Do Chinese Consumers Care? Really?Monday, April 16, 2012 1:27
on a semi frequent basis, I engage in a discussion on the moral fiber of the average Chinese consumer. Whether or not they “care”. The topic could be related to pretty much anything related to China’s development, and the externalities that spin off from it, but often I am focused on the business opportunities that exist for firms with “good” products.
It is a topic/ market that has been evolving over the last few years, and by evolving I do mean growing. The speed by which awareness enters the market is catalyzed by blowouts in consumer trust, and the economics of China are now reaching a point where a consuming class is beginning to show itself.. and even show a bit of loyalty.
But when I read the article Chinese consumers say business practices affect purchases I hesitated as it seemed to me that I was reading the results of another study that was designed to provide the predetermined results that researchers were hoping for.
In a survey last year of more than 10,000 consumers in 10 countries by Cone Communications and Echo Research, nearly three of four respondents in China said they were very likely to switch brands to one associated with a good cause, if there was an alternative in the same price range and of similar quality. That compares with half of respondents in the U.S. and about half of all respondents surveyed.
Meanwhile, 83% of respondents in China said they refused to buy a company’s product when they learned that the company acted irresponsibly, compared with 50% in the U.S. and 56% overall.
The article itself ends up more tempered, partly because it pairs this data against the recent Apple case, and it is here that I thought I would extend their analysis to offer a few thoughts of my own.
so, do the Chinese care? Well, yes and no.
It is very specific to issues, and the tangibility of the issue to the person.
Looking at the areas that would be of greatest concern, and where the largest number of consumers WOULD spend the money on a product, or be willing to make a switch, it would have to be an issues of product safety. Food and children being at the top of the list, with the highest market premium being in children’s food. Organic farms locally count new families as their largest home delivery base, and 100s of millions of USD is spent by new parents to import baby food/ toys/ lotions/ etc into China from abroad. It is a market where several of my friends have established business as a brand themselves, or as the distributor to brands, and are seeing astronomical growth…. and with every failure that occurs this market gets bigger, and hungrier.
Environmentally one would think that the Chinese would “care” and would “punish” firms who act inappropriately towards teh environment, but this movement is still in the earliest of phases. SO early that “consumers” are not likely to spend any more or less money based on the “greenness” of a product, because they are likely to be void of any verifiable information about he claims made by products. Unless it is food, which I have already covered.
Where the environment gets interesting though is from the perspective of the (growing) power of citizens. There has already been a lot of coverage around the various PX protests, where China’s NIMBY movement has probably been the most successful (at the national level), but there are cases like the recent JCI’s Shanghai factory closure where a quieter movement took place. It is a a movement where the local government are beginning to act in a way that I would say “protects” the resident population and where a broader trend of moving “dirty” manufacturing away from newly built residential areas will continue. But, it is still largely a movement highly dependent upon how economically stable/ rich the city/ township is, and there are still plenty of cases that highlight the problems that are faced with industrial pollution.
Socioeconomically, and this is where I would place the recent issues of labor violations, I still do not see any trend to suggest that there is a sustained “care”. There are certainly issues related to consumer trust (i.e. Wal-mart pork pricing, Dell laptop, SKII quality), but that is really about trust. On a purely labor focused decision, there is little evidence to prove that consumers are willing to make a choice to chose the “better” product. some of this is due to the awareness level of the issues, and the options, but it is also about the power of brands in China in the short term.
That being said, I would point to Wang Laoji, and their donation of 100m RMB following the 5.12 earthquake, as a great case for how a firm can do it right. how they can read the minds of the consumer, do the “right thing”, and come out ahead of their competitors.. as national heroes … that should be supported by “the people”. It is not the standard, but certainly a great anecdote.
So, do the Chinese care, and will they support brands that are “good”. The answer is still a maybe, and if the answer is yes, then it is likely that the market one is polling has a direct relationship to food, health, or children. It is a market whose consumers are still quite weak in the sense of having poor access to third party information, is quite complacent under normal circumstances, but can quickly become a force for change. Which is occurring in several sectors, and in a way that provides a premium to “good” companies.
Which is where I see the biggest opportunity for firms entering China, and the biggest threat to those that are here who operate on platform that exploits China’s environment, economic, or society.