Do Chinese consumers have an environmental conscience?

It is evident that Chinese consumers like everywhere else in the world reflect a consumption pattern that is governed by their beliefs, values and ideals. In a research conducted by GfK in 23 countries, 72 % of the Chinese consumers claim that they only buy those products which match their values, beliefs and ideals.  In fact, the ardor of this expression is one of the highest in the world and the Chinese consumers seem to surpass the consumers in most developed countries in the intensity of their expressed emotion. 

That concern for the environment is among these guiding values is clear from the fact that Chinese consumers in most research studies, as in this one, avidly proclaim a strong environmental conscience and also demand responsible behavior from companies. 73 % of them (7th highest among the 24 countries studied) say that they are plagued by guilt when they indulge in an environmentally unfriendly manner. Their demand from brands and companies is even more exacting - 80 % of them feel that brands and companies have to be environmentally responsible. Here again the Chinese consumers are ahead of most developed countries in their standards.

The key question, of course, is will the Chinese consumers pay a premium for an environmentally friendly product? On this, the results in the market so far have been disappointing and there is no evidence of consumers paying more for an environmentally friendly product - as we see them paying for a safe product. Chinese mothers are buying infant milk formula and other baby products from all over the world at the highest prices. However, they don't seem to reflect a similar enthusiasm for products which are less of a strain on the environment. Tesla, the premium fully electric car, which has become an environmental badge in the U.S. seems to have had limited traction on the Chinese roads so far. Even in terms of common environmentally friendly practices such as shunning plastic shopping bags or buying products with reusable or light packaging the Chinese consumers are not really holding a beacon to the rest of the world. 

What do marketers and policy makers need to bridge this gap between espoused values and actual behavior? The key to achieving this is to link the desired positive behavior to a clear consumer benefit. Consumers seldom pay to assuage their conscience, but invariably do when they see a clear and meaningful benefit. Less pollution and safer environment are clear candidate benefits that can be dangled in front of the consumers.  Benefits don't just need to be functional or tangible - emotional benefits could also hold a powerful sway.  The related emotional pay off in this case could be potent - particularly if it relates to the long term protection and health of their children. Chinese consumers will pay if they feel that the premium that they pay today will create a better and safer world for their children tomorrow. The key to a more desirable behavior and premium for environmentally friendly products lies in converting the guilty conscience into a powerful emotional benefit that the Chinese consumers can identify with.  

Written by Ashok Sethi

ashok.sethi@hotmail.com

The Brand Divorce

In 2013 3.5 million Chinese couples filed for a divorce - an increase of 12.3% over the previous year. The Chinese marriage is in a crisis and more and more Chinese are choosing to part ways with their partners and live on their own. Of course many more, particularly educated women (often referred to as shengnu - leftover women or victorious women - depending on the character for "sheng" and your point of view) are choosing not to cast their lot with anyone at all. Similar statistics are hard to come by for the number of Chinese consumers who divorce the brands they have been using, often after years of relationship. However it is clear that the consumers' predilections in personal lives are also reflected in their purchase behavior and brand choice. Chinese purchase behavior is characterized by promiscuity and flirtatiousness, and often resistant to settling down in a faithful and long lasting relationship. What are the root causes of this Chinese detachment and is there a commonality between what is causing the Chinese to shed their bonds with their partners and with their brands? 

Why do so many Chinese marriages end up in a divorce? And do similar reasons prompt them to cast aside the brands they were once in love with? Research shows that there are four main reasons which prompt the Chinese couples to part ways. 

First and foremost it is an erosion of trust. It could be a lack of trust in the spouse's fidelity, or financial conduct or the single-mindedness of the devotion. The brand marriage is also rocked by a lack of trust. Chinese consumers are prompt in divorcing a brand which they feel cannot be trusted - whether it is in terms of safety, quality or honesty. Of special note here is the aspect of safety, where many consumers feel let down by brands which offered products which could harm the health of the consumers and their families.

The second cause of marital discord and subsequent break-up is financial differences. Who should pay the mortgage or the maintenance, where and how should the savings be invested and who should command the household finances. Brand marriage is also rocked by financial differences. Chinese consumers decide to divorce the brand if they feel it is charging them too much and isn't really giving them a good value for their money. Value assurance is perpetual challenge for brands and they need to continuously monitor their perceived worth in the consumer mind.

Marriages also crumble and the couple become distant when their interests and needs start diverging. Brand marriages also crumble when the consumers' interests and needs change and the brands are not able to adapt to the changing needs. Consumer needs are evolving and becoming more sophisticated. Brands need to sharpen and contemporize their proposition to keep up with these changes.

Finally marriages flounder when the love starts to disappear and the relationship becomes a functional dependency and loses the emotional bond which brought the couple together. Couples keep their relationships vibrant and fresh by tender touches, emotional gestures and meaningful communication. Brands in China also need to learn to sustain the romance and keep the marriage healthy and long lasting. 

Managing consumer brand relationships becomes so much easier when we try to understand them with the metaphor of human relationships. Is your relationship with your consumers a healthy and stable marriage or is it a marriage-on-the-rocks?

Written by Ashok Sethi

ashok.set@gmail.com

Ashok is the Managing Director for GfK Custom Research in China

Chinese Manufacturing and Indian Service

The Ministry of Commerce in China recently announced, that the nation has toppled the US and taken the crown of the world’s largest merchandising trader.  Much of this achievement is based on an extraordinary success in manufacturing. China has clearly established its name for its manufacturing prowess. Half its gross domestic product is accounted for by manufacturing. Its plant and factories, churning out huge quantities of washing machines, refrigerators and mobile phones, cater to the insatiable demand of consumer goods in China and also cater to the global appetite for cheap goods. China is the largest trading partner of 120 countries, including India, and with most of them enjoys a favorable balance of payments situation because of successful export of its merchandise. China hence has developed capabilities to efficiently produce these goods not just to meet its own demand, and export to the whole world.

There are several factors which provided a fertile ground for the development of China’s manufacturing industry. China's manufacturing strength is due to its entrepreneurship, good infrastructure and efficient supply chain. The manufacturing boom also occurred at the cusp of huge urbanization, when millions of young Chinese villagers were free and eager to move out to supplement their meagre agricultural income and willing to work as cheap labour in factories. But the manufacturing industry also owes a debt to the fact that as a people, the Chinese are prone to follow instructions, stick to processes and work in a disciplined manner - exactly what manufacturing calls for.

On the other hand, services, though growing healthily, remain a weakness of the Chinese economic model. The Chinese tend to apply the same uniform standards and processes to services, which they employ to manufacturing. This often results in a sub-optimal offer, as services intrinsically have a higher variability in its demand. A three star hotel in China will nearly uniformly provide you clean rooms and sheets, a functioning television and a passable restaurant – but seldom anything more.  The Chinese service model is based on the principles of assembly line of the manufacturing process. The service is divided neatly into different processes and a standardized delivery of a basic quality is designed for each element. Standardization rather than customization is the goal. Airport staff at boarding gates in Chinese airports play recorded "thank you" messages while they scan the boarding cards. “If you have to thank every customer, why not have a recording to spew it out than leave it to the whim of fickle humans,” the Chinese think. 

Indians on the other hand are free-spirited, creative creatures of their own whim and will. They need variety and opportunity for creativity and extemporisation. Manufacturing is stifling for the Indians - it is the creative, on the feet servicing which is their forte. Unlike China’s manufacturing dominated GDP, it is the services which reign supreme in India, accounting for more than half its GDP.

