Artefact Designing For China

Consumerism in the Wild, Wild East:
What to Know
About Designing
for China
by Gabriel Biller
www.artefactgroup.com
Introduction
This article is not a primer on how and content, closes down search,
to do business in China. The reality of social networking, and other sites,
doing business in China can be, well, and spied on Google accounts. They
pretty ugly. We will not go into may have done some other
the corruption and other non-niceties questionable things, but one must
of conducting business there remember that China is not a
in detail. To summarize very briefly, democracy. In a way, it reminds me
China’s leading political ideology of the movie Fight Club, where
(if there is one) according to James the “first rule of fight club is you don’t
McGregor, is enriching the country talk about fight club” (that’s also
(and usually the political leadership the second rule of fight club,
and cadre’s families) in any way incidentally). In China, the first rule of
possible, without ever disrespecting China is you don’t question the
or challenging the government’s rules of China. The second rule is
structure, position, and authority. you don’t disrespect the Communist
In China, you pretty much have party or the government. They
to play by their rules, show respect, shall not lose face. I’m trying to avoid
and demonstrate how your taking political positions here,
objectives are not only good for your so be it. Google’s exit is, perhaps,
business but also good for China as Baidu’s gain.
a nation. You shall never criticize the But let us not digress further.
government or proclaim what’s Discussing the politics of China is not
wrong with their politics. For more within our purview at Artefact,
information on these topics and so better to leave that to the political
some of the more interesting pundits, freedom fighters, activists,
anecdotes from the front lines, we and global political leadership.
highly recommend McGregor’s One We might contend, however, that
Billion Customers: Lessons from the even by playing within China’s rules
Front Lines of Doing Business in of censorship, progress can be
China. McGregor himself also slowly made and China’s citizenry
recommends an excellent reference can be empowered with technology,
on the nuances and peculiarities of information, and the means of
business culture and negotiation in assembling and building
China in Lucian Pye’s work Chinese communities, for they are a clever
Negotiating Style. people with a lot of pent-up creative
Take the recent debacle between ingenuity. Revolution and political
Google and China over censorship: change is ultimately up to
the audacious Googlers violated the China’s people, not to foreign
simple rule that you simply don’t multinational corporations who want
ever question their rules. To be to sell their products and services in
sure, China regularly censors sites China’s markets.
What to Know About Designing for China / artefact 2

Who is the Intended Audience?
The audience for this article is will range from building the right
primarily professionals in product win-win argument, establishing
management and development, long-term relationships with the right
innovation, R&D, product and Chinese business people, power
product portfolio planners, engineers, brokers, and partners, all the while
and executives who are responsible not defying the rules or causing
for designing and creating anyone to lose face. Another
technology products (hardware, significant challenge will be
software, services). In particular, distribution, as getting your product
those of you people above who feel in front of consumers in China is
perhaps a bit less informed about not quite how it works elsewhere in
China than you’d like to be. the world.
What this article is intending to In the spirit of full disclosure: I
convey are some key insights, myself have never traveled to China,
lessons, or realities you should know though I was in Hong Kong for 10
about if you intend to develop, days in 2007 and studied some
design, and market consumer Mandarin and Chinese history in
products for China. Among the many college. In researching and writing
considerations you’ll need to make this article, I owe a tremendous
as a business interested in entering amount of debt to the market
or further penetrating the Chinese researchers, strategists, cultural
market(s), learning how to work and translators, user researchers, and
communicate well with the right Chinese graduate students and other
officials and rainmakers, being Chinese professionals whom I
unbelievably persistent, and interviewed for this article (Elaine
understanding the varying and even Ann, Ash Bhoopathy, Ravi
appalling levels of corruption that Chhatpar, Ian Donahue, Anjali
may be involved will consume much Kelkar, Shuang Li, Lin Lin, Fei Qi,
of your time and energy (and, Erin Sanders, Pinxia Ye, and Lisa
perhaps, your soul). Your challenges Yong among them).

The Short Version:
10 Tips + 1 Caveat
If you are pressed for time, short on patience, or just generally not fond of my laborious prosaic style, here is the
abbreviated version of all the main points I want to make. If you care for more details, please read beyond this
section for additional details, anecdotes, charts, and statistics.
one two three

China consists of many markets and The Chinese have got their minds on Chinese society can be partially
many unique customer segments. If their money, and their money on their understood in terms of social
you don’t know this by now, you minds. The Chinese mindset is, identity theory and notions of
really should. Therefore, you will have contrary to most Western perceptions, “ingroup” and “outgroup.” The
to do your share of ethnographic quite individualistic and in a country in Chinese will always be suspicious of
homework and market research to which there is little to believe in, the outgroup individuals. This is not just
succeed. However, doing the above, primary directive is “to get gloriously a matter of Chinese citizen versus
particularly the ethnographies and rich.” In yuan they trust. Like the foreigner, but even within China
user research, will be more difficult astute social commentators and fans between different regional or ethnic
than you are used to. Add to that of Chinese martial arts culture, The peoples, or to some extent even
that most Chinese consumers still Wu-Tang Clan sang, “Cash Rules between social groups or “tribes.”
don’t really know what their needs Everything Around Me. C.R.E.A.M.
are! Their world has changed so Get the money. Dolla dolla bill, y’all.”
incredibly fast, and for many, they still Why? Because life in China is
are learning about what there is in the unstable and insecure. The
consumer marketplace beyond the government is no longer a provider of
basics of food, clothing, shelter, and any form of safety net. So everyone
the most basic consumer durables. must look out for themselves. Money
Therefore, products cannot simply be is power, prestige, and respect in
“translated” into Chinese; they must China. Hence, the Chinese are prone
take into consideration the cultural to flaunt it if they have it. Incomes in
and social context, thought models, China have not necessarily kept pace
and unique behaviors of the many with GDP growth over the past
different types of Chinese people. couple decades, and meanwhile the
cost of living is rising. Foreign goods
are also subject to high import tariffs,
making them extraordinarily
expensive by Western standards. The
paradoxical thing with the Chinese,
however, is that while they admire
and strive for luxury and quality items,
they are also traditionally very frugal
and value-minded, particularly the
older generations.

four five six
China’s youth generation aged 15-30 Because of these characteristics of In contrast with the “rare generation,”
(nearly 330 million today), in particular ingroup bias and tribal behavior, China’s more senior consumers
the urban youth — sometimes Chinese consumers are especially (aged 35 and older) tend to be very
known as the “rare generation” — drawn to products and brands that frugal, stubborn to adopt new things
are remarkably different from their communicate a clear lifestyle, and technologies, and are extremely
elders. They are mostly only children, identity, and culture. The desire to be value-conscious (if they are middle
under tremendous familial pressure individualistic has its limits; Chinese class; the wealthy are a different
to perform and succeed in life, but consumers, especially the urban story). Most are investing the majority
they also want to enjoy their youth, want to fit in with the sub- of their time, energy, and income on
freedoms, the good life, consume a cultures or tribes in which they want to providing the best of everything for
whole lot, and they want it right now! be accepted. This means buying the their only children (the spoiled rotten
They are driven by the constant same brands and products, following ones are sometimes referred to as
search for newness or novelty. They the same styles and trends, etc. “Little Emperors”). However, in a
are optimistic about the future, yet world completely different from the
very impatient. They are individualistic world in which they were born and
and self-expressive, yet they are grew up, these Chinese adults are
incredibly “tribal,” in Seth Godin’s suddently bombarded with and
sense of the word (except, perhaps, overwhelmed by choices they’ve
in terms of having a clear “leader”). never had to make before. They
And because they are continuously need information and explanations of
experimenting with their own how new products will matter to their
identities and new freedoms through lives, otherwise they’ll simply rely on
fashion, style, food, and material what they’ve always known and buy
goods, who they are and what they the cheapest, good-enough option.
want is constantly shifting. They have
a lot of purchasing power and will
represent a major consumer force for
China, yet they are curiously protean
and one of the most demanding
consumer segments in the world.

