“I measure my success by the things I own.” 71 percent of Chinese respondents agreed with this assessment, according to a survey conducted by IPSOS in September 2014.
Leading the pack out of the 20 countries polled, and in stark contrast with the Americans and Canadians at slightly over 20 percent, China has seemingly taken the global lead in materialism. Just a little over 30 years ago, China had virtually no consumer economy. A decade later, the nation coughed up a whopping 90 million emerging shoppers that more than tripled by 2014 to a new class of 350 million super consumers.
Step aside America, because China has officially taken over your place. As the most important market for key luxury sectors, China and its offspring of shopaholics currently account for 29 percent of luxury-goods sales globally, 60 percent of which is spent outside of the mainland. With the spending power of luxury consumers expected to triple in the next 10 years, many analysts are drawing strong parallels to postwar America.
As most expats will have already noted, the world as we knew it, in the span of a few years, has done a 180. Just as America’s super consumers brought a seismic shakedown to the world order, the same is happening with China today. With the country on the cusp of superpowerdom, understanding its consumer culture has become an intrinsic part of understanding the nation and providing context to the rise of the world’s largest economy.
But what do we really know about those 350 million? Has China’s eager attempt to switch to a more mature demand-driven model of economic growth merely created generations of West-idolizing, superficial materialists? Jumping too quickly to these conclusions is a mistake. After all, China is very big, very old, and very different; large companies have learned to adapt and shape their strategies accordingly. Just as a company cannot transplant its Western business model and expect success in China, we cannot analyze the findings of the survey from a Western standpoint. It is easy to look at the success of Starbucks and Bordeaux wine in a tea-drinking culture as a symptom of China’s Westernization; yet, this is too simplistic. China and the West do not have a shared history, culture, language or conceptualization of values. As China market entry experts Savio Chan and Michael Zakkour point out in their latest book, China’s Super Consumers: What 1 Billion Customers Want and How to Sell it to Them, “…while the destination may look the same, the journey is necessarily quite different.”
Like any other nation, Chinese define themselves by their history; one that goes far beyond the tumultuous times of 20th century China. While the West established its modern cultural and social identity through the Enlightenment period, China’s focus was internal. East and West developed and operated in two entirely separate worlds. China hardly took notice of the rise and fall of the Egyptian, Greek, Roman, Mayan, Aztec, Native American and modern European empires. Judaism, Christianity and Islam were founded and flourished, while the Chinese empires were busy acquiring territorial conquests, fighting countless civil wars and natural disasters as well as surviving the reign and collapse of great and tyrannical emperors.
Over the course of a few millennia, China’s deep and powerful cultural roots shaped most Southeast Asian societies. Historically, the Middle Kingdom has been the world’s leading economic superpower; 400 years of Anglo-European dominance seem a mere blip in comparison. China, with its long history of commerce rooted in a strong value-coded system based on Confucian, Buddhist, and Taoist religio-philosophical tradition, approaches the understanding of time and history in a circular rather than linear manner. Despite modernization, these traditional values define the emotional impulses of the Chinese consumer and their conceptualization of materialism, whereas international consumer theory has been guided by a Socratic and Judeo-Christian set of values emphasizing how individuals fulfill their needs within an individualistic society.
Individualism vs. Collectivism
Research by prominent social psychologists Markus and Kitayama suggests that the “self” is divided into two selves; the private and public. The former is composed of emotions, desires, personal values, memories etc. and the latter characterized by social roles and, as Markus and Kitayama elaborate, “the persona being presented to others.” The private or independent construal of self dictates the behaviour of one’s identity as being separate from the group. In contrast, the public or interdependent self’s identity is expressed through fundamental connectedness between members of one’s social relationships.
In Chinese society, individualism as per our Western definition does not exist. Rather, adhering to social norms and making decisions as a representative of a group is the underlying motivation of the average Chinese consumer. This explains why China was also leading in the second part of the IPSOS survey, with 68 percent of Chinese agreeing with the statement “I feel under a lot of pressure to be successful and make money.”
