"Go To The Countryside" To Find The Next Golden Opportunity

In the past twenty years, China's per capita income has increased by ten times. Now, international First-line brand It has entered the sales of consumer goods market in China's small and medium-sized cities, and the growth of the low tier cities is much faster than that of the first tier and second tier cities. "To the most needed place", Chinese domestic companies began to plough deep into the market early in the market of China's "low line" (three to five line cities) where consumer demand was far from being met. For these multinationals, Chinese companies are their strong rivals as well as learning examples.

163 million no satisfying consumer demand for any family. consumer goods Companies are all "gold mines" that are enough to make people's eyes shine. This is the opportunity for China's low tier cities, according to Xu Liping, the Chinese director of consulting firm Nelson. "Low line cities account for 87% of China's total population, but its retail sales account for only 64% of China's market."

Seeing such opportunities, multinational companies are paying more and more attention to China's low line city market. However, some multinational companies find that despite their early entry into the Chinese low line market and working for many years, the effect is frustrating. In China's low line city market, most multinational brands are not widely accepted as a second tier city.

"Much of it is due to premature timing." Nielsen Co China retail Research Director Fan Yijin said historical data show that demand for modern consumer goods will show an explosive growth when the average household income of urban residents exceeds RMB 6000 yuan. Around 2000, the average household income of China's second tier cities was around 6000 yuan. Now, with the average household income of three and four cities across the threshold, retailers and consumer goods manufacturers will find the next golden opportunity for consumers in these cities.

Indeed, in the past twenty years, China's per capita income has increased by ten times. The rapid growth of residents' wealth has greatly enhanced the Chinese people's spending power. With the popularity of the Internet and the continuous improvement of transportation facilities, consumers in China's small and medium-sized cities have more, faster and more convenient access to new products. Now, it is the best time for brand products to enhance their influence on consumers.

Therefore, more and more multinational enterprises in China begin to extend their tentacles to China's "low line" cities. In their view, the sales of consumer goods market, "low line cities are much faster than the first and second tier cities".

According to the economist, by 2020, 66% of China's middle-income consumers will come from a large number of small and medium-sized cities. This means that brand products need to make more efforts to communicate with consumers in cities all over China, especially in a large number of small and medium-sized cities.

The defensive war of local brands

In the Chinese market, for a long time, multinational brands and local enterprises, based on one brand, have strong brand influence and appeal, and occupy the first tier cities in China. And the Chinese brands represented by Anta and others are "encircling the cities from the countryside", taking the route of differentiation with international brands in terms of channel development and brand positioning, so as to enable enterprises to develop rapidly.

After many years of painstaking efforts, many Chinese brands have not only secured a foothold in the Chinese market, but also have the initial challenge to challenge the international brands. But Nigel Hollis, a leading global analyst at Hua Tong Ming, does not believe that this is a sustainable advantage, "because channels are not the long-term basis for enterprises to rely on them."

This view has also been recognized by Fan Yijin. She believes that because of the need for performance growth and the growth potential of the two or three tier city market, international brands have sounded the horn of large-scale march. After a long period of trial, cultivation and consolidation of the Chinese market, the multinational companies with management and other advantages began to increase their investment in the county level market and stepped forward to this huge emerging market in order to seek new sales increment.

For example, multinational retailers such as Carrefour and bee lotus are developing to low level cities. The annual growth rate is about 10%. In the next three years, with the urbanization process and the modern access to the low level cities in China, the development of multinational corporations will make local enterprises more threatening in the traditional channels of transnational retail companies. {page_break}

Fan Yijin believes that local enterprises should remain invincible in the market competition of China's low level cities. They can no longer rely solely on channels and scale, but just lay out their products. Instead, they should make more efforts in brand intensive cultivation, stimulate consumers' desire to buy and strengthen Internet reputation.

Nelson, deputy director of Greater China analysis and consulting, Chen Chuan, also said: "marketing helps to win market share in the short term, but if there is no additional commercial behavior to deal with industry competition and attract new customers, brand value will be weakened or damaged."

On the other hand, local enterprises should learn more about the product innovation of multinational enterprises. Many multinationals have invested a lot of energy in innovative research, whether in terms of new product quantity, packaging upgrading, or in the category of innovative products, creating more value-added products and mining consumer demand. This is also a reference for future local enterprises to defend their own land.