seven eight
One important thing to understand is In addition to competition coming It’s worth noting a thing or two
that the Chinese have a tremendous (eventually) from domestic brands, about the Chinese consumer retail
amount of national and cultural pride, you must also recognize that right environment and experience as
stemming not just from thousands of now you are engaged in fierce well. While the retail environment is
years of being one of, if not, the competition with shanzhai products beginning to look a lot more like
most powerful civilization in the (“knockoffs”). Regardless of the that of the West (modern shopping
world, but also from three decades differences between the youth and malls and hypermarkets are
of tremendous economic progress. their elders, most Chinese do being built by the hundreds), there is
While they admire foreign, global recognize and appreciate quality and still something very different and
products for their quality, luxury. They just simply cannot afford unique about how and where the
technologies, and design, they also it. They are drawn to the global Chinese shop, which is one reason
fully intend to build their own brands and products that exude you will really need to work hard
domestic brands to compete qualities like performance, luxury, on your distribution strategy.
globally. They are looking to the West beauty, style, and power. However, Shopping malls are more like lifesized
to learn from and borrow (or steal… most Chinese who cannot afford the catalogs for most of the middle
it’s often true) their intellectual global branded products they aspire class, where they can browse and
property, methods, and practices, so to own, are perfectly happy with fake take note of the latest high-end
that they can catch up. But, it is alternatives, which are often as good styles and products. But, more often
critical to recognize that the Chinese as the real thing. In addition, these than not, the middle class consumer
want to modernize, not Westernize. shanzhai products will be will then head out to the street to
They wish to be modern while manufactured and made available to the large marketplaces or bazaars
retaining their Chinese essence. On consumers in more variations than (in areas like Zhongguancun in
the more pop cultural level, you see you’ve ever dreamed of before your Beijing) where hundreds or
this in the form of so-called “China products will ever make it to market. thousands of small vendors will sell
Style,” or fusion of traditional Chinese You can count on that! Finally, the the same or shanzhai versions of
elements with Western styles, music, shanzhai industry should also be many products (electronics, fashion,
fashion, etc. given some credit and recognition for or media) at negotiable prices.
the creative, entrepreneurial, DIY
culture it is fostering, providing
consumers with access to a high
degree of personalized or
customized items across a variety of
product categories. In a country of
1.3 billion people, it’s difficult to
differentiate oneself from the crowd,
but shanzhai products (particularly
electronics) introduce all sorts of
novel variations, at remarkable
product development cycle speeds,
feeding into the Chinese thirst for
anything new.

nine ten eleven (one caveat)
The Chinese have a well-justified Chinese consumption to date has Everything just stated above is,
distrust of media in general. been primarily focused on goods unfortunately, not carved in stone.
However, in the Internet they trust. (fashion, gadgets, etc.), but as Because of the incredible rate of
Bulletin board systems (BBS), consumers they are beginning to progress and change occurring in
forums, blogs, online communities, sophisticate and mature. Relatively China, anything you learn today may
and social media are their most speaking, the average Chinese not be true a year or two from now.
trusted sources of information. They consumer’s purchasing power is still You are playing a frantic game
do not generally believe advertisers’ but a fraction of that of the average chasing rapidly moving targets.
claims. They seek out the advice, American consumer. However, as Therefore, take our suggestions
experiences, reviews, and feedback incomes continue to rise, and for above to heart, but be willing to
of their peers online before making those already upper middle class and revisit them in the near future for
purchase decisions. Chinese wealthy consumers, expect them to further evaluation or validation.
Internet users spend 18 hours per become more demanding for new
week online versus only 12 hours services and experiences, in such WARNING: Stop here if you’ve had
by their American counterparts. areas as food, style, living, mobility, enough or are a lazy reader. Continue
Chinese consumers are also health and wellness, and finances. below the fold if you’d like to hear a
beginning to greatly increase the lot more details. And also join in the
amount of shopping they do online, conversation on our blog by
as credit card penetration has rapidly commenting on, debating, or even
increased and other forms of online contesting our claims. We hope to
payment have emerged and gained open up the conversation to all of our
consumer trust and confidence (like readers for our mutual enlightenment.
Alipay from Alibaba, which is more or
less like Paypal). Also, the Internet
simply offers a great variety of
products to choose from, things
which may not be available on the
mainland. Today, most online
shopping is transacted as cash-on-
delivery, but that is likely to change in
the coming years. And because
mobile phone penetration in China is
significantly higher than computer
penetration, expect that consumers
will begin using their phones and
computers to shop more.
Despite the high value that most
Chinese consumers place in peer-
review of products, however, they are
still suckers (like most of the rest of us)
for the right celebrity product
endorsement. So, don’t underestimate
the influence of the right personality.

The Future Looks Red,
But No Need to Panic (Yet)
Global GDP (nominal) was roughly
US$61 trillion in 2008. According to
the International Monetary Fund, the
European Union collectively
represented about 30.2% of the
global economy, the United States
23.7%, Japan 8.1%, and China had
the fourth largest economy
representing 7.1% of global output.
Ten years ago China represented only
3.9% of global GDP.
In the last 30 years, starting just
before Deng Xiaoping initiated
China’s economic reforms, the
country’s GDP has grown more than
81-fold, while the US’s GDP grew
only about 6.3-fold (not adjusted for
inflation). This is truly awe-inspiring!
But, make no mistake, China is still Sources: US Bureau of Economic Analysis, National Bureau of Statistics of China
overall a relatively poor nation. Today,
it is a country of relatively few haves
and significantly many more have- computers, air conditioners (in urban and analysts — from the World Bank
nots. It has an emerging middle areas), and showers. For the typical to the IMF to Goldman Sachs,
class, which depending on how you Chinese, the future decade will Morgan Stanley, and Credit Suisse
define “middle class,” is anywhere become about buying his/her first car — indicate that Chinese GDP in
from 50-500 million people. The and possibly owning a home. purchasing power parity (PPP) may
middle class and the rural poor have Late last year, China passed the actually pass that of the United
managed to more or less escape United States as the #1 automobile States in anywhere from 5 or 10
extreme poverty in these past three purchasing nation. They now years (optimistically) to maybe 20 or
decades, and now are finally manufacture more cars than we do 30 years (conservatively). The ever
becoming a massive and legitimate too. They’ve all but acquired Volvo entertaining Swedish professor of
consumer force in their own right. from Ford and bought the rights to international health and co-founder
In Maoist China (1949-1979), key technology platforms from Saab and Director of the Gapminder
consumer possessions were a from GM. They have more Internet Foundation, Hans Rosling, has even
bicycle, a wristwatch, and a sewing users (338 million) than the United predicted the very day that Chinese
machine. In the 1980s and 1990s, States has people. They now have GDP per capita in PPP (and that of
major consumer durables included over 720 million mobile phone India) will pass that of the United
color TVs, washing machines, subscribers, and are still at only States: July 27, 2048. Definitely
refrigerators, and electric fans. In the 54.5% penetration. With their strong check out his TED talk.
past decade, key consumer and steady economic growth rate, What is undeniable is that
possessions became mobile phones, predictions from a variety of experts eventually China will have the largest

economy in the world (though not Director of China Market Research
necessarily the highest per capita Group and a widely-recognized
wealth in the world). expert on strategy consulting in
Nobel laureate economist Robert China, has even found through his
Fogel recently raised a lot of own company’s studies that
eyebrows by declaring that in 30 Chinese consumers are also leery
years, China’s GDP will reach $123 of Chinese-made products (food,
trillion and represent 40% of the in particular) and willing to pay a
global economy, with the United 10-20% premium for foreign brands
States trailing in a distant second at they believe will be safer. Moreover,
14% of global output, and the he rejects a McKinsey report to
European Union at a measly 5% of suggest that Chinese trust levels in
global GDP. (see image) domestic brands are actually at an all
His critics arguments aside, the time low. Good news for you!
point here is that Chinese political So, stay positive and read in more
leadership has made it clear that detail about the 10 things you should
they no longer wish to be the factory know about designing products for
for the world. They are proud, the Chinese consumer. We know
optimistic, and determined to attain that these can’t possibly cover
superpower status. And, part of this everything you’ll need to know to
road to global economic hegemony succeed, but these lessons should
will include developing their own provide you a great start.
Chinese companies and brands that
will themselves become global brand
powerhouses. So, while today you
may consider a Lenovo laptop or a
Haier beverage cooler when you go
to Best Buy or Home Depot, be
prepared for an onslaught of other
Chinese brands to become part of
the American consumer landscape.
Eventually. Maybe in a couple
decades. Maybe more?
The good news is that this means
there is still time for you, as an
American or Western business, to
still look to China as an important
component of your global strategy.
Chinese-made products are still
beleaguered by a perception (and,
perhaps still too often, a reality) of
low quality, cheap and shoddy
manufacturing, and questionable Could this be what global economic hegemony will look like?
adherence to safety standards.

