April 18, 2012
This is part one of Shipwire’s multi-part blog series: Expanding into Asia-Pacific. In this series we’ll look at the different Asia-Pacific markets, what makes them special, and how to start expanding your business into them with the greatest success. Today, in Part 1 of the series, we look at China.
If you want to grow your business, you’re going to have to grow your customer base; and if you think of your company as local, you may be limiting your market. Luckily, we have a global economy.
The best way to build your business is to expand into new markets, especially growing or underserved markets. As the world’s center of economic gravity shifts towards Asia and the Pacific basin there is a perfect target for business expansion: China, and Shipwire can help.
World’s Fastest-Growing Market
The world’s largest nation is on its way to becoming the world’s largest market. It’s already projected to become the world’s second largest consumer market as early as 2015, and its economic growth is not slowing down. China’s continued program of rapid industrialization has been driving the largest sustained increase of disposable income in human history. Incomes are rising, mobility is rising, and the combination of better jobs and increased education is fueling a population shift to urban centers. And while large regional economic disparities are likely to remain a part of the Chinese landscape for the foreseeable future, urban China is rapidly becoming a modern and mature consumer market.
The New Chinese Consumer
There is a new Chinese consumer, who is ready, willing, and able to spend money on consumer goods. As a Deloitte study shows, the Chinese consumer today is in a similar position to the Japanese and Korean consumers of previous decades. Incomes are rising and they can see all the things the rest of the world has been taking for granted. Rising incomes have also brought rising expectations, and for Chinese consumers the future looks bright with the promise of future wealth. This promise of future wealth often has the effect of opening wallets in the present, by relieving the fear that money spent now will be unavailable if it’s needed later. Chinese consumers are likely to remain value-conscious for the foreseeable future, particularly when purchasing consumable household goods such as paper towels and detergent, but there is a growing desire for luxuries such as personal electronics. You just need distribution to get your products there.
McKinsey’s latest survey of Chinese consumers shows that in contrast to previous decades, the consumer wealth and disposable income of the average Chinese household is growing at an ever-accelerating rate. By 2020 the average urban household in China will have doubled its 2010 disposable income, going from $4000 to $8000 annually. The numbers show that discretionary spending has been growing at a compounded rate of 13.4% annually since 2010, and is not expected to slow down before 2020. Currently, the largest segment of the urban Chinese market are consumers at the value income level, earning $6000-$15999 annually, followed by the mainstream segment which earns up to $34000 with affluent households beyond that. Not only is disposable income increasing for all income levels, but more and more households are transitioning upwards in income level, with mainstream and affluent households projected to make up 57% of the urban population by 2020. Even those who remain at the value level are expected to shift toward the upper end of that range. China may still suffer from regional economic disparities, but the mainstream and affluent urban consumers who make up the core of the Chinese consumer market have similar spending patterns those in any developed country.
More Discretionary Spending
Chinese growth in discretionary and consumer spending is on pace for China to overtake Japan as the world’s largest market for luxury goods by 2015, and shows no signs of being likely to slow down before 2020. Companies that get into the Chinese market now, show every sign of being able to ride the wave of economic growth. McKinsey also shows that by 2020, many older consumers in China will have the same spending habits as younger consumers do now; with much more discretionary spending on food and apparel. This projected shift in spending patterns means that the time to get your products into the Chinese market is now.
The growth of the mainstream Chinese consumer market puts it in a perfect position to drive global growth. Where better to test future products than in a large and growing consumer market? When you combine the nature of the Chinese market with its projected growth it is safe to predict that after 2020 it will become ever more difficult for any company to take a global leadership role unless they can maintain a strong presence in China.
If you are selling physical products and looking to grow your business, you need to be looking at getting your products into Asia and especially China. That’s where Shipwire can help. As a global leader in shipping and fulfillment, we can get your products to the new customers you need to serve.
Stand by for new posts coming in this series. We’ll write about the vital markets in Asia and culminate with an important announcement that we’re very excited about.