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A new breed of consumer

This article has been taken from The Gen newsletter - Spring 2008.  Click here to download the pdf.

With talk of a US recession and house prices falling, there is some evidence that consumer confidence in the West is dropping: Nationwide’s consumer confidence index dropped in December 2007, with 58 per cent of consumers in the UK currently thinking now is a ‘bad time’ for a large purchase. In contrast, big growth is predicted for consumer products in the next few years within the so called BRIC countries: Brazil, Russia, India and China, with China providing the biggest growth.

We believe one of the key centres of growth of consumerism in the East will be China’s booming middle class. This group is currently growing at around 1 per cent per annum and by 2020 is expected to account for 40 per cent of the population in China – some 560 million people. At a time when demand for consumer products is falling in the West, the Chinese middle class might provide a new market opportunity for which Western companies can design, develop and sell consumer products.

So how do Western companies compete in this culturally different playing field? Previously it has been argued that many of these new Chinese middle class are following the West, looking for products which we take for granted (such as televisions or refrigerators), and that there is little room for innovation or the conception of  Chinese specific products or services. At Sagentia we believe that this is not  necessarily the case; it is becoming apparent that the Eastern consumer is actually very different to the Western consumer. Whilst the Chinese middle class do purchase  some of the same products, they also want to buy products innovated specifically for their own market, and which are culturally important to them. One example is the Piaoi teapot from Taiwan, which separates the leaves from the water at the touch of a button, and is proving to be a huge success. It’s slick, easy to use and innovative, and is culturally important to them as part of the traditional Chinese tea ceremony.

To succeed in this market, it is imperative to have a Chinese team with a deep cultural understanding working with you on the innovation. By mapping this Chinese team onto Western innovation tools and techniques, there is an opportunity to provide real  innovation, resulting in products and services which are appropriate for the culture and the market. Reversing this and immersing Westerners into a Chinese culture does not  save the same results. It takes so long for a Westener to understand the culture  sufficiently that it is never viable. This is further complicated as cultural and professional differences can prevail, leading to a breakdown in communication and potentially ultimately useless products.