Guest Post from John Solomon, Director of enoVate

The fixed gear bike movement has hit the streets of China. Just three years ago, you could count the number of fixed gear bikes here on your fingers (and maybe toes). But spend an afternoon strolling Shanghai’s French Concession, and your sure to see various youth — Chinese and Foreign — riding fixies. What’s more, this movement is not limited to the Big Two (Shanghai and Beijing). Tyler Bowa, founder of People’s Bike, states China’s biggest fixed gear scenes are actually in Shenzhen and Dalian, where 7 months ago there were no such bikes. This movement is spreading to cities nationwide: Suzhou, Nanjing, Chengdu, Wuhan, the list goes on. But why? The fixed gear industry has done little-to-nothing to popularize this product in China. Besides a handful of local companies, like airwalk (link), fixed gear brands have mostly neglected their relationship with the Chinese consumer. This, of course, will change very soon.

Crucial to the rise of fixies in China has been the internet. For one, the fixed gear scene has become increasingly well-documented. Videos and photos litter the online world. These bikes are popping up on popular websites, blogs, and video sharing websites. Chinese youth can watch popular fixie movies, such as MashSF, on youku. Secondly, the internet has provided a place for riders to organize communities. Threemin, China’s first fixed gear website has an active forum, with roughly 4,000 members for its Southern China forum alone.

Also worth mentioning is the sometimes subliminal cultural magnetism of China’s neighbors — Japan, Korea, and Taiwan — where fixed gears have an already long-established tradition. But Karl Ke, co-founder ofPeople’s Bike, notes that beyond just fixed gears, bicycle culture is experiencing a resurgence in China.

“Basically, I think people more and more fancy riding a bike, based on four key areas: 1) the government began extensive promotion of environmental protection concepts. 2) More and more Western media are promoting the concept of bike riding and healthy living. 3) More people want to escape from depression and immerse themselves in city life. Cycling is one of the most effective and easy ways to escape and control things in one’s daily life. 4) Fixed gear is simple and close to the concept of extreme sports, but has its own unparalleled noble temperament.”

For many young Chinese today, the bicycle stands for much more than just a means of transportation. It is now a fast-growing culture, that consists of a large community dispersed throughout China. This is especially the case for fixed gears. Websites like People’s Bike and Threemin keep riders all over connected, while events like Alleycat (video here) have united riders from all over for races in Beijing, Shanghai, and this weekend Guangzhou. This community will continue to grow. The second half of 2009 saw a real explosion in China’s fixed gear scene, but that was just a taste of things to come as we enter a new decade.

We expect to see brands hoping on the bandwagon in the immediate future. Brands like Puma and Thule have already associated themselves with local bike culture by sponsoring the Shanghai Alleycat. Expect more of this, but also expect the fixed gear industry to open its eyes to the China market. It’s an open playing field. Giant will be entering the fixed gear market soon with a new brand called Momentum. This is smart. Fixed gear aficionados tend to stay away from mega-brands when building their cycle. This demographic seeks a personal relationship with their bike. A Giant branded bike would ultimately fail. As Tyler Bowa states, “we don’t want to walk into a big store and pick something off the wall, that’s why small bike companies thrive throughout the world.”

For some great Shanghai fixie photos, check out Tyler Bowa’s portraits on flickr: http://www.flickr.com/photos/peoplesbike. All photos are from Tyler Bowa and People’s Bike.

john solomon is founder and managing director of enoVate. enoVate is an insights and design firm based in shanghai. we publish daily insights and develop creative solutions for China’s youth market. visit enoVate’s website for more information.

Entering the Chinese mid-market segment: key to long-term success?, by Heiko Gebauer, Thomas Fischer and Elgar Fleisch, is an academic report that I found interesting lately while studying a 2nd tier market plan, and as a followup to a recent conversation about firms moving into the 2nd/ 3rd tier looking for growth.

