$40 Cherries and China’s Changing Consumer Behaviors
In noticing China’s monumental economic, cultural, and political changes, I always find it’s best to look at daily life. Today’s Chinaful dose comes from Will Solomon, a Beijing expat with constant opportunity to observe the subtle shifts in Chinese behavior.
In helping American companies enter the Chinese market, I have found Chinese companies to be incredibly price sensitive when making business decisions. Regardless of differences in quality or how much a product/service might save the company in the long term, more often than not decision makers will choose the substitute product that comes in at a lower price point and positively affects their short-term bottom line. However, there are certain markets in China, such as consumer goods, in which we’ve found almost the exact opposite is true.
I recently saw this 236.41 RMB box of 50 Chilean cherries at an international supermarket near my office. With the current exchange rate, that box of cherries costs roughly $38.00 USD, a cost of almost $.80 per cherry.
While western grocery store chains have popped up all over Beijing, the majority are located in areas of town that are largely populated by Westerners that want their American or international fixes. These expats accept they may need to pay a premium for imported goods, but unless their conversion math is off, most of these consumers are aware of what prices should be and are only tolerant of slight price fluctuations.
But there are also some supermarket chains that have found a different niche—selling the same imported products at much higher price points in malls that have a mainly Chinese clientele. These grocery stores, including BHG selling the $38 cherries, specifically target rich and rising middle class in China that are now interested in splurging on one or two imported items to get a taste for the high life.
A majority of BHG’s consumer base is comprised of middle-class Chinese purchasing affordable, made-to-order stir fries and other cafeteria-style options. But three-quarters of BHG’s shelf space is dedicated to very expensive imported goods. It is also interesting that BHG strategically situated the above pictured display of cherries literally right next to the line for the moderately priced stir fries. I could hear people in line chatting away in curiosity, asking each other if they have ever tried Chilean cherries before. If this is BHG’s marketing scheme, it’s working.
While I personally would never spend $40 on a box of cherries regardless of where in the world they came from, I grew up in a country where imported goods were oftentimes cheaper than domestically produced ones. (And I would also be lying if I said that there hadn’t been many instances where I spent much more than I should have simply based on a brand or sheer curiosity.)
Will Solomon graduated from Vanderbilt University in 2008. He has spent the last three years living and working in Beijing. Currently Will serves as the Director of Business Development and Communications for the market entry consulting firm, US-Pacific Rim International, Inc. (USPRI). Will is highly proficient in Mandarin, Chinese and has traveled extensively throughout China and southeast Asia for work and leisure.