Shanghai, Beijing and China’s other first tier cities probably spring to mind when you’re thinking about opportunities in China. Their consumers have more western tastes, buy more western goods and are generally easier to reach than consumers in China’s ‘smaller’ cities. The megapolies also have better networks, infrastructure and facilities for western businesses. However, China’s smaller cities, most you’ve probably never heard of yet, often hold much more opportunity for western businesses with Chinese aspirations, here’s why:
Shanghai and Beijing have a combined population of around 44 million people. Not to be sneezed at, but given more than half of China’s 1.34 billion people live in cities, there are about 650 million urbanites living in other Chinese cities. China’s has about 700 cities with more people than Geneva, so there are plenty potential markets.
The most relevant measure of perspective customers for most western businesses are the affluent consumers. Those earning between $20,000 to $1m a year; enough to have some income left over to make discretionary purchases. There are currently 120 million affluent consumers in China, expected to grow to 280 million by 2020 – 75% whom will live in the ‘smaller’ cities.
There aren’t many well known businesses who don’t have a presence in China these days, but the most common path into China is through the biggest cities more accustomed to western brands and products. That’s made those cities some of the most competitive markets in the world. Many brands are yet to venture into the smaller cities.
The Seaside city of Qingdao with almost 9 million residents is a potential gold mine for western businesses
With all the brands competing in China’s bigger cities, their consumers realise how valuable they are and are often more assertive than western consumers. Many cities don’t have the big-name western stores, and have lower expectations as consumers. They still work hard for their money and expect value.
Chinese consumers in first tier cities have been consuming for over a decade now and many of them are not buying product categories for the first time and are more likely to have developed brand preferences. The majority of first time purchasers in China are in the smaller cities and they’re more open to new brands.
Chinese consumers are increasingly buying their wares online, especially in smaller cities where many goods aren’t available in stores in their city. In categories such as luxury and western goods, the portion bought online is much higher in smaller cities than First Tier cities. With the high price of well-located retail in China, online sales can be a cost effective way to reach the masses.
If you’re not already targeting China’s smaller cities, you should be thinking about it. A word of caution though, marketing landscapes differ considerably from province to province, even city to city. Make sure you’re aware of this and do you homework in whatever market you’re targeting.