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Tailoring Your Business to Wealthy Chinese Consumers

China's booming economy has created a new class of wealthy customers who are eagerly courted by global businesses. At the end of 2011, Chinese individuals with net assets equivalent to $30 million U.S. dollars (USD) or more numbered more than 7,900 - up 41 percent from 2007.[1]

For the first time, there are more millionaires in the Asia-Pacific region than in North America. In fact, there are 3.37 million individuals with at least $1 million in investable income, compared to 3.35 million individuals in North America.[2]

In the Chinese market, much of this new wealth is concentrated in coastal cities such as Beijing and Shanghai, and in places such as Hangzhou and Tianjin, says Robert Collins, president of Doing China Business LLC in Chicago, which helps Western companies find investments and develop expansion opportunities for business in China, and co-author of Doing Business in China for Dummies. Selling to these newly wealthy households "is the main focus of all the luxury brands," he says.

U.S. export businesses expanding into China can benefit from a halo effect from these products by emphasizing their own U.S. origins.

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Tapping into the growing taste for luxury brands can help Western businesses expand their export sales. As international businesses look for new ways to serve the needs of China's wealthy, they can employ the services of a trusted online foreign exchange provider, which makes it easy for business owners to calculate dollar exchange rates at low markups and with total transparency.  

Customers Are Attracted to Foreign Luxury Brands

For many Chinese consumers, luxury brands from Europe and the U.S. are seen as prestigious. In fact, labels such as Louis Vuitton, Chanel, Cartier, Burberry and Apple were among the favorites for gift-giving by wealthy Chinese consumers as of January 2013.[3]

U.S. export businesses expanding into China can benefit from a halo effect from these products by emphasizing their own U.S. origins, particularly if they are marketing luxury items. In marketing materials, international businesses might emphasize that their U.S. exports are high quality and that customers feel good about themselves when they use them.

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Global business owners can also benefit by focusing on luxury brand products that Chinese consumers are more likely to use in public. This is because some middle-income customers will pay more for cellphones and handbags, while saving on goods such as home appliances, according to a Wall Street Journal essay by Tom Doctoroff, chief executive of Greater China for the J. Walter Thompson advertising firm in Shanghai, and author of What Chinese Want.[4]

Capitalize on a Growing Preference for Individualism in the Chinese Culture

As they become savvier consumers, Chinese citizens search out products that are unique and tailored to their needs. Product categories that hold an emotional appeal - such as skin care and cosmetics - are especially attractive targets for small companies expanding business in China.[5]

"Because of the more individualistic nature of Chinese consumers, we will see niche brands becoming more popular," says Max Magni in a McKinsey on China Podcast. Magni heads McKinsey & Company's consumer goods practice for greater China. "Brands that make them feel special are the ones that probably will be able to carve out an important space among consumers."

[1] "China's multi-millionaires mapped: where do they live?" Oct. 5, 2012 The Guardian

[2] "Asia-Pacific Wealth Report 2012," published by Capgemini and RBC Wealth Management

[3] "Chinese Millionaires Stay Hungry for French Luxury Goods," Jan. 15, 2013, Hurun Report

[4] "What the Chinese Want," May 18, 2012, The Wall Street Journal

[5] "How Chinese will the Chinese consumer remain?" McKinsey on China Podcast, McKinsey & Company Greater China

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