Doing Business in China

China has two type of cities,one is largest cities,as Beijing,Shanghai,the other is smaller cities. Ogilvy & Mather has published a report on China’s 4th-6th tier cities (hat tip littleredbook) that may be useful for the China entrepreneur looking beyond China’s already well-developed first and second tier metropolitan markets.

China’s 4th-6th tier towns, which account for 37% of China’s population, have notably different consumer cultures and retail landscapes not only from the major metropolises of Beijing, Shanghai and Guangzhou but also from 2nd-3rd tier cities, according to “China Beyond,” a new study released today by Ogilvy China. Moreover, what works in big cities for marketing firms and brands may not work in the 4th-6th tier locales which range from prefecture level cities to county level towns. Nevertheless, a vast opportunity exists for companies that can tap into local and regional psyches and lifestyles.

The pace of development is amplified by the anxious youth and their relationship with technology. Most young people, though optimistic about the future, do not know how to use the Internet for information, education and better opportunities. Their online behavior mirrors the lackluster, drab realities of a provincial life. Brands that are able to redirect some of the pent-up energy to fuel entrepreneurship, creativity and consumerism are likely to benefit.

There is a natural affinity with open spaces. In low tier cities, many engagements and interactions happen in public. This is contrary to urban people living in closed quarters, with limited capacity and range for activities. It demonstrates that brands must communicate with consumers on the move.

For instance, the hang out culture in lower tier cities means outdoor media can be used to engage rather than simply inform. Brands could tell more ’stories’ rather than a ’short message’ or ‘one key visual’. Brands could help people to hang out together in places they naturally tend to converge to. Food and beverage brands could bring people together with make-shift stools, tables and fixed umbrellas as premia.

Counterfeit brands have taken off in low tier cities as consumers desire brands that symbolize success but are unable to buy the real brands due to vast income gaps. As a result, fake FMCG and consumer durables brands are widely available in China’s lower tier cities – a different phenomenon from what is seen in the big cities where luxury brand fakes proliferate.

Mom-and-pop stores and wet markets are being pushed out while hypermarkets and open-shelf convenience stores are taking over. However, these stores stock far more local and national Chinese brands than international brands. There is also a strong appetite for “new things,” which means consumers easily tire of old brands that do not constantly change and innovate.