Networks and Social Status
“History has taught the Chinese to have the biggest, strongest safety nets they can manage.” Chan and Zakkour
Chinese find security in networks and are consistently looking to strengthen them. Other than security, networks provide money and status; so naturally, they heavily influence purchasing decisions and consumer behaviour. The significance of social networks and conformity provides some insight into the role of materialism in Chinese society. The relationship between “losing face” and social status plays an important role in spending habits. It is quite common to see a secretary making ¥4,000 per month buying a ¥6,000 Gucci bag. In 2013, Chinese consumers accounted for 50 percent of Louis Vuitton’s global sales, most of which were only middle-class consumers earning between ¥4,000 and ¥13,000 per month. This trend is also apparent in the purchasing of cars. China has become the world’s largest auto market, despite the fact that on average a car costs 100 percent more than in the US and represents 120 percent of the recipient’s annual income. However, without a vehicle or apartment, individuals (especially men) and their respective families risk losing face and consequently their rank in the hierarchy of their networks. The success of brands among Chinese consumers is largely a result of the ingrained interdependent self-concepts that merge individual with group and allow for material possessions to display social status. At the beginning of the millennium, brands were worn as badges, and recognizable logos were flying off the shelves.
Social Status and Gifting
Materialism and its correlation to social status and power can be seen throughout the nation’s history. In order to maintain its economic and cultural hegemony, the Chinese empire needed a strong material, economic foundation. The prosperity and wealth that defined this thriving society, was dependent on the pursuit and appreciation of material possessions. This was reflected in the writings of Confucius and Mencius, who were strong critics of the opulent and luxurious ways of the elite. Bestowing bronze, jade, silks, and porcelain gifts on its neighbours has been this nation’s secret and powerful weapon throughout the dynasties.
Besides being a tool of diplomacy at the macro level, gifting is just as powerful at establishing and maintaining social networks. Luxury goods provide honour and esteem to both the recipient and gift giver and contribute to the overall sense of wellbeing, as the social capital gained from the practice far outweighs the costs. Unlike the West, the consumption of luxury goods is not a reflection of private preferences but rather stems out of a desire to conform to social norms.
Unfortunately, just like any other culture, Chinese are not immune to giving in to excesses. The gifting practice, ingrained in the social and cultural fabric of greater China, has spiraled out of control leading China’s president Xi Jinping to crack down on spending by officials and eliminate gifting as an official practice. Gifting is not dead however, it has simply been put in check, and rightly so.
The Chinese style of self-expression translates into an hourglass-shaped consumption model. As the China Market Research Group (CMR) points out, products consumed in public “command huge price premiums relative to goods used in private.” Traditionally, people do not invite each other to their homes as much as the West, due in part to the limited space. Consequently, displaying wealth and status necessitates an external outlet. It is the norm to spend 120 percent of one’s annual income on a car but skimp out for the cheapest appliances and furnishings for the home.
Product Safety
Society and culture are not the only factors at play in determining Chinese spending habits. The rapid expansion of China’s economy is not without its pitfalls. Consumers are consistently expressing growing concerns over the Middle Kingdom’s notorious product safety scandals and inadequate social safety nets. When it comes to health and safety, the hourglass consumption model no longer applies. Middle-class consumers are willing to spend more on private goods if they trust the brand and quality. Product safety has now become the primary consideration when purchasing food, beauty and baby products. The CMR points out that foreign brands from developed markets are more likely to succeed by introducing their products at a higher price-point than local competitors as consumers associate price (relative to local brands) with a higher quality control of the supply chain.
China’s trailblazing transition to a demand-driven economy has generated a large group of optimistic lower and middle-class consumers aspiring to a “rich” future. Unlike more mature consumption-based economies, where people born into the middle-class are content with staying there, the Chinese middle-class does not necessarily view itself as such and consequently spends more freely.
The Chinese consumer landscape is constantly changing and shifting as the market is learning to define itself. In 2012, only Beijing and Shanghai had inhabitants earning more than ¥13,000 per month. The Economist Intelligence Unit estimates that by 2020, inhabitants of as many as 61 cities across the country will be earning as much and 51 percent of the urban population will be considered middle class. New growth for the luxury sector will emerge from second to fifth tiered cities, where an additional 300 million new luxury consumers are expected to materialise. In the next 10 years, the government is also expected to issue 200 million passports to join the 80-90 already in existence, facilitating the purchase of luxury items overseas.
With its continental size, consumption spreading from the coastal regions to the interior and a new influx of Chinese travelling abroad, it has become strategically important to reinterpret Western consumer theory through the lens of the East. Chinese consumers were not born out of a cultural vacuum or influenced by ours. China follows a well-rooted cultural blueprint, evolving with the process of modernization and globalization but all the while remaining distinctively Chinese. Materialism is synonymous with progress and advancement and does not hold the same superficial connotation. Just 20 years ago, China was the world’s factory; today it has become a game-changing global force. The last time a class of super consumers was born it came to be called the American Century. As Chan and Zakkour so eloquently put it, “are we now living at the dawn of the Chinese Century?”
This article was first published in The Nanjinger Magazine, March 2015 Issue. If you would like to read the whole magazine, please follow this link.
