological market research and ethnography, and in it the writer talked about the challenges Coca Cola faced when trying to enter the bottled tea market in China. According to the article, Coca Cola spent millions trying to crack the Chinese tea-consumption habit and traditions.
Coca Cola is hardly the only corporation trying to get a foothold in the Chinese market. Almost every fast-moving consumer goods (FMCG) manufacturer, retailer, and technology company under the moon views the Chinese market as a key market for growth, and even though it is unfamiliar and complex, companies are doing everything they can to enter it.
In this day and age, a Chinese adventure may be too risky and costly for small businesses, but as more and more Western companies enter the Chinese market, it will become more relevant. That is why I decided to share with you a few key insights from a recent McKinsey & Company report regarding the future of the Chinese market.
The report divides Chinese households into four sub-groups: Affluent households that have more than $34,000 a year in disposable income, Mainstream households that have between $16,000 and $34,000, Value households that have between $6,000 and $16,000, and Poor households that have less than $6,000.
The Chinese economy is growing fast—it tripled in size between 2000 and 2010—and the average disposable income of a household in China is expected to double from $4,000 to $8,000 in 2020. This fast economic growth is expected to change the structure of the Chinese market as more households move from the Value group to the Mainstream group. Hence, in 2020, the Chinese market will consist of more affluent consumers who will be more receptive to Western products. Therefore, marketing to the Chinese consumer will require fewer modifications and adjustments.
Another factor affecting the Chinese market is its aging population. In 2020, there will be 5 percent more people who are over the age of 65—an extra 126.5 million consumers. Moreover, unlike today’s elderly consumers who are characterized by asceticism and price sensitivity, the 2020 elderly consumers are much more hedonistic with similar consumption patterns to those of consumers in their 30s. Marketing to this segment will become something that companies entering the Chinese will have to give a thought to.
Last but not least, consumption differences between geographic areas are likely to persist and increase over the next few years. Companies entering the Chinese market will have to learn the different consumption patterns and preferences of each area and choose the one fitting their product the most.
I hope this post expanded your knowledge of the Chinese market as it becomes the “next big thing.”