Learning curve for consumers

Tan, with colleagues, advises many Western companies that are keen to understand the true nature of the Chinese consumer.

"We are helping a Western dairy company at the moment and they are very keen to understand Chinese consumers. Their products are mainly imported from Australia and New Zealand," he says.

"What we have found is that with food safety being such a big issue in China consumers would be prepared to pay 50 percent more for their products than for local brands."

Tan says it is not a particularly surprising finding since in China there is often no direct correlation between income levels and the purchase price. "In the dairy category people are concerned more with the safety issue than with the price. They think it is very important for themselves and their children," he says.

Tan says it is a quirk of the market that Chinese consumers always think Western products are better, even though there are still some sentimental attachments to certain Chinese brands like White Rabbit chocolate or Warrior shoes which go back many years.

"If I buy White Rabbit, it would really be for nostalgia reasons because it bears a childhood memory. I think brands such as this are deploying new branding strategies that take advantage of this collective memory," he says.

Tan says Chinese consumers are not particularly respectful of brands generally and are not loyal even to Western brands. "I think the concept of brand loyalty is more of a Western thing. China does not have a long history of being a consumer society. They are certainly more critical of Chinese brands," he says.

"When there is something wrong with a Western product, they don't think it is the fault of the brand, whereas problems with Chinese brands - such as the scandal over milk powder a few years ago - it can do great damage to Chinese brands. They automatically think the brand itself has something wrong."

Tan says there is a clear divide between the generations in terms of their consumer behavior. "The older generation -those born before 1970 - tend to follow the crowd. In the lower tier cities these people buy such brands as Goldlion (a Hong Kong-based clothing brand) because if they don't buy it, they think they lose face," he says.

"Those born in the 1970s and 1980s are very keen on value and doing online comparisons. Those born in the 1990s, however, just buy things they like so long as they have enough money. They have no concern about the future. Their families always support them financially."

Tan says this often leads to a complex matrix with different generations buying the same products but for different reasons. "If you take designer goods, for example. People say Chinese people like designer goods. What they often don't realize is that they are all different Chinese people," he says.

Tan says there have been some clear examples of foreign brands misunderstanding the Chinese consumer such as Minnesota-based Best Buy, the electrical goods retailer which quit China last year.

"Best Buy offered a spacious and quiet shopping environment but Chinese consumers didn't like that. They prefer their stores to be crowded and bustling, like those of homegrown brands such as Gome and Suning," he says.

Tan admits the Chinese consumer can be difficult to fathom not just for Western companies but for Chinese ones too. "You get situations where many wealthy old people buy very low priced goods whereas young people who don't have much money still buy expensive goods like iPhones. This lack of a link to income is unusual," he says.

Tan says one thing is clear is that modern Chinese consumers are very aspirational. "They have many expectations about their life. They think in a few years they can live better. Chinese consumers are always insatiable. They want to own more."

Deng Zhangyu contributed to this story.

andrewmoody@chinadaily.com.cn