Shaun Rein is giving foreign retailers a crash course on who to target among the Chinese consumers and what the dangers are, in Forbes. They should forget about the Chinese equivalent of the baby boomers, the older generation will not start spending even when health care and pension systems are in place.
The typical Chinese retiree has lived through a world war, a civil war, famine, the Cultural Revolution and political economic turmoil that make the current malaise smacking the U.S. look like almost nothing. Do you really think they will trust new policies so much that they stop saving and suddenly start spending? It is doubtful. Moreover, older Chinese have mostly missed out on the economic boom since 1978. They retired before the gold rush of the last few years, or they’ve been working in state-owned enterprises where the pay stays low. Even though their savings rate hovers around 60%, they don’t have much money socked away.
The new consumer base for multinationals will be in the third and fourth tier cities, although the struggle for the Chinese consumer in those places will be tough as major domestic players like Haier and Li Ning have also set eyes on those regions:
First, consumers in third- and fourth-tier cities are not as price sensitive as many think, but they are very value conscious, and they want premium products…The lesson there is that companies shouldn’t just bring in cheap, watered down versions of their products. They need to bring in their top lines too, although they might have to change those products a bit.