The Indian service model, is based on the concept of customised service, which results in more tailor-made and specific solutions for the customer, often resulting in a higher level of problem solving and satisfaction. However, the Indian service also embodies a high level of variance. A three star hotel in India will show high variation with a quality of facilities and service which could, on one end rival a five star hotel, and on the other hand offer barely liveable accommodation.

Additionally, the Indian model is vulnerable to the whims of fancies for the people who are providing the service.  If you are lucky, you will be greeted with a beaming smile, solicitous attitude, and made to feel like a king. On a bad day (her bad day, which soon becomes your bad day too) you may be scowled at and blamed for interrupting her well-deserved rest.

But most of all, her behaviour and attitude will be based on what she feels the particular customer deserves. Coming from deep notions of a class based society, the behavior will often depend upon at what level or class of society does the person behind the counter pegs you at. Hence, if you are neatly dressed, exude an air of confidence and sophistication, you may be greeted with a smile. On the other hand if you present a bedraggled appearance and are classified as ordinary riff-raff you may be treated with perfunctory callousness. While flexibility is an asset for Indian service, extreme variability is a weakness. Indian model could do with a bit of standardization and learn from the highly homogeneous, low variance output of the Chinese

In this context India's software industry is clearly vulnerable to competition from China. In the long run Chinese are likely to prove themselves to be better in writing code than the Indians - though Indians may still hold an edge in the systems analysis and design. Surely this presents an obvious opportunity for cooperation and collaboration between the two countries.

Written by Ashok Sethi

Ashok is the Managing Director of GfK (a Global provider of market research and consumer insights) in China

Digital year of the horse

China today has 618 million internet users. Internet has pervaded all aspects of life - from buying fresh vegetables, to seeking employment or seeking a life partner. The new year festivities, are on the other hand, one would expect would be seeped in tradition and celebrate the timeless customs. However in China the new year festivities, heralding the year of the horse, have taken a distinctive digital turn.

Firstly, the new year is a time for reunion with families, particularly for the 260 million migrant workers, who toil throughout the year, often away from their families and children. Hence procuring a train ticket to arrive home is of utmost importance. A few years ago, the Chinese  railway  went online and started offering tickets on its website www.12306.cn. The ticket sales would normally begin around a week before the commencement of the journey. Within a few seconds the system is bombarded with millions of requests, and the tickets are often sold out even before you can successfully log in. Local internet companies like came to the rescue with plug-ins which automate the process of trying to login and get into the system. Of course, many cried foul against such ticket snatching plugs, but not before millions were able to benefit from this software to secure a ticket for a ride home, prompting the website to take steps to block the intrusion from such rogue plug-ins. 

Then there is the practice of exchanging greetings, and wishing each other success, happiness and most importantly prosperity in the coming year. Mobile phone SMS became the de facto medium and 31 billion short messages were exchanged over the cellular network in 2013. 2014, however, saw a sharp decline in the use of SMS - only 18 billion SMS greetings were exchanged - an over 40% decline over last year. The exchange of greetings shifted online, particularly to WeChat, an online messaging platform akin to WhatsApp.

And lastly, the new year is not only the time to exchange greetings, but also more substantial hongbaos or red envelops, normally stuffed with a certain amount of cash, and dished out particularly to the younger and the junior. The hongbao gifting also made its way to the digital arena, with  the facility to gift a hongbao from WeChat. You do that by linking your bank card with your WeChat account, which allows you to gift money, just as it allows a host of other e-commerce activities. Tencent (owners of WeChat) claimed that more than 75 million hongbaos were gifted during the first three days of the Chinese new year.

Digital, hence, has conquered another area of tradition, but in true Chinese spirit, not by destroying what is precious and beautiful in the age old practices, but by further enhancing the joys and jubilations associated with this important festival of China.

Written by Ashok Sethiashok.set@gmail.com

Innovation in emerging markets

Quite often when people think of innovation they think of Apple and the iphone. That such innovation is also relevant for emerging and developing markets is proven by the fact that China has already become the second largest market for Apple. But there is more to innovation in emerging markets that producing cute gadgets. 

If we define the purpose of innovation as the process which leads to a better satisfaction of consumer needs, or an improvement in the quality of life of the consumers, we need to firstly look at the profile of the target population of the consumers in emerging markets and see what kind of innovations can they benefit from. While luxury goods may be booming in emerging markets, they also house over a billion people living below the poverty line. Even the emerging middle class in these markets has much more modest spending power than the middle class in the West. This implies that while the Western style innovation of smart technology and slick designs is still relevant in the emerging  markets, there is also a totally new kind of innovation required for consumers who are actively seeking improvements in their lives it terms of basic aspects such as clean and safe drinking water, affordable housing, better education for their children and basic services such as banking. It is not surprising then that m-pesa a mobile phone based money transfer service emerged in Africa and not from the developed markets.

Jugaad innovation

We often use the term "jugaad innovation" in the context of emerging markets. Jugaad innovation is normally used to describe, relatively low cost, problem solving, basic, grass-root level innovation that is often the result of consumer and manufacturer ingenuity, directed at solving some problems and improving the quality of life for consumers. In the Western context, innovation is expensive as it involves expensive R&D, scores of Ph.D's pouring over their microscopes to discover new magical formulas. Innovation is normally a long drawn process with very little short-term return. While companies like Lenovo and Huawei are engaged in this Western style investment, only the most successful companies can afford to put in these kind of resources. For most companies in emerging markets the only route is frugal innovation.

Secondly, most innovation in the Western world is top-down - as the consumer needs in most areas are actually well satisfied and  it is the companies, who in search of higher profits and beating the competition are looking for ways to provide that extra stimulation and thrill to the consumers. However in the emerging markets, innovation often starts at the grass-root level, as the consumers have unsatisfied needs and often resort to cheap and crude but still workable solutions to seek solutions for their problems.

Chinese digital innovation

While the Western companies lead in innovation for technology products, one of the most active areas of innovation in China is the technology services in the digital and mobile arena. True, the Westerns platforms of Facebook and Twitter are not accessible to the average Chinese- but they have something much more suitable to their needs - Weibo. Just as twitter, Weibo allows you to express anything in 140 characters. Of course in Chinese, each character is actually a word, and hence you can say a lot more in 140 characters in Chinese than you can do in English or most other languages. Weibo has attracted more than 300 m users within a few years and has become a platform for discussion of everything from brands to social issues to corruption. Through Weibo urban young Chinese have found a relatively open but still an acceptable way to express themselves. Weibo has emerged and evolved in a uniquely Chinese way to satisfy the needs of the Chinese consumers.  

Similarly while Western companies like eBay and Amazon have made little headway in China, the Chinese e-commerce platform Taobao has 600,000 vendors selling everything from tablet PCs to freshly slaughtered chicken. Taobao was able to innovate to address several resistances towards e-commerce in China - which included a mistrust between sellers and buyers, low penetration of credit cards and extreme price sensitivity. Both Weibo and taobao have developed not through top-down innovation but through their users who have moulded the platforms to best satisfy their needs.

Innovation in emerging markets is extremely important. Not only can it add to the coffers of corporations, it can change and even save lives. Of course, to be effective it needs to be anchored to the consumer needs and a discovery of what can enrich their lives.

Written by Ashok Sethi

ashok.set@gmail.com

The emergence of seamless retail

The juggernaut of online shopping

It is just to state the obvious that the Internet has totally transformed the world for both the shoppers and the retailers. Shoppers have taken to online shopping with gusto and entrepreneurs and businesses are straining hard to exploit the opportunity. In the early days of Internet, it was common to consider the web as a resource or an aid to shopping, and it was expected that consumers will rely on the Net to look for information about products, to locate a store where they can buy and to perhaps look for advice and assistance on how to make the right choice. It is indeed true and nearly all agree that the Internet has become a very useful resource for shopping. However clearly it has gone far beyond that and has become a gigantic marketplace - consumers are buying everything from luxury goods, shampoo, automobiles and freshly slaughtered chicken on the Internet. 