China is still learning how to move up
the global value chain, but it is doing
so at an alarmingly rapid clip. Shaun
Rein, Founder and Managing

The Longer Version
one
Many markets, many customer
segments. Do your ethnographic
homework and market research.
China is big. Really big. And things of

that scale make eyeballs widen and
mouths salivate. But one thing China
most definitely is not is a
homogeneous country of 1.3 billion
identical customers. If there is one
thing you should know about China
by now, this is it. The myth of selling
your product to 1.3 billion customers
has long ago been busted.
When foreigners think of China,
they often imagine unity, consistency,
and regularity… a predilection
toward the collective over the
individual. The truth is, however, that Sources: Artefact (click to enlarge)
China is a complex collection of
provincial, local, cultural, and social
sub-markets, where local politics and “Beijing and Shanghai are not China. consist of the provincial capitals.
cultural practices create major It’s just not true. Just like New York Nonetheless, if you look at GDP per
differences. Furthermore, the and L.A. are not America.” capita figures for these Tier-1 and
Chinese are far more self-interested You’ve probably heard about Tier-2 cities (based on data from the
and individualistic than you may Tier-1, Tier-2, Tier-3, and so on National Bureau of Statistics of
assume. For centuries, there have cities. But, few users of this China), they range quite strikingly
been vast differences between the classification system are ever very from Nanning — a provincial capital
rural and the urban, between one specific or consistent about which whose key industry is mining — with
province and another, but since cities fall into which buckets a GDP per capita of 15,685 yuan in
Deng Xiaoping’s economic reforms (particular Tier-3 and lower), and 2007 ($2,062 US), while Shenzhen
began around 1980, the country has most global companies have tended — a major electronics, high tech,
diverged along multiple dimensions to focus on the richest Tier-1 cities and manufacturing center — has the
as economic development, planning first, then work their way down. highest GDP per capita among
of special economic zones, and new Clearly, the Tier-1 cities consist of China’s cities at 89,814 yuan in 2008
wealth have been distributed Beijing, Shanghai, Guangzhou, and ($13,091 US). Due to the policies of
unevenly, unfairly, and at differing Shenzhen (Hong Kong too, if you these special economic development
rates throughout the country. want to include this Special zones and different regional
As cultural translator and socio- Administrative Region, though it industries, even among these Tier-1
cultural researcher Lisa Yong of Y differs from the rest of China in many and Tier-2 markets the differences
Studios in San Francisco told me, ways). The Tier-2 cities tend to can be significant.

What has happened in China in estimates of the number of Chinese China’s GDP per capita as a
the past 30 years has been that who are considered “middle class” whole was 18,934 yuan in 2007
many people, usually well-connected ranges from 100 million to 250 ($2,490 US). The differences
to Communist Party officials, have million people. Some would go so between rural and urban China are
used their positions and connections far to say that the range might even considerable, as you can see in the
to amass their family fortunes as be more like 50 million to 500 million. table above. Rural China,
privatization increased. The early One scheme for defining the East representing 55% of the population
entrepreneurs and business people Asian Middle Class (EAMC) developed of the country, has per capita net
also capitalized on new business by Hsin-Huang Michael Hsiao and disposable income of 4,140 yuan
opportunities. Real estate Alvin Y. So includes six classes in ($603 US) versus 13,786 yuan
developers and speculators became Chinese society, an elite capitalist ($2,009) for urban households. In
some of the richest of these class at the top, four classes other words, urban Chinese on
entrepreneurs. Others, opening new representing the “middle,” and a average have 3.3 times as much
businesses, found their fortunes lowest class of farmers and peasants: income as their rural counterparts,
increase almost overnight. As stock An analysis conducted by Li the differences being even more
markets opened, many played the Chunling of the Chinese Academy pronounced in Tier-1 and Tier-2
markets and capitalized on the of Social Sciences, estimates that cities.
boom. What this has led to is a of the urban Chinese population in Lisa Yong admits that the
tremendous inequity in the 2006 (577 million), 0.6% were in the differences between all of these
distribution of wealth. There are the Capitalist class, 18.8% in the New “tiers” of cities was and still isn’t
super rich, the nouveau riche, the Middle class, 19.6% in the Old entirely clear cut. She sees the
poor rural folks, and now a large and Middle class, 25.4% in the Marginal development of China’s cities
growing middle class or who are Middle class, and 35.7% in the occurring more organically, with often
typically well-educated, white-collar Working Class. Presumably the some of the most interesting things
professionals working for large remaining rural population (737 often happening in the heartland or
companies. But, defining this middle million) was lumped into the Farmer the most unexpected places. For
class is somewhat controversial in class. Again, one can see in the table example, she claims that Inner
China with no widely accepted below a tremendous range in Mongolia has been successfully
answers, and the most typical incomes and distribution of wealth. growing its own regional brands in
the food and beverage industry. The
lesson here is that you will be facing
competition from the bottom-up who
are more in tune with the currently
most underserved consumers.
Then, there’s the whole
consideration of segmenting these
markets. The major difference,
beyond regional differences and
Sources: Chinese General Society Survey 2006 and National Bureau of Statistics of China income-level, is without question
age. The urban youth generation (15-
30 years old) are markedly different
from their parents and elders,
earning them the nickname the “rare
generation.” We’ll discuss some of
these differences in more detail later.
Beyond, the demographic
differences, you’ll really need to get
immersed in the culture and do more

Source: McKinsey Insights Asia (click to download report)
proper ethnographies and user with groups of smaller cities notion of user research and
research to understand the more developing in their vicinity, as seen ethnography, especially when
psychographic, motivational, and below. One advantage in this model is conducted by foreigners. Culturally,
behavioral difference among these that one can begin to understand how there is a suspicion of foreigners and
age clusters. the value chains between businesses their motives, ingrained for centuries
Finally, if you thought the Tier and industries link neighboring cities as Western imperial powers tried and
system was already enough to wrap together, thus influencing their tried to open China up to trade,
your head around, now McKinsey economic development as well as the started the Opium Wars, and found
Insights Asia is suggesting a new social and cultural customs and numerous other was to offend,
framework around city “clusters,” trends. (see image) anger, and oppress a proud
which they believe overcome some of Do your ethnographic civilization. Certain topics (money,
the limitations of the Tier system, homework and market research. marriage, politics, etc.) may be taboo
which relied primarily on GDP per What all the aforementioned implies or considered rude or too personal
capita. In this approach, 22 “clusters” is that in order to succeed in China, for user interviews.
have been identified, recognizing the your business will have to invest Experienced design researchers in
linkages between neighboring cities in continuously and intelligently in user Asia, like Elaine Ann from strategic
terms of industrial composition, research activities and ethnographies innovation consultancy Kaizor in
government policies, demographic to understand the various segments Hong Kong, says that many of the
characteristics, and consumer you might wish to target. And, this methods of user research taught in
preferences. The clusters tend to won’t be easy. The Chinese people, in the West, at places like Carnegie
include one or two large hub cities, general, are less comfortable with the Mellon or the IIT Institute of Design,

don’t always work that well in China. You also want to make sure to age, by income level, outlook on life,
Her advice is to approach things in a research the right people. This might and by education level. Furthermore,
more personal way, by taking the time be confusing to some Chinese, who Chinese consumers are still learning
to establish a real relationship first. In expect that you’d want to interview about their own needs and wants as
other words, you’ll have to invest and observe the most senior people consumers. So much has happened
more time for many Chinese people in an organization, say, as opposed so quickly that they may not even
to feel comfortable. And, because the to someone who works on the know what want. And, what they like
Chinese are very concerned with how warehouse floor. today might be different tomorrow.
they are perceived by others, it can Knowing your customers and their Ian Donahue, a market research
be disastrous to conduct needs is, of course, a basic principle consultant at Anovax in Shanghai,
ethnographies or research where of smart business. In China, the explains some of the other unique
people are being viewed by strangers challenge is that the consumers are challenges with understanding
or other “outgroup” individuals. very different from place to place, by Chinese consumers. For example,
language ability is not enough.
Social identity theory is an
“The best advice, of important frame for understanding

Chinese notions of ingroup and
course, is to go there for outgroup. Though fluent in Mandarin,

he never moderates an interview
because he is viewed as an outsider.
yourself and really get He suggests further that even
regional differences are critical.
immersed. See it with your “Always use local moderators, if

possible from the same city,” he
own eyes. Have patience explains.

For example, going into a home in
and work with locals to

Shanghai for an ethnography with
a Beijing moderator can be a
problem. Like Elaine Ann suggested,
help build rapport with the one should also expect to invest
more time conducting ethnographies
people you want to than what might be needed in

the West. As Donahue broke it
research. Learn Mandarin down, the first hour will consist of a

lot of resistance, confusion, and
discomfort. “Why are you here?!” the
(or putonghua) too.” participants will be wondering.
However, with a skilled and charming
moderator, possessing a good
personality, and adept at building
rapport, those barriers can
be overcome in the second and third
hour of an interview. At this point,
participants will be more likely to
open up.
Other tips from Donahue include
using small teams for in-home
studies. Chinese homes are small

