WELLINGTON/BEIJING: There are signs of stagnating income growth in China as well as changes to consumer habits and this will make it essential for foreign brands to play to their strengths of innovation and marketing, a leading academic has said.
Professor Siah Hwee Ang holds the BNZ Chair in Business in Asia at Victoria University of Wellington, a position that promotes and supports effective New Zealand business engagement with Asia.
In an article for Interest.co.nz that also has relevance for all foreign players, whether New Zealanders or not, he writes that Chinese consumers are becoming more cautious and selective in their spending.
This is in response to wider economic developments, such as household income growth falling to 6.5% in the first half of 2016, down from 7.6% last year, or news that retail sales among the country's top 100 retailers suffered a 3.2% year-on-year drop in the first half of the year.
Yet huge opportunities remain for foreign companies, Siah Hwee Ang argued, as he pointed to Chinese millennials aged 18 to 30, who are expected to make up more than a third of the urban population by 2020 when their share of total consumption is forecast to reach 53%.
Furthermore, the number of high-end online shoppers is increasing at a rate of 25% a year and it is expected there will be 61m of them by 2020.
But with no solid guarantee of greater consumer spending in the years ahead, that means foreign brands must adapt to Chinese preferences while also deploying their skills of innovation and marketing.
"Foreign players need to make the most of their advantages: innovation and marketing," said Professor Ang. "Local companies are generally still not good at this, as they are used to the mass market mentality.
"As Chinese players continue to make swift progress in these areas over time, it is essential for foreign players to up the ante with developments in innovation and marketing tailored to the Chinese market."
Data sourced from Interest.co.nz; additional content by Warc staff