As part of their report, the professors highlight 5 major missteps groups take when trying to assess or enter China’s middle market:

1. Managers use their existing customer segmentation and transfer it to the Chinese market.
2. Managers fail to continually update their understanding of the Chinese mid-market
3. Managers assume that because mid-market consumers can’t afford top quality merchandise therefore they will accept products and service that aren’t customized
4. Managers overestimate the willingness of mid-market customers to pay a premium for international brands over locally made equivalents.
5. Managers assume that mid-market growth is concentrated in the first and second tier cities such as Beijing, Shanghai and Xian and that the third and fourth tier cities are restricted to the low-end market and do not experience accelerated market growth

Key factors for formulating the product strategy appear to be up-to-date market analysis, early market entry and moderate prices.

• Setting up separate organizational units targeting the mid-market is the key factor for implementing the product strategy.
• Localizing research and development, and adjusting manufacturing processes seem to present both major challenges and the key to success for the separate organizational unit.
• Only if domestic companies have already achieved reliable and constant product and service quality should they undertake the adventure towards the mid-market segment.
• A market entry that is too early and too ambitious can put the company at risk.

The report, while brief (email me for a copy), highlights some critical factors that firms should certainly consider ( there are certainly others that are firm/ industry/ product specific), but on a larger level where I liked this study/ report was that it had the potential to open smart dialogue.

A lot of discussion surrounding the recent metals/ materials pricing volatility, and China’s role in driving that volatility.

Many of the recent reports I have seen seem to indicate that the purchases (and imports) of raw materials are a good sign, a sign that China’s factories are turning the light back on as a result of increased orders. Other reports take an entirely different approach by pointing to stockpiling of materials, stockpiles that will take years to work off and should be viewed as a sign of inefficiency.

It was a topic that we myself and several others discussed last week as part of our What if beers, and after come further thought, and through this post I wanted to offer up some different theories.

Before I do that though, I thought it best to frame the issue a bit with some other unrelated discussions I have been having, discussions that I believe show the manufacturing economy is not the driver. The first discussion was with a member of the risk consultancy community last week, a person whose business has seen the number of factory closures increase over the last year and says are still ongoing. The size and breadth of the closures was still fairly unknown to them as their clients were those who were not locking the doors and skipping town, but were large enough to be negotiating upfront, and it was clear that the numbers and the firms involved were not insignificant.

The second conversations were not really a conversation, but and emailed response to a question I sent to two friends of mine inside large global logistics firms… “howz business” . The first response… “DEAD”. The second response… “Inventory replenishment orders not occurring as hoped for… bad”. That was all I needed to know that despite the recent upturn in Shanghai’s port figures, that the logistics industry was clearly not seeing an increase in containers, and that (as I have written about before) was an indication that the manufacturing economy was not back on.

So, what is causing the surge in metals and materials? Why are Chinese firms importing these goods when the demand for their processes/ finished goods has not returned?

Here are a few of my theories:
1) Speculation – First, quite clearly there are a number of groups who see this as a chance to speculate. Many of the commodities that were at all time highs last year have seen their markets fall out from underneath them, and that leads some to believe that investing in these assets will bring returns… once the economy pops back.

2) Counter inflationary investments – The inflationary issues that China faced during 2007-2008 with inflation, were issues that nearly brought parts of the country to a standstill. Oil was in short supply, coal was unable to make it to producers, metals prices were reaching the stratosphere… and China’s competitive postion as low cost leader was being questioned. IT was a condition that lead to the central government putting up the money and infrastructure for a strategic oil reserve, but it was the bottoming out of oil that lead the reserves to be filled up 9 months early. That, in short, with so much cash on its hands, counter inflationary stock piles can be built so that if there is a run up in prices the stock of cheap supplies can be used.

A tactic that only China could pull off right now, and a tactic that could give Chinese firms a significant advantage going forward as the industrial machine overheats again.

