Chinese consumers are both brand conscious and price sensitive: the key to understanding this dichotomy is to appreciate Chinese culture, where face and social status are crucial as well as the prevailing attitude of a lack of trust in product quality. This skepticism leads Chinese shoppers do significantly more research, across many more channels, than their counterparts in the West. If a brand can signal a higher social and/or economic status, Chinese consumers are happy to pay a premium. If it doesn’t, they become very price sensitive as well as skeptical about quality.
eBay requires buyers to pay first and then wait for an item to be delivered. This model works in societies where the trust level is high. However, there is a serious lack of trust in China between consumers and manufactures, so asking buyers to pay first without seeing the product is a hard sell. That’s why eBay failed in China. Conversely Taobao came up with a different model: It introduced a third-party payment system, namely AliPay, where buyers pay to a third-party account owned by Alibaba (Taobao’s holding company), and only after they have confirmed receiving the products in good order, Alipay will transfer the money to the seller. This model effectively solved the trust issue in e-commerce.
Throughout China`s history companies of all sizes have consistently lied to their consumers, and this is why, even today, the Chinese are so cynical and suspicious about purchasing products, especially online. Facts that might be taken for granted by western consumers will be questioned vigorously in China, and it is necessary to cultivate trust from a low starting point. The challenge for companies is to prove to consumers that their products are rigorously inspected and tested.
Whilst having a natural advantage in the trust area, foreign brands now have to compete move vigorously with domestic brands, especially in budget/mass consumer products. There is also a growing sense of pride in “buying Chinese” which is being utilized to the max by a growing force of domestic brands such as Xiaomi and Anta. A spate of investigations into foreign big name brands a few years ago has eroded the unquestioning faith in western brands, who must now concentrate on the core values of integrity and honesty.
The Chinese may be relatively new to the consumer world, but they are far from naive. They look much deeper than colorful billboards and TV commercials. Increased foreign travel, burgeoning Social media and increased awareness of consumer rights have helped the Chinese consumer become ever more sophisticated.
One area in which foreign companies still outdo their Chinese counterparts is in customer service: with rising expectations amongst the growing middle classes there is still a stark difference between a walk trough an Apple store compared to a domestic computer shop with a traditional sell and forget attitude. However this is also fast changing with Private Banks and Airlines taking the lead. Consumers are becoming savvier, and insistent on, good service, and domestic producers are taking notice. In the high growth regions of 2nd and 3rd tier cities the personal touch is an incredibly effective marketing tool where the standards of customer care remain low.
The days of “Made in China” are now progressively being replaced by “Made for China” foreign companies have to truly understand the needs and changing characteristics of Chinese consumers, and build quality products and services to meet these needs. Crucial to the message is their utilization of social media and brining the latest in consumer services to China.