and space is a concern. Try to limit Chinese research participant to try to
yourself to three people: a guess what they think you the
moderator, an observer/notetaker, interviewer want to hear rather than
and a videographer. be open and honest. But, as she
When interviewing younger people points out, this isn’t too different
(age 15-29), expect their parents and from conducting research in the
grandparents to hover by closely and United States, especially when
suspiciously. These children of the getting paid for one’s participation is
one-child policy — often called “Little a primary motivator.
Emperors” as they are the single In addition, the fields of user-
pride and hope of their families — centered design and ethnographic
tend to be very spoiled and research are still relatively new in
pampered. Their families are very China, and as a result, many of the
cautious and protective of them. local partners with whom you might
Therefore, make sure to show work may not be as skilled or
respect toward other family experienced as you might hope. It
members. Allow them to sit in and will be a challenge for you to keep
participate, but respectfully try to protocols straight, practice good
keep the focus on the participant. interviewing techniques, and impress
Although in complete agreement upon your Chinese research partners
with the sentiments of Ann and to not view the interviews as
Donahue, design research consultant unstructured conversations.
Anjali Kelkar from the Studio for Emphasize sticking to protocol,
Design Research in Hong Kong, asking questions about why people
believes that with many younger, behave as they do, not interjecting
urban Chinese, it can be a little bit one’s own opinion, and so on. Finally,
easier to make the connection that is data are not always viewed by the
critical to a good ethnographic Chinese as inviolable nuggets of
interview. She bases this on her truth. Culturally, there is a deeply-
experience that many of these young rooted history of manipulation of
folk are very curious, chatty, and data in day-to-day life, government,
eager to talk to foreign people and and elsewhere. So, emphasize the
share their experiences. Admittedly, importance of quality, objective data.
though, this sometimes requires As Li puts it, usually “people don’t
either being or being accompanied take them (data) seriously.”
by someone who is part of that right For another perspective on the
ingroup, someone who “belongs.” fudging of data and cooking the
Shuang Li, Principal UI Designer books, check out this piece from
at Intuit, has many years of Shanghai-based business journalist,
experience and perspective doing Jordan Calinoff. And, check out
user research in China, as well as Thomas Friedman’s latest columns
trying to import and teach good UI/ where he suggests that China could
UX and design practices for be the next Enron (note: I
companies like Sina.com. She intimated something along those
corroborates the general truth that very lines in an off-hand Facebook
the Chinese are somewhat taken status update on December 29,
aback when people want to know 2009, two weeks before Friedman’s
what they think. It is typical for a column… just saying…).

two
To get rich is glorious. average citizen with nothing left to development, hoping they’ll turn out
trust in. Except for cash money. an exceptional individual.
The “proverb” above is a loose Cash money Meanwhile, the cost of living is
adaptation of Deng Xiaoping’s and the support of family are increasing. Foreign goods are also
exhortation to his country to “let some truly the only safety net the Chinese subject to high import tariffs,
people get rich first.” The Chinese have. Despite decades of making the shanzhai products even
have always been a mercantile continuous strong economic growth, more attractive bargains. The
society full of entrepreneurial spirit. most Chinese feel less secure than “Little Emperors” are known to be
After the devastation of their before, as they are no longer spoiled rotten and be the “me
economy under Mao Zedong’s Great guaranteed jobs, housing, and a me me” generation. They are crafty
Leap Forward and Cultural pension. Consequently, as a at getting money from parents
Revolution, with Deng opening the society, overall, the Chinese are and grandparents to spend on
country up to economic reforms, it very thrifty, saving reportedly fashion, gadgets, and whatever else
became evident that the only 40% of their income on average. they desire. After all, they symbolize
leading ideology for the country as The older generations are known the singular hope for carrying on
a whole was to “enrich itself,” as for their frugality and extraordinarily the family name.
James McGregor points out in One high savings rate in order to provide Money and wealth and the
Billion Customers. As China’s for their child. Education is also material goods they afford translate
government policy shifted from no longer free, so parents who want to status and respect from others.
wealth repudiation to wealth their children to succeed in life This explains why many Chinese
creation, the dismantling of much must save as much as they can to who have “arrived” like to flaunt their
of the socialist safety net also left the invest in the child’s future and fashions, cars, or gadgets. For
Chinese youth, the mobile phone is
the largest consumer purchase they
typically make. It is for them their
most important symbol of status
and freedom.
The high savings rate that
the Chinese exhibit as a whole does
not translate across all groups,
however. The young, urban Chinese
(15-30) are reported to essentially
save nothing at all, as Pascal
Nouvellon of COFIDIS explained
to Shaun Rein of CMR in an
interview last February.
As credit card penetration
continues to expand, we might
expect the hallmark frugality of the
Photo by: Evan Osnos, Artist: Tao Hongjing, Source: The New Yorker (click to view source) Chinese consumer to change, with
younger people, more optimistic
about the future and their prospects,
choosing to buy on credit and
accumulate more debt in order to
obtain the material goods they desire.

In sum, the young Chinese
consumer is still single-mindedly
optimistic about making it rich.
Along the way, he/she is also
becoming more sophisticated in the
new ways of transacting commerce.
The desire to flaunt one’s arrival will
continue, and I would suspect that
many young people (or their
parents) will be soon learning the
dangers of abusing credit limits.
Already, a New York Times article
cites that “about 11 percent of
Chinese parents have paid credit
card debts for children 22 to 27
years old, a group that has become
accustomed to the good life but has
found it difficult to pay for,
Sources: National Bureau of Statistics of China, company websites, and other (click to enlarge) according to a survey by the Beijing
Youth Daily newspaper.”
Nonetheless, the emerging
Donahue describes every subway transacted as cash-on-delivery. But, Chinese middle class mindset may
station in major cities having makeshift Alipay seems to have garnered the now be that after letting some
“kiosks” set up to get young Chinese young consumer’s trust, with of the people get rich first, as Deng
to sign up for the newest credit accounts now exceeding 250 suggested, now the masses
cards. He describes these kiosks as million. That makes buying things would like to “eat the emperor’s
regularly surrounded by dozens of on Alibaba’s other property, Taobao grain” too. Taking a page from
young people, who are often enticed (China’s version of eBay), a snap. American hip-hop culture, emcees
with a free gift as well. Shaun Rein firmly believes that from the growing hip-hop scene in
As the chart above also shows, e-commerce will continue to China understand the brutal reality
other forms of payment are taking explode in China thanks to the of an increasingly materialistic
off. While China is still primarily proliferation of credit cards, Alipay, world. Wang Li, a 24-year-old
a cash society, Alibaba’s equivalent and the ability of consumers to shop rapper from Dongbei, says in a
of Paypal, called Alipay, has not only from their computers, but New York Times article that, “All
increased its membership from their Internet-enabled mobile people care about is money. If you
dramatically in the past few years. phones as well. This phenomenon, don’t have money, you’re treated
The Chinese have not always felt however, will most surely be limited like garbage. And if you’re not local
comfortable with the security of to the young, urban Chinese who are to the city you live in, people
making transactions online, hence comfortable with this type of discriminate against you; they give
most e-commerce today is consumer behavior. you the worst jobs to do.”

three, four, five & six experimenting with self-expression They are not thinking a whole lot
Ingroup and outgroup / Youth tribes and identity through consumer about their future and are not very
and their elders / Identity, lifestyle, choices. They have no instinctive responsible with their money. The
and culture / Seeking the good life aversion to borrowing or Young Professionals, on the other
accumulating debt, like their elders. hand, follow their parents wishes
The challenge with the Chinese They are obsessed with the latest much more closely, focusing on
consumer is that there are so many fashions and gadgets. Newness and making the right choices in school,
different segments to consider. We novelty are important values to them career, etc. They are incredibly
think two of the most valuable as they want to keep up with styles. hardworking and have very limited
distinctions to make are 1) between This means they can’t always wait to social time. They work on the
rural and urban Chinese, and 2) save up their money to buy the weekends if they need to, tend to be
between the youth and their elders. things they want. They have to buy bottom-rung workers in large
However, below we will tend to focus them now, before it’s too late and companies, and aspire to higher
the discussion on the latter: the they’ve gone out of vogue! salaries which will eventually enable
differences between the “rare While highly individualistic and them to buy the luxury items they can
generation” and their parents and self-expressive, their desire to display as symbols of their success.
elders. What is their middle class be “different” is not quite the same But, some Chinese youth don’t
dream? What do they want? How as in the West. As Ian Donahue necessarily view these young
are they different? What is the good explained it, Chinese youth socially professionals in the most positive
life that they are seeking? tend to resemble the American high light. Qi Fei, a 25 year old graduate
Chinese youth and young adults school clique culture. Social student from Dalian, says that a lot of
under 30, to put it bluntly, are acceptance to a group, or tribe as I people think that these members of
fundamentally different from their might call it, is critical. Being an the are an
elders. They are typically only independent renegade or loner is not “embarrassment.” They work very
children (born under the one-child desirable. Remember, these are hard at large companies, but are at
policy) who’ve grown up without also mostly only children, and to a the bottom of the hierarchy, and
experiencing major political turmoil certain extent there is a high degree don’t have much money compared
(the Tiananmen Square Massacre of loneliness or isolation as they have to the entrepreneurs or people with
perhaps one exception) during times grown up without siblings. They their own companies. To make
of continuous economic growth and seek acceptance and companionship matters worse, they have very little
having relatively more freedom to from others. time for much of a personal life.
make personal and professional Influenced heavily by Korean and Of course, there are many other
choices. They are the pride of their Japanese trends, as well as American youth segments to consider, including
families, often overindulged and products and styles, you will witness the Sporty/Jock types for example,
spoiled rotten (“Little Emperors”), many different types of groups or who might embrace an entire culture
given the best of everything their tribes forming. Donahue mentions the around sports and a brand like Nike,
families can give them, because their two most apparent ones as the which invests heavily in creating
parents are investing all of their hope “Party and Club” group of youngsters and marketing a culture around their
in the future success of their one and the “Young Professional” as brand and products in China.
child who will carry on their family another major group. The former Another popular word in Chinese
name. These youth are ambitious, tends to work just enough to pay for is , meaning “petit
energetic, modern, individualistic, their night time lifestyle. They care bourgeois.” If you ask a Chinese to
creative, and optimistic. They have about fashion, clubs, music, and describe such a person, you will
attitude and personality, are savvy socializing. They might convince their almost universally hear them
and complex, are proud to be parents to buy them a nice car, or hit described as young, single, urban
Chinese, and are constantly up grandma and grandpa for cash. women under 30, fond of Starbucks

