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What The Chinese Consumer Wants. Hint: They Were Not “Born In The U.S.A.”

Posted in China Business

Just finished reading Tom Doctoroff’s book, What Chinese Want: Culture, Communism and the Modern Chinese Consumer.  I knew I would love it and I did.  I knew I would love it because I’ve been reading Doctoroff’s Huffington Post posts for years and I have found him easily to be one of the most insightful people regarding the Chinese consumer. I like him for two main reasons.  First, I never get the sense that his conclusions regarding the Chinese consumer or even China in general are tempered by a desire “to sell tickets.” What I mean by that is that I think he calls it like he sees it, rather than manipulating things so as to push China as a consumer destination so as to increase business for JWT, the mega-advertising agency for which he is the China CEO.  Second, he doesn’t just follow the crowd when it comes to analyzing China. Much of what he says is truly his own, and even when I am not seeing what he is seeing, his analysis always seems sound. In other words, the guy is good.

And so is his book. And so is its main thesis.

The thesis of the book is that no matter how much China’s consumers appear to be becoming more “Western,” they remains distinctly Chinese.  And since China’s consumers are China’s people, I would add that this remains true of the country as a whole.  I will also add, that this is a value-neutral statement.

I actually find it strange that people would think otherwise. Though the world is becoming more global the culture that countries (not just China) have developed over thousands of years do not simply disappear upon using an iPhone. How many truly bi-cultural people do you know?  By this I mean the person who can truly seamlessly meld with more than one culture?  How many do you know who are truly Chinese/American bi-cultural?  I know less than ten.  Ask a Chinese person who spent a long time in the United States whether they think of themselves as Chinese or American or both and see how many say both? I have yet to get that answer?  Ask an American who has lived in China for a long time the same thing, and again, I will bet that none of them say both?  Why is that? Because cultures are relatively immutable. Again, that is a value-neutral statement, though I personally am glad that is the case as I think the world would be a lot more boring if everyone were the same. David Brooks spoke of this in a recent column on Bruce Springsteen, entitled, The Politics of the Particular:

It makes you appreciate the tremendous power of particularity. If your identity is formed by hard boundaries, if you come from a specific place, if you embody a distinct musical tradition, if your concerns are expressed through a specific paracosm, you are going to have more depth and definition than you are if you grew up in the far-flung networks of pluralism and eclecticism, surfing from one spot to the next, sampling one style then the next, your identity formed by soft boundaries, or none at all.

(Maybe this is why younger rock bands can’t fill stadiums year after year, while the more geographically defined older bands like U2, Springsteen and the Beach Boys can.)

The whole experience makes me want to pull aside politicians and business leaders and maybe everyone else and offer some pious advice: Don’t try to be everyman. Don’t pretend you’re a member of every community you visit. Don’t try to be citizens of some artificial globalized community. Go deeper into your own tradition. Call more upon the geography of your own past. Be distinct and credible. People will come.

But I digress.

Doctoroff does not pretend China is going to be America any time soon and he urges companies to act accordingly.  China’s consumers are becoming increasingly modern and international, but they are now and will remain uniquely Chinese.  Doctoroff himself described both his book and the Chinese consumer in an article he wrote for the Wall Street Journal, What Chinese Consumers Want:

Understanding China’s consumer culture is a good starting point for understanding the nation itself, as it races toward superpower status. Though the country’s economy and society are evolving rapidly, the underlying cultural blueprint has remained more or less constant for thousands of years. China is a Confucian society, a quixotic combination of top-down patriarchy and bottom-up social mobility. Citizens are driven by an ever-present conflict between standing out and fitting in, between ambition and regimentation. In Chinese society, individuals have no identity apart from obligations to, and acknowledgment by, others. The clan and nation are the eternal pillars of identity. Western individualism — the idea of defining oneself independent of society — doesn’t exist.

Various youth subtribes intermittently bubble to the surface — see the recent rise of “vegetable males” (Chinese metrosexuals) and “Taobao maniacs” (aficionados of the auction website Taobao). But self-expression is generally frowned upon, and societal acknowledgment is still tantamount to success. Liberal arts majors are considered inferior to graduates with engineering or accounting degrees. Few dare to see a psychologist for fear of losing “face” — the respect or deference of others — or being branded sick. Failure to have a child is a grave disappointment.

