Many firms in New York that want to do business with Chinese consumers are doing it all wrong.
That’s the conclusion of Michael Zakkour, a principal at Tompkins International, where he heads their China/APAC Retail and Consumer Group. Zakkour spoke Tuesday on “China Going Global” at a program hosted by State University of New York’s Confucius Institute for Business in Manhattan, and organized by the East Midtown Partnership and the Madison Avenue Business Improvement District.
According to Zakkour, many firms need to rethink their strategy about doing business with Chinese consumers. “It’s not about taking goods to China. It’s about what you are doing in New York and in Singapore. The Chinese consumer is a global consumer,” he explained.
New York, in particular, has become just as important to Chinese investors and students as China, and businesses here need to understand the Chinese mind-set. That means understanding how the country’s culture, language, history and philosophy interplay with each other in order to engage with Chinese consumers.
One key element that businesses also need to think about is the concept of motivation, but from the Chinese consumer’s point of view.
Zakkour gave as an example a real estate broker in the U.S. selling a $7 million home to a Chinese buyer, but who was expecting a tough negotiation. Instead the buyer closed on the transaction at the asking price, and paid in cash. Zakkour explained that the broker would not have been shocked at the lack of negotiation had the individual realized that the buyer’s motivation was to get the “$7 million out of China.”
When it comes to fashion and apparel, where the consumer is located in the luxury chain matters. Consumers in Shanghai might gravitate toward niche brands instead of the traditional symbols of luxury, such as aLouis Vuitton bag, but that’s because the consumers want to show they are “leaders in fashion, and not followers,” Zakkour explained.
And retailers hoping to grab a share of wallet from their competitors down the street should have two Mandarin speakers on staff. Those having at least one Mandarin speaker onsite typically have a “125 percent conversion rate,” he said.
For anyone thinking that a slowdown in China wouldn’t affect the U.S. economy, Zakkour cautioned that’s no longer true in a global world. “China accounts for one-quarter of the world’s trade,” he said. As the second largest economy in the world, China might need just two more years before it becomes the largest economy in the world, he predicted. Zakkour said China already has the largest middle-class in the world at 350 million. Zakkour said the number of middle-class people in China is “expected to double in 10 years.”
Other data points Zakkour noted include the four million millionaires in China, with an average age of 37. There are 500 million Chinese consumers online. For those traveling overseas, there were 140 million outbound from the Mainland who averaged two trips last year. “Within two years, there will be 190 million traveling out from the Mainland,” Zakkour said.
Finally, one out of three luxury purchases are made globally by Chinese consumers, with 70 percent of those purchases made outside of mainland China.