China is a large and heterogeneous market, which makes talking about Chinese consumers a task which is fraught with dangers and risk of over-generalizations. Given the size and complexity of China, Newton’s law of Consumer trends applies to China. For every consumer trend that you see, there is an opposite, though not necessarily an equal, trend. Hence, if we notice that Chinese consumers are becoming more health-conscious—and that is absolutely a valid trend—we also need to acknowledge that Western junk food restaurants have been growing in the country at a phenomenal rate. The apparently opposing trends may apply to two different segments of the market—both of which are growing swiftly. In fact, they could even apply to the same consumers, who display different behaviors at different occasions and may explain the apparent contradiction by saying that they are often forced to eat junk food as normally they are too busy to cook, but as a rebound also try to engage in compensatory healthy habits by practicing yoga or go for jogging.

Similarly, we may say that the Chinese consumer is getting Westernized—which is evident, at least in terms of adoption of Western food (not just junk food) or customs (all Chinese brides don the Western style, white wedding gown for the ceremony). Even religious festivals are embraced whole-heartedly—the largely atheists Chinese celebrate Christmas with great gusto and festivity. Valentine’s day elicits significant enthusiasm, in spite of the fact that the Chinese also have their own Valentine’s day (七夕节or qixijie). The Chinese believe having two Valentine’s days allows you to celebrate the joy of romance twice in a year—possibly with two different partners. But we also need to point out that there is a resurgence of interest in traditional Chinese culture—including studying Confucian philosophy and Chinese art and design.

The reason for the apparent contradiction is that apart from being large and heterogeneous, China is also a nation on the move and is hence perpetually changing. The fact that different parts of it are changing at a different pace presents a collage of contrasting and captivating pictures. One part of it has progressed far ahead of the rest and it has given China much to be proud of. It has achieved an economic miracle by clocking an average annual growth rate of 9% every year for more than two decades. It has lifted 350 million people out of poverty and achieved almost all millennium development goals set by the United Nations Development Program (UNDP). But another part of the country is still languishing and has formidable challenges that it needs to address. The most significant aspect of China’s development perhaps is that while it has achieved growth, the effect of this growth is not uniform. The growth is much more visible in large cities and in the coastal areas—the large rural populace and the Western provinces are relatively untouched by this bountiful progress. Within the cities itself, there are yawning gaps between the haves and the have-nots causing tension and social strife. This dual picture presents opportunities for both luxury and premium products, as well as the low-priced basic necessities.

So while we all look at China with awe, celebrating its status as the second-largest economy in the world, we cannot but acknowledge that it is a long way from being a developed economy. If we temper its economy with the size of its population, we see that as it still ranks around 90th in the world, in terms of per capita gross domestic product (GDP). As an economist remarked some time ago, China looks great when its bulk (such as its population) is in the numerator but looks miserable if the same heft shifts to the denominator.

In the media, we often see pictures of young, attractive, modern urban Chinese consumers gleefully carrying a basket full of goods in their hands. This is the picture that the Western companies like to see—they dream and hope that such consumers will lap up their products, possibly compensating for the Western consumers’ thriftiness after the financial crisis. But are these typical Chinese consumers? Or the typical consumers are the 600 million rural residents, with an average annual disposable income of US$1000?

And then we realize that both pictures are true. China is now the largest luxury goods market in the world (if you add what the affluent Chinese buy outside of China in their frequent jaunts abroad). It is estimated that there are more than a million Chinese with a million dollars in their pockets. But when you look at 45% of the Chinese population which lives in rural areas, we see that even their entire annual income will not be adequate to buy them a Louis Vuitton bag.

This book is a result of being a witness to the evolution of Chinese consumers from thrifty survivalists to global luxury powerhouses. The book looks at the trends which have been shaping the Chinese consumers and attempts to look ahead and imagine the shape of things to emerge.

