“China today is a land of nouveau riche due to long periods of destructive revolutions, and that explains a lot of the Chinese consumer behaviors so far,” said Andrew Wu, Group President, Greater China for LVMH. To understand the emerging Chinese consumer is to understand the evolution of China’s political and social history.
The psychographics are “extremely complex,” and when looking across four distinct demographic groups, Andrew pointed out that younger Chinese consumers are more comfortable with decision-making and spending freely. That’s because until recently the Chinese had no choices in an economy characterized by material deprivation and scarcity when “everything was rationed and everything needed permission,” he said.
Within the past 10 years China has experienced an extraordinary shift in consumer spending power. Total Chinese retail market sales more than quadrupled from 4 trillion renminbi yuan in 2002 to 18.1 trillion renminbi yuan in 2011.
And while average Chinese incomes still pale to the $47,000 average per capita income of U.S. citizens, it has grown from $1,024 in 2003 to $4,000 expectedly for 2012. The country also went from zero billionaires (in U.S. dollars) to 100 since 2002. With a population of 1.34 billion, that provides many unique customer opportunities. The market, however, is also full of difficulties, such as its geographic spread. “Distribution management”, Andrew said, “is one of the biggest challenges.” And China is probably the most internationally competitive marketplace, as everyone is there already.
With China in rapid generation shifts and its consumers growing globally connected, Andrew pointed out, “We all need to remain humble and continue to learn.”
PHOTO CAPTION: A Sephora store in Beijing; LVMH’s Andrew Wu and Pamela Baxter; FIT’s Stephan Kanlian