Online shopping has not just established itself in the developed markets, it has firmly established itself in the developing markets and e-tailing already accounts for 5-6 percent of 2012 retail sales in China and about 5 percent in the United States. In China online sales recorded an astonishing estimated 60% year-on-year growth in 2012 (Source: McKinsey. MGI China e-tailing report)

Last year online shoppers grew by 25% in China, with nearly 50 million new shoppers added to the fold (Source: CNNIC January 2013). The growth of group buying or tuan gou (which actually originated in China), also continues. We also see that consumers are losing their fear on online payments. In the initial era of online shopping, cash on delivery used to be a common method of payment, but thanks to Taobao (the largest online shopping platform in China with more than 6 million merchants listing their products), and the escrow system of payment known as Zhifubao, which protects both the buyers and the sellers, online shoppers are now ready to pay online.

The circuitous consumer journey

For the consumers the two worlds of online and offline shopping are now intrinsically intertwined. In the initial days of online shopping the consumers often looked for information on products online but the then returned to the comfort and security of the familiar bricks and mortar environment to lighten their wallets. While this is still a reality, the other phenomenon is more prevalent and on the rise - consumers today often touch and feel the product in the traditional stores, but come back to their comfortable chair at home, where they sit in front of their favorite computer or the newly acquired tablet and enjoy in-home retail therapy by clicking the "Buy" button.

The fact is that today the Internet is as much a part of the retail scenario, as is the supermarket or the hypermarket. Whether you are a retailer or a marketer of brands, it is no longer a question of developing an e-commerce strategy - the task really is to entirely reshape and develop a retail strategy for the digital world.

Online, offline and seamless..

This juggernaut of online sales has huge implications on the online as well as the traditional retail industry. It is not possible to understand the implications for e-commerce unless we simultaneously look at and compare the respective roles that online retail and conventional retail are carving for themselves. And to understand that we must understand what consumers expect in an online environment and what are their expectations in a traditional store.

Consumers are very clear when they think about what is important to them in an online store – ‘saving money’, ‘more payment and delivery options’ and  ‘better selection and delivery’ top the list. The needs from an offline store are very different. ‘Ability to touch and feel the products’, ‘satisfaction of immediate delivery’,  ‘better service’ and ‘enjoyable experience’ top the list. So the two channels have very different strengths and at this moment at least, it is too early to proclaim the demise of the traditional trade, though some change in its role is definitely in the offing

According to Deloitte’s Store 3.0 Survey among retail executives, it is apparent that the role as well as form of a bricks and mortar store will inevitably change. Today the executives say that he role of in-store employees is largely in providing basic purchase service and assistance and display some product knowledge. But this is expected to be totally transformed five years from now, when the most important skill of the workers will be to be able to leverage technology to enrich the customers' experience. Another important role of the sales staff will be to act as brand ambassadors. In fact retail executives indicated that in five years, providing customers with a compelling brand experience will become the primary role of the store.

So what does it augur for the future of online and offline trade. Online retailers need to clearly understand, that they lag behind the traditional trade when it comes to providing immediate gratification, intimate touch and feel, the immersive experience and the joy of shopping. They need to look at innovative ways of providing that intimacy - can technology be used to provide a better virtual touch and feel of the products, can virtual reality be used to help consumers come closer to the product? Can they collaborate with traditional retailers or can they establish their own limited brick and mortar presence (as some of them are doing already)? 

For offline retailers, the task it to zealously guard and enhance their ability to facilitate human interaction with the consumer. The store's function is not just to act as a convenient transaction center, it is to provide a valuable and important experience to the customer. For brands it is an opportunity to develop a relationship and bond with the customer, which is more of a challenge in an impersonal online environment. The most successful retailers will be those who can offer the best of both offline and online shopping and in fact offer a seamless shopping experience in which the shoppers can effortlessly move from online to offline, back to online then again to offline if they so desire .

This article is based on FutureBuy 2013 - a research study conducted by GfK in 14 markets across the world – which focuses on understanding shopping trends across the globe.

Written by Ashok Sethi

Ashok.set@gmail.com

Spring festival blues and commercial opportunities

The Chinese new year is a festival of joy, family reunion, fun and celebration. However when 1.3 billion Chinese decide to celebrate and get reunited with their families during the same seven day period, it generates unprecedented competition for limited resources and ensuing hardship. At the same time it generates a commercial bonanza. According to data from the Ministry of Commerce in China, total retail sales during the week long festivities reached 539 billion yuan ($86 billion)- 14.7% more than last year. The commercial opportunities do not just exist for the big retailers and manufacturers, this special time of the year generates some rather niche, ingenious but also sometimes dubious commercial activity.

Take me home

The most intense competition during this period is for transportation to go back home. According to popular estimates in the media, the Chinese will make 3.4 billion trips during the peak 40 day travel period around the Chinese New Year, of which 3.1 billion will be road trips. 220 million are expected to take a train ride during this period. Online ticketing, which started just a few years ago, was expected to make the whole process relatively painless - however it turned out to be a barrier for migrant workers in buying tickets to go back home during the spring festival. According to a survey by the Shanghai Institute of Foreign Trade, more than 90% of the migrant workers preferred taking a train to go back home and almost 80% of them said that they would do so by buying tickets from a ticket office. 70% of them said that they were not familiar with the online ticketing procedure and only 18% had tried using the online ticketing service. A kindly couple who was offering the service for online ticket purchase at a small fee to migrant workers was apprehended with the accusation of touting. 

For those who are internet literate the task of making a booking is no less arduous. The average daily number of hits on the website has topped 120 million during the peak days. Online sales are now responsible for over a third of total tickets, accounting for as many as 6 million tickets a day. The buyers often face interminable waits while the overtaxed computers cope up with the deluge of booking requests. In an exhibition of ingenuity, three internet giants - Qihoo360, Kingsoft and Sogou - designed plug-ins for browsers to automate the task of repeatedly trying to login and buying  train tickets on the overloaded train booking website. Critics opined that the software gives the internet savvy an unfair advantage to secure the much prized tickets.

The road less travelled 

Many consumers are taking the "road less travelled" with one entrepreneur from Hangzhou choosing to take 48 buses to reach his home in Linyi in Shandong. Another enterprising soul undertook the arduous journey back home using 8 train tickets and transfers from Shanghai to his home town in Sichuan. As direct tickets are most difficult to secure, this segmented approach worked well for him and he was able to get home smoothly and relatively quickly. In fact the train enthusiast is offering consultancy to others on identifying circuitous routes back home where ticket purchase is still a possibility.

Meet your future son/daughter-in-law

When the young city workers go home, the parents are solicitous about their quest for marriage partners. Those who have not achieved success in this area, are worried about creating anxiety among their parents and persistent pressure on themselves. Taobao, china's online megastore, which offers everything from the latest iPad to freshly slaughtered chicken, comes to rescue on this count also. For a few thousand yuan, any unattached youth can hire someone who would pretend to be his or her future life partner during the golden week that is spent with the parents. Things do not always go as smoothly and dispassionately as planned, with a genuine spark of affection for the hired companion. 

