3 Trends of New Asian Consumers

Asian consumers will account for about 60 percent of global purchasing power. In my latest article on Forbes, I discuss three trends of new Asian consumers: their youth, their proficiency with mobile technologies, and their innate sense of what constitutes good value for their money.

Here is a summery of the article:

Asian consumers are significantly younger than their Western counterparts. In China, those born after 1980 are becoming mainstream consumers. India’s demographics are more compelling. In 2014, India’s median age was 27, compared to 38 in the US and 46 in Germany.

Asians are more adept with mobile devices than with personal computers. Therefore, mobile commerce is more advanced and widespread in Asia Pacific than the West. For example, in 2013, 55 percent of consumers in China had used mobile payments, compared to only 19 percent in the US.

Lastly, Asian consumers are value seekers, much more so than their Western counterparts. They have an innate sense for the value of any product and service they consume. Whether they are shopping for luxury goods or penny-pinching for a bargain, they want to get the most for their money.

Read the full article on Forbes.

Will China Lead Innovation In Mobile Social Commerce?

Social commerce is a novel term in the US, and many people are not familiar with it. Some think it refers to those annoying ads on Facebook. According to Wikipedia, social commerce is the use of social networks in the context of e-commerce transactions.

In China, social commerce has taken up a life of its own and become the backbone of e-commerce.

While the “Ice Bucket Challenge” has gone viral on Facebook, Chinese consumers use social media in a much more thoughtful way. Instead of posting some silly videos and pictures, they turn to social media to solve real life problems, to seek advice from friends and opinion leaders, and to decide what products to buy or not to buy.

Read the full article on Forbes.

The Rise of the New Global Middle Class

The global middle class will explode in the next fifteen years, growing from 1.8 billion in 2009 to 4.9 billion in 2030. About 66 percent will be in Asia Pacific, compared to only 7 percent in North America and 14 percent in Europe. New Asian Pacific consumers will wield nearly 60 percent of total purchasing power, double that of North America and Europe combined. This is a significant shift in economic power from West to East that hasn’t been seen in the last 300 years. Its impacts could dwarf the Industrial Revolution.

China and India will make the biggest waves in this surge of the new global middle class. In 2009, these two Asian countries comprised just over 5 percent of global middle class consumption; in 15 years, their share of global middle class consumption will increase to 41 percent or more.

What do you make of this? Comments are welcome.

SAIC Taking Wrong Approach to Build Its Brands

China’s number 1 auto maker, Shanghai Automotive Industry Corp. (SAIC), is setting up a venture capital firm in Silicon Valley to tap advanced technology for its automobile brands back home. As Rose Yu writes in the WSJ’s China Real Time blog:

Chinese car companies, including SAIC, could do with all the help they can get, as the majority of Chinese consumers prefer foreign-branded cars. Chinese domestic brands’ market share in the country’s passenger-vehicle market fell to 36.5% in May from 39.4% in the year-earlier period, the ninth-consecutive month of decline, according to data from a government-backed industry group.

“Building a brand is an arduous job,” said Chen Hong, Chairman of SAIC Motors. “Chinese car makers must go upscale, otherwise the situation will be worse.

“In terms of sales, SAIC is a big car company. But when it comes to core technologies, we are far from strong enough,” said Mr. Chen, who became chairman in May. “Silicon Valley houses a number of emerging-technology companies. Having a footprint there will help improve our innovation ability.”

But how could “having a footprint in Silicon Valley” help improve their innovation ability? It’s not like breathing the Silicon Valley air will automatically make a company more innovative. Money isn’t only the way to acquire new technologies. The best innovations happen where the problems need to be solved. SAIC doesn’t need to look farther than China to find these.

The 1990 Institute: China’s Growing Global Impact

I was honored to speak at The 1990 Institute’s Teachers Workshop on Monday in San Mateo, California. The two-day workshop, titled China’s Growing Global Impact, was designed to help high school teachers understand what’s happening in China and prepare our students for a future that will be very different from their parents’.

My presentation, of course, is on the subject of the rise of China’s middle class. Here are the slides I presented at the workshop:

The 1990 Institute is an organization that fosters better understanding between the U.S. and China. Other people on the panel include Dr. Tom Gold, professor of sociology of UK Berkeley, Dr. Mark Henderson, program head of Environmental Studies at Mills College, and John Kamm from Dui Hua Foundation. It was a real honor to be in such a distinguished company.

