The Challenging Chinese Consumer Market

May 16, 2011

When foreign businesses such as Home Depot or Wal-Mart open for business in China, knowing the market and consumer is a good idea.

Most Chinese consumers have a different perspective than most Western shoppers when it comes to spending money. The average Chinese consumer born before 1980 prefers to pay cash and buy the best quality for the lowest price.

There’s also a difference in spending habits between younger Chinese born after 1980. Evidence suggests that younger Chinese have caught the credit card virus and are running up debt similar to the average American consumer.

Bob Schmitz writing for NPR’s Marketplace on Friday, April 8, 2011 says, “Home Depot not a hit in China.”

Schmitz talks to Raymond Chou, the CEO of Home Depot operations in China. When asked about closing five stores, Chou indicated this is not a sign of failure and said, “(Home Depot) has closed stores to focus on China’s lesser-known cities where much of the country’s real estate development is booming.”

One criticism Schmitz writes of is the fact that many of Home Depot’s products are made in China and may be bought for less from Chinese merchants.

However, one Chinese contractor says he shops at Home Depot because “It’s easy to exchange and return goods… and (he) knows the materials (at Home Depot) are safe and not fake.”

Wal-Mart critics may rejoice. According to NPR, Wal-Mart’s goals in China are to purchase a chain of retail stores there.

If this scheme will succeed remains to be seen. Wal-Mart has faced slowing business in the United States, is struggling in Japan and failed in Germany and South Korea.

Wal-Mart’s biggest challenge is to overcome its habit of fighting unions and paying low wages, which forces many workers to rely on local welfare and public-health programs. This isn’t welcome in some markets and is the reason why Wal-Mart left Germany.

For the same reasons, Wal-Mart, which is allergic to unions and paying workers a living wage, is facing a Chinese government that is strengthening worker protections and rights to organize/join labor unions.

Last summer, Wal-Mart was forced to allow its Chinese workers to join a union for the first time.

To understand the Walton family, Bizmarts.com reported, “As Sam Walton explained in his 1992 autobiography, Made in America, he didn’t believe in giving ‘any undeserving stranger a free ride’. Nor did he believe in being generous with company profits.”

Forbes reported that the Walton family was worth about 90 billion dollars or 18 billion each.

Discover how China is Holding a Vital Key to Humanity’s Future

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

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Changing China through its Youth – Part 3/5

February 1, 2011

The PBS Frontline narrator mentions how entrepreneurs that have been away from China must get used to doing business in China, which may include bribes.

In fact, to Chinese there is no clear definition of what is bribery — what the West calls corruption is deeply rooted in China’s culture (and has nothing to do with Communism) and is not seen the same way.

Lu Dong, going into the business of Internet tailoring, says, “If we use Western values to judge a Chinese company’s behavior, I think it is very hard to do business with them.”

Ben Wu, the Internet Cafe owner, says they (Chinese businessmen) have no interest in helping or not helping him, and he cannot figure out how to influence them.

To get help in China, one must make friends and since China is an eating culture that takes money. To learn more, discover the meaning of Guanxi in China.

Ben Wu, who was born in China but educated in the US, says he will not bribe anyone. However, he doesn’t think he can stop his Chinese partner.

One wise quote explains the choices. “There is nothing you can do. A fish has to live in water and if the water isn’t clean you must get used to it.”

Now, for a corruption reality check. Here is a comparison with the US. We know an engineer who stopped working in construction because of the difficulty in finding contractors that are honest.

We also had a bad experience with a contractor we signed on to build an addition to our house. Twenty-eight thousand dollars later without any construction starting, he was still asking for money.

An investigation on my part revealed he hadn’t taken out the construction permit even though he had collected the money months earlier to do so. We cancelled the contract and he filed a lien on our property for about $200,000 US.

Months later, we managed to get about half the 28 thousand back and California forced him to cancel the lien. However, we had to see and pay for a lawyer, file a complaint with a state agency in California and the process was stressful and frustrating.

The fact is that there is corruption in every culture and country. It just wears different clothing.

