Author Shaun Rein of The End of Cheap China: Economic and Cultural Trends that will Disrupt the World advised recently Mizuho Securities on key issues when investing in China. In Forbes three issues are summerized.
Lesson 2: Invest in premium goods.
China has been emerging as a market to sell into, not just produce in. Despite the slowing Chinese economy, Chinese consumers remain confident, and they will drive 15% retail sales growth in 2012. However, they are changing their spending habits. They are increasingly seeking to upgrade in categories like food, handbags, cosmetics, and travel. No longer do they only buy what is cheap, as they did 15 years ago, when most Chinese struggled to put food on the table. Now more are searching out brands that have cachet and are perceived to be safe and nontoxic.
Key takeaway: Look at brands that command great loyalty and that can transfer higher costs to their end consumers without losing them. Chinese have reported very high loyalty to Apple, Estee Lauder, and Starbucks, despite their relatively high prices. A 26-year-old women from Jiangsu province who makes $250 a month as a clothing vendor told me, “I skipped lunch for six months to buy an iPad 2.”
Shaun Rein is the author of The End of Cheap China: Economic and Cultural Trends that will Disrupt the World
and also a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.