What You Can Learn from Burger King’s Missteps

Eight years after Burger King first entered the China market in 2005, the world’s second largest burger chain restaurant has only 63 restaurants in the country, falling far short of its own plan of opening 250 to 300 restaurants by 2012.

Many analysts pointed to Burger King’s uphill battle with its competitors. Both Yum! Brands and McDonald’s entered China much earlier and both have established significant presence in the country. Yum! China has more than 4,000 KFCs and 750 Pizza Huts, in addition to its China-based units East Dawning and Little Sheep. McDonald’s China division has more than 1,500 locations.

However, there is plenty of demand for more than two big American restaurant chains in China’s $29 billion fast food market, thanks to a growing Chinese middle class. Here are a few things Burger King can do to catch up:

Myth that Chinese Don’t Eat Beef

Burger King has failed to play up the advantages of its traditional beef dishes. Instead, it added chicken burgers, believing Chinese prefer chicken to beef. The reason many Chinese consume more pork and chicken is because they are more affordable and readily available. Chinese farmers typically raise pigs and chickens to sell in the market, while cows are used mainly for farming.

The truth is that Chinese consumers consider beef a quality meat because it has less fat. Continue reading

Tom Friedman: China Needs Its Own Dream

Last month, I was honored to be invited to a private dinner with Tom Friedman in Shanghai. The dinner was hosted by Peggy Liu, founder of US-China Collaboration on Clean Energy (JUCCCE) to help Friedman get an insider’s view on China.

At the dinner, we (about twelve of us) discussed many challenges as well as opportunities China faces. Some cited the low trust in the Chinese society, others talked about entrepreneurial activities on the ground. I had a chance to give Friedman a copy of my book The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You.

In his recent column “China Needs Its Own Dream,” Friedman pointed out that China needs to define its own dream rather than blindly follow American’s  “We all need to be rethinking how we sustain rising middle classes with rising incomes in a warming world, otherwise the convergence of warming, consuming and crowding will mean we grow ourselves to death.”

I am glad he used the size of the Chinese middle class from my book – 300 million people expected to grow to 800 million by 2025.

Five Things Starbucks Did to Get China Right

If there is one company that should have failed in China, it would be Starbucks. China has thousands of years of history drinking tea and a strong culture associated with it. No one could have guessed that Chinese would ever drink coffee instead of tea.

Yet, Starbucks has successfully opened more than 570 stores in 48 cities since it first entered China twelve years ago. Building on this momentum, it plans to open 1,500 stores by 2015. What did the Seattle-based coffee company do right in China? Here are five lessons from Starbucks’ success.

Think Different

When Starbucks entered China in 1999, many were skeptical that Starbucks had a chance. Given the fact that Chinese people have traditionally favored tea, it seemed impossible that Starbucks would be able to break into this market.

However, Starbucks did not let this skepticism stop it. A careful market study revealed that as the Chinese middle class emerged, there existed an opportunity for Starbucks to introduce a Western coffee experience, where people could meet with their friends while drinking their favorite beverages.

Starbucks literally created that demand. Now you can find a Starbucks almost on every major street of the coastal cities in China. Even my 90-year old father in China began to tell me how he drank coffee after meals, rather than tea, to help his digestion. Starbucks has revolutionized how Chinese view and drink coffee.

Position Smart

Once Starbucks decided to enter China, it implemented a smart market entry strategy. It did not use any advertising and promotions that could be perceived by the Chinese as a threat to their tea-drinking culture. Instead, it focused on selecting high-visibility and high-traffic locations to project its brand image.

The next thing Starbucks did was to capitalize on the tea-drinking culture of Chinese consumers by introducing beverages using popular local ingredients such as green tea. This strategy has effectively turned potential obstacles into Starbucks’ favor. Chinese consumers quickly developed a taste for Starbucks’ coffee, which was essential to Starbucks’ success in China. Continue reading

The Secret of Succeeding in China

For those who have participated in our survey on The Secret of Succeeding in China seminar, thank you very much and we really appreciate your feedback!

We have received a total of 108 responses. A overwhelming majority of them says that a China strategy is extremely important to them. About 40 percent of the survey responders say the biggest challenge for them to enter the China market is “government regulations,” and 35 percent says “no connections.” Almost 80 percent people indicate that they are likely to attend our seminar.

Currently, this survey is closed. Since we have a basic account at SurveyMonkey, we are only allowed to collect the first 100 responses. If you haven’t received our free report yet, that means you are among the last 8 people who responded our survey. You can go to our Free Downloads page to download your free report.

Thank you again for your interest. Please stay tuned for our upcoming seminar The Secret of Succeeding in China.