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What to Know About Designing for China
by Gabriel Biller
This article is not a primer on how to do business in China. The reality of doing business in China can be, well, pretty ugly. We will not go into the corruption and other non-niceties of conducting business there in detail. To summarize very briefly, China’s leading political ideology (if there is one) according to James McGregor, is enriching the country (and usually the political leadership and cadre’s families) in any way possible, without ever disrespecting or challenging the government’s structure, position, and authority. In China, you pretty much have to play by their rules, show respect, and demonstrate how your objectives are not only good for your business but also good for China as a nation. You shall never criticize the government or proclaim what’s wrong with their politics. For more information on these topics and some of the more interesting anecdotes from the front lines, we highly recommend McGregor’s One Billion Customers: Lessons from the Front Lines of Doing Business in China. McGregor himself also recommends an excellent reference on the nuances and peculiarities of business culture and negotiation in China in Lucian Pye’s work Chinese Negotiating Style. Take the recent debacle between Google and China over censorship: the audacious Googlers violated the simple rule that you simply don’t ever question their rules. To be sure, China regularly censors sites and content, closes down search, social networking, and other sites, and spied on Google accounts. They may have done some other questionable things, but one must remember that China is not a democracy. In a way, it reminds me of the movie Fight Club, where the “first rule of fight club is you don’t talk about fight club” (that’s also the second rule of fight club, incidentally). In China, the first rule of China is you don’t question the rules of China. The second rule is you don’t disrespect the Communist party or the government. They shall not lose face. I’m trying to avoid taking political positions here, so be it. Google’s exit is, perhaps, Baidu’s gain. But let us not digress further. Discussing the politics of China is not within our purview at Artefact, so better to leave that to the political pundits, freedom fighters, activists, and global political leadership. We might contend, however, that even by playing within China’s rules of censorship, progress can be slowly made and China’s citizenry can be empowered with technology, information, and the means of assembling and building communities, for they are a clever people with a lot of pent-up creative ingenuity. Revolution and political change is ultimately up to China’s people, not to foreign multinational corporations who want to sell their products and services in China’s markets.
What to Know About Designing for China / artefact
Who is the Intended Audience?
The audience for this article is primarily professionals in product management and development, innovation, R&D, product and product portfolio planners, engineers, and executives who are responsible for designing and creating technology products (hardware, software, services). In particular, those of you people above who feel perhaps a bit less informed about China than you’d like to be. What this article is intending to convey are some key insights, lessons, or realities you should know about if you intend to develop, design, and market consumer products for China. Among the many considerations you’ll need to make as a business interested in entering or further penetrating the Chinese market(s), learning how to work and communicate well with the right officials and rainmakers, being unbelievably persistent, and understanding the varying and even appalling levels of corruption that may be involved will consume much of your time and energy (and, perhaps, your soul). Your challenges will range from building the right win-win argument, establishing long-term relationships with the right Chinese business people, power brokers, and partners, all the while not defying the rules or causing anyone to lose face. Another significant challenge will be distribution, as getting your product in front of consumers in China is not quite how it works elsewhere in the world. In the spirit of full disclosure: I myself have never traveled to China, though I was in Hong Kong for 10 days in 2007 and studied some Mandarin and Chinese history in college. In researching and writing this article, I owe a tremendous amount of debt to the market researchers, strategists, cultural translators, user researchers, and Chinese graduate students and other Chinese professionals whom I interviewed for this article (Elaine Ann, Ash Bhoopathy, Ravi Chhatpar, Ian Donahue, Anjali Kelkar, Shuang Li, Lin Lin, Fei Qi, Erin Sanders, Pinxia Ye, and Lisa Yong among them).
What to Know About Designing for China / artefact
is that while they admire and strive for luxury and quality items.A. clothing. “Cash Rules Everything Around Me. three Chinese society can be partially understood in terms of social identity theory and notions of “ingroup” and “outgroup.M. shelter. The government is no longer a provider of any form of safety net. they are also traditionally very frugal and value-minded. thought models. This is not just a matter of Chinese citizen versus foreigner. however.” In yuan they trust. but even within China between different regional or ethnic peoples.E. and unique behaviors of the many different types of Chinese people. and statistics. If you don’t know this by now. two The Chinese have got their minds on their money. and their money on their minds. Money is power. Incomes in China have not necessarily kept pace with GDP growth over the past couple decades.” The Chinese will always be suspicious of outgroup individuals. y’all. will be more difficult than you are used to. making them extraordinarily expensive by Western standards. they must take into consideration the cultural and social context.” What to Know About Designing for China / artefact 4 . and the most basic consumer durables. The paradoxical thing with the Chinese. particularly the ethnographies and user research. If you care for more details. products cannot simply be “translated” into Chinese. Foreign goods are also subject to high import tariffs.” Why? Because life in China is unstable and insecure. one China consists of many markets and many unique customer segments. anecdotes. you really should. Hence.The Short Version: 10 Tips + 1 Caveat If you are pressed for time. prestige. and meanwhile the cost of living is rising. However. quite individualistic and in a country in which there is little to believe in. please read beyond this section for additional details. doing the above. the primary directive is “to get gloriously rich. C. So everyone must look out for themselves. Like the astute social commentators and fans of Chinese martial arts culture. they still are learning about what there is in the consumer marketplace beyond the basics of food. and respect in China. Therefore. the Chinese are prone to flaunt it if they have it. Get the money. Add to that that most Chinese consumers still don’t really know what their needs are! Their world has changed so incredibly fast. or to some extent even between social groups or “tribes. The Wu-Tang Clan sang. and for many. Dolla dolla bill. particularly the older generations. or just generally not fond of my laborious prosaic style. short on patience.R. you will have to do your share of ethnographic homework and market research to succeed. The Chinese mindset is. contrary to most Western perceptions. charts. here is the abbreviated version of all the main points I want to make. Therefore.
five Because of these characteristics of ingroup bias and tribal behavior. the wealthy are a different story). Chinese consumers are especially drawn to products and brands that communicate a clear lifestyle. and are extremely value-conscious (if they are middle class. want to fit in with the subcultures or tribes in which they want to be accepted. six In contrast with the “rare generation. energy. yet they are curiously protean and one of the most demanding consumer segments in the world. and they want it right now! They are driven by the constant search for newness or novelty. food. Most are investing the majority of their time. but they also want to enjoy their freedoms. They have a lot of purchasing power and will represent a major consumer force for China. and income on providing the best of everything for their only children (the spoiled rotten ones are sometimes referred to as “Little Emperors”). The desire to be individualistic has its limits. Chinese consumers. in a world completely different from the world in which they were born and grew up. perhaps. This means buying the same brands and products. yet they are incredibly “tribal. style. who they are and what they want is constantly shifting. and culture. the good life. yet very impatient. stubborn to adopt new things and technologies. They are mostly only children. in particular the urban youth — sometimes known as the “rare generation” — are remarkably different from their elders. etc. these Chinese adults are suddently bombarded with and overwhelmed by choices they’ve never had to make before. They are optimistic about the future. and material goods. They need information and explanations of how new products will matter to their lives. otherwise they’ll simply rely on what they’ve always known and buy the cheapest. in terms of having a clear “leader”). They are individualistic and self-expressive. following the same styles and trends.” China’s more senior consumers (aged 35 and older) tend to be very frugal. And because they are continuously experimenting with their own identities and new freedoms through fashion. What to Know About Designing for China / artefact 5 . However.” in Seth Godin’s sense of the word (except. consume a whole lot. identity.four China’s youth generation aged 15-30 (nearly 330 million today). under tremendous familial pressure to perform and succeed in life. especially the urban youth. good-enough option.