It starts by looking at the megatrends. Megatrends are broad economic, demographic and environmental changes which are normally beyond the control of the consumers and the marketers. In Chap. 1 I start by looking at a mega-shift, which is at the top of everyone’s mind—the slowing Chinese economy and whether it spells doom. I examine the big facts and figures from the point of view of marketing companies, which really hope for the continuation of the dream run, and do not want the party to end. While everyone acknowledges the slowdown, its implications on the consumer market are not clear. Will it mean an end to the era of growth in consumer goods or even a decline, or merely a slowdown or in fact a transition to a new set of consumer goods, as the profiles and priorities of the Chinese consumers shift?

As incomes and urbanizations are intrinsically linked mega forces, the same chapter analyzes the trends in urbanizations and the effect it is likely to have on China’s consumer market. While all developing nations have succumbed to the forces of urbanization, it is the scale and pace of the phenomenon in China, which amazes as well as poses unique challenges to its government and interesting opportunities to the marketers. Every year, for the past 20 years or so, as many as ten million additional Chinese have become a part of urban communities and at the same time a part of the consuming class. However, what is relevant from a marketing point of view is what it does to the minds of these newly urbanized consumers, who often display behavior and preferences which neither resemble the urban consumers, not the rural brethren that they have left behind.

A unique aspect of the Chinese development is the rapid change in the demographics. Economists often like to say that China is one of the few countries in the world which has become old before it became rich. The contrasting reference is to the Western economies and also Japan, which also show some of the same demographic shifts as China (particularly aging) but are already upper-income countries, and hence in a much better position to cope with the demographic shift and look after the elderly. The economists also worry about the loss of demographic dividend (a favorably high ratio of economically active, working population as a proportion of the total population) as a result of low birth rate and increasing longevity. The Chinese working population actually declined for the first time in 2013 and is expected to continue to decline in the coming years. What implications will it have on the consumer incomes and spending? Of course, the biggest policy change of allowing all Chinese to have two children instead of one is expected to alter this course to some extent, and I examine the expectations that this and further loosening of state’s grip on the public reproduction habits is likely to result in. As a part of the analysis of the megatrends, I examine the story of the Chinese demographics and its implication on the shape of Chinese consumer market to come (will more chocolate be consumed by the elderly than children in China?).

The one-child policy coupled with traditional Chinese preference for the male child has created a gender imbalance in China that is not seen in many other parts of the world. It is estimated that because of China’s gender imbalance, 30 million men will fail to secure a bride in the coming 20 years or so. At the same time increasing education levels among the Chinese women (52% of undergraduate and graduate students in China are female) along with growing career ambition, leads to late marriages and often no marriage at all, leading to a group of women disparagingly referred to as leftover women or shengnv剩女. Add to this the trend of late marriages and rising divorce rates, and you see that China is becoming a nation of singles. I examine the implications of these changes in the family structure on companies who want to market to them.

China has seen several different revolutions, the most hallowed of them being the People’s Revolution of 1949 which liberated the country from years of subjugation and misery and gave birth to the modern Chinese nation. It then witnessed a less hallowed and more hellish cultural revolution which brought misery and mayhem of an unprecedented nature to millions of Chinese and put the country back by several decades. In Chap. 2 I talk about the latest revolution in China—the digital and mobile revolution and the way it has transformed the country, not just economically but also socially, given its citizens a voice (albeit a trifle muffled one) and unleashed the excitement and rapturous delights of shopping anywhere and anytime. Digital has ceased to be an additional or peripheral aspect of the Chinese consumers, and just another “channel” that the marketers need to use to reach the Chinese consumers. Digital is now an all-pervasive environment, and all traditional channels of communication are converging into digital (as more and more Chinese watch popular television dramas on their computers or mobile phones) just as traditional channels of distribution are trying to transform themselves into seamless omnichannel offerings.

