Last week, a reader sent me a link to an article about Valentine’s Day in China. This is a great story because it makes a number of points about the Chinese consumer:
1) He is rapidly adopting Western customs, particularly concerning holidays and gifts
2) He is focused more on possessions than experiences. In contrast, the biggest driver of economic growth in the US is services. There was a recent book written about the “experience economy” arguing that people in the US buy experiences, not goods. For example, they go to Starbucks so they can sit in the cafe and feel at ease, not so they can spend $4 on a cup of coffee. Chinese consumers spend on luxury goods. If you believe the theory posited in the book, China is still evolving from a commodity economy to a goods business, unlike the US, which is moving from selling services to selling experiences. Perhaps this is because wealth is something to be flaunted or because there is a large gap between what the mass market purchases and what luxury goods offer. In any case, the Chinese love brands and are often willing to spend money to get them. China has become the largest market in the world for luxury goods. There are more Omega and Rolex stores than Wal-Marts in Shanghai and Beijing.
3) Most people still don’t get paid very much. Despite the demand for luxury, labor is cheap and GDP per capita is likely to remain far below the Western World for the next 30 years. It’s just that there are so many people in China that the top 1% in income comprises a market of 14 million people.