They wish to be modern while retaining their Chinese essence. providing consumers with access to a high degree of personalized or customized items across a variety of product categories. not Westernize. What to Know About Designing for China / artefact 6 .seven One important thing to understand is that the Chinese have a tremendous amount of national and cultural pride. On the more pop cultural level. the shanzhai industry should also be given some credit and recognition for the creative. It’s worth noting a thing or two about the Chinese consumer retail environment and experience as well. entrepreneurial. so that they can catch up. In a country of 1. While the retail environment is beginning to look a lot more like that of the West (modern shopping malls and hypermarkets are being built by the hundreds). However. global products for their quality. but also from three decades of tremendous economic progress. the most powerful civilization in the world. where they can browse and take note of the latest high-end styles and products. feeding into the Chinese thirst for anything new. but shanzhai products (particularly electronics) introduce all sorts of novel variations. methods. Regardless of the differences between the youth and their elders. fashion. you must also recognize that right now you are engaged in fierce competition with shanzhai products (“knockoffs”). They just simply cannot afford it. Shopping malls are more like lifesized catalogs for most of the middle class. style. They are drawn to the global brands and products that exude qualities like performance. it’s difficult to differentiate oneself from the crowd. most Chinese who cannot afford the global branded products they aspire to own. it is critical to recognize that the Chinese want to modernize. DIY culture it is fostering. luxury. fashion. there is still something very different and unique about how and where the Chinese shop. they also fully intend to build their own domestic brands to compete globally. or media) at negotiable prices. stemming not just from thousands of years of being one of. most Chinese do recognize and appreciate quality and luxury. technologies. They are looking to the West to learn from and borrow (or steal… it’s often true) their intellectual property. and power. eight In addition to competition coming (eventually) from domestic brands. While they admire foreign. these shanzhai products will be manufactured and made available to consumers in more variations than you’ve ever dreamed of before your products will ever make it to market. which are often as good as the real thing. if not. You can count on that! Finally. beauty. the middle class consumer will then head out to the street to the large marketplaces or bazaars (in areas like Zhongguancun in Beijing) where hundreds or thousands of small vendors will sell the same or shanzhai versions of many products (electronics.” or fusion of traditional Chinese elements with Western styles. But. are perfectly happy with fake alternatives. etc. at remarkable product development cycle speeds. and design. and practices. you see this in the form of so-called “China Style. In addition. which is one reason you will really need to work hard on your distribution strategy.3 billion people. But. more often than not. music.
). And also join in the conversation on our blog by commenting on. don’t underestimate the influence of the right personality. They seek out the advice. online communities. but that is likely to change in the coming years. What to Know About Designing for China / artefact 7 . in the Internet they trust. However. expect them to become more demanding for new services and experiences. You are playing a frantic game chasing rapidly moving targets. So. but be willing to revisit them in the near future for further evaluation or validation. in such areas as food. Despite the high value that most Chinese consumers place in peerreview of products. reviews. Because of the incredible rate of progress and change occurring in China. Relatively speaking. Therefore. And because mobile phone penetration in China is significantly higher than computer penetration. as credit card penetration has rapidly increased and other forms of online payment have emerged and gained consumer trust and confidence (like Alipay from Alibaba. forums. they are still suckers (like most of the rest of us) for the right celebrity product endorsement. gadgets. We hope to open up the conversation to all of our readers for our mutual enlightenment. debating. Bulletin board systems (BBS). experiences. Today. Chinese Internet users spend 18 hours per week online versus only 12 hours by their American counterparts. the Internet simply offers a great variety of products to choose from. Chinese consumers are also beginning to greatly increase the amount of shopping they do online. and for those already upper middle class and wealthy consumers. which is more or less like Paypal). However. WARNING: Stop here if you’ve had enough or are a lazy reader. and feedback of their peers online before making purchase decisions. not carved in stone. as incomes continue to rise. blogs. ten Chinese consumption to date has been primarily focused on goods (fashion. expect that consumers will begin using their phones and computers to shop more. the average Chinese consumer’s purchasing power is still but a fraction of that of the average American consumer. eleven (one caveat) Everything just stated above is. or even contesting our claims. however. and finances. living. mobility. and social media are their most trusted sources of information.nine The Chinese have a well-justified distrust of media in general. style. most online shopping is transacted as cash-ondelivery. things which may not be available on the mainland. take our suggestions above to heart. health and wellness. Also. etc. unfortunately. They do not generally believe advertisers’ claims. but as consumers they are beginning to sophisticate and mature. anything you learn today may not be true a year or two from now. Continue below the fold if you’d like to hear a lot more details.
the future decade will become about buying his/her first car and possibly owning a home. But No Need to Panic (Yet) Global GDP (nominal) was roughly US$61 trillion in 2008.2% of the global economy. In the 1980s and 1990s. National Bureau of Statistics of China computers. In the past decade.1%. and showers. the United States 23. According to the International Monetary Fund.7%. They now have over 720 million mobile phone subscribers. Definitely check out his TED talk. Late last year. air conditioners (in urban areas). and are still at only 54. Sources: US Bureau of Economic Analysis. In Maoist China (1949-1979). major consumer durables included color TVs. and now are finally becoming a massive and legitimate consumer force in their own right. Today. the European Union collectively represented about 30. What is undeniable is that eventually China will have the largest What to Know About Designing for China / artefact 8 . and electric fans.” is anywhere from 50-500 million people. and a sewing machine. which depending on how you define “middle class. key consumer possessions were a bicycle. starting just before Deng Xiaoping initiated China’s economic reforms. In the last 30 years.The Future Looks Red. while the US’s GDP grew only about 6. For the typical Chinese. With their strong and steady economic growth rate. They’ve all but acquired Volvo from Ford and bought the rights to technology platforms from Saab from GM. China is still overall a relatively poor nation. Hans Rosling. 2048. Japan 8. and China had the fourth largest economy representing 7. predictions from a variety of experts and analysts — from the World Bank to the IMF to Goldman Sachs. washing machines. and Credit Suisse — indicate that Chinese GDP in purchasing power parity (PPP) may actually pass that of the United States in anywhere from 5 or 10 years (optimistically) to maybe 20 or 30 years (conservatively). The middle class and the rural poor have managed to more or less escape extreme poverty in these past three decades.3-fold (not adjusted for inflation). They have more Internet users (338 million) than the United States has people.9% of global GDP. a wristwatch. China passed the United States as the #1 automobile purchasing nation. make no mistake. It has an emerging middle class.1% of global output. Ten years ago China represented only 3. This is truly awe-inspiring! But. key consumer possessions became mobile phones.5% penetration. refrigerators. the country’s GDP has grown more than 81-fold. has even predicted the very day that Chinese GDP per capita in PPP (and that of India) will pass that of the United States: July 27. Morgan Stanley. The ever entertaining Swedish professor of international health and co-founder and Director of the Gapminder Foundation. it is a country of relatively few haves and significantly many more havenots. They now manufacture more cars than we do too.
economy in the world (though not necessarily the highest per capita wealth in the world). Maybe in a couple decades. Shaun Rein. and the European Union at a measly 5% of global GDP. but it is doing so at an alarmingly rapid clip. with the United States trailing in a distant second at 14% of global output. be prepared for an onslaught of other Chinese brands to become part of the American consumer landscape. Nobel laureate economist Robert Fogel recently raised a lot of eyebrows by declaring that in 30 years. So. Founder and Managing Director of China Market Research Group and a widely-recognized expert on strategy consulting in China. Could this be what global economic hegemony will look like? What to Know About Designing for China / artefact 9 . cheap and shoddy manufacturing. as an American or Western business. perhaps still too often. stay positive and read in more detail about the 10 things you should know about designing products for the Chinese consumer. while today you may consider a Lenovo laptop or a Haier beverage cooler when you go to Best Buy or Home Depot. he rejects a McKinsey report to suggest that Chinese trust levels in domestic brands are actually at an all time low. Chinese-made products are still beleaguered by a perception (and. in particular) and willing to pay a 10-20% premium for foreign brands they believe will be safer. Eventually. has even found through his own company’s studies that Chinese consumers are also leery of Chinese-made products (food. the point here is that Chinese political leadership has made it clear that they no longer wish to be the factory for the world. part of this road to global economic hegemony will include developing their own Chinese companies and brands that will themselves become global brand powerhouses. (see image) His critics arguments aside. a reality) of low quality. We know that these can’t possibly cover everything you’ll need to know to succeed. Moreover. and questionable adherence to safety standards. and determined to attain superpower status. Good news for you! So. They are proud. China is still learning how to move up the global value chain. Maybe more? The good news is that this means there is still time for you. And. to still look to China as an important component of your global strategy. but these lessons should provide you a great start. optimistic. China’s GDP will reach $123 trillion and represent 40% of the global economy.