coffee and Häagen-Dazs ice cream, and now leads more of a hardcore aggressive. He is driven by attaining
who typically spend 1/3 of their party lifestyle at night, drinking, fame, power, and money. He wants
income on bars and restaurants, 1/3 dancing, listening to deejays, etc. He a cool car to reflect his status and is
on shopping for brand-named gets money from his family to support passionate about technology and
clothing, have an aversion to saving his lifestyle. He might look more like a gadgets. He spends a lot of his free
money at all, love watching European “street punk,” with dyed hair, tattoos, time on his computer, watching
art performances and listening to and piercings. He sleeps in late and movies and listening to music
Italian violin, and have Van Gogh gets up in the afternoon to hang out (mostly free or bought on pirate
paintings hanging on the walls of their until he parties the rest of the night. discs on the street), playing games,
apartments. They appreciate the Both of these groups/tribes/personas and reading about and engaging
value of design and lust after the are similar in that they will have a socially online in his passions. His
latest trendy foreign products (iPod, unique set of preferences, styles, mobile phone, as with all the other
Miss Sixty jeans, Gucci, Chanel), but brands, and definitions of what’s young people in China, is his
have to save up for some time to be “cool” or fashionable. most essential tool and symbol of
able to afford one or two of these The Striver and the Modern status when away from home. He
luxury items. These women seem to Conservative might cluster together strives for the good life that he
enjoy the experience and atmosphere into the Young Professional segment believes is possible through the
of being out and about in expensive described by Donahue. The Striver formula below for achieving success
clothing, sipping coffees, and view is a young professional, very (primarily among those in the Tier-1
themselves as rather elegant. But, the hardworking, ambitious, and and Tier-2 cities):
term is also used somewhat
disparagingly by other Chinese youth.
Yu, Chan, and Ireland’s
identification of four “personas”
among the urban youth of China
(from China’s New Culture of Cool),
included: 1) Ding Li, The Playgirl, 2)
Wang Liang, The Striver, 3) Chen
Hong, The Modern Conservative, The Wu Zi (“5 Zi”): Aspirational motivators for the Chinese middle class (typically, male)
and 4) Li Hua Min, The Rule Breaker dream, Source: Anovax
or those who are sometimes called

the or “hooligans.”
There are some clear consistencies
between Donahue’s more general
assessment of the youth market and
the Cheskin team’s four personas.
The Playgirl and Rule Breaker tend to
cluster with the Party and Club-going
tribe, though the Playgirl tends to be a
younger teenager, working a low-end
job in something like retail, interested
in friends, boys, fashion and
shopping. She aspires for luxury items
in her life eventually, though she
doesn’t think a whole lot about the
future yet. The Rule Breaker is usually
older, perhaps not having succeeded
in entrance exams for the university,

As you can see, this is clearly the On the flip side, there is also a she seeks more balance, though she
more male perspective on what growing trend of female may be too reserved to admit this to
constitutes the good life. In a country empowerment in China. Many of them. She follows the rules and tries
where there are 40 million more men these young women are interested not to stand out too much, but she
than women, these young men are in savoring life and the things you values her personal freedom to
actually in serious competition to can buy and not particularly choose a career and eventually
achieve their version of the Chinese interested in having children. choose to live however she likes. She
dream. Many feel a great amount of The Modern Conservative is is less likely to want to have children,
pressure to earn enough income, similar to The Striver in terms of her though she’d like to be married and
own a nice car, and have a house desire to achieve professional lead a life of balance between work
before being considered eligible or success. She is socially more and personal leisure and travel.
desirable for marriage. conservative and reserved, and These are just some of the few
The parallels between this possibly more likely to be one of the segments beginning to describe the
perspective from American hip-hop so-called “Little Emperors.” She is large and complex group of 327
artists to the new Chinese under tremendous pressure to please million young people in China. These
hip-hop artists is incredible. The her parents and live up to their “tribes” form their own unique social
perceived keys to male middle class standards, but though she studies cultures, where the products,
(heterosexual) success are and works hard, she may not want to fashions, and styles they strive for
seemingly identical. Compare Young be competing to the be the very tend to be more consistent within the
MC’s lyric from his popular hit “Bust best. She wants to live a rich and ingroup. However, as a rule of thumb,
a Move” to the freestyle rap of Wang fulfilling life, which she defines brand loyalty within these tribes is
Li of Dongbei, mentioned earlier: differently from her parents, where very low in China, because all brands
“Got no money and got no car, then you

got no woman and there you are.”
— Young MC
“If you don’t have a nice car or cash,

You won’t get no honeys,
Don’t you know China is only a heaven
for rich old men,
You know this world is full of corruption,
Babies die from drinking milk.”
— Wang Li

are new. And since the young
Chinese especially are constantly
searching for the next new thing, they
can change their loyalties very quickly.
As another peripheral example of
the type of sophisticated
segmentation happening in China,
Jessica Liu — formerly vice general
manager of Sinomonitor
International, now Research
Director of Media at Synovate
— in one study segmented just the
most affluent of Chinese
consumers into no fewer than five
groups, including such segments as
the “Modern Butterfly,” the
“Peacock” and the “Laboring Bee.”
Yong warns that the challenges of
defining and segmenting your Sources: CNNIC, National Bureau of Statistics of China, CTIA, and US Census Bureau
customers will be a real challenge.
”There’s so much gray area, so you
need to put a lot of effort in,” she these young people we’ve been service and data to monthly
says. She says that the labels are discussing, however, is that they are subscription plans. Incidentally, the
nice but hard to do well. The on a continuous quest for identity Chinese are also known to save up
boundaries are blurry and everything and self-expression. They are young and spend a lot of money on a fancy
is becoming more and more adults still figuring things out and are mobile device, but they can be quite
interconnected within China and changing rapidly. They are all hungry cheap when it comes to paying for
between China and the rest of the for novelty and increasing their texting and data plans.
world. As she puts it, “Some parts of exposure to the rest of the world. As an aside, you often hear about
China are looking more and more like With this group, you can’t, for the amount of texting and IM/chat that
Hong Kong, Taiwan, or Japan even. example, sell them into a 2-year the Chinese do, but do not be fooled
So, where is the real China now?” contract for a mobile phone (which when you hear all the big numbers.
Again, the message is clear: you Apple is learning the hard way), Our analysis below shows that
can’t really know and understand because none of them can imagine Americans are far more prolific texters
China and its people until you go keeping a phone for that long, not to than the Chinese. Why? Most likely
there and see it and them for yourself. mention that culturally the Chinese because we are more inclined to
The one thing that is true for all of prefer pay-as-you-go methods for purchase unlimited text and data plans.
The Chinese generally seek to avoid
paying for services like that as much as
possible. And they are accustomed to
finding ways to evade paying for things
that can be gotten through pirated
means or through cheaper alternatives.
Hence, they are much more prolific
users of IM/chat, like QQ, than they are
of text messaging. (see image above)
Ancient Chinese proverb