Return to Changing China through its Youth – Part 2

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.


Advice from an Australian Expatriate Doing Business in Beijing

December 16, 2010

An expatriate living in China sent me a copy of The Australian’s Goodwill Offers a Rich Yield by Greg Rudd.  The commentary was published in that newspaper back in May 2009.

However, what Greg Rudd says is just as important today as it was then regardless of the few negative voices that left comments.

I find it interesting that the negative comments from such as “lao de lao ren” and “RN of Canberra” may be from ignorant individuals that do not realize that the Founding Father’s of the United States despised “democracy” and built a “republic” where only male property owners could vote.

“RN of Canberra” even compared China to Hitler’s Nazi Germany, which isn’t even close. There is no comparison. Today’s China is a much safer place to live than Nazi Germany was and there are no signs that China plans to go out and wage war against the rest of the world.

Both “lao de lao ren” and “RN of Canberra” express that China should become a democracy, which is a sign of total ignorance.

The first time the US was officially called a democracy was by President Woodrow Wilson more than a century after the US was founded.

Presidents John Adams and Thomas Jefferson both said democracy was no better than mob rule, which explains why the Founding Fathers created the Electoral College to select presidents and why George Bush lost the popular vote by a million to Al Gore but Bush became president anyway.

Greg Rudd offers some advice about China in his commentary.

He says, “My mother taught me when you walk into someone’s house you shouldn’t be rude. You may not like what you see sometimes, and advice and suggestions can be given in the right spirit and in the right atmosphere, but always remember it is not your house.

“When we are in China’s house we should show respect and when they are in our house they should show respect.”

Greg Rudd is managing director of GPR Asia, based in Beijing. GPR advises on investment and joint ventures.

GPR Asia works with Asian companies who wish to invest/joint venture/merge or acquire companies in Australia and/or with Australian companies that wish to invest/joint venture/ merge or acquire companies within the Asian region.

Discover more about Doing Business in China

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.


Naked Capitalism Gets it Wrong about China

July 18, 2010

Yves at naked capitalism provided a perfect example of Sinophobic comments when writing about doing business in China. In GE CEO Immelt Gets Pissy About China, Obama, I agreed with Yves when he pointed out the hypocrisy of a US corporate executive complaining about how Chinese officialdom is not supportive of GE’s business goals.

However, Yves then quotes “Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production”  and selected quotes like “Chinese manufacturers cut corners wherever they can, from product quality to factory equipment and maintenance…”  Before you believe everything Yves writes about doing business in China, I suggest you check out what China Law Blog says on the subject. 

I have met Westerners doing business in China, and those who are carless get burned and others, who do their homework and know what they are getting into, have few if any complaints. When a careless, lazy deal with a Chinese manufacturer turns sour, a careful examination often shows that the fault lies with the foreigner—not the Chinese. Understanding China’s culture and laws is the key to success.

See Bob Grant’s guest post about doing business in China

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too. 

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Understanding How to do China Business

April 27, 2010

There’s a reason my wife warned me to never do business in China; then she went and lost money doing business there herself—and she’s Chinese. However, being Chinese in China is the same as being American in America—there is no guarantee that anyone is going to be a success and fill buckets with money.

If you want to read the nightmare side of doing business the wrong way in China, see Showdown at Changsha by John Alley. “Western companies felt they had to be players in the China market, and dozens of the world’s largest corporations fell over themselves losing money in abortive China joint ventures.” Source: Asia Review of Books

Walmart in China

Google appears to have failed because they did not learn that doing business in other cultures means changing the way you think and present yourself. On the other hand, Bob Grant’s guest posts on iLook China are examples that there are success stories in China. Recent news shows that GM is making profits in China—more than in the US. McDonald’s announced recently they are opening hundreds more fast food outlets in China this year.

Anyone wanting to do business in China should consider going back to school. I checked one of America’s top universities, Stanford, and found a course taught by an expert. There’s even a Doing Business in China for Dummies book.

Learn more about Doing Business in China

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.