Furthermore. the Tier-1 cities consist of Beijing. then work their way down. high tech. But one thing China most definitely is not is a homogeneous country of 1. they range quite strikingly from Nanning — a provincial capital whose key industry is mining — with a GDP per capita of 15. but since Deng Xiaoping’s economic reforms began around 1980. if you look at GDP per capita figures for these Tier-1 and Tier-2 cities (based on data from the National Bureau of Statistics of China). the country has diverged along multiple dimensions as economic development. As cultural translator and sociocultural researcher Lisa Yong of Y Studios in San Francisco told me. And things of that scale make eyeballs widen and mouths salivate. Do your ethnographic homework and market research. The Tier-2 cities tend to consist of the provincial capitals. and manufacturing center — has the highest GDP per capita among China’s cities at 89. however.A. if you want to include this Special Administrative Region. China is big. between one province and another. many customer segments.The Longer Version one Many markets. What to Know About Designing for China / artefact 10 . Due to the policies of these special economic development zones and different regional industries. Nonetheless. there have been vast differences between the rural and the urban. The truth is. Tier-2. few users of this classification system are ever very specific or consistent about which cities fall into which buckets (particular Tier-3 and lower). Clearly.062 US). Really big. If there is one thing you should know about China by now. the Chinese are far more self-interested and individualistic than you may assume. and regularity… a predilection toward the collective over the individual. and so on cities. But. though it differs from the rest of China in many ways). It’s just not true. The myth of selling your product to 1.3 billion customers has long ago been busted.091 US). they often imagine unity. When foreigners think of China. unfairly. cultural. and social sub-markets. planning of special economic zones. Guangzhou.814 yuan in 2008 ($13. Tier-3. that China is a complex collection of provincial. even among these Tier-1 and Tier-2 markets the differences can be significant. and most global companies have tended to focus on the richest Tier-1 cities first. and at differing rates throughout the country. and new wealth have been distributed unevenly.685 yuan in 2007 ($2. For centuries.3 billion identical customers. are not America. while Shenzhen — a major electronics. Just like New York and L. where local politics and cultural practices create major differences.” You’ve probably heard about Tier-1. local. consistency. Sources: Artefact (click to enlarge) “Beijing and Shanghai are not China. Shanghai. and Shenzhen (Hong Kong too. this is it.
the differences being even more pronounced in Tier-1 and Tier-2 cities. The differences between rural and urban China are considerable. estimates that of the urban Chinese population in 2006 (577 million). Sources: Chinese General Society Survey 2006 and National Bureau of Statistics of China China’s GDP per capita as a whole was 18.009) for urban households. As stock markets opened.8% in the New Middle class. So includes six classes in Chinese society. 18. Then. Presumably the remaining rural population (737 million) was lumped into the Farmer class. Again. beyond regional differences and income-level. The lesson here is that you will be facing competition from the bottom-up who are more in tune with the currently most underserved consumers. The major difference. 19. 25. The urban youth generation (1530 years old) are markedly different from their parents and elders. have used their positions and connections to amass their family fortunes as privatization increased. Some would go so far to say that the range might even be more like 50 million to 500 million. the nouveau riche. What this has led to is a tremendous inequity in the distribution of wealth. She sees the development of China’s cities occurring more organically. she claims that Inner Mongolia has been successfully growing its own regional brands in the food and beverage industry. opening new businesses.140 yuan ($603 US) versus 13. 0. There are the super rich. the demographic differences. white-collar professionals working for large companies. Lisa Yong admits that the differences between all of these “tiers” of cities was and still isn’t entirely clear cut. with often some of the most interesting things often happening in the heartland or the most unexpected places. But. The early entrepreneurs and business people also capitalized on new business opportunities. Real estate developers and speculators became some of the richest of these entrepreneurs.786 yuan ($2. many played the markets and capitalized on the boom. representing 55% of the population of the country.6% were in the Capitalist class.” and a lowest class of farmers and peasants: An analysis conducted by Li Chunling of the Chinese Academy of Social Sciences.490 US).7% in the Working Class. there’s the whole consideration of segmenting these markets. has per capita net disposable income of 4. For example.934 yuan in 2007 ($2. and 35. Rural China. is without question age. and now a large and growing middle class or who are typically well-educated. earning them the nickname the “rare generation. the poor rural folks. one can see in the table below a tremendous range in incomes and distribution of wealth. you’ll really need to get immersed in the culture and do more What to Know About Designing for China / artefact 11 . Others.4% in the Marginal Middle class. urban Chinese on average have 3. usually well-connected to Communist Party officials. In other words.” We’ll discuss some of these differences in more detail later. and the most typical estimates of the number of Chinese who are considered “middle class” ranges from 100 million to 250 million people. found their fortunes increase almost overnight. four classes representing the “middle.3 times as much income as their rural counterparts. defining this middle class is somewhat controversial in China with no widely accepted answers.What has happened in China in the past 30 years has been that many people. as you can see in the table above. One scheme for defining the East Asian Middle Class (EAMC) developed by Hsin-Huang Michael Hsiao and Alvin Y.6% in the Old Middle class. an elite capitalist class at the top. Beyond.
as seen below. marriage. your business will have to invest continuously and intelligently in user research activities and ethnographies to understand the various segments you might wish to target. etc. In this approach. if you thought the Tier system was already enough to wrap your head around. anger. at places like Carnegie Mellon or the IIT Institute of Design. ingrained for centuries as Western imperial powers tried and tried to open China up to trade. started the Opium Wars. like Elaine Ann from strategic innovation consultancy Kaizor in Hong Kong. and behavioral difference among these age clusters. government policies. motivational. especially when conducted by foreigners. Certain topics (money. in general. now McKinsey Insights Asia is suggesting a new framework around city “clusters. Culturally. And.Source: McKinsey Insights Asia (click to download report) proper ethnographies and user research to understand the more psychographic. thus influencing their economic development as well as the social and cultural customs and trends. recognizing the linkages between neighboring cities in terms of industrial composition. The clusters tend to include one or two large hub cities. What to Know About Designing for China / artefact 12 . there is a suspicion of foreigners and their motives. and found numerous other was to offend. which relied primarily on GDP per capita. with groups of smaller cities developing in their vicinity. politics. are less comfortable with the notion of user research and ethnography.) may be taboo or considered rude or too personal for user interviews. this won’t be easy.” which they believe overcome some of the limitations of the Tier system. and consumer preferences. One advantage in this model is that one can begin to understand how the value chains between businesses and industries link neighboring cities together. What all the aforementioned implies is that in order to succeed in China. and oppress a proud civilization. Finally. (see image) Do your ethnographic homework and market research. The Chinese people. 22 “clusters” have been identified. demographic characteristics. says that many of the methods of user research taught in the West. Experienced design researchers in Asia.
Learn Mandarin (or putonghua) too. by taking the time to establish a real relationship first. However. He suggests further that even regional differences are critical. as opposed to someone who works on the warehouse floor. of course. Like Elaine Ann suggested. language ability is not enough. what they like today might be different tomorrow. Other tips from Donahue include using small teams for in-home studies. At this point. and adept at building rapport. the challenge is that the consumers are very different from place to place. As Donahue broke it down.” age. if possible from the same city. So much has happened so quickly that they may not even know what want. by “The best advice. because the Chinese are very concerned with how they are perceived by others. of course. Though fluent in Mandarin. explains some of the other unique challenges with understanding Chinese consumers. And. by income level. For example.don’t always work that well in China. and by education level. a basic principle of smart business. Furthermore. is to go there for yourself and really get immersed. You also want to make sure to research the right people. going into a home in Shanghai for an ethnography with a Beijing moderator can be a problem. and discomfort. “Always use local moderators. he never moderates an interview because he is viewed as an outsider. participants will be more likely to open up. confusion. In other words. you’ll have to invest more time for many Chinese people to feel comfortable. In China. Social identity theory is an important frame for understanding Chinese notions of ingroup and outgroup. See it with your own eyes. For example. a market research consultant at Anovax in Shanghai.” he explains. Knowing your customers and their needs is. And. possessing a good personality. “Why are you here?!” the participants will be wondering. This might be confusing to some Chinese. say. one should also expect to invest more time conducting ethnographies than what might be needed in the West. Chinese consumers are still learning about their own needs and wants as consumers. Chinese homes are small What to Know About Designing for China / artefact 13 . the first hour will consist of a lot of resistance. it can be disastrous to conduct ethnographies or research where people are being viewed by strangers or other “outgroup” individuals. those barriers can be overcome in the second and third hour of an interview. Her advice is to approach things in a more personal way. outlook on life. Ian Donahue. who expect that you’d want to interview and observe the most senior people in an organization. Have patience and work with locals to help build rapport with the people you want to research. with a skilled and charming moderator.
