When talking about selling in China, the Chinese regional polarization becomes a relevant frame of reference. How to deal with such a vast country which could be considered a continent in itself?
In any process of business development in the Chinese territory, companies face the same fundamental problem. Even if there is not a single answer, these three below are constantly repeated.
First, the Company lacks totally of any real knowledge about China. Intuition is not a pray and you would be wrong.
Doing business in China by making a North-South East-West division is not useful, neither the best solution. Split the territory geographically will drive you towards more inaccuracies. To give you an idea, Guangzhou and Shenzhen belong both the south but they barely share any similarity.
Guangzhou is traditional Cantonese speaking city with a strong rooted culture. Meanwhile, Shenzen is more cosmopolitan mandarin speaking city populated in its vast majority by immigrants from all over the country and overseas. There is a Chinese common say about Shenzhen, “Once you get to Shenzhen, you become <<Shenzhenese>>”.
Secondly, once we realized that geographical distribution might not be the best option dividing by tiers could seem quite reasonable.
As you probably already know, in China cities are classified in 5 ranges, from Tier 1 to Tier 5, so dividing by tiers is again a mistake.
The example just exposed would serve also as explanation. Another example would be Beijing and Shanghai. Both belong to Tier 1 cities; nonetheless there is no possible comparison between Beijing and Shanghai, despite of the fact that both are super cold in the winter, although they tried to sell us that Shanghai belongs to the south…!
Beijing, capital of the People’s Republic of China, has been the capital of the country for much of the past eight centuries. Beijing is the cultural and political core of the Chinese nation. Tradition is venerated and could be observed in every place of the city.
Shanghai on the other hand, is the largest city in the world and the financial center of China. Luxury, skyscrapers and mix of cultures are some of the characteristics of the city. In Shanghai is common to find a huge number of expats and western style neighbors due to existence of the old French concession. So, there is no point to focus on city size.
Third and yes, Chinese people share several distinctive characteristics which are markedly different from any other culture, but Chinese are still Earthmen.
So please, do not fall into generalizations but neither forget a main description of the modern Chinese consumer:
- First, the Chinese remain best disciplined savers. The Chinese saving is not only driven by culture but also due to its lack of a real social care system
- Second, the Chinese are not loyal to brands, and they love experimenting trends, products and services
- Third, Chinese are savvy consumers, based on the price variable
- Fourth, Chinese shoppers have begun to understand the gap between price and value
Therefore, which would the best way to segment China?
Recently, Mckinsey studied which would be the best way to segment China into reasonable pieces. After reviewing many indicators, experts concluded that it was reasonable to cluster the Chinese territory.
It is helpful to focus on cluster size and much more effective. China is huge and Cities can be very far from one to another, so you better bear in mind that distance is a key point when doing business. We also must add that areas can be much attractive to business than cities, due to its bigger GDP and incomes, larger population and better facilities.
In the meantime, take a look beyond historical growth rates can help you to extrapolate future trends and discover if your product or service is going to last. Remember Clusters share trends and determine their evolving. For example, milk was slowly introduced in the country, first in the Shanghai area, to gradually spread.
Landing in China is never easy
In 2 Open we hope you enjoyed the reading but especially, that these tips have helped you know better the Chinese business reality.
Keep in mind that it would be much better if your arrival occurs by the hand of a consulting agency specializing in Chinese business, Ecommerce and Digital Marketing.
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This article was edited by Paula Vicuña from 2 Open.