China has 1.4 billion consumers. It will be naïve to paint all of them with the same brush. Segmentation, a commonly used but often misunderstood marketing technique, offers a useful way of looking at a large consumer mass in smaller more manageable parts. Most usefully segmentation needs to be applied for a specific product category and in fact even more specifically from the point of view of examining and evaluating opportunities for a particular company or brand, in relation to its strengths and weaknesses. However, applying segmentation in this manner will lead to China being divided into hundreds of segments, which will make the task of studying them an arduous undertaking. Hence I choose the middle path (the right path to take in a book about the Middle Country or 中国Zhongguo, as the Chinese call their country in their own language). With this perspective, in Chap. 3 I look at a few broad, specific segments of Chinese consumers and attempt a general, and not a product-specific classification of the Chinese consumers, with an objective to look at certain specific groups which may offer a certain degree of homogeneity of needs and warrant a commonality of approach for developing the marketing strategy directed at them. Specifically, this book examines the following consumer groups, and tries to explain their importance and their peculiar characteristics which could be relevant for marketing to them:

(I do not look at the popular group of “middle class”—as firstly, I do not think that China has a middle class the way it is commonly understood. When marketers and economists talk about China’s middle class, they are really referring to its “consuming class” which is highly skewed to the higher end of the population spectrum, as I will explain later. And secondly this “consuming class” is not one homogeneous block, but a highly heterogeneous group which is spread over all the other specific consumer groups that I do talk about).

Apart from looking at specific target groups, it also makes sense to look at some specific industries which are benefitting from the trends and changes in China. As the Chinese market is maturing, some product categories are facing stagnation, or even decline, but some other categories are booming (to take an example, beer and instant noodles are declining in urban China, but yogurt and makeup are growing healthily). Many of these new industries are services and have grown from practically nothing in the last 10 or 15 years. These include travel (particularly international travel), financial investments, education and learning (apart from the basic school education, which has been compulsory in China since 1986), premium beauty care (including cosmetic surgery), and entertainment. In Chap. 4 I examine some of these industries, the factors which are driving their growth, and their future prospects.

One of the most interesting and intriguing marketing phenomena in China has been the ballistic rise of the luxury goods market. The global luxury goods market has been sustained on the basis of unfettered enthusiasm and passion from the Chinese consumers. Are there any specific attitudes and socio-cultural factors that have led to the Chinese embrace of high priced gloss and luxury? However, the latest figures have jolted the industry leaders as Chinese consumers are exhibiting a more restrained behavior perhaps driven by the anti-corruption stipulations on the Chinese officials or a softening of the incomes. The factors responsible for the growth, as well as for the slowdown, are important to analyze to understand how long will the sheen last, how will its character change in the coming years, and what opportunities will the Chinese consumers offer for luxury and premium goods in the future. This subject, I felt, deserved a chapter by itself and I devote Chap. 5 to the luxury consumers of China.

In the second part of the book, I look a bit more deeply into the consumer mind, and specifically their changing values and preferences with implications on the shape of things to come in China. It is a common refrain among marketers and China experts that China is different and Chinese consumers are different. You cannot, therefore, assume that the Chinese consumers will be guided by the same functional and emotional needs that make the consumers in the developed markets reach for their wallets. As we will see through various pointers and insights, that while there is some truth in this assertion, there is also a whole lot of commonality which binds the Chinese consumers to their brethren in the rest of the world. And that is because the Chinese human beings espouse to, more or less, the same values that people in the rest of the world claim as their own. Even though the Communist Party may urge them to adopt and give more priority to socialistic values than anything else, the Chinese consumers are guided by universal values.

The Chinese consumers share the same conscience and scruples whether determined by a goodness of heart, or selfishness about ensuring a healthy, safe, and pollution-free environment for their children. In Chap. 6 we look at certain strong consumer trends and values which need to guide all marketing and branding in China. This chapter collates data from various surveys and research studies done by numerous research organizations, who have all been trying to fathom the Chinese mind and understand what makes the Chinese consumers tick.

The Chinese consumers are often seen as fickle, promiscuous bargain hunters and marketers often spend more on short-term tactical promotions than long-term brand building in China. In Chap. 7 I look at the task of branding in China. The key fact that we need to acknowledge about marketing in China is that the history of marketing in China is very short. When Mao Zedong’s red guards acted on his call to destroy the “four olds” (old customs, old culture, old habits, old ideas) they inadvertently destroyed the “four P’s of marketing” too—in fact, the whole discipline of marketing. In the chaos that ensued and the era of scarcity and rationing, there was little to buy and little to market. It w...