and impress upon your Chinese research partners to not view the interviews as unstructured conversations. And. usually “people don’t take them (data) seriously. this isn’t too different from conducting research in the United States. Finally. and as a result. Emphasize sticking to protocol. She bases this on her experience that many of these young folk are very curious.” Shuang Li. emphasize the importance of quality. and elsewhere. Although in complete agreement with the sentiments of Ann and Donahue. check out Thomas Friedman’s latest columns where he suggests that China could be the next Enron (note: I intimated something along those very lines in an off-hand Facebook status update on December 29. and eager to talk to foreign people and share their experiences. It will be a challenge for you to keep protocols straight. and a videographer. As Li puts it. objective data. She corroborates the general truth that the Chinese are somewhat taken aback when people want to know what they think. asking questions about why people behave as they do. two weeks before Friedman’s column… just saying…). as well as trying to import and teach good UI/ UX and design practices for companies like Sina. there is a deeplyrooted history of manipulation of data in day-to-day life. Jordan Calinoff. as she points out. Their families are very cautious and protective of them. data are not always viewed by the Chinese as inviolable nuggets of truth. When interviewing younger people (age 15-29). So. but respectfully try to keep the focus on the participant. it can be a little bit easier to make the connection that is critical to a good ethnographic interview. an observer/notetaker. These children of the one-child policy — often called “Little Emperors” as they are the single pride and hope of their families — tend to be very spoiled and pampered. 2009.com. Therefore. chatty. many of the local partners with whom you might work may not be as skilled or experienced as you might hope. make sure to show respect toward other family members.and space is a concern. and so on. though. not interjecting one’s own opinion. urban Chinese. government. Culturally. believes that with many younger. In addition. especially when getting paid for one’s participation is a primary motivator. Allow them to sit in and participate. Admittedly. this sometimes requires either being or being accompanied by someone who is part of that right ingroup. check out this piece from Shanghai-based business journalist. But. has many years of experience and perspective doing user research in China. It is typical for a Chinese research participant to try to guess what they think you the interviewer want to hear rather than be open and honest. practice good interviewing techniques.” For another perspective on the fudging of data and cooking the books. someone who “belongs. expect their parents and grandparents to hover by closely and suspiciously. Try to limit yourself to three people: a moderator. What to Know About Designing for China / artefact 14 . Principal UI Designer at Intuit. design research consultant Anjali Kelkar from the Studio for Design Research in Hong Kong. the fields of usercentered design and ethnographic research are still relatively new in China.
and a pension. hoping they’ll turn out an exceptional individual. or gadgets. What to Know About Designing for China / artefact 15 . cars. making the shanzhai products even more attractive bargains. as a society. The older generations are known for their frugality and extraordinarily high savings rate in order to provide for their child. The “Little Emperors” are known to be spoiled rotten and be the “me me me” generation. saving reportedly 40% of their income on average. Education is also no longer free. the dismantling of much of the socialist safety net also left the average citizen with nothing left to trust in. They are crafty at getting money from parents and grandparents to spend on fashion. Foreign goods are also subject to high import tariffs. as they are no longer guaranteed jobs. it became evident that the only leading ideology for the country as a whole was to “enrich itself.” as James McGregor points out in One Billion Customers.” The Chinese have always been a mercantile society full of entrepreneurial spirit. the mobile phone is the largest consumer purchase they typically make. as Pascal Nouvellon of COFIDIS explained to Shaun Rein of CMR in an interview last February. Artist: Tao Hongjing. with Deng opening the country up to economic reforms. most Chinese feel less secure than before. the Chinese are very thrifty. so parents who want their children to succeed in life must save as much as they can to invest in the child’s future and Photo by: Evan Osnos. After all. Meanwhile.two To get rich is glorious. Source: The New Yorker (click to view source) development. we might expect the hallmark frugality of the Chinese consumer to change. The high savings rate that the Chinese exhibit as a whole does not translate across all groups. housing. The “proverb” above is a loose adaptation of Deng Xiaoping’s exhortation to his country to “let some people get rich first. Money and wealth and the material goods they afford translate to status and respect from others. Except for cash money. with younger people. As credit card penetration continues to expand. more optimistic about the future and their prospects. After the devastation of their economy under Mao Zedong’s Great Leap Forward and Cultural Revolution. overall. and whatever else they desire. It is for them their most important symbol of status and freedom. they symbolize the singular hope for carrying on the family name. urban Chinese (15-30) are reported to essentially save nothing at all. the cost of living is increasing. Consequently. however. gadgets. Cash money and the support of family are truly the only safety net the Chinese have. As China’s government policy shifted from wealth repudiation to wealth creation. This explains why many Chinese who have “arrived” like to flaunt their fashions. Despite decades of continuous strong economic growth. For Chinese youth. The young. choosing to buy on credit and accumulate more debt in order to obtain the material goods they desire.
he/she is also becoming more sophisticated in the new ways of transacting commerce. phones as well. While China is still primarily proliferation of credit cards. who are often enticed (China’s version of eBay). you’re treated The Chinese have not always felt however. a 24-year-old a cash society. Taking a page from young people. and I would suspect that many young people (or their parents) will be soon learning the dangers of abusing credit limits.” What to Know About Designing for China / artefact 16 . says in a of Paypal.” Nonetheless. called Alipay. the emerging Donahue describes every subway transacted as cash-on-delivery. now the masses cards. American hip-hop culture. has not only from their computers. And if you’re not local comfortable with the security of to the young. will most surely be limited like garbage. don’t have money.In sum. as Deng to sign up for the newest credit accounts now exceeding 250 suggested. That makes buying things would like to “eat the emperor’s regularly surrounded by dozens of on Alibaba’s other property. He describes these kiosks as million. Sources: National Bureau of Statistics of China. a New York Times article cites that “about 11 percent of Chinese parents have paid credit card debts for children 22 to 27 years old. the young Chinese consumer is still single-mindedly optimistic about making it rich. a snap. This phenomenon. people making transactions online. hence comfortable with this type of discriminate against you. emcees with a free gift as well. But. Taobao grain” too. a group that has become accustomed to the good life but has found it difficult to pay for. Along the way. you the worst jobs to do. Wang Li. and other (click to enlarge) according to a survey by the Beijing Youth Daily newspaper. “All increased its membership from their Internet-enabled mobile people care about is money. urban Chinese who are to the city you live in. Already. world. If you dramatically in the past few years. Alipay. but New York Times article that. The desire to flaunt one’s arrival will continue. they give most e-commerce today is consumer behavior. e-commerce will continue to China understand the brutal reality other forms of payment are taking explode in China thanks to the of an increasingly materialistic off. Shaun Rein firmly believes that from the growing hip-hop scene in As the chart above also shows. with of the people get rich first. company websites. Chinese middle class mindset may station in major cities having makeshift Alipay seems to have garnered the now be that after letting some “kiosks” set up to get young Chinese young consumer’s trust. Alibaba’s equivalent and the ability of consumers to shop rapper from Dongbei.
music. or tribe as I might call it. because their parents are investing all of their hope in the future success of their one child who will carry on their family name. five & six Ingroup and outgroup / Youth tribes and their elders / Identity. a 25 year old graduate student from Dalian. Influenced heavily by Korean and Japanese trends. often overindulged and spoiled rotten (“Little Emperors”). below we will tend to focus the discussion on the latter: the differences between the “rare generation” and their parents and elders. who might embrace an entire culture around sports and a brand like Nike. are savvy and complex. We think two of the most valuable distinctions to make are 1) between rural and urban Chinese. and don’t have much money compared to the entrepreneurs or people with their own companies. Donahue mentions the two most apparent ones as the “Party and Club” group of youngsters and the “Young Professional” as another major group. They are not thinking a whole lot about their future and are not very responsible with their money. etc. creative. is critical.” They work very hard at large companies. some Chinese youth don’t necessarily view these young professionals in the most positive light. They have no instinctive aversion to borrowing or accumulating debt. before it’s too late and they’ve gone out of vogue! While highly individualistic and self-expressive. and to a certain extent there is a high degree of loneliness or isolation as they have grown up without siblings. like their elders. including the Sporty/Jock types for example. says that a lot of people think that these members of the are an “embarrassment. and 2) between the youth and their elders. on the other hand. They are incredibly hardworking and have very limited social time.three. and are constantly experimenting with self-expression and identity through consumer choices. they have very little time for much of a personal life. meaning “petit bourgeois. As Ian Donahue explained it. to put it bluntly. follow their parents wishes much more closely. urban women under 30. Being an independent renegade or loner is not desirable. single. But. and aspire to higher salaries which will eventually enable them to buy the luxury items they can display as symbols of their success. focusing on making the right choices in school. you will almost universally hear them described as young. Newness and novelty are important values to them as they want to keep up with styles. given the best of everything their families can give them. Of course. which invests heavily in creating and marketing a culture around their brand and products in China. or hit up grandma and grandpa for cash. To make matters worse. clubs. and socializing. The former tends to work just enough to pay for their night time lifestyle. They might convince their parents to buy them a nice car. They care about fashion. This means they can’t always wait to save up their money to buy the things they want.” If you ask a Chinese to describe such a person. modern. there are many other youth segments to consider. lifestyle. Qi Fei. They seek acceptance and companionship from others. They are typically only children (born under the one-child policy) who’ve grown up without experiencing major political turmoil (the Tiananmen Square Massacre perhaps one exception) during times of continuous economic growth and having relatively more freedom to make personal and professional choices. as well as American products and styles. Remember. Chinese youth socially tend to resemble the American high school clique culture. four. They have to buy them now. They work on the weekends if they need to. energetic. you will witness many different types of groups or tribes forming. but are at the bottom of the hierarchy. They are the pride of their families. individualistic. these are also mostly only children. However. their desire to be “different” is not quite the same as in the West. are proud to be Chinese. and culture / Seeking the good life The challenge with the Chinese consumer is that there are so many different segments to consider. The Young Professionals. fond of Starbucks What to Know About Designing for China / artefact 17 . are fundamentally different from their elders. These youth are ambitious. Social acceptance to a group. Another popular word in Chinese is . tend to be bottom-rung workers in large companies. What is their middle class dream? What do they want? How are they different? What is the good life that they are seeking? Chinese youth and young adults under 30. They are obsessed with the latest fashions and gadgets. They have attitude and personality. career. and optimistic.