I think we can all agree then, at support their child with housing On the other hand, another
this point, that China’s urban youth costs, and especially for a male child graduate student from Beijing, Ye
(15-30) are and will become a by buying him a car. The net result is Pinxia, says that it’s easy for the
unique and transformative force, vital that this older middle class older generations to make choices:
to spurring consumption in the demographic is extremely challenging they just compare prices and get
Chinese economy. And, in doing so to market to. the cheapest one. She shared with
they will also lead social and Qi Fei, the graduate student from me another story about how she
cultural changes as they exercise Dalian, says her father is not at all and her mom went to the big
their significant collective purchasing tech-savvy and is frequently electronics marketplace to get her a
power. The key to success, overwhelmed with technology. When new mp3 player because the CD
according to Donahue, is that these she left Dalian to go to graduate player she’d been using for 8 years
young consumers need to be school in Chicago, she strived to had broken. While Ye urged her
able to understand how the products teach him to use MSN, video chat, mom to get something cool and
marketed to them are beneficial to email, and the computer in general fancy, her mother was unmoved by
and fit into their lives and the so that they could communicate. the thousands of choices, features,
lifestyles they want to lead. Otherwise, But, today he still struggles with and designs. She wanted something
they will just be passing fads. these technology products and that played mp3s, had a radio, and
So what about their elders? The wouldn’t dream of buying something was cheap. End of story. After
older generation of Chinese online. On the other hand, his comparing prices among many
consumer (35 and up) remember a generation is very happy about the vendors, she got a non-descript
time when they had next to nothing options they now have in clothing, device for 140 yuan (about $20). Ye
and few if any choices. While they are shoes, and accessories. is pretty certain it’s a shanzhai
excited with the quantities and As Qi explained, “Almost all product too.
varieties of foods they may find at a technology products are geared As we mentioned before,
hypermarket, they are generally toward young people. I don’t believe traditional Chinese attitudes toward
struggling to understand all the new manufacturers are doing a good job saving are deeply ingrained. Among
products and brands which they’ve at selling to people like my dad and the older generation, who are used
never had a need for before. providing them support. They always to using cash almost exclusively, you
Consequently, they are very resistant feel frustrated so they don’t use always save first and then spend. Qi
to change or experimentation with these things actively.” feels that the notion of buying on
new products. They feel that their For many of the older generations credit is actually quite foreign to
lives are good enough, and their of Chinese, now confronted with many older Chinese, in fact, and that
interests are in providing for their more consumer choices than ever too many people have limited
child. Raising a child has become before in more areas of life than ever knowledge of how credit cards work.
more expensive, college tuition is before, they are simply poorly She knows people who have used
expensive, and their child has many equipped for making confident credit cards for a few months and
wants and needs. They may wish to decisions in the face of over- then cancelled them after too many
spend extra money on developing a whelming options. This is a potential unexpected charges. Chinese banks
talent in that child (music, sport, etc.) source of stress and confusion in general have not been very
in the hopes of making him/her a that product developers and customer-centric, and there may still
more exceptional student who will marketers should be sensitive to. For be a lot of mistrust among
succeed in entrance exams and example, consumer advocacy, consumers when it comes to credit
pursue and education leading to a information resources, and peer and other banking products.
good career. Children in college rarely review and filtering resources could In terms of associating products
get part-time jobs, and if they do, be of tremendous value to these with particular lifestyles or cultures,
they tend to be low paying ones. consumers. That is, if they are willing the older generation are less likely to
Entry level jobs after graduation also to adopt the technologies that offer be swayed by the designs of
are low paying, so parents frequently such resources. modern global brands, which

younger generations tend to In the end, China’s urban youth
associate as being cool and tend to be more interested in
different. For Ye Pinxia, a Macbook brands and products that project a
or Apple product is cool, not just for lifestyle or image they’d like to
its design but because so few identify with or aspire to, something
people in China have them. Even new and exciting, and not
with her cell phone, she does necessarily purely about traditional
research on which stickers her luxury or status-oriented brands.
friends have placed on their phones With the older generation, the
to make sure she doesn’t end up traditional values, colors, designs,
getting the same stickers. However, and brands with strong reputations
for Ye’s mom, she finds the products tend to be more appealing. But for
which appeal to more traditional all, being a savvy shopper will
Chinese styles more appealing. become an essential life skill.
Mom recently told her that an HP When all is said and done,
laptop skin designed by a Hong though, each type of consumer will
Kong designer with a huge Chinese have his/her unique set of
flower and lots of red and gold preferences and needs. As the
ornaments was her favorite. ancient Chinese proverb goes:
Ancient Chinese proverb

seven & eight drastically improving.” Nonetheless, and their economic power continues
Competition: national pride and she says if you compare two to grow, China is fully intent on
national brands + the shanzhai bookstore websites like Amazon. building and growing its own national
industry com with Dangdang.com, you’ll see brands to compete globally. Few are
many violations of basic HCI well known at this point, besides
At its core, Chinese society is all principles in the latter. It will take time Lenovo and Haier. But there are
about self-interest. It is very strong for the domestic brands to learn. major competitors growing
on competition but very weak on In James McGregor’s book, he domestically in China, like Huawei
cooperation. Despite its admission to also is pretty brutal about the fact that which is beginning to rival Cisco.
the WTO in 2001, China still hasn’t your technology, trade secrets, And China has been working hard to
quite gotten its act together in terms designs, and know-how will be stolen create their own microprocessors
of respecting intellectual property and/or copied (and probably even get to feed their tremendous demand for
rights. Historically and culturally, they to market first). Guaranteed. China, he computing power.
just have never had major qualms says, is not the legalistic society that In other industries, China is even
about stealing ideas. typifies the West. If a Chinese wants taking a lead, like new, clean energy
Commenting on the current to do something, he will find a way to technologies, for example. There’s an
situation with Google and the skirt the rules or laws. (see quote below) excellent piece by Evan Osnos on
Chinese government, Oded Shenkar, But, don’t forget lesson #7 about their 863 Program in a recent New
a professor of business management the tremendous national pride of the Yorker article.
at the Ohio State University and Chinese. They do not wish to be the Another rising domestic brand in
author of The Chinese Century, world’s factory any longer. They do China is Li Ning, a sporting
stated in a New York Times piece not want their consumers to equipment and apparel company
that, “The U.S. is the world’s greatest embrace and adopt only global that is taking on Nike. In my
innovator and China is the world’s brands. As they learn and modernize conversation with Ian Donahue from
greatest imitator.”
Shuang Li has witnessed in the
past 8 years that Chinese companies
are taking the influences of product “Any technology company
doing business in China
design from Japan, Britain, France,
and other countries, but starting to
design their own unique versions and
takes on them to better suit the
tastes of traditional Chinese culture.
should assume that
However, in the realm of software
and user interface design, she feels its designs and products
they are still mainly imitators with a
lot to learn. Her experience trying to are being copied. China’s
tech sector is built on
instill good human-computer
interaction (HCI) principles at Sina.
com was frustrating. ”People here
like these things, the cartoons, small
animations, lots of blinking… but in
reverse engineering foreign
the past few years they are picking
up and starting to build serious products.”
applications, for banks and real
estate companies, and they are — James McGregor

Anovax, he explained their mind, also, that the average urban category for urban households. Keep
successful strategy of targeting the citizen earned 2.6 times as much as in mind that as of 2007, automobile
lower tier cities first by offering the average rural citizen, while ownership was quite low overall for
products with styling and looks consuming 3.6 times as much on China with about 6 cars for every 100
reminiscent of global brands like Nike personal household expenditures. urban households. For the high
but at a fraction of the cost. They are As a result, the amount of income urban households in the 9th
now one of China’s most well known consumption by rural folks on many decile, there were nearly 12 cars per
and well regarded brands, working of these consumer categories are 100 households. For the highest
their way up from the lower-end incredibly low. I’ve converted to US income urban households (10th
consumers and now hoping to dollars to give you a better sense of decile), there were slightly more than
challenge Nike head-to-head in the relative difference with American 25 cars per 100 households. We
some Tier-1 and Tier-2 cities. citizens. (see image below) were unable to break down the data
Of course, Nike’s response or Since we at Artefact are in the “transportation and
approach is to do what they always particularly interested in technology communications” category to any
have done: emphasize their products, we then broke out the more granularity, but let’s see how the
technological advancements and “transportation and communications” numbers turned out: (see image page 24)
superior features which distinguish
their product, and do a heck of a
job marketing themselves. But, Nikes
are affordable only to the richest of
the Chinese consumers. Never-
theless, they’ve done a remarkable
job of creating a community and a
culture around their brand. And, as
mentioned in lesson #5 above,
Chinese youth are drawn to
aspirational products and brands that
they can identify with, products that
evoke a lifestyle, culture, and identity.
Will more Chinese brands become
dominant global players? Yong
believes that the Chinese are confident
that there will be a “homegrown Apple
or Microsoft eventually.”
The fact remains, however, that
the Chinese consumer on average,
Source: National Bureau of Statistics of China, Analysis by Artefact (click to enlarge)
is still relatively poor by Western
standards. Based on the National
Bureau of Statistics of China’s 2008
Yearbook, this is what the
breakdown of urban household
consumption was per capita in
2007. The data are broken out into 7
groups: the poorest 10%, the
second poorest 10%, the 2nd
quintile, the 3rd quintile, the 4th
quintile, the second wealthiest 10%,
and the wealthiest 10%. Keep in