3) They have nothing else to do with the money – During the recent round of beers one of the participants said that as part of the government stimulus “Banks have a responsibility to loan money, and firms have a responsibility to spend it”. the problem was, as we all agreed, that we were not seeing the money spent in the ways that one would hope for. That the massive expansions in operations and investments have not been occurring, but leaving the money inside a savings account is going to do no one any good either. The traditional asset markets (real estate and equity) have already seen a huge run up in the last 12 months, and so these goods are seen as a way to park their cash for a while and perhaps make some money.

For me, while the first theory is the one that the Chinese government is most concerned with (due to its tie to hot money), it is #2 that I find most interesting as the implications could be significant in the context of global manufacturing.. and it is this one that I will keep my eye on as it will potentially have the greatest impact on the real economy.

If anyone else out there has other theories, feel free to post them in the comments section.

The Guangzhou branch of the British Chamber of Commerce has just released, through their chamber magazine the Chamber Eye, one of the most comprehensive guides to due diligence I have seen to date.

36 pages in length, the articles on contributions from some of China’s most experienced providers and practitioners, and I highly suggest readers take the time to read it (pdf here).

P10: A Different Toolbox For M&A DD In China by Jay Boyle
P14: Commercial DD – An Essential Tool For Every Transaction
P16: Technical Due Diligence
P18: Legal Due Diligence
P21: Due Diligence in a Cautious M&A Market
P23: HR Involvement Critical to M&A Success
P27: Examining the Financial Health of Your Deal

Last week’s Newsweek article Generic Giants: Why China Can’t Create Brands took a stab at answering the question many have been asking: Whee are China’s brands.

It is one of those debates that has been ongoing throughout the duration of my time here, and is usually partnered with the equally unanswered question. When will Chinese firms begin acquiring foreign firms in mass.

China is famous as the factory to the world, but even its best companies enjoy little if any fame. That paradox has become a vexing problem for China’s leaders. The nation is now too rich to continue growing at a double-digit pace by simply putting more peasants to work in factories, and then underselling its Western, Japanese, and South Korean competition.

The article provides some interesting examples of brands, Huawei and Haier, that have done well globally but have yet to establish a “brand”, while at the same looking through a wider angle:

The simplest explanation for China’s failure to build global brands is cutthroat domestic competition. In most product categories, hundreds or thousands of firms compete for domestic market share, leaving profit margins razor thin. China has 150 firms licensed to make cars and other motorized vehicles, and more than 500 bicycle manufacturers. And because foreign brands have taken much of the market’s high end, most companies are forced to compete on cost, leaving little room for investment in R&D or marketing. China’s weak protection for intellectual-property rights—the patents and ideas that are the solid core of any brand—makes it risky for companies to invest heavily in innovations that could make them famous worldwide but could easily be stolen by rivals at home. Finally, the recent string of product recalls—including poisonous pet food and faulty tires—has left consumers wary of made-in-China goods.

A theory, that when broken down into bit size chunks offers insight… and perhaps room for improvement.

1) Domestic competition
Name an industry, and what you will find is that the market is highly fragmented. That, 150 car firms, 200 solar panel firms, 80,000 logistics firms, are all trying to make their mark on “China”. It is something that I have seen over and over and over again as I have mapped out competitive landscapes in China, and without exception, the most interesting dynamic within these industries is just how fast things change.

Yes, the industries are fragmented, but to say that this inhibits anyone I believe fails to account for the fact that of the 150 of the auto firms, only 10 have a China brand, and than of those 5 are poised to become global brands within the foreseeable future. That, like a pachinco machine, many industries are seeing rapid funneling of firms. Firms that are being forced to compete first at the village level (live or die), city level (live or die), Provincial level (live or die) , regional level (live or die), the national level (live or die) and then at the global level.

Barrier certainly include cutthroat competition and margins, but more importantly it comes down to each firm’s ability to develop markets that are foreign to them, even if they are a single province over. A process that includes being able to market, distribute, and service a market at a level of quality that improves the brand image.. and in a manner that can then be scaled out.

