The new Chinese “Middle Class”

When one talks about the American Dream, it seems it is most often characterized by images of average sized homes, white picket fences, two kids, a dog, and a new car in the driveway. And to most, this is a “middle class” lifestyle. The home isn’t a villa, and the car isn’t a Jaguar. However, the home is neither crowded nor too old. Everything is nice and modest. For an average American family, the median household income is around $50,000. However, the “middle class” household of China lives on somewhere between 6-15,000 a year. It doesn’t take a genius to see that there is a discrepancy between the two different definitions of “middle class.” The Chinese definition is still well below the poverty line in the US.

Why do I spend time highlighting the differences in the term “middle class” you may ask? It is simple. A firm that markets itself as a middle class firm in the US would certainly have to reevaluate its marketing strategies in China. The article I read  for this week, also expounded on some of the ways in which Chinese “middle class” consumers shop that differ from the US consumer. When I go to a shopping mall in America, I first must choose what type of mall I want to go to. There are some smaller high end boutique malls like the Galleria of Edina in Minnesota, where I am from. These malls feature Armani, Tiffany, Coach, etc. There is clearly a certain consumer that this mall, and the stores in it, are targeting. Or, I can choose a low end strip mall featuring Dollar Stores, fast food, and other low end retailers. However, the most iconic image of a US shopping mall are the large, middle class, suburban malls like The Mall of America (MOA). Here, mostly middle of the road retailers target “middle class” consumers with a sprinkling of high and low end retailers as well. Because the definition of “middle class” in China is so different, it makes sense that the consumers would behave differently. The article (linked above) noted that many of these “middle class” consumers have to make a choice about the types of goods they buy. Though they may be considered “middle” they infrequently purchase goods that market themselves as “middle.”gap-china-sm

There is a choice that consumers are making: save a lot and buy luxury brands or buy low end brands for a little. There is little interest in purchasing median priced goods, as Gap learned the hard way. Other brands though, like Starbucks, have rebranded themselves and actually charge more to create a perception of luxury. Companies that have long defined themselves by their middle-class roots, are forced to reexamine where they want to enter the market. There is an overall feeling in China that anyone can get rich. Consumers want to feel rich, and western companies need to understand this before moving in. There is a lot of room for growth in China due mainly to the growth of the middle class. However, it would be foolish for western companies to ignore the differences in consumer habits.

 

Other relavent articles: NBC Business News