interested in friends. The Playgirl. styles. He sleeps in late and gets up in the afternoon to hang out until he parties the rest of the night. Chanel). very hardworking. He might look more like a “street punk. watching movies and listening to music (mostly free or bought on pirate discs on the street). included: 1) Ding Li. playing games. His mobile phone. perhaps not having succeeded in entrance exams for the university. dancing. 3) Chen Hong. The Striver is a young professional. and have Van Gogh paintings hanging on the walls of their apartments. boys. and now leads more of a hardcore party lifestyle at night. tattoos. and money. She aspires for luxury items in her life eventually. The Striver and the Modern Conservative might cluster together into the Young Professional segment described by Donahue. and view themselves as rather elegant. He strives for the good life that he believes is possible through the formula below for achieving success (primarily among those in the Tier-1 and Tier-2 cities): The Wu Zi (“5 Zi”): Aspirational motivators for the Chinese middle class (typically. Gucci. The Playgirl and Rule Breaker tend to cluster with the Party and Club-going tribe. as with all the other young people in China. have an aversion to saving money at all. love watching European art performances and listening to Italian violin. Yu. The Rule Breaker or those who are sometimes called the or “hooligans. ambitious. Both of these groups/tribes/personas are similar in that they will have a unique set of preferences. fashion and shopping. The Modern Conservative. the term is also used somewhat disparagingly by other Chinese youth. etc. The Rule Breaker is usually older. brands. and aggressive. These women seem to enjoy the experience and atmosphere of being out and about in expensive clothing.coffee and Häagen-Dazs ice cream. and Ireland’s identification of four “personas” among the urban youth of China (from China’s New Culture of Cool).” There are some clear consistencies between Donahue’s more general assessment of the youth market and the Cheskin team’s four personas. though she doesn’t think a whole lot about the future yet. They appreciate the value of design and lust after the latest trendy foreign products (iPod. He spends a lot of his free time on his computer. working a low-end job in something like retail.” with dyed hair. and reading about and engaging socially online in his passions. drinking. He gets money from his family to support his lifestyle. He wants a cool car to reflect his status and is passionate about technology and gadgets. 1/3 on shopping for brand-named clothing. and 4) Li Hua Min. though the Playgirl tends to be a younger teenager. and definitions of what’s “cool” or fashionable. but have to save up for some time to be able to afford one or two of these luxury items. Miss Sixty jeans. is his most essential tool and symbol of status when away from home. listening to deejays. who typically spend 1/3 of their income on bars and restaurants. sipping coffees. The Striver. male) dream. Source: Anovax What to Know About Designing for China / artefact 18 . He is driven by attaining fame. But. Chan. and piercings. 2) Wang Liang. power.
Compare Young MC’s lyric from his popular hit “Bust a Move” to the freestyle rap of Wang Li of Dongbei. The perceived keys to male middle class (heterosexual) success are seemingly identical. You won’t get no honeys. these young men are actually in serious competition to achieve their version of the Chinese dream. and have a house before being considered eligible or desirable for marriage. Babies die from drinking milk. The parallels between this perspective from American hip-hop artists to the new Chinese hip-hop artists is incredible. fashions.” — Young MC “If you don’t have a nice car or cash. She is less likely to want to have children. The Modern Conservative is similar to The Striver in terms of her desire to achieve professional success. Many of these young women are interested in savoring life and the things you can buy and not particularly interested in having children. though she’d like to be married and lead a life of balance between work and personal leisure and travel. She is socially more conservative and reserved. and possibly more likely to be one of the so-called “Little Emperors. These are just some of the few segments beginning to describe the large and complex group of 327 million young people in China. because all brands “Got no money and got no car. which she defines differently from her parents. there is also a growing trend of female empowerment in China. this is clearly the more male perspective on what constitutes the good life. You know this world is full of corruption. though she may be too reserved to admit this to them.” She is under tremendous pressure to please her parents and live up to their standards. These “tribes” form their own unique social cultures. where the products. She follows the rules and tries not to stand out too much. and styles they strive for tend to be more consistent within the ingroup. brand loyalty within these tribes is very low in China. She wants to live a rich and fulfilling life. she may not want to be competing to the be the very best. Many feel a great amount of pressure to earn enough income. then you got no woman and there you are. In a country where there are 40 million more men than women. own a nice car. where she seeks more balance. Don’t you know China is only a heaven for rich old men. but she values her personal freedom to choose a career and eventually choose to live however she likes. as a rule of thumb.” — Wang Li What to Know About Designing for China / artefact 19 . However. mentioned earlier: On the flip side.As you can see. but though she studies and works hard.
The boundaries are blurry and everything is becoming more and more interconnected within China and between China and the rest of the world. they can change their loyalties very quickly. (see image above) Ancient Chinese proverb What to Know About Designing for China / artefact 20 . the message is clear: you can’t really know and understand China and its people until you go there and see it and them for yourself. As she puts it. Taiwan. is that they are on a continuous quest for identity and self-expression. for example.” Yong warns that the challenges of defining and segmenting your customers will be a real challenge. however. including such segments as the “Modern Butterfly. where is the real China now?” Again. So. or Japan even. now Research Director of Media at Synovate — in one study segmented just the most affluent of Chinese consumers into no fewer than five groups. Why? Most likely because we are more inclined to purchase unlimited text and data plans. but they can be quite cheap when it comes to paying for texting and data plans. the Chinese are also known to save up and spend a lot of money on a fancy mobile device. Incidentally. so you need to put a lot of effort in. The one thing that is true for all of Sources: CNNIC. than they are of text messaging. As an aside. “Some parts of China are looking more and more like Hong Kong. The Chinese generally seek to avoid paying for services like that as much as possible. they are much more prolific users of IM/chat. They are young adults still figuring things out and are changing rapidly. not to mention that culturally the Chinese prefer pay-as-you-go methods for service and data to monthly subscription plans. because none of them can imagine keeping a phone for that long. ”There’s so much gray area. Jessica Liu — formerly vice general manager of Sinomonitor International. like QQ. sell them into a 2-year contract for a mobile phone (which Apple is learning the hard way). but do not be fooled when you hear all the big numbers.are new. With this group. And they are accustomed to finding ways to evade paying for things that can be gotten through pirated means or through cheaper alternatives. And since the young Chinese especially are constantly searching for the next new thing. National Bureau of Statistics of China. you can’t. They are all hungry for novelty and increasing their exposure to the rest of the world. Our analysis below shows that Americans are far more prolific texters than the Chinese. Hence. She says that the labels are nice but hard to do well. CTIA.” she says. and US Census Bureau these young people we’ve been discussing. you often hear about the amount of texting and IM/chat that the Chinese do.” the “Peacock” and the “Laboring Bee. As another peripheral example of the type of sophisticated segmentation happening in China.
