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Consumer Revolution

 

Study China’s

consumers

to glimpse

the future

 

Brands and marketers must

prepare for major changes

 

by Nihar Das

Global Account Director

MediaCom

Nihar.Das@mediacom.com 

 

Archana Ram

Product Lead (Team P&G)

MediaCom

Archana.Ram@mediacom.com 

  

The Industrial Revolution has been long heralded as a significant inflection point in human history. It transformed every aspect of society, from food production and clothing to housing and infrastructure, and catalyzed urbanization. By 1840s, the urban population in UK exceeded the rural. This led to an explosive impact on society’s needs and wants. The ability to have things faster and better changed not just how people lived but also how they thought and interacted with each other and laid the foundation for many of the modern traits visible even today. We’re on the cusp on another major change that, without much exaggeration, could be called a Consumer Revolution.

 

In 2014, the urban-rural balance of the most populous country in the world tilted—China’s urban areas overtook its rural areas in population size. The urbanization of China has followed a path similar to the industrial revolution—growth in trade and commerce driven by factories, which laid the foundation for cities. Just as the UK was the epicenter of the ripples created in the Industrial era, China is poised to create waves that will have far-reaching global impact in the new Information era.

 

China’s journey to urbanization and prosperity has led to accomplishments that dwarf any country in the world. Sales during China’s Singles Day is nearly three times as much Black Friday and Cyber Monday combined. Its high-speed rail network is longer than the rest of the world put together. However, viewing these developments merely as interesting anecdotes means we risk missing the bigger picture. Similar to the influence of the UK during the Industrial Revolution, China will lead the changes both in technology and in consumer behavior in the Digital era.

 

The first wave of this phenomenon is already being experienced by developing nations around the world, where wealth is reaching people faster than infrastructure. In such markets, technology—specifically e-commerce and mobile access—is fast filling the infrastructure vs. consumer demand gap. China is becoming an example, and the leading provider of accessible technology to solve these gaps. Other countries, like India, are rapidly riding this same wave.

 

China: The new canary in the consumer coal mine

But China is moving faster. The Chinese consumer now leads the world in being the most demanding. China has displaced Japan and the Nordics as the “torture test” market for all products, from baby diapers to mobile phones. Chinese consumers have become more demanding and discerning, prompting marketers to test products in China first—because if you win with the Chinese consumer, you are likely to win everywhere else. This phenomenon in turn is fueling societal changes—more discerning consumers, more stringent performance expectations, more focus on wants over needs. It shouldn’t be surprising that many global brands are moving their design centers to China, as Made in China becomes Designed in China.

 

This consumer sophistication, relative to the West, relates, in part, to the contrast in business models between Western and Chinese internet giants. Most internet giants that originated in the West, such as Google and Facebook, have advertising as the backbone of their revenue. For the Chinese internet giants, advertising contributes a minority share of the revenue, with a major chunk coming from commerce. This fundamentally alters their behavior. From “super apps”’ such as WeChat to the sprawling e-commerce empire of Alibaba, China is at the forefront of innovation in commerce at scale—the opposite of the impression of China as a “copy” economy. The first-mover advantage of Chinese technology brands in many key sectors (Huawei in Telecom or Didi Chuxing in transportation), and their focus on making solutions cheaper and faster have made their products ubiquitous.

 

With an insatiable appetite for growth and constant innovation, China is set to expand its influence in the high-growth markets. This could be the beginning of new wave of “Digital Colonization.” The irony that the Industrial Revolution, and related outsourcing of low-cost manufacturing by the West to China, led to this shift in power is not lost on us. But brands and advertisers today have to prepare themselves for the cultural and societal fallout of these changes and get ready to deliver, or risk getting left behind. Sadly, this reality is not yet broadly reflected in the advertising and communication industry’s outlook towards China. Often China is left alone for being different, as opposed to embracing it as the harbinger of the future!