Spending Spree
They're young. They have money to burn. And the race is on to win them as customers
Up next. India isn't far behind China, and it, too, has captured the attention of multinational marketers. Its burgeoning middle class--those with discretionary spending power--exceeds 60 million, though Indian officials tend to boast of even higher numbers. And half of India's 1.1 billion people are under the age of 25. An estimated 2.1 million people are graduating from college each year, 200,000 of them engineers and 40,000 in management. The country's economy has been growing at a clip of 8 percent a year. A McKinsey & Co. report predicts that within 10 years the average Indian income will be twice as high as it is now. India boasts the world's fastest-growing information technology market, creating skilled, high-wage jobs for software engineers, business-process experts, and call-center workers. Some 700,000 Indians now work in call centers; a novel titled One Night @ the Call Centre, written by a young investment banker, has been a bestseller with its depiction of young Indians whose attitudes and activities would be easily recognized in, say, the tonier suburbs of Los Angeles.
When they talk about China and India, western business executives can't stop using the word "scale." Take the experience of Blizzard Entertainment, based in Irvine, Calif. It took a year to attract a million paying subscribers in North America for World of Warcraft, its popular online video game; in one month, the company signed up 1.5 million for the Chinese version of the game. How about cellphones? There are 400 million cellphone users in China, and, on average, they replace their phones every three to six months. Consumers in China can choose from something like 900 different models, compared with only 80 or so in the United States. Companies like Samsung offer a new handset model in China as often as once a week. In India, mobile-phone subscriptions are growing at a rate of 4 million new subscribers a month.
Understandably, more and more companies are betting on these still-immature markets to drive future growth. Many companies are already beginning to develop designs and products catering to the Chinese market. General Motors has introduced a range of models in China, customized for every segment from farmers to the nouveau riche. Adidas, whose business in China doubled in 2004 and almost doubled again last year, just opened an Asian Design and Development Center in its Shanghai headquarters. Designers there will be turning out products for Asian fit and tastes, cutting development time from 18 to 12 months, for a "faster response to the fast-changing consumer tastes in China," according to marketing director Paul Pi. The first line of products is due out next year. Last year, the company's signature basketball shoe, made for NBA star Tracy McGrady, was launched in China, the first time Adidas has done a global launch outside the United States. It released a limited edition of 800 pairs of the shoes, available only in greater China. They sold out in hours.
Brand names. In both China and India, urban youths are increasingly conscious of the brands they buy and of product quality. "Brands are fueling the rise of the middle class in China," says Tom Doctoroff, the author of Billions: Selling to the New Chinese Consumer. "The Chinese have an aching ambition to climb up the ladder of success, and brands are the mark of people who have made it." In China, this means people are much more willing to spend on publicly consumed goods (suits, diamonds, mobile phones) than on private ones (washing machines and other items used at home).
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