And. today he still struggles with these technology products and wouldn’t dream of buying something online. had a radio. they tend to be low paying ones. Consequently. which What to Know About Designing for China / artefact 21 . While Ye urged her mom to get something cool and fancy. Qi feels that the notion of buying on credit is actually quite foreign to many older Chinese. sport. vital to spurring consumption in the Chinese economy. that China’s urban youth (15-30) are and will become a unique and transformative force. shoes. college tuition is expensive. in fact. says that it’s easy for the older generations to make choices: they just compare prices and get the cheapest one. So what about their elders? The older generation of Chinese consumer (35 and up) remember a time when they had next to nothing and few if any choices. After comparing prices among many vendors. they are simply poorly equipped for making confident decisions in the face of overwhelming options. Entry level jobs after graduation also are low paying. etc. they are generally struggling to understand all the new products and brands which they’ve never had a need for before.) in the hopes of making him/her a more exceptional student who will succeed in entrance exams and pursue and education leading to a good career. She wanted something that played mp3s. and their child has many wants and needs. features. They may wish to spend extra money on developing a talent in that child (music. video chat. his generation is very happy about the options they now have in clothing. But. email. and designs. they are very resistant to change or experimentation with new products. The net result is that this older middle class demographic is extremely challenging to market to. Raising a child has become more expensive. End of story. she got a non-descript device for 140 yuan (about $20). Among the older generation. now confronted with more consumer choices than ever before in more areas of life than ever before. if they are willing to adopt the technologies that offer such resources. As Qi explained. at this point.” For many of the older generations of Chinese. according to Donahue. They feel that their lives are good enough. She shared with me another story about how she and her mom went to the big electronics marketplace to get her a new mp3 player because the CD player she’d been using for 8 years had broken. and there may still be a lot of mistrust among consumers when it comes to credit and other banking products. She knows people who have used credit cards for a few months and then cancelled them after too many unexpected charges.I think we can all agree then. For example. in doing so they will also lead social and cultural changes as they exercise their significant collective purchasing power. Ye Pinxia. This is a potential source of stress and confusion that product developers and marketers should be sensitive to. The key to success. and the computer in general so that they could communicate. information resources. Chinese banks in general have not been very customer-centric. I don’t believe manufacturers are doing a good job at selling to people like my dad and providing them support. and peer review and filtering resources could be of tremendous value to these consumers. As we mentioned before. and was cheap. and especially for a male child by buying him a car. “Almost all technology products are geared toward young people. she strived to teach him to use MSN. On the other hand. That is. and their interests are in providing for their child. is that these young consumers need to be able to understand how the products marketed to them are beneficial to and fit into their lives and the lifestyles they want to lead. traditional Chinese attitudes toward saving are deeply ingrained. you always save first and then spend. Qi Fei. Children in college rarely get part-time jobs. On the other hand. When she left Dalian to go to graduate school in Chicago. her mother was unmoved by the thousands of choices. another graduate student from Beijing. they will just be passing fads. Ye is pretty certain it’s a shanzhai product too. and accessories. While they are excited with the quantities and varieties of foods they may find at a hypermarket. so parents frequently support their child with housing costs. who are used to using cash almost exclusively. Otherwise. the graduate student from Dalian. In terms of associating products with particular lifestyles or cultures. the older generation are less likely to be swayed by the designs of modern global brands. consumer advocacy. They always feel frustrated so they don’t use these things actively. and that too many people have limited knowledge of how credit cards work. says her father is not at all tech-savvy and is frequently overwhelmed with technology. and if they do.
though. In the end. colors. China’s urban youth tend to be more interested in brands and products that project a lifestyle or image they’d like to identify with or aspire to. for Ye’s mom. As the ancient Chinese proverb goes: Ancient Chinese proverb What to Know About Designing for China / artefact 22 . she finds the products which appeal to more traditional Chinese styles more appealing. not just for its design but because so few people in China have them. When all is said and done. Even with her cell phone. a Macbook or Apple product is cool. and not necessarily purely about traditional luxury or status-oriented brands. and brands with strong reputations tend to be more appealing. Mom recently told her that an HP laptop skin designed by a Hong Kong designer with a huge Chinese flower and lots of red and gold ornaments was her favorite. For Ye Pinxia. the traditional values. designs. With the older generation.younger generations tend to associate as being cool and different. something new and exciting. But for all. However. each type of consumer will have his/her unique set of preferences and needs. she does research on which stickers her friends have placed on their phones to make sure she doesn’t end up getting the same stickers. being a savvy shopper will become an essential life skill.
In James McGregor’s book. is the world’s greatest innovator and China is the world’s greatest imitator. small animations. They do not wish to be the world’s factory any longer. she says if you compare two bookstore websites like Amazon. There’s an excellent piece by Evan Osnos on their 863 Program in a recent New Yorker article. for banks and real estate companies. However. And China has been working hard to create their own microprocessors to feed their tremendous demand for computing power. the cartoons. Her experience trying to instill good human-computer interaction (HCI) principles at Sina. But there are major competitors growing domestically in China. Despite its admission to the WTO in 2001. is not the legalistic society that typifies the West. Historically and culturally. Another rising domestic brand in China is Li Ning.com. and they are drastically improving. for example. China. she feels they are still mainly imitators with a lot to learn. It will take time for the domestic brands to learn. Chinese society is all about self-interest. Few are well known at this point. he will find a way to skirt the rules or laws. designs. “The U. he also is pretty brutal about the fact that your technology. stated in a New York Times piece that. clean energy technologies.seven & eight Competition: national pride and national brands + the shanzhai industry At its core. lots of blinking… but in the past few years they are picking up and starting to build serious applications. besides Lenovo and Haier. China still hasn’t quite gotten its act together in terms of respecting intellectual property rights. France. They do not want their consumers to embrace and adopt only global brands. (see quote below) But. he says. ”People here like these things. like new. If a Chinese wants to do something. you’ll see many violations of basic HCI principles in the latter. trade secrets. Commenting on the current situation with Google and the Chinese government. China is fully intent on building and growing its own national brands to compete globally. In other industries. they just have never had major qualms about stealing ideas.” — James McGregor What to Know About Designing for China / artefact 23 . It is very strong on competition but very weak on cooperation. in the realm of software and user interface design.” Nonetheless. a sporting equipment and apparel company that is taking on Nike. but starting to design their own unique versions and takes on them to better suit the tastes of traditional Chinese culture. As they learn and modernize and their economic power continues to grow. China’s tech sector is built on reverse engineering foreign products.” Shuang Li has witnessed in the past 8 years that Chinese companies are taking the influences of product design from Japan. com with Dangdang. and other countries. In my conversation with Ian Donahue from “Any technology company doing business in China should assume that its designs and products are being copied. com was frustrating. and know-how will be stolen and/or copied (and probably even get to market first). Oded Shenkar. don’t forget lesson #7 about the tremendous national pride of the Chinese. a professor of business management at the Ohio State University and author of The Chinese Century. Guaranteed. like Huawei which is beginning to rival Cisco. Britain.S. China is even taking a lead.
6 times as much on personal household expenditures. working their way up from the lower-end consumers and now hoping to challenge Nike head-to-head in some Tier-1 and Tier-2 cities. For the high income urban households in the 9th decile. but let’s see how the numbers turned out: (see image page 24) Source: National Bureau of Statistics of China. And.6 times as much as the average rural citizen. is still relatively poor by Western standards. Keep in mind. and do a heck of a job marketing themselves. Nevertheless. the second poorest 10%. The data are broken out into 7 groups: the poorest 10%. For the highest income urban households (10th decile). there were nearly 12 cars per 100 households. products that evoke a lifestyle.” The fact remains. this is what the breakdown of urban household consumption was per capita in 2007. Keep in mind that as of 2007. Nikes are affordable only to the richest of the Chinese consumers. the 3rd quintile. Analysis by Artefact (click to enlarge) What to Know About Designing for China / artefact 24 . (see image below) Since we at Artefact are particularly interested in technology products. the second wealthiest 10%. Chinese youth are drawn to aspirational products and brands that they can identify with. they’ve done a remarkable job of creating a community and a culture around their brand. and identity.Anovax. They are now one of China’s most well known and well regarded brands. Nike’s response or approach is to do what they always have done: emphasize their technological advancements and superior features which distinguish their product. that the Chinese consumer on average. We were unable to break down the data in the “transportation and communications” category to any more granularity. however. Of course. as mentioned in lesson #5 above. Will more Chinese brands become dominant global players? Yong believes that the Chinese are confident that there will be a “homegrown Apple or Microsoft eventually. I’ve converted to US dollars to give you a better sense of the relative difference with American citizens. culture. As a result. Based on the National Bureau of Statistics of China’s 2008 Yearbook. and the wealthiest 10%. the 2nd quintile. the amount of consumption by rural folks on many of these consumer categories are incredibly low. that the average urban citizen earned 2. the 4th quintile. there were slightly more than 25 cars per 100 households. he explained their successful strategy of targeting the lower tier cities first by offering products with styling and looks reminiscent of global brands like Nike but at a fraction of the cost. automobile ownership was quite low overall for China with about 6 cars for every 100 urban households. while consuming 3. we then broke out the “transportation and communications” category for urban households. also. But.
