Many Western brands in China might be targeting the emerging middle class, but that does not exist in China, like it does in the US, argues retail analyst Shaun Rein. Chinese consumer got for the premium products, or for the cheap, there is no middle ground, he writes in Bloomberg.
To understand what these consumers want, China Market Research Group has talked with thousands of Chinese in 15 cities in the past year. Our research suggests most “middle class” Chinese consumers consider themselves on their way to riches despite the slowing economy. Their salaries have been rising in double digits or more for the past decade. Everyone knows someone who was tilling farms 15 years ago who now is a multimillionaire, driving a Mercedes and living in a posh villa. Many of the Chinese we spoke to think they, too, can get seriously rich.
Consumers are likely to either save up to buy high priced brands like Louis Vuitton of Tiffany to show off status and sophistication—or trade down to discount brands. Companies that position themselves in the middle are in no-man’s land and unlikely to gain much traction…
At some point, perhaps 10 years from now as it becomes impossible for China to sustain fast-paced growth, China’s middle class will truly be middle class in their aspirations and economic potential, and brands will be able to emphasize a middling heritage. Until then, however, there are far more similarities with Indian and Russian consumers, who spend for luxury for some products but are price sensitive on others.