Spending Spree
They're young. They have money to burn. And the race is on to win them as customers
What's driving it all? Merely looking at per capita income can be misleading. An urban "young white-collar" worker who earns as little as 5,000 yuan (about $625) a month typically still lives and eats with his parents and so may have almost 100 percent disposable income. It isn't uncommon for this demographic to save for months to buy a brand-name handbag or pair of sneakers for hundreds of dollars. Young Chinese are much more comfortable taking risks than their parents--partly because they see little opportunity for safe investment, other than real estate.
Expectations. In making purchasing and other lifestyle decisions, some young Chinese take their cues from what they see in western media. A college student says she started smoking because she thought Sarah Jessica Parker looked so cool with cigarettes on Sex and the City. "It's different from five years ago, because now they have a range of options with which to define themselves," says P.T. Black, whose market research firm, Jigsaw International, focuses on Chinese youth, defined as 15 to 35. "To a proactive person, the entire world is available--from underground hip-hop to the catwalks in Milan. We track them as one generation because their tastes change really quickly from Nike to Louis Vuitton, as they enter the workforce. They're moving forward so quickly, and their expectations are high."
To this end, brands are vying--sometimes with comic effect--to capture the attention of the Chinese consumer. Watchmaker Cartier, for example, created a massive ice sculpture of its flagship Paris store at this year's ice festival in the northern city of Harbin. Tiffany erected a huge replica of its trademark blue gift box outside a Shanghai shopping mall. Other brands choose to go with age rather than size. At a smoky Shanghai bar, young Chinese men sit at tables glancing at each other uncomfortably, sipping whiskey mixed with green tea. On one wall is projected a video presentation about John Walker--born in Scotland in 1805--and his sons. This is an event hosted by Diageo. The 50-odd people in the bar have been invited as "potential consumers," whose names were collected from other events. "We want to strengthen their brand loyalty by sponsoring a prestigious experience for them," says Timothy Cheng, a marketing manager for Diageo. "To Chinese consumers, heritage and age mean something." Lithe young women in black and yellow jackets stroll around the room refilling glasses while a well-known video jockey from Taiwan emerges and works the room. He stops by one table and asks a scrawny man in mid-sip, "What is the motto of Johnnie Walker?" "'Keep on walking'?" the man responds hesitantly. Bingo! A young woman rushes over and hands the man a bag filled with Johnnie Walker paraphernalia.
Competition for this new breed of shoppers is fierce. Foreign brands are battling not only with each other for a piece of the mainland market but also with a legion of increasingly innovative Chinese companies. Theft of intellectual-property rights also cuts into profits, especially for technology-driven products.
But the newness of this market has allowed for certain kinds of innovative marketing that might seem strange in the West. When Nike entered the China market in 1994, it found a country where regular kids didn't play sports; that was the province of elite athletes aiming to win medals in international competitions. Nike changed all that. The company began sponsoring entire high school basketball leagues, with the hope that more widespread competition would eventually pay off in brand recognition. The leagues are now in 16 cities across the country, and Nike has seen a payoff--in spades. In 1994, the company claimed sales of just $8 million in China. Three years ago, sales reached $100 million, and today the company will hit $450 million in annual sales. In poll after poll, Nike is cited as the "coolest" brand. "Now, there's a perfect storm coming," says Terry Rhoads, a sports marketing consultant who worked for Nike for 12 years. "The middle class is beginning to grow. Kids all use the Internet and see what their counterparts in the U.S. and Europe are listening to, what sports they play. They want to be part of a global tribe."
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