The New Age of Consumerism has arrived in China

2 years ago, I wrote about “Beyond the Copycats: 5 things I learned about China”, in which I highlighted how “Copy to China” is vastly changing and that great innovation is popping up.

4 months ago, I left Silicon Valley for China. I turned myself into a sponge, trying to understand all the development that has occurred. It is no exaggeration that time passes in “Dog Year” in China . Every 6 months, it evolves into a brand new country.

Just as how China skipped the PC age and became the first to popularize “mobile first” trend. For payments, China skipped the phase of credit cards and went directly to mobile payment even for the street vendors in remote villages. For lodging and hotels, China developed its boutique hotel ecosystem with the best furniture, smart home devices and scan QR code to bring furniture home. As you can see, every vertical forms its own format and business model in China.

One week long “study” trip to China is only the tip of iceberg as Shanghai and Beijing are their own universe and quite different from 3rd and 4th tier cities in China. One could only start to understand its scale and innovation after living and working here.

The New Consumerism Trend in China

After returning to China, I took a “Consumerism Upgrade” class and spent time with entrepreneurs who run lifestyle and consumer products from luggage, LED lights, rice to furniture. Unlike the craze over social apps with revenue coming from advertising 3–4 years ago, the new trend in China has been reimagining consumer products and retail with better design and quality, as well as online sales channels.

Most notably, combing traditional manufacturing capability with online marketing speciality. Over the years, Xiaomi, known as China’s major smartphone maker, has been investing in lifestyle and home products from suitcase, lights, TV to water heater. It lends its supreme marketing expertise to traditional manufactures, who have been suppliers for well known Western brands. Xiaomi aspires to be the MUJI of China and has been quietly building its own empire of smart home devices.

Now, Xiaomi products have percolated into the homes of middle class throughout China regardless of 1st or 4th tier cities.

“Xiaomi products look nice, have good quality and are cheap,” a doctor from my hometown (4th tier city) told me.

“Xiaomi heater is a must have as it maintains water temperature. “ an accountant in Hangzhou wrote to me after learning that I bought a German water heater.

The above example from Xiaomi shows that the quality and design of products in China have increased. On the supply side, the 2nd generation of Chinese suppliers and manufactures want to transform from “Made in China” to “Created in China.” Many of these 2nd generation have been educated abroad or equipped with global foresight. On the consumption side, Chinese middle class has the disposable income and the mindset to appreciate and enjoy good design.

The increase of aesthetics occurred as easier access to travel and media distribution (especially via social media) have collectively democratized information. Instagram, TV / movies and global-trotter bloggers have helped popularize Scandinavian furniture design, Japanese minimalism style and bulletproof coffee in China.

In the past, restricted access to travel overseas and the Great Firewall have casued information asymetry. Knowledge of fitness, wellness and interior design tend to be a few years or a decade behind the newest trends in the U.S. However, this has been reverted. Over the past 5 years, visa policy for Chinese passport holders has eased up. For example, I no longer need to renew US visa every year, but now have a 10 year tourism visa.

Media has played a role in upgrading the taste of Chinese middle class. For example, Yitiao (means “One Piece Of Video”) media with over 10 million users in China produces a 5min lifestyle video every day. When a trend like home decor picks up, thousands of media similar to Yitiao appear. As a result, Scandinavian and Japanese interior design have taken China by storm. Moreover, the new middle class in China is willing to pay for good design and quality. Coupled with the manufacturing capacity, homes in China now look like in Los Angeles or Copenhagen.

Thanks to Alibaba and Taobao, not only can Chinese consumers see beautiful furniture designs, we can buy them online and get delivered home fast. Taobao (Alibaba’s E-commerce platform) has trained hardworking and smart merchants, who can turn popular furniture design into products or figure out efficient supply chain to import within a few days. I ordered a wooden Japanese bowl and a fiddle leaf plant from Taobao, and received them within 3 days.

The popularity of boutique hotels and BNB is another sign of consumerism upgrade in China. Chinese government now encourages urban dwellers to go back to villages to revitalize countryside, which includes Bed and Breakfast and Boutique Hotels. In 2017, 400+ boutique hotels / BNBs were crowdfunded.

Another key observation is a declined appetite for global brands and a growing willingness to consume Chinese domestic brands. 2017 is the first year during which the sales of Chinese cosmetics brands surpassed the Western brands. With 1.4 billion people, domestic brands have the potential to make major breakthrough. To give you a few brand names, LePur yogurt (China’s Fage), Tree Squirrel Nuts, HeyTea, Yeelight, 90Fun suitcases (China’s Rimowa) etc. Many of these entrepreneurs have overseas education background.

The New Breed of Chinese Entrepreneurs

In the past, my impression of Chinese entrepreneurs is that they are practical, hardworking, and good at copying and executing. Good design was not part of it. However, I am wrong.

During a visit to Suzhou Gardens with a group of Chinese entrepreneurs , the founder of a LED light company pays close attention to different floor patterns, traditional Chinese wisdom, and take instagram-worthy photos just like my photographer friends. At night, the conversations during card games reminded me that the popularity of Japanese craftsmanship and Scandinavian design have led to the appreciation for good design and aesthetics . This is a key mindset shift among Chinese entrepreneurs as good design has been historically under-appreciated.

“Made in China” no longer means cheap labor, but production with scale, good design and quality. I am excited to see how these entrepreneurs will shape the future of China when hardworking and wisdom are combined with good design and quality products. Moreover, China now has a new class of Middle Class ready to appreciate and pay for good design. The age of New Consumerism and Retail has arrived.

My next post will be 4 Trends in China in 2017 that set the background for entrepreneurship in China.