Here's a case study:
Last year, when an apparel giant opened four stores in China and failed to gain a significant portion of the retail sales, multinational retail stores took note. The Gap, an apparel line successful in more than 3,000 locations worldwide, had everything going for them. So, what went wrong?
The Gap’s biggest mistake was the cookie cutter approach it took to establishing its presence in the world’s largest youth market. The Gap sought to target the increasing middle-income consumers in the rapidly growing Chinese market, but failed to capture the attention of their most important customers, the Chinese youth.
In China, the Gap is perceived as middle class apparel selling for a luxury price. Status and luxury are important goals for China’s consumers, especially for the youth. However, a premium price for a middle class product is a cost youths are not willing to bear. Moreover, The Gap chose to open stand-alone stores rather than locating in mall areas, forcing customers to go out of their way to make a special trip just to visit the store. The majority of Chinese consumers purchase apparel at a mall because they can use it as a single destination for shopping, eating, and entertainment. The Gap failed to realize that China’s middle class youth consumer is very different from an American consumer.
The Gap is not the only apparel company unraveling in the Chinese market. American Apparel also has had issues targeting the youth market. While in the U.S., American Apparel advertises its style as “sexy,” Chinese female consumers prefer “cute” clothing. With all of these differences between the Western and Asian markets, how can a multinational company succeed in China?
While many companies are struggling in China, some have found a path to success. Enovate, a consulting company based in Shanghai, uses its strengths of networking and social media to successfully navigate the complexities of China’s youth.
Why is China’s youth market so challenging?
While the youth market is a difficult target, the Chinese youth market poses additional challenges for companies attempting to enter China. An important segment, Chinese youths have both the desire and means to spend. Disposable income is growing for younger and urban households, and the younger Chinese tend to spend more than save.[1] With rising income levels, the youth are able to afford more diverse and discerning tastes in their purchases.
What sets China apart from other nations is the one-child policy and its effects on the Chinese youth market. Since the implementation of the policy in the 1980s, which has resulted in 90 million only-children, the Chinese youth market is unique. The result of the policy is that a single child is now the focus of two parents and four grandparents, often leading to over-indulgence and high-pressure. These one-child policy children are regularly referred to as “little emperors” and are very persuasive in how their parents spend their money. In comparison, youth in the U.S. tend to have siblings whose parents balance the demands of each child. With so much familial attention and pressure focused on cultivating these only-children, the Chinese youth are interested in expressing their identity through personal choice. This desire to separate and differentiate makes the youth market a broad and diverse demographic.
Many companies looking to enter the Chinese market have yet to develop a more sophisticated understanding of how to successfully target the Chinese youth. Companies still believe that younger Chinese consumers are particularly influenced by Western trends in music, fashion, celebrities and sports. According to Passport GMID, “Chinese brands are slowly picking up market share, and even respect, amongst the fashion-conscious set, but foreign [Western] brands are still king in this marketplace and especially amongst the younger age groups.”[2] However, this old tactic of pushing Western brands without understanding the Chinese consumer is likely to fail.
Although popular culture is reported to be heavily influenced by Hollywood, regional and local influences are not to be ignored. Neighboring countries’ celebrities are also popular in China, evidenced by celebrity endorsements by Rain (Korea) and Ayumi Hamasaki (Japan). Strong foreign trends come from Japanese and, more recently, Korean pop culture, and resonate with many of the Asian youths. In addition to looking towards their neighbors, the Chinese youth also are impacted by Chinese pop culture. Popular Chinese celebrities are Faye Wong (Beijing), Andy Lau (Hong Kong), and Jay Chou (Taiwan). Additionally, half of box-office sales in China are for domestically produced motion pictures.[3]
Furthermore, China has regional differences, affecting preferences for local and foreign influences. For example, Shanghai tends to adopt more Japanese and Western aesthetics whereas Beijing is influenced by its indigenous arts and music culture.[4] Clearly, companies entering China must not underestimate the power of regional and local influences in the diverse youth market when introducing Western brands and culture.
Soruce: http://business.in.com/article/thunderbird/the-race-for-chinas-youth-market/30252/1#ixzz1hzZEO8Rp
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