Happy meals

Those who have already tied the knot and are the sole bearers of the family name and hopes for their parents ( as a result of family planning) need to make the difficult decision of with which set of parents should they have the nianyefan or the New Year's Eve dinner. Restaurants have come to the rescue urging the young from hosting the dinner at their premises, including both set of parents and even grandparents. The service is popular and the good restaurants are often booked months in advance.

Packaging for 'face'

Of course, when you go home you must carry gifts. Migrant workers who have left their children in their home towns and villages in the custody of their elders, have no dearth of what they can buy, and go back home loaded with toys for their children. The elderly are often rewarded with health foods, which will provide them with even more energy and stamina to look after their grandchildren. Marketers often exploit the gifters' need for face and desire to be seen as someone who has done well in the city and has come back with generous and valuable gifts. The often modest gifts are made to look more alluring and grand through excessive packaging. The authorities have taken notice of this and are coming down or deceptive and wasteful use of extravagant packaging.

Sleep well while you travel home

A product named "sleep support" has gained popularity on the internet as a sleep support for sitting upright sleep. The gadget provides head and chest support to the users, while sleeping upright on a train. a netizen suggested that if the instrument can also provide a place for comfortably holding an iPad its value will be considerably enhanced.

Written by Ashok Sethi

ashok.set@gmail.com

Looking ahead to 2013

An ode to joy 
  

Like every year we went through our ups and downs in 2012, holding our breath, praying, cursing , rejoicing and regretting. But it was delightful to see that the year ended with a cry of joy (or rather the promise of a cry) when it was declared that Kate Middleton, the Duchess of Cambridge was expecting a baby. Through sheer luck and extraordinary coincidence, prince William a kind of heir to the British throne and Kate's husband, is expecting the same! The British (or rather the world's) cup of joy runeth over and we should see a brighter and more prosperous 2013. David Cameroon, the British Prime Minister said that he was delighted at hearing the news. John Osborne, the Chancellor of the Exchequer announced that the austerity (not abstinence)  measures seem to be paying at last and the end of recession can not be far now. The world will listen to every gurgle, splutter and burp coming from the royal mahogany cot and look once again at the future with a sense of optimism. Such good fortune while the British were still basking in the glory of the Olympian sun, and the Queen's diamond jubilee! Experts feel that this will make the British a less cynical nation and might transform the nation of stiff upper lips to one of drooping lower jaws.

Pantagon

 

General  Petraeus, who moved a while ago from Pentagon to CIA, apparently left his pants behind and was caught without them, having an affair with his biographer.  "I wasn't content just having my name on the book, and wanted to get under the covers," said Paula Broadwell, his biographer.  It was a shirtless FBI agent who blew the whistle on the trouser less General Petraeus. The story captivated the American public's attention, while the nation was having its pants taken in Afghanistan. 

A number of other countries competed to put forward their own sex scandals. In UK news channel BBC was itself in the news, when it accused one who didn't of sexual offences, and broadcasted Christmas tributes to the one who did it. Thankfully Jimmy Saville, the one who did it, is dead and severely handicapped in doing it again. 

New leadership

After a grueling electoral battle with Mitt Romney, Barack Obama won the tenancy of the White House for four more years. Mitt put up a brave fight and spent a lot of money to evict Obama but failed to win favour of  "binders full of women", and hordes of Asians and non-whites who set their faith in Obama. Obama's acceptance speech saw a change of sponsor from Metal Can Company (and hence the slogan -Yes, we can) to American Best Foods (the Best for America is yet to come). Perpetually being scolded by his wife Michele for not listening to her, Obama embraced her on Twitter and proudly announced "Four more ears".  The Economist urged him to follow this with an embrace of a Republican.

New leadership also surfaced in the most important country in the world and Xi Jin Pin replaced Hu, while Wen looked on. Bent on making a difference, Xi started by setting a record for the shortest speech delivered by a senior Chinese leader. He announced, to the amazement of everyone, that the mission of the party was to look after the needs of the people. He also made the political leaders tongue tied by banning "empty talk" and red carpet receptions, with bouquets, banquets, expensive Chinese liquor and smiling children. The share price of all Chinese white spirits companies has been coming down and orphanages putting up more smiling children for adoption after the announcement.

In Russia, Vladamir Putin decided that Russia is yet to realize its full Putintial and moved back into the presidential palace.  A man called Hollande was elected leader, not of the Netherlands, but France, and is showing Dutch courage by attempting to raise the tax rate of on the wealthiest French to 75% of their income.

Liberal world

It was a good year for GLTB's as three states in America voted to legalise marriage between partners of the same sex. Several other states are expected to follow suit, while some are considering gay marriages to be the only legal marriages in their territories. Some American states changed their attitude towards marijuana usage and said that they will not try to shoot or blow up recreational users of the drug. The Netherlands on the other hand demanded a proof of Dutch citizenship before serving the stuff in its cafes, saying that it was worried about crime, though it did push tourism (as well as the tourists) to a new "high".

Banking in a fine fettle

That everything was fine with the world's banks, was proven by the fact that UBS paid nearly a billion dollars in fines to the regulators for fixing something called LIBOR. HSBC and Standard Chartered also paid over a billion each in a fine gesture to help the struggling US economy under the guise of a punishment for money laundering.

Apple and Siri 

It was a fruitful year for Apple, when it shortly became the firm with the largest market capitalization ever. As it conquered and expanded to new markets, it learnt their ways and talk and Siri started speaking Chinese when iOS 6 was released. To the delight of the Chinese iPhone users, Siri was very well informed about the location of brothels and promptly named several prominent establishments when asked "where can I find a prostitute?". This service has since been suspended and the phone now Siriously reprimands the enquirers on their cheekiness.

Bedlam in India

Indians, of course, do not have sex but still somehow manage to produce a prodigious number of babies. Many of these babies grow to become adults and need jobs which makes it imperative that the country registers a decent level of economic growth. India lost its secular momentum and reverted closer to the Hindu rate of growth. The Prime Minister made desperate efforts including allowing direct foreign investments from the likes of Walmart in retail trade. Opposition parties, true to their name, opposed this initiative (as they opposed everything else - good or bad - it is not for nothing that they are called opposition) saying that Walmart will eat the lunch of small shop owners by stealing their shoppers. 

Ending the year in style

The whole world rocked to the beat of Gangnam style from Park Jae-sang, better known as PSY, whose video clocked a billion hits on YouTube. Another young Korean, a little to the North, called Kim Jong Un, son of the Great leader Kim Jong Il (who passed away last year)  was declared the most handsome man by the satirical news channel called the Onion, which was widely and seriously endorsed by the China media. Kim swore to keep his country fit by allowing only low calorie diets for the country's starving people. It is rumoured that he might inadvertently succeed in shooting a rocket to the moon, by attempting to fire one at South Korea. 

Cliff-hanger finish

it was a cliff-hanger finish to the year. Republicans were refusing to accept any tax increases, particularly for the rich, who they argue work harder than the poor and hence deserve more tax breaks, and the Democrats were balking at any spending cuts. Speaker of the House John Boehner, a ski enthusiast, dismissed the cliff as a mild slope and decided to use it to ski down for his new year holiday. To most others, however, it was clear that the cliff will be very sharp indeed. Despite sovereign claims it is not just an American cliff, the whole world would to enjoy the precipice. As we enter 2013 we look forward to being taken for a collective ride - you don't have to have an American passport or even a green card to enjoy the spectacle and the ride. 

