Entering the Chinese Consumer Market: Problems and Prospects
Entering the Chinese consumer market may be risky but ultimately lucrative. With Hong Kong coming back under Chinese control in June of 1997, the Chinese consumer market is bound to experience some ups and downs. In depth understanding of not only the economy, but also the cultural and political terrain will be the mandatory for interested foreign investors.
The advance of foreign capital into Chinese retail markets is bound to cause changes those markets. The Chinese entrepreneurial experience lags behind more Western consumer driven economies. Until recently, Chinese demand for consumer goods outstripped supply. Producers would focus on suppliers, not consumers. Manufacturers rarely felt compelled to search for customers outside their home territory. In other words, national brands with customer loyalty are largely unknown in China (Yatsko, 1996, 70).
The Chinese economy is still centrally controlled and largely driven by 5-year plans. The combination of slowly loosening economic controls and inadequate infrastructure has created a difficult situation. While foreign investors see great potential in the Chinese market, things are not yet at anything near full capacity. Even Thakral Corp. which seems adept at dealing with the emerging Chinese market consumer electronics market, admits that continually learning how to penetrate that market is their first and main concern. Thakral sees retail operations as a vital, direct link to the Chinese consumer, but also sees retail operations operating currently as a loss leader. Sub-contracting and import/export from Hong Kong nets more profit, retail acts more as on-site advertising for an evolving Chinese economy. Currently, due to bad roads and poor distribution retail simply does not pay in China. Distribution in the short term will prove more worth while ("Plugging into China," 1996, 4).
But changes a...