As an example, looking at the logistics industry, there have been several firms that have done this successfully, that moved from local brand, to regional, and are developing their national brand. Kerry logistics (HK based), SF Express (Shanghai based), and others have slowly been creeping across China developing partners, buying up assets, and branding all along the way.

2) Foreign brands owning the luxury market
This is also an issue that many of my clients have faced, and has always provided some of the most interesting conversations as foreign clients have looked to leverage their luxury position and hit the middle market.. realizing that their Chinese competitors were looking to leverage the middle ground to rise up and capture the positions foreign firms hold in China, and abroad.

Again, in the current market, there is no denying that the foreign brands still own much of the luxury and top of the middle markets. Due in large part to their quality of products, marketing campaigns, stronger cash positions, and management prowess, we have see firms like Porsche, GUCCI, and San Pellegrino sweep across China.

The fact that these products exist and own the market is a bit of a head fake as the author assumes that their were (1) Chinese Brands capable of competing at this level (2) that foreign brands capturing the market is sustainable and most importantly (3) that the luxury market is what matters. That, while many foreign firms may see the luxury market as their market, Chinese firms are focused on developing products that provide profits in volumes.That , while the 100 million or so who are able to consistently afford luxurious lifestyles, it is the 400 million or so (and 600 million more to join) that are buying mid level brands that are more interesting to them.

.. and, more importantly, that those billion customers will provide the profits they need to afford to build a luxury brand of their own. Or at the least afford purchasing one of their own.

3) Domestic IP Protection & “Made in China”
Externalizes to the economists and process that many firms are working with to develop brands, I have brought these two together as I see neither as a true barrier to developing a global brand. FAW, Shui On, Huawei, and other national brands have all had their issues with IP theft, but none of those would say that it limited their market potential on the national or global level anymore than the recent release of the Geely GE does the Rolls Royce Phantom.

Many fakes and ripoffs in China are known to be fakes (note: food and pharmaceutical industry are an obvious exception to this), and firms that are ripping of the larger brands are doing so because hey have been incapable of developing their own products, have not developed a sustainable competitive advantage, and will more than likely will fall by the wayside as the national firms marginalize their products through more sophisticated products and marketing.

Other thoughts:
Outside of the above, there is one question that was surprisingly unaddressed. do Chinese firms really want to compete on the global stage? Do they want to have global brands at all, and if so… why?

Sure, there is nothing that will sell papers than a decent trade war, or brand competition, but does that make it true? Referencing the author’s own words:

During a Guangdong road trip in April, Wen called the crisis an opportunity for Chinese firms to innovate and expand abroad. Beijing has ordered state banks to make tens of billions of dollars in loans available to firms eyeing the global market.

A statement that leads me to believe that Chinese firms, some who have developed capabilities, are simply not interested or enticed even with money being thrown at them. Which leads me to the next question.

Why aren’t Chinese firms interested in developing global markets?

Later that week, while walking from Xintiandi to Huai Hai plaza (roughly 1km) to an event, I took out my iPhone camera to capture one of those moments where I realized that all the good economic recovery news was not translating to the street.

In short, over the course of my 1km journey, I captured roughly 15-20 open retail spaces (recently vacated and going through fit out) that highlighted a simple point… that things are not what they seem.  That, even as some still look to China to be the consumers of last resort and as a source of potential economic catalyst, the fact that there are 15-20 open retail spaces available along one of Shanghai’s busiest retail zones is not only discouraging, but shows that consumers are not going along with the plan unless there is a deal.

the recently released 8 page report Manufacturing in China Opportunities in a competitive market (download here) is the first in a series of regular reports from AMCHAM, and it is well worth the read.

A report that draws on AMCHAM’s large membership of firms operating in China, its Small Manufacturers Business Council, and Booz & Company, the opening statement says it all:

Regardless of when China’s economy recovers, it is clear that the manufacturing landscape for foreign-invested companies has changed. Focusing on China only as a provider of low cost labor for exports is unlikely to be a winning strategy moving forward. With increasing competition and continued rising costs, implementing industry best practices is no longer an option but a necessity.