Written by Ashok Sethi

ashok.set@gmail.com

Half price for those with no "better half"

Singles' Day

One would have thought that Singles' Day would be a celebration of being single, when those who consider themselves lucky having escaped the clutches of matrimony, will revel with gusto and exchange congratulatory messages.  However in China, one of the few countries which has taken to the festival with enthusiasm, we see dating parties, mass marriage ceremonies and other activities designed to help the singles in losing their independence. Singles' Day seems to be treated as an occasion to attempt to rid oneself of one's single-hood and start dreaming of romantic togetherness, rather than a celebration of "single-hood". 

Online shopping extravaganza

While the significance that this day (which is celebrated every year on the 11th day of the 11th month) is debatable, the marketers have latched on to this and adopted it as a day when they will get rid of their inventories and persuade consumers to liberally open their purse strings.  During some other holidays also, most notably golden week holidays (or huangjinzhou ), we witness festooned shopping malls beckoning customers with enticing deals. Customers normally do not disappoint the marketers and reach liberally for their wallets during this period of biannual break (down to two a year from the earlier three, as May Day holiday is reduced to a single day celebration). Other festivals like Mother's Day or Father's Day also try to offer excuses for retail therapy. Singles' Day is a relative new addition to these hyper shopping festivals. The logic of why one should shop on Singles' Day is not clear (one can more easily understand why one would shop on Valentine's Day). Perhaps it is to console oneself, literally using shopping as a therapy for loneliness. Or to buy the latest fashion paraphernalia to prepare oneself for the mating ritual and try to win the attention of the opposite sex while dressed like a peacock. One needs these accessories as the game is becoming increasingly competitive, the gender imbalance in China means that there would be 24 million Chinese men who will be unable to secure a bride in the next 10 years. For these souls Singles' Day may become a life-long celebration (or lament), and "half price" at the retail shops a substitute of having a "better half".

With the unstoppable growth in popularity of online shopping, the e-commerce vendors are trying to create their own occasions for shopping. They seem to have successfully hijacked Singles' day shopping bonanza and clearly established it as a special occasion not just for any shopping buy specially for online shopping. This year it is estimated that 213 million of the 550 million internet users, took the opportunity to click a purchase on Singles' Day. Alibaba, the owner of the largest online platforms in China (Taobao and Tmall) claims to have offloaded merchandise worth a hefty 19.1 billion yuan on a single Singles' day. The secret of the success is attributed to generous discounting, with some products available for picking at half the regular price. 

Marketing opportunity

Is this shopping orgy, on a particular day of the year, with no natural connection to buying, a marketing success? Does it lead to sustained increased consumption, or merely an advancement of the purchase date, as is true with many other promotions? Does it really add value to the brands or the retailers in the long run? As with all promotions, marketers need to seek answers to these questions by carefully studying consumer behavior and attitudes. At the same time they need to worry about the potentially negative effect of heavy price-offs on brand image. In fact they need to explore how they can convert this occasion from a mere opportunity to offload their unsold goods, to an occasion to knit a bond with the consumers. According to the TIME magazine's "10 Ideas that are changing  your life", living alone is the new norm - 28% of all U.S. households are made up of people who live alone. With declining birth rate, delayed marriages and high divorce rate, the number of single member households in China is also on the increase. Marketers need to adopt a long-term strategy and look at the Singles' Day as an opportunity and occasion to win the affection and hearts of these singles in a more durable manner (after all they are still unattached and very likely to be open to a bit of love and wooing!) rather than merely a tactical opportunity to lighten their unsold inventory.

Written by Ashok Sethi

Regional Development Director – GfK Consumer Experiences, Asia Pacific

Importance of being "Foreign" -Global, local or glocal?

Multi-national companies in China often wonder the extent to which they should emphasize their foreign origin to the consumers as against demonstrating roots and strength in the local market.  In general it is true that in China, as in many other developing countries, products of international origin command a certain degree of respect and are often favored over their domestic rivals. The reasons for this are not difficult to fathom - including frequent disastrous experiences that consumers have had with some miscreant local players. However, given the ascending star of China on the global stage and the emergence of a strong streak of national pride, one could also be forgiven to assume that emphasizing local roots is of paramount importance.

Like many marketing riddles in developing markets, this is a complex question and the answer depends upon many factors. First of these factors is whether the product category in question is a premium product or an inexpensive product of daily use. At one end of the spectrum are luxury product categories.  In these categories, only international brands have been able to register their prowess with the consumers so far. Consumers use such products for their exclusivity, as status symbols and as markers of success in their climb up the ladder of success. Brands are valued for their high quality, craftsmanship and heritage. Brands are often strongly associated with a country and derive their image from the perception of the country (as in case of Luxury automobiles from Germany, a country known for its craftsmanship and engineering skills, or perfumes from France, associated with romance and chic)  Clearly establishing your international origin is of critical importance in this category. Such brands normally do not need to (in fact are not advised to) adopt their core offer and brand essence  to the local markets.

At the other end of the spectrum are daily use products whose usage is in the private space. Whether you use an expensive premium product or a cheap one, may have a significant effect on how well does your bathroom floor shine, but not in terms of how are you seen by your friends and compatriots. The consumer choice of such products is based on price and basic functionality, and consumers show little concern about the origin or provenance of the brand. In fact, often the consumers are not able to correctly classify such fast moving consumer goods as local or foreign. In a research among consumers in second tier cities of China, many consumers mentioned Johnson & Johnson as coming from Shanghai!

For products which fall somewhere in between the continuum of luxury and pedestrian, the issue is a bit more involved and establishing the international origin can be a plus though not necessarily so. While being foreign may be associated with better quality, being nimble and having a strong pulse of the market and the consumers can be even more important. Marketers have to carefully decide the relative emphasis they need to place on their international origin and local roots. One important guiding factor is the specific product category. For high technology products, consumer experience suggests that international brands bring in a quality and panache that local brands struggle to achieve. On the other hand for some categories such as skin-care or apparel, understanding of local tastes and preferences can act as a plus. In this middle territory, local brands often try to disguise themselves as international ones by choosing names such as Metersbonwe ( a popular apparel brand in China) with varying degrees of success. 

The third factor guiding the brand's strategy is specific to the brand. For brands like Coca Cola and Nike, which through clever and consistent marketing investments, have built a unique narrative and aura for themselves, which has stood the test of time as well the test of geographical diversity, it makes sense to exploit their universal value in all markets. For other brands, which though still international, lack that strong narrative, localisation and ammasing local strength may be a more logical choice. Even when such brands choose to retain their global aura and persona, localization of communication themes and styles is necessary - absence of which often leads to alienation.    

Lastly, while such preferences and attitudes do determine the importance of being "foreign", certain events can suddenly change the equation. The most notable of which has been the milk contamination scandal, which drove mothers to imported milk powder to ensure the safety of their children. In a short period of time, the share of imported milk powders rose to unimaginable levels. International marketers need to be on the look out for such sudden "change of wind", which can make their provenance and heritage more valued by the consumers.

Written by Ashok Sethi

ashok.set@gmail.com

The case of the fraudulent frauleins

Financial fraud is becoming more salient in China. Interestingly, of late, we have witnessed a number of "fraudster frauleins" – a few women entrepreneurs who scooted (or tried unsuccessfully to scoot) after relieving a number of gullible lenders of rather large sums of money. Ms. Zhang Hong, boss of a medical devices company in Nanjing in Jiangsu province, went missing with her son a few weeks ago. Along with her went a sum of RMB 500 million which she owes to several hundred private lenders. In another case of the "most beautiful boss", Ms. Gu Chunfang was apprehended in Shanghai, having earlier tried to make herself scarce with an equally large sum of money. While the temptation for these skilful and attractive operators is strong, the punishment in China is disproportionately severe. Ms. Wu Ying, another comely entrepreneur from neighbouring Zhejiang Province, is facing a death sentence for crimes involving similar fund raising.