For the aspiring middle class
consumers, fake products are just
fine. Sometimes they’re even better
than the real thing. Li describes the
typical Chinese consumer decision-
making process as follows:
1. Is someone else using it?
2. Can I afford the full price one?
3. Is the fake alternative available
and being used by lots of people?
4. If so, I can get a fake one and
not lose face since so many other
people have them.
5. Finally, for small electronics,
phones, and watches, often the
more features there are, the better.
Because, culturally, people like to
show off the bells and whistles.
Another reason why Chinese
Source: National Bureau of Statistics of China, Analysis by Artefact consumers are generally okay with
shanzhai products is that “getting a
good deal is important in the culture.
As you can probably conclude more or less the same, has the It shows you are an intelligent, savvy,
from the chart above, the average same features, but costs half the smart shopper.”
Chinese urban consumer is price or less. So, Chinese consumers do not
not currently spending a whole lot Literally, “mountain stronghold,” have big hangups about pirated or
of money per year on but it has come to mean the pirated fake products. And fake everything is
transportation and communication or knockoff goods, especially available around every corner, in
products or goods. Cars and electronics, made by those who more styles and variations than you
electric bikes aside, even mobile operate far from official control. can possibly imagine.
phones are hard to come buy According to Shaun Rein’s firm,
for $131 if you are in the middle CMR, they estimate that as many
class. Mobile phones in China are as 3.5 million Chinese consumers
not subsidized by carriers; have at one point owned an iPhone.
consumers must pay full retail He contends that 2 million real
prices. Suddenly it becomes a little jailbroken iPhones were smuggled
easier to understand why buying a into China before China Unicom’s
$300 or even $500 mobile phone is debut of the phone on October 30,
a major expense. 2009. Many of the real ones already
And, thus, shanzhai products resold on the secondhand markets.
come in to fill a market need for Meanwhile, China Unicom’s
more affordable technology predictions of 5 million handset sales
products (or fashion, shoes, etc.). Literally, “mountain stronghold,” but it in the first few years is looking
has come to mean the pirated or knockoff
Get something that looks goods, especially electronics, made by those
unlikely, as supposedly only 5,000
more or less the same, works who operate far from official control. have been sold. The reasons for this

have been explained above, but Moreover, the shanzhai industry is The better your reputation, the
basically can be summarized as exporting their wares too, in large more likely you are to have your
Apple and China Unicom didn’t really numbers. Their biggest destination is products counterfeited.
understand their target consumers India, but they also export to Of course, to look on the positive
and their needs and preferences. developing countries in Eastern side, one interesting aspect of the
But besides the jailbroken iPhones Africa, Asia, and Latin America. shanzhai industry is the entre-
in China, there are the HiPhones, iSuppli estimates on the number of preneurial spirit and creativity of young
iPones, iPhone Airs, iPone Airs, and “gray market wireless handset Chinese individuals or small groups of
hordes of other shanzhai phones shipments” have grown from 37 individuals. It makes one wonder if
trying to capitalize on the appeal of million units globally in 2005 to 145 they could potentially take their DIY
the Apple brand and product, with million units in 2009, with growth approach and legitimize it and cater
some estimates as high as 10-13 expected to continue. They to more demanding niche audiences
million so-called “iPhones.” Here’s a anticipate 192 million fake phones making customized or bespoke
gallery of a small sampling of fake shipping worldwide in 2012. If you gadgets? Think the Long Tail.
iPhones and other shanzhai phones. combine those figures with Gartner’s Lisa Yong, in fact, believes this is
Or someone proudly showing off her figures on global handset shipments, the next logical step for the smart and
“shanzhai iPhone and iMac” (sic). you’ll discover that 4.53% of all progressive entrepreneur. To evolve
And, it only takes a small mobile handset shipments in 2005 their design process into one that
workshop with 5-10 people to were shanzhai phones. In 2008, the becomes a highly customizable
produce these devices. They’re all proportion increased to 8.64%. experience for the brand or the
over Shenzhen, within 100 miles of That means that all together, product. ”Not unlike the modding
all of the suppliers the “real” phone shanzhai phones had about the same scene in the US for computers,
companies are using. So, they just market share as LG or Sony- laptops, or cars,” she says. The
buy the same parts and assemble Ericsson! beauty of all of this, she believes, is
and modify them into all kinds of And, it’s not just phones, laptops, that it is all happening organically,
strange frankengadgets. By avoiding purses, or sneakers. According to from the street, the bottom-up, with
taxes, these little enterprises can sell the Annovax website, Microsoft these small workshops in Shenzhen
shanzhai devices very cheaply and estimated that 82% of their Windows or with other entrepreneurial business
still make a handsome profit. operating systems being used in people who want to co-opt what’s out
Gartner estimates that more than China in 2007 were pirated. there and make it uniquely their own.
20% of phone sales in China are Counterfeit products are produced in Bottom line for you: your stuff will
shanzhai devices. So, not only are every product category, from engine be stolen, copied, imitated, and
these products competing with foreign lubricants to mobile phones to food possibly even improved on. And,
global brands, but with legitimate and beverage. Even shanzhai that’s not likely to change any time
domestic Chinese brands as well. tissues… for your nose. soon in China.

nine good user experience, a device that Her experience is probably typical
In the Internet, They Trust was user-friendly, had good build of most young, urban Chinese
quality, and an acceptable price. Her consumers, however, Ye says her
As mentioned in the short version, the typical search begins on Google or parents’ generation doesn’t do much
Chinese have a general distrust of Baidu, then she narrows down by research online for product
media. To most, government media price range, and then begins to drill information. They simply don’t have
and ad-supported media channels down on specific models, reading the know-how. Qi Fei also adds that
simply lack integrity. Every advertiser reviews. After sufficient research, she most young people don’t pay
claims that the product they are decided on a Motorola model, attention to TV commercials, but
pitching is cool and fashionable. But headed over to Zhongguancun in their parents’ generation relies
this can’t possibly be, so the Chinese Beijing, visited several vendors to on TV advertisements a lot more as
consumer has been for years relying compare prices and bought what source of information. Both young
on the Internet as a primary source of she had decided on, without any women say they don’t care much for
trustworthy information. problems at all. newspapers as sources of
In fact, the China Internet Network
Information Center (CNNIC), in their
24th Statistical Report, indicate
that trust in the Internet is high:
“84.3% of Internet users believed the
Internet to be the most important
information channel.”
Because the government
monitors Internet sites and frequently
censors or shuts down sites (check
out if your website is blocked by
the Great Firewall of China), most
Chinese are leery of sharing too
much about their identity online. For
this reason, good old bulletin board
systems (BBS) have been the tried
and true forum for people to connect
and share information with one
another. It is estimated that there are
more than 3 billion user accounts on Photo by: onion83, http://www.flickr.com/photos/onion83/2681946555/sizes/l/
BBSs in China, with 338 million
Internet users. That’s almost 9
accounts for every user. The
popularity of BBSs stems from the
fact that most accounts can be
created anonymously.
Ye Pinxia says that she is
constantly on the Internet. When she
wanted a new mobile phone, she
went online and read several articles
where people described their
experiences. She cared about a

information on consumer products, budget, particularly because, as
but magazines can be excellent mentioned before, the average
sources of information and images Chinese person uses the Internet 18
for inspiration, for things like fashion. hours a week versus only 12 hour a
However, as much of that content is week by the average American. The
moving online, they are more likely to young Chinese consumer is not
seek such content on the Internet. generally interested in TV or print, like
The Chinese are also big American consumers.
bloggers, even finding the courage to For the average Chinese person,
express themselves somewhat freely the Internet has opened up their
online. According to some slightly world (when not censored) immensely
dated statistics from CNNIC, by to discover infinite new things,
the end of November 2007, there people, products, cultures, and news.
were 47 million bloggers and 72.82 Despite all the positive benefits of
million blogs in China, which Internet access in China, Anjali
represented nearly 25% of all the Kelkar also points out that use of the
Internet users in China at that time. Internet as a way to alleviate social
Social media usage has been on isolation and loneliness is becoming
the rise as well. Facebook has been a concern for some of the only
regularly shut down in China and children of China. These children
user numbers are dropping to 1-1.5 rarely have cousins even, since their
million. However, Renren.com parents were also only children. They
(formerly Xiaonei) is a Facebook spend vast amounts of time online,
clone with 40 million users. seeking companionship and
Kaixin001 has 30 million users. friendship, frequently through online
51.com has 130 million users. And multiplayer gaming, chatting, or other
Baidu (search engine) is used by 110 social media. While certainly not a
million people. problem unique to China, there are
Twitter has been completely some who are concerned with the
blocked. However, there are plenty of amount of isolation and time spent
Twitter clones: Taotao from QQ has online, and the possibility of it
over 50 million users. Fanfou, Jiwai. eventually leading to future social
de, and Digu are also popular. and psychological problems among
However, these microblogging very active users.
services have also been prone to Finally, Shuang Li doesn’t
being shut-down by the government. necessarily believe that all people
Despite the regularly shutdowns invest all their faith in the Internet. In
and censorship, Shaun Rein sees her view, China is “still very much a
consumers being increasingly word-of-mouth society from those
influenced by digital and social you can trust.” In that regard,
media marketing as a trend for however, she believes that blogs and
2010 and beyond. This is a critical other social media tools can help
consideration for your marketing amplify this word-of-mouth effect.

