How important is the Chinese consumer?

Yesterday, China brought in the New Year and the celebrations looked magnificent as ever. Whether it’s the year of the sheep, the ram, or the goat – no one is entirely sure. What’s more certain is that this year the Chinese economy will continue to transform, as it looks to focus more on consumer spending.

Despite a much-publicised slowing of China’s very rapid growth, from a consumer point of view the potential for huge reward still exists. Chinese consumer spending currently stands at around 37% of GDP, compared to 67% in the US, and so it’s no surprise that many Western brands are still trying to gain a presence in this fertile market. Last week I wrote about how luxury brands are already having to fight logo fatigue on the part of the Chinese consumer. The level of competition among luxury brands in the country belies the importance of the Chinese market to that industry. In 2012 the country made up 25% of global luxury sales, and that figure is projected to be as high as 50% by 2025.

Burberry is a notable British brand that’s got it right in China, as Angela Arhendts recognised the potential of the Chinese market very early on, and Christopher Bailey has made the most of it. It’s also noteworthy that Apple’s breakthrough in China – and their recent record-breaking quarterly profit – came after Angela overhauled their retail operations in the country. Burberry’s success in China came about because the brand understood the Chinese market. As well as successful digital marketing campaigns on Weibo campaigns and an Alibaba site – China’s luxury consumers are typically younger than their European and American counterparts – Burberry managed to avoid logo fatigue by positioning itself less as a brand and more as the concept of ‘Britishness’. The ‘Made in China’ phenomenon of the 90s seems to have reversed, as Chinese consumers now want ‘Made in Britain’. Burberry has been rewarded with strong growth in China as the country has come to make up a large proportion of global sales. The brand’s most recent results, though, hit by the protests in Hong Kong, demonstrate that the Chinese market remains a challenge.

It’s not saying anything new to label China as the next superpower or the world’s key economy. China has been the most important emerging market for a long time now. As companies continue to struggle in Europe and America, though, many are growing to rely on the Chinese consumer, with mixed results – take a look at Coca-Cola and Unilever, for example.

China itself is not immune to the economic slowdown, but unlike most western economies, its potential for growth is still huge. The government is deliberately trying to increase consumer spending by freeing up the disposable income of the average consumer, as it looks to control China’s transformation into a developed, consumer-led economy.

It’s not surprising, then, that Western companies are keen to crack the Chinese market. Even if trading continues to be difficult in the short-term, the long-term rewards could be huge. How influential do you think the Chinese consumer could become? Let me know at, and have a great weekend.