Perhaps more than any other report I have seen to date, this report presents what companies are experiencing on the ground and uses that as the foundation for putting forward their recommendations:

• Develop a strategy to capitalize on the continued growth of the middle class while reducing dependence on export markets by moving beyond the premium segment and down the price/performance ladder.
• Develop new business models for the domestic market and tailor current products to meet local preferences and conditions.
• Align manufacturing and purchasing strategies and link local activities with the extended global supply chain to build and capture economics scale and scope, harnessing the duality of China in the process.
• Continue to invest in manufacturing best practices to take advantage of “latent productivity” that exists in most operations to offset rising costs.

Now, none of this is particularly new to firms who have been in China for a while (I remember being at an event 5 years ago where the majority of attendees (250+) were selling into the China market), but the report does add some perspective on the fact that while many of the largest firms in the world are no longer able to leverage CHina as an export base.

A message perhaps that the central government would find more interesting than the average reader?

One of the more interesting comments, and one I had not heard before, was this:

Even with the current economic conditions, manufacturing in China has become more expensive. Companies reported that costs are still rising – up to 15 percent in 2008 compared to an increase of 10 percent in 2007 – particularly in compensation costs for management, support staff and blue-collar workers as well as raw materials. Although labor and raw materials costs have come down from the premium levels of last summer, they are expected to rise again once market conditions improve.

Keeping in mind that there has been a run up recently in raw materials (primarily from China building safety stocks), I found the staffing costs very interesting, and would be very interested in seeing if this is a function of firms paying more to keep staff, paying layoff packages, or simple business as usually merit raises.

There was a time when the only coffee outfit was Starbucks, and its knock off SPR.

Along Nanjing Road, the highest concentration existed with 5 stores between the Portman hotel and People’s park, and in total there were roughly 80 by the end of last year (as you can see from the map above).

Over the last 18 months though Starbucks’s hold on the market changed. Dramatically.

Leaving aside the recession for a moment, and the fact that a tall latte goes for 28RMB, the growth of Starbucks has been eclipsed by the by new entrants: Costa Coffee, 85c, Dunkin Donuts, and others. It is a market that in many ways was made by Starbucks, that others have learned from, and in the case of the Taiwanese 85c brand, looked to take away.

At first, 85c was a single store on the less than traveled corner of Maoming Road and Weihai Road (.5 km south of Nanjing road). A store that perhaps drew few glances at first from the folks at Starbucks, but within a week, it was probably clear to executives on Yishan road that they were witnessing the birth of a strong competitor.

The cakes themselves were measurably better than the local alternatives one would find at some of the other cake shops, and the bread variety was quite good (the Parmesan bread is fantastic!), but it was the 7RMB bubble teas and coffees that were growing in popularity. Everyone was talking about it, and myself and a few others quickly looked at the website and talked about taking up some of the licenses that were being offered up for the new stores.

It was the birth of what will shortly be the largest cafe in Shanghai, and the recent CHAINA article Watch out Starbucks, 85c is the new kid in town in China has a very interesting interview with one of its executives detailing its recent growth,

Q: When did you start the business in China?
PZ: We opened our first store in Shanghai 2 years ago. We now have 42 stores, 31 are in Shanghai and the rest are in Hangzhou and Suzhou. We are planning to open another 91 stores in Shanghai by the end of the year. We built our factory in Song Jiang in June last year.

What it is going to take to support that growth.

Q: Why did you choose Song Jiang as the location of the factory?
PZ: We needed a place big enough to accommodate us. We have around 6,500 square meters, which has the capability to supply 60 stores. Since we are growing so fast, a key issue that we face is how to supply the growing number of stores. We have already found a venue in Hangzhou which is 10,000 square meters in size and we’ll soon build an-other factory there.