The speed with which China’s citizens have embraced all things digital is one sign that things are in motion in the country. But e-commerce, which has changed the balance of power between retailers and consumers, didn’t take off until the Chinese need for reassurance was satisfied. Even when transactions are arranged online, most purchases are completed in person, with shoppers examining the product and handing over their cash offline.

Even digital self-expression needs to be safe, cloaked in anonymity. Social networking sites such as Sina Weibo (a Chinese version of Twitter), Renren and Kaixing Wang (Chinese versions of Facebook) have exploded. But users hide behind avatars and pseudonyms. A survey conducted by the advertising firm JWT, where I work, and IAC, the Internet holding company, found that less than a third of young Americans agreed with the statement “I feel free to do and say things [online] I wouldn’t do or say offline,” and 41% disagreed. Among Chinese respondents, 73% agreed, and just 9% disagreed.

Chinese at all socioeconomic levels try to “win” — that is, climb the ladder of success — while working within the system, not against it. In Chinese consumer culture, there is a constant tension between self-protection and displaying status. This struggle explains the existence of two seemingly conflicting lines of development. On the one hand, we see stratospheric savings rates, extreme price sensitivity and aversion to credit card interest payments. On the other, there is the Chinese fixation with luxury goods and a willingness to pay as much as 120% of one’s yearly income for a car.

According to Doctoroff, brands in China need to follow three rules.

Rule one is that products consumed in public can consume premium prices if they publicly convey status.  Chinese consumers spend on luxury goods not for their inherent beauty or craftsmanship, but as status investments. The Chinese consumer with a $1500 pen may very well be unwilling to spend more than a dollar on a pair of underwear. And that leads to the second rule:

The second rule is that the benefits of a product should be external, not internal. Even for luxury goods, celebrating individualism — with familiar Western notions like “what I want” and “how I feel” — doesn’t work in China. Automobiles need to make a statement about a man on his way up. BMW, for example, has successfully fused its global slogan of the “ultimate driving machine” with a Chinese-style declaration of ambition.

Sometimes the difference between internal versus external payoffs can be quite subtle. Spas and resorts do better when they promise not only relaxation but also recharged batteries. Infant formulas must promote intelligence, not happiness. Kids aren’t taken to Pizza Hut so that they can enjoy pizza; they are rewarded with academic “triumph feasts.” Beauty products must help a woman “move forward.” Even beer must do something. In Western countries, letting the good times roll is enough; in China, pilsner must bring people together, reinforce trust and promote mutual financial gain.

Emotional payoffs must be practical, even in matters of the heart. Valentine’s Day is almost as dear to the Chinese as the Lunar New Year, but they view it primarily as an opportunity for men to demonstrate their worthiness and commitment. In the U.S., De Beers’ slogan, “A Diamond is Forever,” glorifies eternal romance. In China, the same tagline connotes obligation, a familial covenant — rock solid, like the stone itself.

The last rule for positioning your brand in China is to address the Chinese consumers “need to navigate the crosscurrents of ambition and regimentation, of standing out while fitting in.”

Men want to succeed without violating the rules of the game, which is why wealthier individuals prefer Audis or BMWs over flashy Maseratis.

Luxury buyers want to demonstrate mastery of the system while remaining understated, hence the appeal of Mont Blanc’s six-point logo or Bottega Veneta’s signature cross weave–both conspicuously discreet. Young consumers want both stylishness and acceptance, so they opt for more conventionally hip fashion brands like Converse and Uniqlo.

Chinese parents are drawn to brands promising “stealthy learning” for their children: intellectual development masked as fun. Disney will succeed more as an educational franchise — its English learning centers are going gangbusters — than as a theme park. McDonald’s restaurants, temples of childhood delight in the West, have morphed into scholastic playgrounds in China: Happy Meals include collectible Snoopy figurines wearing costumes from around the world, while the McDonald’s website, hosted by Professor Ronald, offers Happy Courses for multiplication. Skippy peanut butter combines “delicious peanut taste” and “intelligent sandwich preparation.”

