beyondbrics

China has long been a bit of a sucker’s market for foreign brands: the simple fact of foreignness was enough to sell a consumer good.

Domestic brands found it hard to compete with the conventional wisdom that, in the words of a Chinese proverb, “foreign monks give better sermons”: overseas goods are almost always assumed to have the edge on quality.

But Chinese consumers are not such doormats anymore: according to a study of Chinese consumer attitudes released this week by McKinsey, though Chinese consumers are still the world’s most brand-crazy, “they are also tremendously value-orientated and will seek out the best deal once they get into the store”.

“We are seeing more maturity in consumer behaviour,” says Yuval Atsmon, retail expert at McKinsey in Shanghai. “Consumers are not just swayed by the big brand names, they are willing to pay for products that are better, but are also weighing the different dimensions (of a purchase) in a more mature way”.

Levi Strauss this week translated that realization – that Chinese consumers are increasingly demanding more for their money, even from foreign brands – into the launch of a new cheaper jeans brand, (Denizen, aimed at young consumers not just in China but throughout the emerging world). The new brand will command only a small price premium over domestic brands – much less than Levi’s has previously asked for.

Chinese consumers are also developing a softer side, the McKinsey survey found, looking for the “emotional” as well as the “functional”. “Purchasers of laundry detergent are now increasingly demanding ‘good scent’ as well as ‘appealing package design’,” the report says. They have also become more health conscious (some laundry detergents even market themselves by the fact that they include ingredients of Chinese traditional medicine).

Foreign companies will want to keep all this in mind when marketing to the Chinese – but they will not want to forget an even more basic fact, underlined by a new consumer survey published today by the Economist Intelligence Unit: Chinese consumers remain relatively tightfisted, despite Beijing’s best efforts to get them to part with their cash.

Related reading:
Chinese consumers pragmatic, conservative -McKinsey, Reuters