.. and the logistics that goes into supporting the stores

Q: How do you manage logistics to each store?
PZ: Currently our 42 stores make their orders every day before 10 a.m. based on their previous day’s sales. Then our factory works 24 hours a day to make the delivery be-fore the following morning since our products have a short shelf-life. We need to pre-set product specifics on each item into our ERP system. So if I need to produce 1,500 pieces of cake today, then the system will tell me how much butter and dough we need and so on. Before 4:00 pm the same day, the products will be ready and around 7:00pm, we’ll make the delivery of the frozen cakes from factory to each store. At 2:00 am, we’ll make the second delivery of the day of normal-temperature cakes.

An interview that is interesting from many angles (Successful China business case, Retail Logistics, Branding, and real estate), I found the dialogue very interesting, telling, and was amazed to see just how profitable one of these stores could be:

What’s the average sales revenue of a store?
PZ: The best shop can have revenue of RMB1.9 million per month in Shanghai, while our store in the US, can do in excess of USD 400,000 per month.

Read the rest of the article here

A few years back, my team was working on a program to understand the needs of Shanghai’s elderly. It was a program initiated through a conversation on what it would take to implement the American “Meals on Wheels” program, and through our study of one district one thing became apparent.

That there was a huge market being missed.

A market whose potential market size I was once again reminded of (Shanghai has roughly 2 million over the age of 65) when reading Ogilvy’s report Embracing Change, Realizing Dreams (written by Kunal Sinha).  26 pages in length, this blunt overview into China’s gray market to, will surprise few:  That in the race to capture China’s up and coming middle class, firms are missing the opportunity offer products and services to those that actually have money in the bank time on their hands, and are looking for outlets.

That while “hip-hop” granny troops may be an up and coming market, the need for specialized care services and facilities are well known and opportunities exist.  Needs that will only continue to grow as China’s population only gets older (Shanghai is expected to be 20% over the age of 65 by 2020), and through changes in culture and geography, many of these elderly will find themselves in a position where they need to rely less on their families for support.

Filled with interesting profiles and anecdotes, this is a report that I would highly suggest reading as it is quite insightful, it is entertaining, and it offers some insights into what will be one of China’s more interesting markets.

For more on this topic, I also suggest the following articles/ reports:

• Living Arrangements of Older Adults in China
• 50% of China’s Elderly Live Alone

Recently found an excellent report from China Youthology called China’s Youth Trends and Business Implications where the authors took an approach I have yet to see through others in measuring the youth market here:

Different from many consumer trends report, we understand the youth as ‘human beings’, rather than merely as consumers and shoppers. In order to understand them as human beings, we believe in a holistic approach that accounts for social changes, especially in an environment as fast changing and complicated as the China market.

It is a lens that as I was reading through the report proved refreshing, and where many like to either look at how spoiled China’s Post 80s kids are, this report does an excellent job of showing that there is another side to “China”.

At the same time, when putting forward their 5 trends, I also like the approach of showing that while their data reflects a trend, there are nuances to each trend. They recognize that context is everything, and that while they see “a” trend, there are clearly other parallel trends occurring.

Trend 1: From ‘Little Emperors’ to A ‘Bird Nest Generation’: Making Small Differences by Social Participation
For some, there will be a natural reaction that will immediately cause your eyes to role back into your head while uttering “yeah right, yet I encourage you to maintain focus.  That whether through volunteering at the Beijing Games, donating to the Sichuan Earthquake, or harnessing the power of the internet, today’s youth are beginning to understand and experiment with a new role.

That of a socially responsible citizen.