000 have been sold. smart shopper. If so. Finally. And. Chinese consumers do not have big hangups about pirated or fake products. Mobile phones in China are not subsidized by carriers. Sometimes they’re even better than the real thing. phones. CMR.). culturally. Meanwhile. Many of the real ones already resold on the secondhand markets. China Unicom’s predictions of 5 million handset sales in the first few years is looking unlikely. I can get a fake one and not lose face since so many other people have them. For the aspiring middle class consumers. they estimate that as many as 3. shoes. especially electronics.5 million Chinese consumers have at one point owned an iPhone. for small electronics. in more styles and variations than you can possibly imagine. He contends that 2 million real jailbroken iPhones were smuggled into China before China Unicom’s debut of the phone on October 30. Analysis by Artefact As you can probably conclude from the chart above. especially electronics. Cars and electric bikes aside.” but it has come to mean the pirated or knockoff goods. Get something that looks more or less the same. Suddenly it becomes a little easier to understand why buying a $300 or even $500 mobile phone is a major expense. 2009. The reasons for this What to Know About Designing for China / artefact 25 . Literally. etc. 5. “mountain stronghold. Another reason why Chinese consumers are generally okay with shanzhai products is that “getting a good deal is important in the culture.” but it has come to mean the pirated or knockoff goods. thus. According to Shaun Rein’s firm. works more or less the same. has the same features. made by those who operate far from official control. Literally. fake products are just fine.Source: National Bureau of Statistics of China. as supposedly only 5. people like to show off the bells and whistles. Is the fake alternative available and being used by lots of people? 4. shanzhai products come in to fill a market need for more affordable technology products (or fashion. And fake everything is available around every corner. and watches. Can I afford the full price one? 3. Li describes the typical Chinese consumer decisionmaking process as follows: 1. made by those who operate far from official control. the average Chinese urban consumer is not currently spending a whole lot of money per year on transportation and communication products or goods. “mountain stronghold. savvy. Because. Is someone else using it? 2. It shows you are an intelligent. often the more features there are. but costs half the price or less. even mobile phones are hard to come buy for $131 if you are in the middle class.” So. consumers must pay full retail prices. the better.
the shanzhai industry is exporting their wares too. you’ll discover that 4. in large numbers. and possibly even improved on.have been explained above. iPone Airs. Or someone proudly showing off her “shanzhai iPhone and iMac” (sic). and hordes of other shanzhai phones trying to capitalize on the appeal of the Apple brand and product. The better your reputation. or cars. purses. they just buy the same parts and assemble and modify them into all kinds of strange frankengadgets. she believes. within 100 miles of all of the suppliers the “real” phone companies are using. in fact.” she says. The beauty of all of this. If you combine those figures with Gartner’s figures on global handset shipments. is that it is all happening organically. copied. Bottom line for you: your stuff will be stolen. According to the Annovax website. iPhone Airs. So. with growth expected to continue. it only takes a small workshop with 5-10 people to produce these devices. In 2008. one interesting aspect of the shanzhai industry is the entrepreneurial spirit and creativity of young Chinese individuals or small groups of individuals. iSuppli estimates on the number of “gray market wireless handset shipments” have grown from 37 million units globally in 2005 to 145 million units in 2009. That means that all together. but with legitimate domestic Chinese brands as well. and Latin America. from engine lubricants to mobile phones to food and beverage. or sneakers. the proportion increased to 8. And. It makes one wonder if they could potentially take their DIY approach and legitimize it and cater to more demanding niche audiences making customized or bespoke gadgets? Think the Long Tail. Their biggest destination is India. that’s not likely to change any time soon in China. But besides the jailbroken iPhones in China.64%. the more likely you are to have your products counterfeited. but basically can be summarized as Apple and China Unicom didn’t really understand their target consumers and their needs and preferences. They anticipate 192 million fake phones shipping worldwide in 2012. not only are these products competing with foreign global brands. the bottom-up. Asia. Moreover. By avoiding taxes. ”Not unlike the modding scene in the US for computers.53% of all mobile handset shipments in 2005 were shanzhai phones. believes this is the next logical step for the smart and progressive entrepreneur. Lisa Yong. Even shanzhai tissues… for your nose. Microsoft estimated that 82% of their Windows operating systems being used in China in 2007 were pirated. shanzhai phones had about the same market share as LG or SonyEricsson! And. with these small workshops in Shenzhen or with other entrepreneurial business people who want to co-opt what’s out there and make it uniquely their own. To evolve their design process into one that becomes a highly customizable experience for the brand or the product. iPones. They’re all over Shenzhen. there are the HiPhones. laptops. So.” Here’s a gallery of a small sampling of fake iPhones and other shanzhai phones. imitated. it’s not just phones. but they also export to developing countries in Eastern Africa. from the street. with some estimates as high as 10-13 million so-called “iPhones. to look on the positive side. What to Know About Designing for China / artefact 26 . Counterfeit products are produced in every product category. Gartner estimates that more than 20% of phone sales in China are shanzhai devices. Of course. these little enterprises can sell shanzhai devices very cheaply and still make a handsome profit. And. laptops.
But this can’t possibly be. with 338 million Internet users. visited several vendors to compare prices and bought what she had decided on. however. had good build quality. She cared about a good user experience. Ye says her parents’ generation doesn’t do much research online for product information. a device that was user-friendly. Her typical search begins on Google or Baidu. They Trust As mentioned in the short version. good old bulletin board systems (BBS) have been the tried and true forum for people to connect and share information with one another. Qi Fei also adds that most young people don’t pay attention to TV commercials. reading reviews. most Chinese are leery of sharing too much about their identity online. and then begins to drill down on specific models. headed over to Zhongguancun in Beijing. indicate that trust in the Internet is high: “84. Her experience is probably typical of most young. urban Chinese consumers. Both young women say they don’t care much for newspapers as sources of Photo by: onion83.com/photos/onion83/2681946555/sizes/l/ What to Know About Designing for China / artefact 27 . It is estimated that there are more than 3 billion user accounts on BBSs in China. the Chinese have a general distrust of media. so the Chinese consumer has been for years relying on the Internet as a primary source of trustworthy information.flickr. without any problems at all. After sufficient research. When she wanted a new mobile phone. That’s almost 9 accounts for every user. she decided on a Motorola model. but their parents’ generation relies on TV advertisements a lot more as source of information. and an acceptable price. in their 24th Statistical Report. Ye Pinxia says that she is constantly on the Internet. They simply don’t have the know-how. Every advertiser claims that the product they are pitching is cool and fashionable. she went online and read several articles where people described their experiences. the China Internet Network Information Center (CNNIC). To most. In fact. The popularity of BBSs stems from the fact that most accounts can be created anonymously.3% of Internet users believed the Internet to be the most important information channel.” Because the government monitors Internet sites and frequently censors or shuts down sites (check out if your website is blocked by the Great Firewall of China). government media and ad-supported media channels simply lack integrity. then she narrows down by price range. For this reason. http://www.nine In the Internet.
However. which represented nearly 25% of all the Internet users in China at that time. frequently through online multiplayer gaming. While certainly not a problem unique to China. They spend vast amounts of time online. like American consumers. cultures. However. by the end of November 2007. seeking companionship and friendship. Despite the regularly shutdowns and censorship. people. and the possibility of it eventually leading to future social and psychological problems among very active users. Facebook has been regularly shut down in China and user numbers are dropping to 1-1.com (formerly Xiaonei) is a Facebook clone with 40 million users. there were 47 million bloggers and 72. these microblogging services have also been prone to being shut-down by the government.5 million. particularly because.” In that regard. For the average Chinese person. Shuang Li doesn’t necessarily believe that all people invest all their faith in the Internet. What to Know About Designing for China / artefact 28 . Twitter has been completely blocked. Despite all the positive benefits of Internet access in China. 51. she believes that blogs and other social media tools can help amplify this word-of-mouth effect. since their parents were also only children. Kaixin001 has 30 million users. and news. Shaun Rein sees consumers being increasingly influenced by digital and social media marketing as a trend for 2010 and beyond. Finally. According to some slightly dated statistics from CNNIC. The young Chinese consumer is not generally interested in TV or print.com has 130 million users.information on consumer products. de. Renren. there are plenty of Twitter clones: Taotao from QQ has over 50 million users. there are some who are concerned with the amount of isolation and time spent online. However.82 million blogs in China. products. but magazines can be excellent sources of information and images for inspiration. In her view. as mentioned before. the average Chinese person uses the Internet 18 hours a week versus only 12 hour a week by the average American. Fanfou. China is “still very much a word-of-mouth society from those you can trust. however. However. even finding the courage to express themselves somewhat freely online. Social media usage has been on the rise as well. And Baidu (search engine) is used by 110 million people. chatting. for things like fashion. or other social media. they are more likely to seek such content on the Internet. These children rarely have cousins even. as much of that content is moving online. Anjali Kelkar also points out that use of the Internet as a way to alleviate social isolation and loneliness is becoming a concern for some of the only children of China. and Digu are also popular. Jiwai. the Internet has opened up their world (when not censored) immensely to discover infinite new things. The Chinese are also big bloggers. This is a critical consideration for your marketing budget.