Even China’s love affair with Christmas — with big holiday sales and ubiquitous seasonal music, even in Communist Party buildings — advances a distinctly Chinese agenda. Santa is a symbol of progress; he represents the country’s growing comfort with a new global order, one into which it is determined to assimilate, without sacrificing the national interest. The holiday has become a way to project status in a culture in which individual identity is inextricably linked to external validation.

If you are seeking to sell to China, Doctoroff’s book is literally a must-read.  No question about it. If you are doing business with China, you really cannot afford not to read it either. Get it now. Seriously.

I don’t purport to be a branding expert nor an expert on China’s consumer culture, but what Doctoroff says certainly seems to jibe with what I have seen and heard.  Do you also agree with Doctoroff?

  • http://twitter.com/vdwutc racism Korean

    As for China expecting it, all things in the world seize a Chinese thing

  • Bruce Brokenspringstein

    Mainland Chinese people don’t have any individual self-Will, which makes them susceptible to external influences and suggestions. So, under the influence of Capitalistic consumerism, the whole society quickly becomes corrupt and goes down the toilet.

  • Spruce Bingsteen

    Born in the u.s.a., I was born in the u.s.a.
    I was born in the u.s.a., born in the u.s.a.

    Got in a little hometown jam
    So they put a rifle in my hand
    Sent me off to a foreign land
    To go and kill the yellow man

    Born in the U.S.A…

  • http://twitter.com/Holaba Jan Van den Bergh

    I still have to read the book.
    It has probably arrived by now at my Belgian address. I follow Tom since 2005
    and also read his Huffington posts – I don’t read his Huntingon posts however. My
    only remark is that consumers worldwide are the same, since the same very human
    basic needs define him. How that consumer behavior expresses itself is related
    to the culture in which each of us grew up. That’s why there are some differences
    between Western and Chinese consumers.

    Also the West has been (and still
    is) a mix between rusted hierarchies and bottom-up
    social mobility. Western citizens are also driven by an ever-present conflict
    between standing out and fitting in, between ambition and regimentation. Maybe
    less than in China now and less than 30-50 years. But it’s all still there. To
    that is added the political element. But a government that frightens citizens
    to self-censorship is not typically Chinese either. Displaying status and
    expressing one’s state of mind is often dwarfed by self-protection. And that is
    even the case in the West.

    Therefore his 3
    rules he points at in China for postioning are all valid in the West too.

    1.    Products
    consumed in public can consume premium prices if they publicly convey
    status. The luxury brands in China are luxury brands in Europe too. They
    come form Europa

    2.    The
    benefits of a product should be external, not internal. Although that’s more
    outspoken in China. Emotional payoffs must be practical, even in matters of the
    heart. The notion -for some of us – that having experiences is a lot more valuable
    than having stuff is only gradually penetrating in the West. The recent proofs
    of greed of bankers are not to be misunderstood.

    3.    Address
    the need to navigate the crosscurrents of ambition and regimentation, of
    standing out while fitting in.

     

    My conclusion?
    Tom knows the universal consumer very very well. He knows China very well. But
    he overestimates the Chineseness of that consumer and overestimates the
    individualism of the Western consumer. There are a lot more similarities than
    differences.

  • http://buxiebuxing.livejournal.com/ Phil H

    Ha! I disagree with almost everything in this post.

    “Western individualism — the idea of defining oneself independent of society — doesn’t exist.”

    I agree with that, but I think it’s more to do with the repressed media environment than anything else. I know a bunch of people who might well choose to define themselves as independent of society (just think of all those people who are keen to emigrate right out of society), but they find the idea that they could express their desires even in social media laughable. Until mainstream media are able to represent any kind of counterculture, it is very difficult for it to define itself.

    “Failure to have a child is a grave disappointment.”

    Not everywhere. I know at least two high-net worth couples who made the choice not to. This concept will come. But there is still a big gap with Europe/the US.

