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Be Like the Crocodile in the Yangtze River

Commentary

Be Like the Crocodile in the Yangtze River

Jack Ma, the founder of Alibaba group and the king of e-commerce in China, once famously said “eBay may be a shark in the ocean, but I'm a crocodile in the Yangtze River. If the crocodile fights the shark in the ocean, it will lose, but if we fight in the river, we win.”

For many New Zealand businesses, the Chinese market remains as enigmatic as the Yangtze river, full of promises of riches but also frought with risk and hidden-traps. In this article, I’ll seek to explain some key characteristics of what makes the Chinese consumer tick and what all this ultimatly means to you, as a business owner in New Zealand.

It is well known that Chinese consumer products suffer from notorious quality issues. While this is not an issue isolated to China as a developing nation, it deeply affects how Chinese consumers behave. Case in point, the most recent food scare in China is “beef paint”, a coating put on its cheaper pork counterparts that when cooked, make the meat taste like beef. The coating is toxic and is carcinogenic. Needless to say, the Chinese consumers are paranoid about the quality of consumer products.

Perhaps due to this paranoia, there is an increasingly strong desire for branded products in China. An often publicised fact is that China is the biggest luxury market in the world. What is less known however is that 50% of those customers earnings less than 2,000 USD a year! What explains this paradox? Why are the Chinese consumer not obeying Maslow’s hierarchy of need, buying luxury goods when sometimes their basic needs for food and shelter are not met?

While consumers all over the world appreciate products that allow them to express their own identity, the disparity of wealth and the large population base in China has really amplified the identity issue. For example, recent university graduates in Chinese cities have earned a new nickname: “Ants Tribe” as they cram themselves into closet size rooms. Consumers products that does well often allow the consumers to feel important and unique as consumers attach social status to the items they purchase.

Finally, it’s important to remember many middle-class Chinese consumers today is the first generation of Chinese in modern history that has surplus income. Parents of the older generation often remind their kids born after the 80’s and 90’s what a comfortable life they are leading now and that as a kid growing up, they often did not have enough to eat. This is the first generation of Chinese in many centuries where putting food on the table is not a concern, but we should not forget that China overall is a poor country.

So what does this all mean to you? First, think in division and not multiplication. It’s not about how many times larger China’s market is compared to the local market, it’s about understanding consumers in specific markets to cater to their particular desires and demands. Addition, a brand that instills trust and one that can enhance one’s own identity is paramount to win the minds and hearts of Chinese consumers.

To build your brand in China, you should be smart about how you do your marketing. New Zealand businesses often do not have the marketing budget to get celeberity endorsements, run billboards or television campaigns, however there are extremely cost-effective and innovative marketing channels emerging in recent years. For example, one of the best ways to gain traction and buzz in the Chinese market for consumer goods is through online subscription sampling. The biggest player in this market is called MyLuxBox (www.myluxbox.com), which happens to be co-founded by a Malaysian-Kiwi. They’ve had great success with pushing New Zealand and many international cosumer brands into the Greater China region.

The beauty of the MyLuxBox model is that consumers pay to receive samples and then the consumers share their sampling experiences online through MyLuxBox’s social media platforms or their own social media networks. As a result, brands achieve high levels of buzz and awareness and instant word-of-mouth marketing. It’s great for the consumers because they are given an opportunity to learn about and try out luxury products each month, while for the brands, this means an innovative way to acquire new customers and increase sales revenue through product sampling (at minimal costs).

Jack Ma reckons that the best way to win in the Chinese market is to understand the market and act like a native Chinese company. I agree with him. By using innovative models like MyLuxBox to market your consumer based products, you can be the crocodile in the YangTze river and might just see your efforts in the Middle Kingdom reap much reward.

About the author: Bowen Pan is an entrepreneur in residence at the Zhen Fund backed MyLuxBox, which operates Asia’s most successful luxury sampling website. He is a Chiwi (Chinese Kiwi): born in China, grew up in New Zealand, and is fluent in both English and Mandarin. In the past, he launched Treat Me, one of the largest daily deal websites in New Zealand, worked as a Strategy and New Ventures associate at Trade Me and led the Spark $100k business planning competition. Bowen holds a Bachelor of Engineering (Hons) and Bachelor of Property from the University of Auckland and will embark on a MBA program at Stanford University from September 2011. If you would like to contact him, you can find his LinkedIn profile at www.linkedin.com/in/bowenpan