they will evolve up The Economic Pyramid. identified four key areas where the upwardly mobile young Chinese consumer will be evolving his/her consumption. National Bureau of Statistics of China reported 9. According to Bureau of Economic Analysis data from 2008. What to Know About Designing for China / artefact 29 . and increasing expectations of consumers has led products (in the generic sense) to become commoditized.7% on services. As consumers’ incomes increase. Source: The Experience Economy. in the West. but our best estimate shows an overall split of 86. It is in these four opportunity areas that the demand for new services and experiences will be experiencing some of the most rapid changes and developments. etc. food. They are now demanding entertainment. (see image) China has rapidly moved in the last three decades from a commodities and goods economy to the beginnings of a service and experience economy. increased competition. that they believe is evolving because technology. but they are now beginning to pay for services and new experiences. and Ireland. In China. they would argue that we are experiencing the evolution from a service economy to an experience economy. the rising middle class and wealthy urban consumers are not just buying luxury and expensive goods and products. personal consumption by Americans is split about 33. in China’s New Culture of Cool.4% on services. or enlightenment from their consumer experiences. Qi Fei believes that Chinese manufacturers still have a long way to go in terms of service and support for their products. In terms of the product landscape in China. the distribution is more or less the opposite. This will be an area of tremendous economic development for the Chinese economy. engagement. Of course. where consumers demand more than just someone else delivering the goods/services they want to them at a reasonable price.6% on goods and 66. one of the reasons why she tends to prefer American or European products.ten Transitioning from Goods to Services and Experiences: Food / Style / Living / Mobility / and more… If you are familiar with The Experience Economy. by Pine and Gilmore this pyramid in terms of the “products” they will want and expect.3% on goods and just 13. For the most part. they introduce the notion of a pyramid of economic value creation.33 trillion yuan of total household consumption in 2007. they still have relatively low incomes so most of their spending is on basic needs like food. These four areas are in: style. living. clothing. Chan. It is somewhat difficult to break out how the expenditures were distributed between goods and services. education. by Pine and Gilmore. and mobility. shelter. Yu.
entrepreneurial Chinese are also taking this influences and fusing them with traditional Chinese elements to create new types of cuisines (part of the larger “China Style” trend). appliances. tools. contracting. who are more easily able to leave their own province and explore the rest of China. one could easily include these in the Cheskin folks’ categories of food and living. Laptops are also fairly ubiquitous among university students. much like shopping malls. consumers are curious about experimenting with new flavors. Source: China’s New Culture of Cool. some of which are low or no emissions vehicles. outside the home. will boom. entertainment. lighting. grooming and personal care services. with the exposure to cuisines and influences from the outside world. and other home-related goods are booming. ingredients. Cable/satellite TV and Internet services will increase. along with that there should be increased service offerings around interior decorating.Four domains of opportunity for the young. and spas. cosmetic surgery. beauty consultations. urban Chinese consumer. the mobile phone has become a prerequisite device for China’s youth. wall treatments. travelling. But. or leave China entirely to see the world. and financial management will also be areas of opportunity for these upwardly mobile young consumers. In “mobility. In “living. wellness. and quick convenience food destinations or carts. and other maintenance. furnishings. materials.. and eating experiences. and Christopher Ireland I would add that health. or even business or productivity needs. Auto owners are enthusiastically joining driving clubs and communities around particular vehicles or brands. Auto repair and customization services should be expected to grow. home theater installations.” as China’s citizens have transitioned away from government provided housing to having to rent or buy their own properties. In terms of the other key object representing mobility. China’s social life is expanding beyond just the street. What are some examples of these new services and experiences that young Chinese consumers are demanding? In “style. And other aspect of living. adventure seeking. gym memberships. As home ownership increases and home-owners seek ways to personalize and individualize their own environments. by LiAnne Yu. there has been an explosion in the home furnishings and decorating industries. including exercise. yoga. home repairs. Now.S.” beyond the fashion and accessories are services like beauty salons. there are coffee shops.” the two primary objects around which mobility revolves are the automobile and the mobile phone. entertainment. Food is a central focus of Chinese culture. Travel and adventure are another new opportunity for Chinese consumers. plumbing. both of which provide personal freedom. though computer penetration overall in China is still relatively low. Of course. Other forms of mobility taking off (besides the ubiquitous bicycle) are electric bikes. Cynthia Chan. Of course. enabling them social freedom. and other types of leisure activities.” the big thing is people eating out. Unlike the U. Because What to Know About Designing for China / artefact 30 . just empty shells awaiting the owner to provide the flooring. etc. In “food. Restaurants are places to be seen and to people watch. retail sales of appliances. homes in China are typically bare when purchased. In addition to restaurants. bars.
They will need to be educated as they become more sophisticated and wealthier consumers. Smart businesses offering these services will also need to understand their distinct customer segments and their needs and concerns well. and the futures of their children if they choose to have them. investments. Another important area of future development of services and experiences will be around all matters financial. etc. and communications that consumers will identify with and understand how to incorporate into their lives. Currently. they are becoming the conduit to the Internet and new opportunities for entertainment. services. What to Know About Designing for China / artefact 31 . young Chinese and old alike will be increasingly looking to financial. and communication needs. and investment products to help them manage their money and plan their futures. experiences. As the Chinese consumer’s income continues to rise. insurance. and as the current excitement over spending on goods wanes and consumers mature.mobile phones. most Chinese consumers have a fairly low knowledge of finances. however. services. insurance. are rapidly penetrating the population. credit cards. banking. in order to develop the products. as home ownership increases. as credit cards begin to further penetrate the population.
should provide American and Western business leaders. Louis Vuitton.Conclusion Trying to summarize China’s development and emergence as a superpower and consumer powerhouse is a daunting task. that’s for sure. One of the challenges inherent in trying to capture insights about the Chinese market and its consumers is that anything you learn today may not be true a year or two from now. and the cultures. etc. put in their due diligence. and adapt to one of the most rapidly changing and exciting markets in the world. It is in these smaller cities and towns where you’ll really face the competition with China’s rising domestic brands. and anyone else interested in the Chinese markets with some useful background. guidance. empowering. but are also eager to strive for the quality. For example: · the aging population and declining birth rate leading to a potential demographic crisis decades ahead · the environmental catastrophes that have resulted from a belated rush through industrialization with little regulation or concern for ecological consequences · possibly looming credit and housing bubble crises · new lust for automobiles · music and pop culture · politics · the fact that China is soon to be the largest luxury market (their wealthy consumers really love their Gucci. These are cities where people have less purchasing power. product developers. truly immerse themselves in the country. the people. we think the 10 subject areas we presented above. It should be an exciting opportunity for continuously learning and facing new challenges. and things to think about. What to Know About Designing for China / artefact 32 . communicate with family back home. You’ll probably note that we omitted many trends and issues that are by no means any less relevant than those presented above. In addition. It’s going to be an exciting decade to come for China. in both the more digestible and the more bloated forms. etc. don’t forget the “heartland” of China beyond the Tier-1 and Tier-2 cities. (check out some of McKinsey Global Institute’s many fine reports on the subject area. designers. But. You’ll see global companies try to bring innovative products to the growing consumer class. and well-reputed products of the West. how they will adapt.) · rapid urbanization and the potential social problems inherent in large numbers of less educated migrants shifting en masse to urban centers looking for work. including their prediction of 1 billion urban people by 2030) · an increasing rich-poor gap · education in China: is it still too rote-memorization modeled? Will they produce the great designers and innovators of the future? Nevertheless. don’t let that deter you. There’s simply too much to cover. but they will need to shed a lot of their assumptions.
Cheers! What to Know About Designing for China / artefact 33 . thoughts. They should also be thinking about how to improve customer and user experiences as their marketplaces become overwhelmed with products and services ranging from the totally crappy to the totally genius. These are likely to be online tools and services. shoes. personalize. cultures. and make their own. Consumerempowering tools and online community-based product reviews and peer-filtering tools across many product categories (cars. financial management software and applications. products providing food and medicine safety information. to add their own Chinese essence to. with better decisions and choices about the products and services they incorporate into their lifestyles.Simultaneously. technology. the Chinese are keenly aware of the ascendance of design as a key differentiator in many product categories. and needs of a dynamic and diverse populace. etc. If you actually made it this far. as we hope to continue expanding our knowledge on this most fascinating topic. home furnishings. credit cards. life management tools. from the bottom-up especially and maybe even from the topdown. and other types of products that are currently on the cutting-edge. fashion. accessible via mobile Internet devices. personal care products.) will be vital to equipping the Chinese consumers. harness their creative drive and entrepreneurial spirit. of course. health monitoring devices. products for the elderly. fashion. old and young alike. And. but they will need to be adapted to the unique customs. you’ll witness innovation and new ideas and products emerge from China itself. develop product platforms and remixable/ mashable elements that consumers can use to customize. Global manufacturers need to think about how they can help empower Chinese consumers. including electronics. congratulations! Please be kind enough to share you comments. and criticisms with us. music. and more.
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