In China it is not easy for small and medium enterprises to borrow from banks to finance their operations. Most banks are state-owned and they tend to favour lending to state-owned enterprises. On the other hand, China's large body of savers are finding it difficult to find attractive returns, as interest rates are low, the stock market has been sluggish, and the property market is on a strong leash. The lure of double-digit returns through private lending, therefore, is not insignificant. Hence there is a healthy demand as well as supply for private lending.

The effect of pulchritude on human emotions and behaviour is a complex subject. Daniel Hamermesh, an economist at the University of Texas, has been frequently writing about “pulchronomics” or the linkage of looks and economics. In a recent book called “Beauty Pays” he professes that, over a lifetime, a good looking worker in America might on average make $230,000 (in terms of today’s wages) more than a relatively plain one.   Beauty generates the confidence of competence and trust. Research has shown looks of the candidates play a significant role in voters’ choice. And  given the number of cases of fraudulent frauleins in China, one can possibly at least raise the hypothesis that Chinese men of substance find themselves reaching more readily for their wallets when confronted with a woman of grace.

In the meanwhile the Supreme People’s Court of China has overturned the death sentence for Wu Ying and ordered a retrial. It is not known whether the defendant’s good looks and youth were a part of the factors which led the judges to overrule the severe punishment.  But research does show that good looking offenders do get away with lighter punishments.

Linsanity

China found another hero in Jeremy Lin, whose success gave birth to a new word "Linsanity". The lightning and stratospheric ascent of Jeremy Lin in popularity among the Chinese seems to suggest that they are rather desperately in search of heroes and ready to overlook minor details of origin and political belief (Jeremy Lin is a Christian with his origins in Taiwan) in their embrace of such icons.

The psychology of this quest for heroes possibly lies in the Chinese desire for celebration of their achievements as well as international recognition of their success. While China is continuously adding to its list of achievements domestically, international recognition is often not forthcoming or comes begrudgingly. Even if recognition is accorded, it comes with a spectre of Chinese dominance. While Western nations refuse to applaud China's achievements, Western brands need to make sure that they do so – or else they will lose the opportunity for emotional connection with the Chinese.

While national or clannish identification definitely leads to hero worship, the developing countries like China and India reward  another characteristic in selection of their heroes – which is the quality of being underdog, who wins accolades against all odds, fighting and valiantly overcoming the hurdles and barriers which came in his way. On the face of it Harvard educated Jeremy Lin is hardly an underdog – a privileged Asian kid form an Ivy league university. However these are the precise characteristics, which make him an underdog in the world of NBA – which rewards not Ivy league education but towering body height and impressive physique – something which one would not associate easily with Jermey Lin and which perhaps does enhance the value of his accomplishments as seen by his large fan base in China.

By

Ashok Sethi

Ashok.set@gmail.com

Chinese consumers in 2011

As the world prepares to bid adieu to 2011, the Chinese still have a few weeks before the year of the rabbit sprints off and the mighty dragon is ushered in. The developed world has seen a miserable year and this has been a tough year for the Chinese too. Inflation has been consistently high - the consumer price inflation finally being reined down to under 5% only in November, economy is slowing down - and the Shanghai Composite index has lost more than 20% of its value since the beginning of the year. However 2012 is the year of the dragon - which is as propitious and auspicious as they get. With furrowed brows and much on their mind, the Chinese look back at 2011 with reflection and look forward to 2012 with optimistic anticipation.

Slow train coming

While in 2010 the nation witnessed a devastating fire in a 28 storey building under renovation in Shanghai in which 58 people lost their lives, in 2011 it was the Wenzhou train crash which resulted in similar protestations and lament at a preventable tragedy. China has been on the fast track in developing the largest fast train network in the world, with trains running at speeds of up to 350 kms an hour. The “gao tie” high speed train service between Shanghai and Beijing was inaugurated around the middle of the year and now consumers can do this journey of 1300 kilometers in just over 5 hours. However, the euphoria over this undoubtedly extraordinary achievement was short lived, when two high speed trains collided (though on a different route) taking many lives with it. The Chinese citizens were aghast and protested vociferously against suspected flouting of safety standards and lack of transparency. Transparency is something the Chinese have begun to value more and more - whether it is from the government or the companies who try to sell to them.

Swill oil and other food horrors

A few years ago the Chinese encountered the "melamine tragedy" - in which unscrupulous middlemen adulterated milk with the chemical. Hundreds of children developed stones in their kidneys and a few lost their lives. This year the consumers continue to be confounded by more food scares - the most horrifying of which was the alleged recycling of used cooking oil from sewers next to the restaurants. Consumers were also scared out of their wits by feeding of clenbuterol to pigs, which results in lean meat but can cause nausea, dizziness and heart palpitations in people who eat animals that were fed with it. We can be sure that the consumers are going to demand the highest level of food safety from manufacturers in 2012.

PM2.5 detector on the roof of the American Embassy

The health concerns of the consumers were not just confined to what they ate, but also the air they breathed. The number of smoggy days in Beijing and other big cities seem to have increased in recent times. Consumers complained that the official reports on air pollution were not accurate when they saw the results of the air pollution monitor that the American Embassy installed on its roof in Beijing. The Americans also measured PM2.5 particles (particles in the air with a diameter of less that 2.5 microns) which some scientist believe are actually more harmful than the larger ones. The government now has agreed to report PM2.5 in their pollution reports and hopefully the citizens can breathe more freely and look forward to cleaner air in 2012.

Rousing out of callousness

The Chinese have often felt that, preoccupied with the pursuit of money, there is certain degree of callousness that has overtaken the country and we often ignore injustices around us and hesitate to extend a helping hand. It took the tragic death of 2 year old Yueyue that roused the collective conscience of the nation and the Chinese took to upbraiding themselves for the thickness of their skin. The two year old was run over by two vehicles in Foshan, Guangdong and ignored by passerby’s till a cleaning lady took notice. It is believed that a major factor which restrains the helping hand is the fear that the rescued may turn into an accuser, as it has occurred in a few cases in the past. Several prominent professors from leading universities offered to compensate their students and cover their liabilities if they were ever sued by the subjects of their help. 2012 should see more sensitive hearts and a more willing hands in China.

Bad news for entertainment

In 2011 the authorities thought they need to protect the consumer from too much entertainment and also too much advertising. Firstly in March Chongqing television decided to go totally “ad-less”. In October, the State Administration of Radio, Film and Television (SARFT) decided to limit each of the country's 34 satellite channels to a maximum of 90 minutes of entertainment content from 7:30 pm to 10 pm every day. The remaining time, it was suggested, should be filled with news and programs to uplift the moral standards of the viewers. And most recently the officials announced that the government would impose a ban on advertisements in the middle of television dramas starting in 2012, though the ads will appear in the beginning and the end of the programmes. The marketers and the advertising industry feel that they can cope up with it – though some experts feel that it may drive more advertising to the digital medium.

China's own heaven

Largely an atheist nation, and not believing in the existence of heaven or hell, the Chinese have created their own heaven in space. Tiangong-1 or "Heavenly Palace -1" space station module was successfully launched this year. Subsequently Shenzhou VII spacecraft gloriously docked with the space station and returned back to earth in one piece. It is believed that this is a strategy to compensate for the possible decline in Chinese exports, by opening up a new revenue stream by renting space in the Chinese "heaven" to the religious departed from the West.