    “Even when transactions are arranged online, most purchases are completed in person, with shoppers examining the product and handing over their cash offline.”

    Nope, I don’t see this as a cultural thing at all, it’s purely a systems thing. There is no trust in the system, no effective controls, so you *have to* talk to your counterparty to get any kind of accountability. As companies become more sophisticated, and start taking over quality control functions from the government which has failed so conspicuously, this will change. No-one needs to do a cash transaction for an iPhone, do they? Because you know what you’re getting with an iPhone – as opposed infant formula, for example. Now Amazon is in China, I expect to see this changing quickly as other retailers emulate them.

    “Chinese consumers spend on luxury goods not for their inherent beauty or craftsmanship, but as status investments. The Chinese consumer with a $1500 pen may very well be unwilling to spend more than a dollar on a pair of underwear.”

    Firstly, this phenomenon is hardly unknown in the west. Secondly, do you remember when expensive underwear really took off? It was CKs, right? And what did CKs have? The wide waistband *designed to be seen*. Conspicuous consumption is a word coined in English. Trying to pretend it’s uniquely Chinese is just silly. The difference is that in the UK, people are more attuned to consumption. They will recognise more types of luxury, whereas for a lot of Chinese consumers, luxury is still pretty much defined by 5 star hotel/LV/iPhone/Audi/stupid expensive foods like abalone. This is a question of time and the gradual broadening of the palette.

    “Luxury buyers want to demonstrate mastery of the system while remaining understated…Young consumers want both stylishness and acceptance”

    Seriously? On what part of the planet is this not true? Platitude dressed up as insight.

    I did think that there were two good practical points in there: a lot of marketing is built around spurious health benefits and making kids grow up healthy and clever. 

    • http://buxiebuxing.livejournal.com/ Phil H

      And actually – sorry to double post – but I wanted to say that where the luxury is a more traditional Chinese item, the consumption is much less conspicuous than is implied here. Your extracts are really talking exclusively about *foreign* luxury goods. But where I live, people pay silly money for the tea they drink every day at home. The more culturally-minded of them will pay a lot for good calligraphy, and they hang it on the wall, not necessarily making a big thing of it. (It has that educational value mentioned.) So I think it’s worth noting that the market for luxury Chinese (perceived-Chinese) goods is quite different to the market for imported stuff.

    • Philip Hand

      I’m sure no-one’s watching, this, but I’m going to big myself up for a good prediction here: “Now Amazon is in China, I expect to see this changing quickly as other retailers emulate them.” And within a year, Taobao launched TMall. Now, as I understand it, TMall has not entirely solved the problem of trust. But just in the way people around me use the internet, I’m seeing a lot more quick buying already. Much less conversation with the vendor than there was a few years ago.

  • Twofish


    The thesis of the book is that no matter how much China’s consumers
    appear to be
    > becoming more “Western,” they remains distinctly Chinese.

    Chinese consumers (or at least the small set of Chinese consumers that are interested in Western products) behave differently than “Western” consumers, but consumers in New York City will behave differently than consumers in Des Moines, Iowa.  I think the mistake is to think that differences come from some “deep unchanging culture” whereas a lot of the differences come from very recent events.  A lot of “Western individualism” comes from the counter-culture of the 1960′s, and the historical impact of decolonialism in Europe, and the Vietnam War in the United States.  The idea of the person being part of a group makes more since to someone that, for example, lived in the United States during World War II.

    Even things like the financial crisis has made a big difference in marketing.  The Chinese that Western companies market to are very similar to Reagan-era “Yuppies” and when times are good, people like to flash luxury.  In the US, people are less likely to show signs of wealth in 2012, because chances are you know someone that is unemployed, and looking like a Wall Street banker is the last thing you want in the US.

    Just because the US and China are different doesn’t mean that this has anything to do with what happened several thousand years ago.

    > How many truly bi-cultural people do you know?  By this I mean the person
    who can
    > truly seamlessly meld with more than one culture?  How many do
    you know who are
    > truly Chinese/American bi-cultural?  I know less than
    ten.  Ask a Chinese person who
    > spent a long time in the United States
    whether they think of themselves as Chinese or
    > American or both and see
    how many say both? I have yet to get that answer? 

