There’s no need to sugar coat it, China’s economic slowdown is real.
Its GDP growth has been in double figures for decades and currently sits around 6-7 percent, and even though China still makes up one for one of the largest global exporters it can no longer rely on the driving forces it once depended on to fuel their economy.
However, amid China’s economic deceleration, the emergence of the Chinese consumer is a more powerful force than it has ever been and shows little signs of slowing down. In fact, consumer growth in China will only become more pronounced in the future. Within the next three years management consultants McKinsey believes there will be over 400 million “mainstream consumers”-consumers with household incomes that make them part of the “middle class”. If we look at the data of our own economy in America we know that the middle class makes up for most consumer purchases, therefore, it is the middle class of Chinese consumers that American brands should start to focus on.
From now until 2030 Euromonitor estimates that China will contribute more than any other country to global consumer expenditure growth. In the past, global brands dreamed of taking a slice of the America pie but now you wouldn’t be far-fetched to set your eyes on the fortune cookie of the Far East.
Understanding the Chinese Buyer
In the past, the purchasing behavior of the Chinese consumer was value-now that’s starting to change dramatically. Where price was once the driving factor, consumers are now more likely to strongly consider factors like quality, brand, and the status attached to the products they buy. Much like America’s Millennial generation, Chinese consumers are increasingly fickle and if you want your brand to cash in you’ll need to appeal to their emotions. The Chinese consumer story has a large potential to reward your brand, but it is important to note that you’ll also have to contend with an increasingly volatile market.
China’s counterfeit culture
China has always led the market in the flood of counterfeit goods, to date, 63% of the counterfeit goods found on Alibaba come from China and most replica watches on the market are manufactured there as well. Swizz watch companies have lost billions due to the Chinese replicas and consumer brands in other industries are suffering the same fate.
Take the case of Bobbie Bear for instance. The Bobbie Bear is a bright purple teddy bear stuffed with lavender from a farm in Australia owned by a man named Robert Ravens. After Zhang Zingyu, a Chinese actress and model, posted a photo of the bear online Robert saw his orders jump from 10 a month to 4,000, but as soon as counterfeiters decided to cash in on the craze Robert found his sales dropping just as quickly as they rose.
Although counterfeiting is an issue, it’s also one that can be beneficial to the American brand. The prevalence of counterfeits in China has eroded the consumer’s trust in domestically produced products and this lack of trust has lead consumers to search for international brands that they can come to love. The case of the Bobbie Bear also highlights the power of Chinese celebrities to quickly shape consumer demand as well. American brands can benefit by using the power of social media to reach the Chinese consumer and create like, know and trust through influencer marketing.
As China’s economy becomes indispensable to more companies around the world the country will be able to set the terms of a trade deal to its advantage. That means China will be able to drive a hard bargain in terms of lowering tariffs on imports of Chinese manufactured goods and raising tariffs on products imported into China. However, as the consumer power of China continues to grow the profit margins for American brands shouldn’t be affected by the trade deals. On top of that, many American brands are unaware of the continual growth of the Chinese consumer- therefore the country is seeing many Chinese logistics companies importing products to North American shores and leaving on an empty boat-this provides an opportunity for the American brand that decides to take advantage.
If your brand decides to cash in on China’s consumer growth consider using a Chinese logistics company for shipping your goods. More than likely you’ll receive a far better freight quote than you would from one of their international competitors which will result in a decrease in overhead and an increase in your profit margins.
The Chinese Consumer Isn’t Going Anywhere
Yes, the economic slowdown in China is massive and one that could potentially become a crisis especially with its massive debt build up. China’s debt levels are higher than they’ve ever been and investors are even making comparisons of the countries’ current condition to that of the United States before the financial crisis of 2008. If an economic crisis is on the loom, and China can’t solve the problem, the middle class will take a huge hit.
But while some analysts predict a crisis, in truth no one really knows if this will happen and most predict a slowdown rather than a crisis. Regardless of what the future holds, the fact remains that the growth of consumerism in China is happening now, its real and the country’s major cities are putting enormous emphasis on making the economy more driven by consumption.
This is going to majorly disrupt the world economy, and if Uber is of any evidence it’s the brands that are on the side of disruption that reap the benefits and the ones that chose to ignore the trend who fall victim to it.
If you are an American brand that wants to tap into the Chinese consumer market we at Clipper Transport would be more than happy to help meet your logistics needs. With established branch offices in major port cities in the U.S. and China, we offer one-stop logistics service solutions and complete operational coverage to meet your supply chain-oriented demand with efficiency and cost-effectiveness.
At Clipper Transport, we have one clear and defined goal- handle your transportation so you can focus on improving profit.
Click here to contact us to receive a free shipping quote on your freight today.