Marriage for love

It its attempt to foster greater love and lower commerce in marriage,
the Chinese courts made it clear that a home purchased before marriage is the personal property of the person who bought it. In case of divorce, the registered owner will keep the house but needs to compensate the partner if he or she contributed to any mortgage payments and any other expense which increased value in the property. The amendment to the marriage law was largely seen as rational, though the view was divided on whether it will discourage fortune hunting and result in a greater number of marriages being founded on the solid rock of love.

Naked marriage and other dressing downs

Confounded by rising cost of marriage, a new trend of naked marriage took shape in 2011. Contrary to what is suggested by the name, the nuptials do not take place in a state of undress; the "nakedness" is merely figurative and indicates that the couple took the plunge without the usual extravagant preparations and expense which accompany the occasion. The phrase caught the fancy of the citizens and they quickly coined other things that you can do with a similar degree of unpreparedness or vulnerability - such as naked resignation (resigning without another job) or naked examination (showing up for the test without adequate preparation). 2012 should see more the Chinese showing more willingness to break away from the herd, and follow their own hearts and minds.


Written by Ashok Sethi
Ashok.set@gmail.com

New languages of the Chinese internet

Chinese Weibo

When we compare the Chinese microblog (Weibo) with Twitter, we often forget that as each Chinese character is, in fact, a word. This means you can communicate a lot more in 130 Chinese characters as compared to 130 Latin characters. Chinese microbloggers are fully utilizing this freedom and license and the Weibo has become a hotbed of protest, expression of solidarity, generosity and philanthropy and even romance. The last one did lead to some unexpected consequences for a Chinese official, who mistook Weiboi as a one on one, private communication tool and was found to be romancing his mistress and fixing a surreptitious rendevous, in open sight of millions of bemused Weibo users!

First on Weibo

It is not surprising, therefore, that often Weibo is the first to report important news and generate a lively debate. When China’s image of progress and dynamism, assiduously created by erecting an enormous and still expanding network of bullet trains, was tarnished with a collision of two trains near Wenzhou, in which more than 30 people lost their lives, the accident was first reported on Sina Weibo (a popular Chinese microblog). The topic touched a raw nerve with the Chinese consumers and the continued discussion on Weibo thereafter generated strident criticism of the railways for lack of transparency and possible flouting of safety standards. The authorities have taken the lashing seriously and have withdrawn several trains for safety examination and actually reduced the speed of many trains, including the flagship Shanghai to Beijing service. The defiant mood is characteristic of the Chinese middle class consumers, who are trying to protect themselves and their families from anything ranging from sub-standard infant milk powder, to restaurant food prepared from recycled oil to unsafe rail travel – and quite often Weibo is the platform where they first air their grievances.


The language of the internet

It is often said that the development of a civilisation or a society is indicated by the degree of sophistication of its language. In Weibo and other parts of the Internet, Chinese netizens have developed not one, but several languages on the internet. These, referred to as "Mars languages" (火星文) are widely used on the internet not just by the consumers, but now increasingly also by the marketers. These include "pao xiao ti " or the roaring style, which the consumers often use to express their frustration on the many challenges of life – often linked to study and work. Or the “tao bao ti”, named after the all pervasive e-commerce platform called Taobao, where you can buy anything from a freshly slaughtered chicken to a luxury automobile. “Tao bao ti” embodies the solicitous attitude and the language that the vendors on Taobao often adopt to win customers in face of an extraordinarily fierce competition.

高考(Gao kao), the mega test of endurance and knowledge that the young Chinese need to go through to secure college admission, unfortunately decided to prohibit the use of 火星文(Mars language) in the exam, earning the epithet of "ungelievable" (meaning not cool or awesome) from the 8 million students who undertake this examination in an attempt to secure a position in a good university and pave the way to a bright future. These students, who face immense pressure (yali da 压力大as they like to say - which can also mean "my pear is big” when you change to another set of homonymous characters) will have to curb their inclination for these unorthodox modes of expression - at least for the two and half days that they toil in the examination hall.

Written by Ashok Sethi
ashok.set@gmail.com

Demographic dividend or population explosion?

Counting the millions

2010 was the year of census operations and billions were spent in enumerating and profiling the populations of the largest countries in the world. The greatest contemporary world power, the United States, as well as the future powers of China and India undertook the onerous but important task of counting their residents. Currently China retains the crown of the most populous country in the world, though its status is increasingly threatened by India. China announced that it added 73.9 million Chinese from 2000 to 2010, taking the current population to 1.37 billion. India on the other hand exhibited a much higher level of productivity and added 181 million Indians in the same decade, taking its population to 1.21 billion - a mere 160 million short of China's. US on a more modest base only added 27.3 million Americans. But its growth rate in the decade was nearly twice as high as that of China but only half as much of India.

Demographic dividend

Historically India's high fertility rate and rapid population increase was often referred to by economists and experts as "population explosion" - an ominous phenomenon threatening the country’s multitudes with misery and starvation. However, economists are a malleable tribe, who like to show flexibility and often change their views with the direction of the wind. Today, India's teeming millions are being referred to as the country’s "demographic dividend" and expected to help it maintain its economic growth engine, even help it surpass China’s economic pace some time in the future. The logic of having a large proportion of the population in the economically active age group (that is to have a favourable dependency ratio) is irrefutable - this group has to generate the resources not only for themselves but also look after the youth and care of the elderly who are no longer in the work force. However this needs to be balanced with the cost of over population and low share of family resources that each child enjoys in large families. Surely it does not condone having hordes of children by penurious parents who do not have the wherewithal to bring them up, educate and prepare them to be economically productive citizens. The logic of having large families just to ensure a good supply of income earners for the nation does not seem to stand scrutiny in today's resource scare and over populated world.

Even if we do accept that having an adverse dependency ratio, places a burden on the society, the answer for the developed countries could be in other measures, including higher retirement age and relaxed immigration policies, which will attract migrants of income earning age into the country and redress the imbalance. This is precisely what is happening in the US - where the population increase is mainly contributed by the Hispanics and the Asians, rather than white population. In fact this may offer the best of both worlds - ensuring that there are enough income earners, without having to invest in creating, educating and developing them! Like running its IT services, US can consider outsourcing the task of maintaining its demographic dividend to India!

Additionally while comparing the "demographic dividend" of India and China the economist also need to take into consideration the economic potential of the population. On this criterion, China scores a lot higher, given higher education levels and a much higher participation of women in the workforce.

Wanted : 24 million brides

The census also indicated that both China and India continued to suffer from a gender imbalance with China having 51.3% of its population as male. Experts estimate that 24 million Chinese men will be unable to secure a bride in the next 10 years. Unfortunately neighboring India will not be able to help much as it is likely to face its own scarcity of marriageable women – India’s population is 51.5% males (but only 914 girls for every 1,000 boys under the age of six). US could come to rescue - as it has more females than males (50.8% females) though currently one sees more evidence of American men succumbing to the charm of Chinese women, than Chinese men seeking American brides!

Written by Ashok Sethi

Ashok.Set@gmail.com

Retailing in small towns

The diversity

China has 654 official cities, whose urban population ranges from over 20 million residents for Shanghai to less than a hundred thousand for a small county level city. The cities differ not only in terms of the population but also in terms of economic activity, occupational profile, income and spending ability of the residents. As the top tier cities become more competitive and saturated, more and more companies are taking their wares to the smaller towns in search of new consumers. The important marketing question is whether the marketers should paint the smaller cities with the same brush stroke and replicate their large town strategies and tactics for these emerging markets, or should they modify and fine-tune their actions to enhance their effectiveness?

