Yeah yeah, we're supposed to be angry at China for keeping their currency artificially low, sending us too much cheap stuff, and bouncing back from the global recession faster than we did. Foot stomp. There. I'm mad.
Now that I've gotten my Chinese tantrum out of the way, I can appreciate an insightful new study by consulting firm McKinsey & Co., which recently surveyed 15,000 Chinese consumers in 49 cities to find out how they shop (and how McKinsey's clients can better market to them).
China may have the world's most fascinating economy. It's growing at near-double digit rates, and it recently displaced Japan as the world's second-largest economy. Every day China disproves long-held tenets of capitalism, creating vast amounts of wealth despite the kind of Communist government that isn't supposed to be able to accomplish such things. China's domineering government can build world-class infrastructure overnight, putting the aging transit systems and energy grids of Europe and the United States to shame. It even builds brand-new "pop-up cities" to help fuel its economic boom—whether people arrive or not.
China's boom may very well conceal an artificially inflated economy that falls back to earth sooner or later. But whether you agree or disagree with its policies, China is becoming too influential to ignore—and so are its consumers. Keep in mind, consumerism as we know it in the West is practically brand new in China. Yet that's why it's interesting to watch how the Chinese approach the kind of materialism that has clearly gotten the West into trouble. China's booming middle class is rapidly acquiring the kind of disposable income that middle-class shoppers in Europe and America take for granted. And for now, most Chinese consumers are still uncorrupted by easy credit, must-have marketing, and other double-edged attributes of affluent societies. While they have their own values and cultural touchpoints, Chinese consumers today are also similar to Americans in the 1950s and '60s: Somewhat naïve and probably too trusting, yet buoyant, proud, and fueled by optimism.
So how do they shop? Some Chinese habits are quite familiar. They research products on the Internet and pay a lot of attention to word-of-mouth recommendations. But they're also careful and deliberate about spending, which is why McKinsey says they're "among the world's most pragmatic consumers." Policymakers in Washington actually think Chinese shoppers are too pragmatic, and they're pushing China to adopt policies that would encourage more domestic spending, so that the world economy relies less on over-indebted Americans to buy everything in sight. But you could also argue that American consumers addicted to spending should shop more like the Chinese. Here are four Chinese shopping habits that Americans could learn from:
Chinese consumers don't gorge on debt. China's financial system isn't yet geared to consumers, and credit is a lot harder to get than it is in the West. Yet even as it becomes available to higher-income consumers, they're not biting. "Consumers elsewhere tend to trade up as they get wealthier," according to the McKinsey report. "Some start relying on credit, often spending more than they can afford. Not in China. Consumers there remain very concerned about financial stability and spend within their means." It will be interesting to see if Chinese consumers retain that discipline as their nation gets wealthier. They seem to be off to a good start.
If they "trade up" to more expensive goods, they also "trade down" on other things to help pay for the indulgence. McKinsey's survey found that in three-quarters of urban households, Chinese consumers said they had traded up in at least one product category—buying a more expensive product or brand than they used to buy. But the majority of those people also spent less on other products to finance the upgrades. Many white-collar men spent more on restaurant meals, for instance, often to impress clients or business colleagues. But most of those big spenders also cut back on things like personal-care products or snacks, to balance out the spending. More than 80 percent of trade-up demand for higher-quality clothing and shoes came from working-class people trying to craft a more impressive professional image—and they, too, gave up a variety of other things to pay for it. Such tradeoffs might seem like an obvious choice—except we all know how hard it can be to give up even small luxuries, once we've gotten used to them.
They budget first and buy second (or don't buy at all). McKinsey reports that the typical Chinese family determines how much it can afford to spend, then lists the things it wants to buy, and finally holds a "beauty contest" to determine which products on the wish list are most appealing. Those are the ones they buy. Many Americans budget just as carefully, but far too many of us buy extra stuff anyway, because we feel entitled to it or it just makes us feel better. It's second-nature in America to push a cart through the aisles of Target or Home Depot, filling it with little things we never intended to buy, or even thought of before we got to the store.
They spend months researching purchases. Many Chinese families in the market for a computer spend three to six months deciding which model to buy, visiting a store four or five times to check out the offerings. Other big-ticket items get just as much scrutiny, and Chinese shoppers also deliberate carefully over everyday things like food, drinks, and health and beauty items. Many shopping trips, in fact, are just for research, with nobody actually buying anything. Western-style marketers, no doubt, will work hard to make Chinese shoppers less careful and more impulsive—and McKinsey does in fact report that "emotional" purchases are on the rise. The race is on to see if we become more like them, or persuade them to become more like us.