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Understanding consumers key to survival

By ZHENG YANGPENG (China Daily) Updated: 2015-04-28 15:12

Market gets more competitive as shoppers become sophisticated and demanding, but also emotional in terms of what they buy

The drama of Chinese consumers going crazy for high-tech toilet seats being sold in Japan during the Lunar New Year holiday has led to a kind of "soul-searching" back home.

For Chinese manufacturers, it is a huge embarrassment because most of the "smart" electronic seats are actually made in China. Beyond embarrassment, it also said something about Chinese consumers' changing thinking that deserves careful study by foreign companies that are vying for a piece of the world's second-largest consumer market.

For Jeff Walters, a partner and managing director of the Boston Consulting Group and an expert on China's consumer goods sector, it revealed multiple facets of the Chinese consumer story.

"The thing that is true about consumers around the world is that you can never tell them what to do. A lot of the time, consumers move faster than companies," he said.

Looking at consumer companies in China, there is a wide range of performance. One reason is that the market "only gets more competitive", Walters said.

Another is that the business model that worked in the past decade does not work now. Companies are figuring out a new model. What is behind that is the shift of the whole macro-context.

"The past 10 years were more about the emergence of real 'consumers' who for the first time were able to buy basic goods," he said.

Now China is seeing the emergence of an upper-middle class, with a minimum monthly salary of 12,000 yuan ($1,960), who are buying branded everyday goods, such as personal care items and food, he said.

In the past, availability, a well-known brand and some assurance of quality were enough to ensure a company's sales in China, Walters said. But now companies must either convince consumers to buy more often, or to buy a better version of the product.

"You are not going to buy more shampoo when you get richer. Successful companies have got to convince consumers to buy better products with higher prices. That's the game that lots of companies are playing.

"What that involves is how to please consumers and persuade them that if you buy this product, you feel better. That can only be done through really understanding how people feel, what they want and what they are concerned about," he said.

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