Even with the cool down of China’s economy over the last few months, officials at Samsonite anticipate a growth in sales of over 10 percent this year, up from 5 percent the year before. Mr. Ramesh Tainwala, chief operating officer at Samsonite, recently stated that despite the uncertainties caused by China’s shift away from heavy industry and exports, increasing wages are bolstering the ranks of the middle class and also increasing the demand for travel and suitcases.
Samsonite is not the only foreign company preparing for increased consumerism from the Chinese. With more than 100 million Chinese traveling abroad in 2013, retailers like Burberry and Prada are in a mad rush to hire Mandarin speaking sales associates at their outlets worldwide. Besides hiring Mandarin-speakers, outlets are also catering to the cultural quirks of their Chinese consumers. For example, Samsonite outlets have begun providing scales for customers “to double-check the advertised weight of bags they are considering purchasing”, a habit Samsonite noticed among its Asian customers. Analysts estimate that by 2020 over 200 million Chinese will travel abroad each year, so it will be interesting to see what other kinds accommodations companies begin adopting to cater to their anticipated consumers.
Maybe if enough Chinese consumers begin to go outside of their own nation to do their consumer item shopping, Chinese policymakers will ease restrictions on foreign companies being able to establish themselves and do business within Chinese borders. If they are going to lose the business anyway, they might as well let it happen domestically and collect tax on the sales.
I don’t think restrictions are the biggest problem–after all, foreign firms have always found ways around them. Foreign firms need to adapt to a changing business climate.
Your post re-emphasizes the point I made in my earlier post, “Is Chinese Luxury Coming Home?”–that is, Foreign (read: Western) brands are scrambling to adapt to the preferences of a much more democratic Chinese consumer base–whether that is Chinese culture-influenced brands, Mandarin-speaking sales affiliates, better websites and mobile apps, or idiosyncrasies like having scales in a luxury leather-goods retailer. The Chinese are one of the most savvy consumer bases, and their demand for such protections as scales to weigh goods reflects their understanding of the scale and scope of counterfeiting undertaken to meet a growing demand.
Its really interesting to see that many of the foreign manufacturing companies leave China due to rise in wages while the luxury brands enjoy the increase in luxury goods consumption. Isn’t this ironic?
I guess as China experiences rapid economic growth, many Chinese (the rich) now want to spend more time and money on their leisure and luxury goods while the poor still suffers from low wages (it is still low relative to wages in Western countries).
This also shows one aspect of the income gap problem in China.
gjeong– I’m writing my term paper on the income inequality in China and you’re right that it is a problem. The gap between the wealthy and poor is the largest it has been since the government began reforms in the 1980s and it seems to only be getting bigger. I’ve found numerous articles that attribute some of China’s economic slowdown to this growing income inequality. I think it’ll be interesting to see what kinds of policies the Chinese government implements to address this issue.
Unfortunately, as I mentioned elsewhere, intranational income inequality is growing globally, perhaps correlating with the decreasing trend in international income inequality.
We need to be careful not to assume companies are in general excluded from “being in” China. Imports may incur tariffs; some sectors are strategic and require licenses. But other sectors are open, or licenses are routinely approved. Samsonite is surely not viewed as operating in a strategic sector (unlike car assembly). Now a company such as Nike may remain in China in terms of sales, even while moving some of its manufacturing capacity to other locations. So “leaving China” also needs to be detailed.
Now even for companies that are solidly in China, products may not need to be modified so much as product offerings need to be modified and marketing help provided – scales to check how much luggage weighs, more of certain colors and sizes, less than of others and so on. What size are luggage racks in Chinese trains? American purchasers would be focused on carryon restrictions on airlines, but Chinese may face other constraints or desired characteristics in their use of luggage. All of this ought to be no-brainer sorts of things. Unfortunately plenty of companies apply no brains to their foreign operations. While in start-up mode, for example, a fairly junior person may be sent, and because of that they may not be permitted to modify “the” way their company does things. Now in American Wheels we also saw there are advantages to operating under the radar of HQ. So it can work the other way as well – as long as you’re small you can do what you want, but if you do too well HQ steps in and takes over.