The Chinese Market: Large But Even More Frugal
December 21st, 2008American marketing agencies are soon going to find out that no matter how good their campaigns are, how many tests they do, or how much money they spend, a surprisingly high number of their performance driven campaigns in China are going to fail.
Why?
There is a lot of talk about China’s economic growth. American companies are excited to have a Chinese presence. But the truth is so many companies want to be there but don’t really know why. There is a sense that something is about to erupt, and not being there equates to missing out.
But is China really that promising? Sure, China has had double digit growth for years. But it wasn’t the Chinese who were consuming. So, before American companies rush over there to sell the Chinese products and services that were selling well elsewhere, let’s stop for a moment to recognize that the Chinese are not a consumer culture.
Stephen Roach, the chairman of Morgan Stanley Asia, called Americans, “the most over-extended consumer in world history.” And now that Americans are no longer buying so many Chinese exports, China will have to find another consumer base for its enormous production machine. And they know it won’t come from within.
As Thomas Friedman wrote:
“China has no real Social Security, health insurance or unemployment insurance. Without that social safety net, it’s hard to see how Chinese don’t end up saving most of their stimulus.”
In the SEM agency world, having a presence in China is important to prospective clients. This presence represents the gateway to a huge, seemingly untapped market.
The problem, however, is that these agencys’ clients are going to realize that the Chinese will require, according to Fred Hu, chairman for Greater China for Goldman Sachs, a huge “cultural and structural” shift before they start consuming the largely unnecessary products that Americans love.
China will prove to be the largest market, but so frugal that some marketers will realize that it isn’t worth trying. For example, Adobe Systems essentially ignores the market, recognize that pirating is out of control there, the Chinese government is not helping police the piracy, and that the Chinese consumer doesn’t have the money or mindset to pay for the software.
A wave of companies are about to discover what Adobe knew ten years ago. China is more stingy than it is large.