It was a role that was traditionally heavily manage and influenced by others, namely the State, but with this change will come a need for firms to also make changes

1) CSR will be come under scrutiny – Corporations must become responsible citizens
2) Small and continuous actions in daily life (Stop talking, Prove it) – NO MORE GREENWASHING
3) Get it Louder through Communities – Localize community efforts

Trend 2: From ‘Globalization’ to ‘Post-Globalized Chinese’: Growing Confidence in Identity
Closely aligned with the Nationalistic movement in China, this section deals with the fact that there is a movement (a feeling) away from the belief that Western is better.  That, for some of China’s youth, as Starbucks and McDonald’s expand their presence in Chia, they equate that to a lose of Chinese culture.  A feeling I have had expressed, and can empathize with, on multiple occasions through conversations with friends.

It is a movement that probably peaked with Anti-CNN, but going forward it carries some real impacts (Carrefour can testify to that):

1) Local brands have started to gain ‘Cool Mind Share’ – Local artists, musicians, and writers are tapping the vein of discontent at a much higher rate than anything “western”
2) True Connection through Resonance of Collective Memories – Perhaps Hello Kitty is better positioned than Barbie?
3) Localization with Context Awareness

Trend 3: From ‘Cool’ to ‘Geeky’: Deep-ization of Hobbies and Empowerment of Communities
Whether through an internet chat room, QQ, or another medium, China’s youth are finding new ways to come together, share experiences, and identify with others in the electronic rhelm.  It is a trend that we have seen in Japan and Korea before it, and as with China’s internet population being the largest in the world it should not come as a complete surprise that this trend exists:

Implications:
1) Marketers need to understand 2 types of Geeks – Category Geeks and Cultural Geeks
2) ‘Great products’ Engross Category Geeks – Can you say iPhone?
3) Build Blood Connections by Engaging and Empowering Cultural Geeks

In short, this community in its broadest terms, is really no different than what you would find in other markets.  Geeks are geeks regardless of geography, and considering most geeks are trading cyber real estate before physical real estate, geography may not be the proper terms anyway.

Trend 4: From ‘Fun-Seeking’ to ‘Creativity- Seeking’: Remarkonomy
In short.  What they found was that there was no shortage of low hanging fruit or disposable eye candy in the market.  what they found was that in trying to attract the mass market, and in playing to the lowest common denominator, brands were missing the market. That consumes were looking for an experience that was memorable, and replicable.

It is a trend that the researchers found 14 nuances (Everyday  life trifles, Non-consumerism – organic, Kidult, Handmade, Inconvenience, Fragility, TEchy, Social conscience, Chinese Chic,Collective Memory, Hitting the Road, Sarcasm and Spoofing, Sensuality, and violence) for, but only 2 business implications:

1) ‘Designy’ everything – every element of the product (incl. packaing and display) are important to the sale.
2) Crowdsourcing to meet the long tail needs

Trend 5: From ‘Indulgence’ to ‘Sustainability’: Pains of Modernity and Risk Awareness

While the youth enjoy the ‘fruits’ of modern life, they’ve also started to feel the ‘pains of modernity’ at the same time: the polluted environment, the growing incidence of diseases in younger age, the severe issues of food safety, and now the economic crisis. They have realized and experienced the many risks in the society and in their life, and they aspire a life and world that is more sustainable.

Perhaps the trend that I am most active in, apart from #1, it has been amazing to see just how the issues of global warming’s primary inputs (population, water scarcity/ pollution, and air pollution) are beginning to really resonate with China’s population (not only its youth).  It is true that progress is much needed, however one of the last key steps before large gains are made is that China’s citizens will grow educated and empowered to address China’s environmental and socetal issues.

It will occur online through outing pollution firms and offline through voluntary service, but more importantly for businesses it will mean:

1) Knowledge marketing – Consumers are getting smarter, and firms need to understand and respect that
2) Sustainable Products – Firms need to begin “greening” their products

In the end, this was one of the more interesting reports as it focused on some of the good that exists in China’s consumers.  So often, the brands are playing to the “consumer” in every citizen, but where this report is different is that it fundamentally recognizes that China is not a land of conusmers on a credit card high.   That firms need to make adjustments.

To download the report, and read for yourself, you can click here.