– With the new year – both Western and Chinese versions – behind us, we get a better picture of consumer sentiment…or do we? For years now the retail sales numbers have been highly problematic in terms of their methodology and selective interpretation by the state media. The last few months’ numbers, depending on how you fiddle with and interpret them, can pretty much tell you anything you want to hear. This means we get a lot of numbers to fit theories – "confirmation analysis" it’s called in the business.
– What became clear in January was that there is a widening gap in consumer behavior between the export-heavy and foreign investment-heavy coastal cities and the tier-two and tier-three cities in China’s hinterlands. The latter are, it is hoped, less exposed to the vicissitudes of the export economy and more dependent on domestic investment and the strength of China’s internal continental economy.
– One apparent casualty of the economic downturn seems to be the much-lauded Yum! Brands, owner of KFC and Pizza Hut. Yum!’s December 2008 same store sales (SSS) declined 1% on a very tough comparison – it posted SSS growth of 23% in December 2007. Yum! says it is seeing people cutting back on soft drinks but it also appears they are reducing their intake of fast food. The average spend at a KFC is US$4 and US$20 at Pizza Hut, which Yum! claims is considered high by Chinese consumers. Maybe, maybe not. Perhaps many consumers are starting to worry about their weight and health as much as their wallets, and this gradually waning love affair with pizza and fried chicken is about healthy hearts as much as healthy bank balances?
– In retail, everyone’s favorite game at the moment is guessing which sectors will take a hit and which will ride out the storm. So here, unscientifically based on various recent conversations, is our winner of the month. Most people I spoke to thought the growing number of coffee shop chains would hold up well – nothing to do with coffee particularly but rather the ability to lounge around for a while indulging in a "treat purchase." My equally unscientific survey of Shanghai’s coffee shops showed pretty full houses one Sunday night at Starbucks, Costa, Coffee Bean and Tea Leaf and the 85°C chain from Taiwan. Many independents seemed to be doing well too. The coffee may not be that cheap but conversation and people watching are free activities.
– As for our loser of the month, look no further than the much-vaunted market for Western spirits. Most bars I’ve spoken to say customer traffic and sales are significantly down. Customers are swapping whisky and other spirits for longer lasting, and cheaper per milliliter, good old-fashioned beer. Consequently, a number of spirits brands are reportedly struggling these days. The standout example is Solid Vodka, which made a big splash with promotions and advertising galore, only to crash out of the market in spectacular fashion. It would appear that few people plan on boozing their way through the downturn.
– This month’s annoying buzz phrase is "kou kou zu" (stingy group), which apparently applies to the generation born around the 1980s but are now 20- and 30-somethings who are regularly accused of being spoilt. Quite how the purveyors of this buzz phrase perceive this group to be "stingy" is not clear to me, as their savings rate is below the national average. They are also starting to use credit and are the driving force for most mid- and upper-mass market brands. More often than not they are people sitting in all those coffee shops. I suppose the invention of buzz phrases remains an essential component of the marketing industry and so they just keep doing it regardless.
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