ten are experiencing the evolution from a this pyramid in terms of the
Transitioning from Goods to service economy to an experience “products” they will want and expect.
Services and Experiences: Food / economy, where consumers demand According to Bureau of Economic
Style / Living / Mobility / and more… more than just someone else Analysis data from 2008, personal
delivering the goods/services they consumption by Americans is split
If you are familiar with The Experience want to them at a reasonable price. about 33.6% on goods and 66.4%
Economy, by Pine and Gilmore, they They are now demanding on services. In China, the distribution
introduce the notion of a pyramid of entertainment, education, is more or less the opposite; they still
economic value creation, that they engagement, or enlightenment from have relatively low incomes so most
believe is evolving because their consumer experiences. (see image) of their spending is on basic needs
technology, increased competition, China has rapidly moved in the like food, clothing, shelter, etc.
and increasing expectations of last three decades from a National Bureau of Statistics of China
consumers has led products (in the commodities and goods economy to reported 9.33 trillion yuan of total
generic sense) to become the beginnings of a service and household consumption in 2007. It is
commoditized. For the most part, in experience economy. As consumers’ somewhat difficult to break out how
the West, they would argue that we incomes increase, they will evolve up the expenditures were distributed
between goods and services, but
our best estimate shows an overall
split of 86.3% on goods and just
13.7% on services.
Of course, the rising middle class
and wealthy urban consumers are not
just buying luxury and expensive
goods and products, but they are now
beginning to pay for services and new
experiences. This will be an area of
tremendous economic development
for the Chinese economy.
In terms of the product landscape
in China, Qi Fei believes that Chinese
manufacturers still have a long way
to go in terms of service and support
for their products, one of the reasons
The Economic Pyramid, Source: The Experience Economy, by Pine and Gilmore why she tends to prefer American or
European products.
Yu, Chan, and Ireland, in China’s
New Culture of Cool, identified four
key areas where the upwardly mobile
young Chinese consumer will be
evolving his/her consumption. It is in
these four opportunity areas that the
demand for new services and
experiences will be experiencing
some of the most rapid changes and
developments. These four areas are
in: style, food, living, and mobility.

contracting, plumbing, home
theater installations, and other
maintenance. Cable/satellite TV and
Internet services will increase. And
other aspect of living, outside the
home, will boom, including
exercise, gym memberships, yoga,
adventure seeking, travelling,
Four domains of opportunity for the young, urban Chinese consumer.
Source: China’s New Culture of Cool, by LiAnne Yu, Cynthia Chan, and Christopher Ireland
entertainment, and other types of
leisure activities.
In “mobility,” the two primary
I would add that health, wellness, Style” trend). In addition to objects around which mobility
and financial management will also restaurants, there are coffee shops, revolves are the automobile and the
be areas of opportunity for these bars, and quick convenience food mobile phone, both of which
upwardly mobile young consumers. destinations or carts. Restaurants provide personal freedom. Auto
Of course, one could easily include are places to be seen and to people owners are enthusiastically joining
these in the Cheskin folks’ watch, much like shopping malls. driving clubs and communities
categories of food and living. China’s social life is expanding around particular vehicles or
What are some examples of beyond just the street. brands. Auto repair and
these new services and experiences In “living,” as China’s citizens customization services should be
that young Chinese consumers are have transitioned away from expected to grow. Other forms of
demanding? government provided housing to mobility taking off (besides the
In “style,” beyond the fashion having to rent or buy their own ubiquitous bicycle) are electric
and accessories are services like properties, there has been an bikes, some of which are low or no
beauty salons, beauty explosion in the home furnishings emissions vehicles. Travel and
consultations, cosmetic surgery, and decorating industries. Unlike adventure are another new
grooming and personal care the U.S., homes in China are opportunity for Chinese consumers,
services, and spas. typically bare when purchased, just who are more easily able to leave
In “food,” the big thing is people empty shells awaiting the owner to their own province and explore the
eating out. Food is a central focus provide the flooring, lighting, rest of China, or leave China entirely
of Chinese culture. Now, with the appliances, wall treatments, etc. As to see the world. In terms of the
exposure to cuisines and influences home ownership increases and other key object representing
from the outside world, consumers home-owners seek ways to mobility, the mobile phone has
are curious about experimenting personalize and individualize their become a prerequisite device for
with new flavors, ingredients, and own environments, retail sales of China’s youth, enabling them social
eating experiences. Of course, appliances, materials, tools, freedom, entertainment, or even
entrepreneurial Chinese are also furnishings, and other home-related business or productivity needs.
taking this influences and fusing goods are booming. But, along with Laptops are also fairly ubiquitous
them with traditional Chinese that there should be increased among university students, though
elements to create new types of service offerings around interior computer penetration overall in
cuisines (part of the larger “China decorating, home repairs, China is still relatively low. Because

mobile phones, however, are rapidly money and plan their futures, and
penetrating the population, they are the futures of their children if they
becoming the conduit to the choose to have them.
Internet and new opportunities for Currently, most Chinese
entertainment, services, and consumers have a fairly low
communication needs. knowledge of finances,
Another important area of future investments, banking, credit cards,
development of services and insurance, etc. They will need to be
experiences will be around all educated as they become more
matters financial. As the Chinese sophisticated and wealthier
consumer’s income continues to rise, consumers. Smart businesses
as home ownership increases, as offering these services will also
credit cards begin to further need to understand their distinct
penetrate the population, and as the customer segments and their needs
current excitement over spending on and concerns well, in order to
goods wanes and consumers develop the products, services,
mature, young Chinese and old alike experiences, and communications
will be increasingly looking to that consumers will identify with
financial, insurance, and investment and understand how to incorporate
products to help them manage their into their lives.

Conclusion
Trying to summarize China’s Nevertheless, we think the 10
development and emergence as a subject areas we presented above, in
superpower and consumer both the more digestible and the
powerhouse is a daunting task. more bloated forms, should provide
There’s simply too much to cover. American and Western business
You’ll probably note that we omitted leaders, designers, product
many trends and issues that are by developers, and anyone else
no means any less relevant than interested in the Chinese markets
those presented above. For example: with some useful background,
· the aging population and declining guidance, and things to think about.
birth rate leading to a potential One of the challenges inherent in
demographic crisis decades ahead trying to capture insights about the
· the environmental catastrophes Chinese market and its consumers
that have resulted from a belated rush is that anything you learn today may
through industrialization with little not be true a year or two from now.
regulation or concern for ecological But, don’t let that deter you. It
consequences should be an exciting opportunity for
· possibly looming credit and continuously learning and facing
housing bubble crises new challenges.
· new lust for automobiles In addition, don’t forget the
· music and pop culture “heartland” of China beyond the
· politics Tier-1 and Tier-2 cities. These are
· the fact that China is soon to be cities where people have less
the largest luxury market (their purchasing power, but are also
wealthy consumers really love their eager to strive for the quality,
Gucci, Louis Vuitton, etc.) empowering, and well-reputed
· rapid urbanization and the products of the West. It is in these
potential social problems inherent in smaller cities and towns where you’ll
large numbers of less educated really face the competition with
migrants shifting en masse to urban China’s rising domestic brands.
centers looking for work, how they will It’s going to be an exciting
adapt, communicate with family back decade to come for China, that’s for
home, etc. (check out some of sure. You’ll see global companies try
McKinsey Global Institute’s many fine to bring innovative products to the
reports on the subject area, including growing consumer class, but they
their prediction of 1 billion urban will need to shed a lot of their
people by 2030) assumptions, put in their due
· an increasing rich-poor gap diligence, truly immerse themselves
· education in China: is it still too in the country, the people, and the
rote-memorization modeled? Will they cultures, and adapt to one of the
produce the great designers and most rapidly changing and exciting
innovators of the future? markets in the world.

Simultaneously, you’ll witness And, of course, the Chinese are
innovation and new ideas and keenly aware of the ascendance of
products emerge from China itself, design as a key differentiator in many
from the bottom-up especially product categories, including
and maybe even from the top- electronics, fashion, shoes, financial
down. Global manufacturers need management software and
to think about how they can help applications, life management tools,
empower Chinese consumers, health monitoring devices, products
harness their creative drive and providing food and medicine safety
entrepreneurial spirit, develop information, products for the elderly,
product platforms and remixable/ credit cards, and more.
mashable elements that consumers
can use to customize, personalize, If you actually made it this far,
and make their own, to add their congratulations! Please be kind
own Chinese essence to. enough to share you comments,
They should also be thinking thoughts, and criticisms with us, as
about how to improve customer we hope to continue expanding our
and user experiences as their knowledge on this most fascinating
marketplaces become overwhelmed topic. Cheers!
with products and services
ranging from the totally crappy to
the totally genius. Consumer-
empowering tools and online
community-based product reviews
and peer-filtering tools across many
product categories (cars,
technology, home furnishings,
fashion, personal care products,
music, etc.) will be vital to equipping
the Chinese consumers, old and
young alike, with better decisions
and choices about the products
and services they incorporate
into their lifestyles. These are likely
to be online tools and services,
accessible via mobile Internet
devices, and other types of
products that are currently on the
cutting-edge, but they will need
to be adapted to the unique
customs, cultures, and needs of a
dynamic and diverse populace.

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Consumerism in the Wild, Wild East:

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one two three

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adherence to safety standards.

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China is big. Really big. And things of

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“The best advice, of important frame for understanding

course, is to go there for outgroup. Though fluent in Mandarin,

immersed. See it with your “Always use local moderators, if

own eyes. Have patience explains.

and work with locals to

people you want to than what might be needed in

research. Learn Mandarin down, the first hour will consist of a

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or those who are sometimes called

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“Got no money and got no car, then you

“If you don’t have a nice car or cash,

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Ancient Chinese proverb

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