    Well, there’s me. 

    Also I think you are making the common American mistake of assuming that US=Western, when in fact there are huge differences between how Americans behave and say how English or Canadians behave.  When people talk about “Western individualism” they mean American individualism.

    China isn’t going to turn into the United States but neither is Canada.  For that matter, New York City isn’t going to turn into San Francisco, and Manhattan isn’t going to turn into the Bronx.

    > Because cultures are relatively immutable.

    1) They aren’t.  Cultures change.  However, they can change in *different* ways.  Shanghai in 2012 is very different than Shanghai in 1972.  NYC in 2012 is very different than NYC in 1972.  But that doesn’t make them the same.  Nor does being different mean that they don’t change. 

    2) National cultures often are the least important aspect of a situation.  I’ve found that for example, the fact that I’m a computer programmer means that I have the same sort of outlook as other programmers regardless of whether they are Indian, Polish, or Argentine.  However, we all are *very* different than the people in sales and marketing.  You see similar differences due to position in social hierarchy.  A Chinese CEO is likely to have more in common with an American CEO than either has with the nerds in the trenches.

    3) There are generational shifts.  The drive to be “company men” is something that would have been very familiar to Americans living in the 1950′s.  But it was in the 1960′s and Vietnam then Watergate that made people in the United States very seriously question what they point of all of this struggle was.  It’s very likely that there are going to equally radical cultural shifts in China over the next decades, but the details of what those shifts are going to be like will be very much due to “accidents of history” rather than long standing immutable truths.

  • Twofish

    > Nope, I don’t see this as a cultural thing at all, it’s purely a systems
    thing. There is no
    > trust in the system, no effective controls, so you
    *have to* talk to your counterparty > to get any kind of accountability

    There are also legal differences.  In the United States you have the Fair Credit Billing Act which was passed in 1975 which basically says that you can deny a charge on your credit account.  This had the (quite unintentional) effect of turning credit card companies into escrow services for online shopping.  You use a credit card, then you get something broken, you block the charge, at which point it’s the credit card companies problem to deal with the merchant which they will do.  If someone steals your credit card number in the US, you are not liable for the charges above a nominal amount.

    There is no such thing in China, which means that there is no advantage for using a credit card over paying cash, and the one Chinese credit card processor isn’t set up to do escrow services.   This also impacts who you give your credit card to.  If I’m eating an expensive restaurant in China or staying at a hotel, I can give people my credit card since I don’t think that they are harvesting numbers.  However, I will feel extremely uncomfortable giving my card to some random shop on the street.  This creates a market for stored value cards, which seem to have gone nowhere in the US.

    There are also tax issues.  Interstate mail order is not subject to state sales tax, whereas China taxes everything with VAT.  In the US, large interstate companies can get away without charging tax, whereas small local companies have to charge sales tax.  In China, the smaller the company, the more likely it is to be “flexible” with reporting VAT.  And if they are being “flexible” with taxes, then they would much rather you pay cash.

    Also, there are some differences in city layout.  Because Chinese cities are compact with very good public transport, it’s *easier* to talk face to face with someone.

    Finally one thing that pretty much every Chinese person that I’ve met finds bizarre about Americans is that they seem to want to buy fake branded goods in China.  If you are Chinese either you care about the brand or you don’t.  If you care about the brand then you buy the real thing.  If you don’t care about the brand then you buy something that is non-branded.  Why someone would want to buy a fake Rolex or Gucci item is something that makes no sense at all.

  • http://modelrailwaytrains.org/ Model Trains

    The Chinese see the only absolute evil as chaos and the only good as stability – a platform on which progress is constructed. Family, not the individual, is the basic productive unit of society. China has an anti-individualistic social cohesion liked to the nation and clan. The nation also features top-down patriarchal management – eg a peasant father retains authority over his billionaire son. CEOs bow to Party leaders. The nation also features diplomatic pragmatism coupled with a long-term perspective.