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WWD CEO Summit: Huang Hung

The ceo of China Interactive Media Group makes the case that the Chinese middle class is not so different from its American counterpart after all.

The Chinese middle class is not so different from its American counterpart after all.

This story first appeared in the January 8, 2013 issue of WWD.  Subscribe Today.

That’s the conclusion of Huang Hung, chief executive officer of China Interactive Media Group.

Much of that is due to the changing face of China as a country, impacted in part by the leadership transition last fall.

When Xi Jinping took over as General Secretary of the Communist Party, his first edict centered on changing the government’s image via a ban on extravagance and a crackdown on corruption.

That has meant “no more bling,” according to Hung, a nod to past government officials’ ostentatious habits where luxury gifts to them — the favorite being watches — often gave rise to speculation about corruption. One government official was dubbed “The Watch Man” for his predilection for expensive watches, which was shown all over the Web in China. His exposure resulted in a downturn in luxury watch sales in China, Hung said, and, now, “if you go to a meeting in China, you realize everyone is wearing long-sleeve shirts to cover their watches.”

The ban on bling also has impacted the “mistress industry,” the giving of gifts by corrupt officials to their mistresses.

While the stance has resulted in a damper on the luxury industry, the face of e-commerce in China has been booming. Government may put restrictions on media, but it seems to want to promote e-commerce and the growth in small mom-and-pop businesses selling online. That has impacted the changing consumer tastes in China, particularly among the middle class.

On Nov. 11, a quirky online shopping holiday in China called Single’s Day, where some merchants promised discounts of 50 percent for items bought by singles, resulted in what may be the busiest online shopping day in the world.

Hung said that the Taobao site, Alibaba’s consumer-oriented e-commerce platform similar to eBay in the U.S., took in 19.1 billion yuan, or $3.03 billion at current exchange. She noted that’s “more than double 2011’s U.S. Cyber Monday sales in volume.” The dollar amount is also “equal to three weeks of Hong Kong retail sales” based on the average daily sales volume in August.

“The highly educated are already on the Internet,” Hung said. There is also increased penetration of online usage with those age 40 and older, as well as in rural areas.

Compared to when she was growing up, the “next generation grew up with more choices.”

The change in politics has helped, she said, explaining that in the new model, it’s OK to want to be educated and a successful businessman, whereas before the focus was on the red guard.

Homes also are not that different these days from houses in the U.S., giving the younger generation a different lifestyle. That’s compared with when Hung was growing up and a family was expected to live in a dorm room where her father was teaching, as well as share communal space.

On the entertainment front, the availability of material such as television dramas and even pirated DVDs of current movies “flattens the taste of Chinese consumers.”

“The next generation of Chinese consumers are so globalized that the American market can transition to the next generation of Chinese consumers,” she said.

There’s still some paranoia regarding showcasing women in politics — so don’t expect a rush to dress the first lady of China — a leftover stigma attached to Chairman Mao Zedong’s widow, Jiang Qing, who committed suicide while serving a life sentence in prison.

That hasn’t applied to women’s fashion in China today.

“Fashion [in China has] changed because the government has allowed it to change,” Hung said, noting that its stylishness today is an evolution from the traditional drab of Mao suits worn by women in the Seventies.

The future consumers of China are of the Internet generation, and their buying decisions are different from their elders. While the older generation’s early successes had them identifying first with luxury brands as a symbol of having made it, that’s not true of the new generation.

“They don’t need it. They don’t want it. Their buying decisions are more sophisticated than their parents,” Hung said, adding that in China, this group is called “the Eighties and the Nineties” after the years they were born.

Being a part of the age group that easily adapts to modern technology, “the young fashionable Chinese [called the] rich second generation are comfortable buying online,” Hung said.

But she stressed that online shopping is still done “the Chinese way,” showing a slide of a disorganized warehouse with packages strewn all about. Hung admitted logistics remains a major problem in China, saying most e-tailers in the country get around the problem by owning their own logistics companies.