Market trends 'changing all the time'

'Emotional' behavior is a result of Chinese consumers having more buying choices, says academic

Jeffrey Towson says one of the major challenges for businesses around the world is to understand Chinese consumers.

Even the Guanghua School of Management professor was taken aback by the response to an article, How China's Increasingly Emotional Consumers Are Shaking the World, that he posted on his LinkedIn profile last month.

Within 24 hours it had some 50,000 hits as those who responded were seeking some insight into the Chinese buying public.

"I literally wrote it while I was stuck at Oslo airport and I thought I would just post it. When I got off my plane, I just checked to see if anybody had read it. Within a couple of hours, some 27,000 people had viewed and I was like: 'What the hell has happened'?"

Towson, coauthor with Jonathan Woetzel, a senior partner at McKinsey & Co in Shanghai, of the One Hour China Consumer Book, believes the response was just symptomatic of the global interest in the behavior of the middle class Chinese consumer, seen by many as a business mega trend.

He says the increasingly emotional behavior of Chinese consumers has got everybody in the commercial world - from Chinese companies to foreign multinationals - guessing as to what their right strategy needs to be in order to reach them.

"Emotional is almost a loaded term but I think it is the right one. It means, 'We love this. We don't like that', 'Oh, this is really cool, let's do that' or 'You know I feel really cool when I buy this'.

"These are the consumer behaviors we now see everywhere in China, as opposed to someone wanting a real good deal on an airconditioner. The key point about it all is that it is very unpredictable and it is therefore difficult for businesses to position brands and what they are actually selling in the market because the market trends are changing all the time."

In his LinkedIn article, Towson cites two examples of Chinese consumers' emotional behavior. One is their response to the 2012 Chinese box office comedy hit Lost In Thailand, directed by and starring Xu Cheng. Its success led to Chiang Mai becoming a major destination for Chinese tourists.

The second is how Bobbie Bear, a purple bear stuffed with lavender, made by Robert Ravenus on his farm in Tasmania as a retirement business, became a must-have product in China overnight. Chinese model Zhang Xinyu posted a photo of the bear online and orders surged to more than 45,000. Annual visitors to the farm exceeded 60,000.

"A hit movie is a hit movie. It doesn't tend to imply a big behavioral trend or change but Lost in Thailand was of a different order. I was in Chiang Mai last year and it felt like 50 percent of the people were Chinese," he says.

"With the bear, you know, even when (President) Xi Jinping flew to Tasmania, he was presented with one. People were showing up in droves at this little farm in the middle of nowhere."

Towson, 45, believes the only option for businesses wanting to target the Chinese market and understand consumer trends is to get up close to Chinese consumers.

"You have to stay as close as possible to the conversation. You have to find out what people are saying around the dinner table, in their offices and online. This now matters a great deal.

"These conversations matter now as much as what American consumers are saying. The difference is that American consumers aren't changing nearly this quick so there isn't this unpredictability factor."

Towson, who was born in Walnut Creek in northern California, has been professor of investment at Peking University's Guanghua School of Management for the past six years.

Apart from the book on Chinese consumers, he has also written the One Hour China Book, itself an instant hit, which came about after a US congressman asked him what he needed to know about China.

"The pitch for both books really was you give me an hour of your time and the price of your coffee."

Towson originally studied sciences and was a Fulbright scholar at the Karolinska Institute of Biotechnology in Sweden, before studying medicine at Stanford. He switched to become a management consultant for what was then Booz, Allen & Hamilton in New York.

From there he worked for Prince Al-Walid, then the fourth richest man in the world, and conducted business deals across the Middle East, Africa and Asia, from where he first developed a China connection.

He now combines his role at Guanghua with running his own investment company, Towson Capital, from New York and Beijing

He believes that some of the "emotional" behavior of Chinese consumers is a result of them now being able to make choices.

He says the urban middle class are no longer "value hunters" as they are expected to have a disposable income of $8,000 a year by 2020, about the current level of South Korea.

"I think there is a sort of experimental behavior happening with Chinese consumers. They are trying a lot of stuff for the first time. For the majority of Chinese consumers, when they have been traveling over the past couple of years, it was their first trip abroad."

He believes the Chinese consumer market is proving to be even more dynamic than that of South Korea.

"I don't see South Koreans discovering new places to buy homes, and traveling every six months like the Chinese are right now."

Towson says the Chinese market is difficult to comprehend for those who want to sell.

"It is not just that it is big. You have a dramatic spread of income and lifestyles across the country. You can get on a train in Shanghai, where you have wealthy consumers, and within a few hours feel almost 100 years back in time when you go to the poorer, third-tier cities. The Chinese consumer market is the most complicated on the planet."

He says one of the complexities of the market also is the huge differences in life experiences between the generations.

People who are now middle-aged have known real poverty and many lived through the "cultural revolution" (1966-76), which saw huge turmoil in the country. Many of the post-1990 generation, on the other hand, have never known real hardship.

"They are worlds apart from middle-age or senior Chinese. They live online, they are overwhelmingly urban and they have not necessarily known hardship growing up. They haven't ever been hungry."

Because 70 percent of the population is now networked on the Chinese instant messaging service WeChat, which has far greater take up in China than Facebook's WhatsApp in the West, trends can take off very rapidly.

He cites Meitu Xiu Xiu, a Chinese mobile app aimed at women which allows them to take selfies of themselves and also edit and improve the image, making them look perhaps slimmer or different in some other aspect.

"You don't see an app like this in the US but in China it went from an idea to something like 800 million users in no time at all."

Towson says the challenge for any corporation is to reach people in China through social media, where a lot of consumer behavior is now determined.

"You know people will be talking about you, whether you like it or not. So if you are not out there promoting yourself online, your competitors could be talking you down. You have got to play on the offense."

andrewmoody@chinadaily.com.cn

(China Daily European Weekly 04/08/2016 page9)