City tier or geography

There is a school of thinking which propounds that city tier differences are becoming less consequential and geography takes precedence in determining consumer behaviour and not city tier. It is expected that the differences between neighbouring large and small cities will gradually diminish and consumption patterns become more homogeneous. The reasons are because development of better transportation and high speed railways will encourage more movement among the cities and the large cities will expand their boundaries and take some of the neighboring cities under their fold,. However there are intrinsic differences between large and small cities (population is the usual basis for dividing cities into various tiers) in terms of consumer profile, lifestyle and media habits which have significant implications on marketing.

In Shanghai over 3.2 million adults enjoy a monthly household income of over RMB 100,000 and in Nantong, just 100 kms away, only around a 100,000 adults have the same income. The relative strength of various media is vastly different across different city tiers. While internet penetration is increasing in lower tier cities also, the frequency of use is much higher in larger cities as compared to the smaller cites (78% of internet users access the net every day in tier1 cites as compared to only 28% in tier 4). Similarly while nearly all large city internet users access the internet from a PC at home, in smaller cites, reliance of iCafes is significantly higher.

It is natural that in a geographical cluster of homogeneous cities, similar strategies would work, but when the cities within a geographical cluster are heterogeneous, different strategies need to be adopted.

Implications for retailers

Despite the differences today, the smaller cities are in transition and a huge change is underway - the change is in terms of movement from traditional trade to organised trade, from primitive modes of transportation to modern ones, from old run-down houses to modern swanky apartments, and from traditional entertainment venues to the modern ones. Malls and retail outlets need to help the consumers in this transition – facilitate access the new things they want and at the same time help them preserve what they cherish from the old. We give below eight implications for marketers and retailers as they move from large cities to smaller ones.

1. Consumers in small towns want to make the best choices and derive the best value for their money. In order to achieve their aim they are willing to go to greater lengths than consumers in larger cities, who are more driven by convenience. Convenience, therefore does not enjoy the same importance in smaller cities as it does in larger cities. Consumers in large cities are time poor and cash rich - whereas for those in lower tier cities just the reverse holds true.

Store designs often have to make trade offs between convenience and thorough immersion and good exposure of the consumer to the full range of products. The trade-offs in larger city tiers are often made in favour of convenience. One exception to this rule is IKEA stores, which even in big cities sacrifice convenience for exposure. The IKEA strategy is the one which retailers need to follow in lower tier cities - let the consumer see the products properly, have a good experience - even if it takes more time and causes a bit of inconvenience.

2. Access and location. Most small towns and cities have a predictable lay out with a central area clearly defined and marked out. Consumers often converge to the centre and public transportation often runs from the centre to the outlying areas. This central area, therefore presents the most logical location for retail establishments. While a central location may still be possible in smaller cities, over time newer malls and departmental stores have no option but to open in relatively distant areas. Retailers need to have a strategy for attracting the consumers to the store in these locations. This could include free transportation, identifying potential transportation hubs such as metro stations or addition of some specific services to the mall. Mall owners and retailers must study the local situation in each city and decide on the ways to compensate for location deficiency if it exists.

3. Educate the consumers. Given the relatively small history of branding and quality products in China, many buyers are first time buyers. Over 50% of luxury goods buyers today have never bought luxury before. Retail outlet for them is therefore not just a final purchase point, but a place to evaluate the various alternatives - often with no prior experience. In this context, the consumer may often be confused and the retailer may lose the sale if the consumer is unable to decide. The retailer in small cities has the job to educate and guide the consumer and help them make the decision.

Recognising this, many marketers add in-shop demonstration and education activities to help consumer make the choice. Hydron, an eye care brand, established mobile stations in low tier cities’ which offered eye examinations and eye health communication for students. Hydron built its brand image through its exceptional consumer education efforts and was selected as one of the “Most popular brands” by college students in China. Another brand which has done consumer education rather well is Nokia - which opened a number of small shops in over 600 prefecture-level and county-level cities. These shops also offer product demonstration to help consumers better understand the product capabilities and accept its price.

4. Localize marketing programs. Localization of the marketing programs is warranted from several perspectives:

- Firstly the media environment is different, with the role of outdoor media, outdoor activities and social intercourse in public areas such as the public square being higher

- Secondly in order to develop credibility at the local level, the retail stores need to develop and demonstrate local support and roots. Enlistment of local well known personalities need to supplement the use of international and national spokespersons or communication. Local dialect is often used by retailers to strike a chord with the population.

- Lastly traditions and festivals play a greater role in smaller towns and cities and hence provide a greater opportunity to leverage for sales promotion.

Localization is required not just for the marketing activities but even for the product range itself. An example of a retailer which has very successfully used local marketing is Ling zhi or Bestseller Company whose brands include JackJones, ONLY and VERA MODA. Ling Zhi's annual revenue in China has increased by an average of 20% a year in the past 3 years. It has more than 3000 shops in China and around 1000 shops are in Tier3 or Tier 4 cities, and a few hundred even in Tier 5 cities.

5. Make the customer feel at home. 91% of the consumers in small cities said that good staff attitude is a strong factor in their choice of the store. The retailers need to make the shopping environment attractive, but at the same time not too alien - the consumer should feel drawn but not daunted. This is not just about providing excellent service - but it is about making the consumers feel absolutely comfortable in the environment, where they are not shy to interact with the product or the sales staff. A significant number of Chinese internet users comment positively or negatively about brands on the internet and one of the things that makes them comment is their experience of service. There is a lot of positive buzz on the internet nowadays about a girl and her boy friend who had a stormy scene in Hai Di Lao hot pot restaurant. The waiter sent them a card and flowers trying to bring them together again.

6. Simplify. The range of available products in China has multiplied several fold in a short period of time. The number of options that the consumers are suddenly exposed to is bewilderingly large. Behavioral science has told us that "too much choice" is confusing and some times leads to loss of sale. Retailers in lower tier cities needs to strike a balance between offering consumers enough choice so to meet their needs, but at the same time not get totally confused. Shelf displays need to be designed with this objective in mind. Displays can be designed at two levels - with a primary display in the front , and a secondary display to be accessed if the customer needs greater choice. Retailers need to experiment on this count and reach the optimal display configuration for them.

7. Leverage the internet. E-commerce has penetrated well into China's lower tier cities. In fact one of the reasons why lower tier consumers do online shopping is because premium and luxury brands are not well distributed in these cities. The success of Taobao in lower tier cities bears a great testimony to this. We also know that while online shopping is attractive to consumers, there are also certain barriers. Most importantly trust, fear about quality or fake products and payment and delivery related issues are thorny points with the consumers. We also know that there is a multi-directional traffic and interaction between online and offline stores which includes online search and offline buying, or offline evaluation and online buying for lower price or any other reason, or even online search, offline examination and finally online buying.

Retailers should develop a concerted strategy to link their offline and online stores. Computer terminals can help the customers surf the online store for greater variety and selection. The retailer can arrange for the customer to order from the online store and pay in the offline store and collect the products. Burberry recently provided all their in store sales staff with an iPad. The staff can use the iPad to expose the consumer to a larger range of products or explain product qualities better.

8. Not just shopping. Perhaps an obvious point, albeit an extremely important one. General attitudes towards shopping are different in China as compared to the developed world, and within China in the lower tier cities as compared to the key cities. Shopping is not a routine chore - but something to be enjoyed and relished. it is a source of entertainment and a shopping trip can be an leisure outing. Consumer attraction to shopping malls will increase if they could add more supplementary entertainment activities to truly make shopping a leisure activity.

Written by Ashok Sethi

Ashok.Set@gmail.com