Brands are familiar with the Asian power markets of Hong Kong, Tokyo, Seoul, Shanghai and Beijing. However, as profit margins shrink in these key markets, retailers are turning to the less well-known Tier II Chinese markets to take advantage of double-digit growth.
The Tier I cities of China such as Beijing, Shanghai, Guangzhou and Shenzhen have developed economies and have become familiar names in the West, especially after the 2008 Olympic Games and the 2010 World Expo. Small, on the other hand, are much less understood by the Western world. It is these rapidly developing metropolis that will drive China's growth in the coming decades. Here are 5 keys to succeeding in these flourishing retail markets.
1. China's Distribution market Situation
China's retail sector has contributed significantly to overall GDP growth, especially in recent years. In some markets, such as Chengdu, the growth of retail trade has even seen rates higher than that of general GDP. The city is showing a new class of consumer who wants the latest in fashion and household goods.
China's retail market is the second largest in the world, with only the United States selling more dollars. According to China Daily, retailers have scored US $ 3.87 trillion with China retail sales shooting up 13.1% from 2012. Level II cities make up larger shares of that amount as growth In Tier I cities decelerate to the lower half.
International retailers are finding attractive markets outside of Tier I cities. With available revenues increasing at much faster rates in Tier II cities, Chinese consumers in these markets eagerly snatch western brands and luxury goods.
Digital in China !When surveying customers at their largest outlets in Shanghai and Hong Kong, national and multinational retailers are discovering that a growing share of sales comes from wealthy visitors from smaller cities. Retailers now see the need to establish a presence on line via Digital Marketing in smaller cities to serve the nouveau riche distributed throughout China.
See more information about Digital in China
2. Understanding the local market
A retail brand will be directly associated with its location and selection of projects within a Chinese market. As in any part of the world, a carefully selected location will be needed to maximize potential and success in a new city.
Tier II China may present unique challenges when it comes to the selection of sight. The main locations can be very difficult to identify without the help of a local presence or consulting firm. Brands should be careful in selecting real estate partners who not only have the knowledge of the market but also the interests of retailers in mind. Steps to ensure the agent is on your side include confirming which developers work and which side pays the agency fee. International developers including Daxueconsulting as well as local developers like China Resources Land have considerable experience working with foreign brands on their projects throughout China.
3. Think, learn, and react locally
The perception of the brand in China is paramount for retail success. Chinese consumers put a lot of weight on how the use of a particular brand will be perceived in their social circles before making a purchase; Price is of secondary importance.
This is good news for luxury brands; Occasionally, Chinese shoppers will see their shop windows and buy entire cabinets without looking at the price. But what about the small international brands that want to jump to the Chinese market?
Smaller retailers need to be realistic about their brand's market knowledge. They may have to invest in large advertising, marketing and social media campaigns before Chinese consumers begin to understand and accept them. Patience, creativity and commitment are fundamental to this whole process.