Recession-era consumption

– A quick trip to the countryside to check on the government-sponsored drive to sell discounted appliances. Certainly, plenty are buying with some pent-up migrant worker remittances, but I was surprised to see that many new appliance owners weren’t actually bothering to plug in their new bargain purchases. There appear to be several reasons for this: A fear of high electricity bills, the fact that there isn’t much to put in either the washing machine or the fridge to make it worthwhile switching them on, but most of all just a desire to have the appliance sitting in the corner on public display – a sort of "keeping up with the Wangs" approach. Still, it’s helped clear the expensive inventory backlog many domestic appliance manufacturers were sitting on.

– Takashimaya’s announcement of a massive 40,000 square-meter department store for Shanghai confirmed what many in the retail business have known for some time – that the suburbs are increasingly where the action is. As more and more people leave the city center, the high spenders are on the outskirts rather than downtown. Retailers had better follow the wallets.

– Getting around the suburbs is becoming easier, too. Once, Shanghai had a fantastic tram system (in fact it had three – an English one, a French one and a Chinese one) and now a new line is being built in Pudong’s Zhang-jiang district. The first few stops should be operational by May. Eventually the 10-kilometer route will link Zhangjiang Hi-Tech Park Metro Station with Jinqiu Road in the Zhangjiang Semiconductor Industry Park, allowing more people to skirt the edges of the city rather than fighting through traffic into and out of the center.

– The recession-era Chinese consumer is forcing big supermarkets to re-examine their strategies. It seems Carrefour will focus on brand building rather than rely on a rolling series of promotions. Over at Tesco they are looking to better understand the consumer in preparation for the launch of their "secret weapon," the Membercard (better known to many of us as the Tesco Clubcard). Higher brand awareness, talking to consumers, club cards – the name of the game in 2009 is locking in the customer for the long haul with loyalty points and rewards rather than short-run cheap gimmicks.

– Chinese companies are getting good at acquiring and revitalizing dying foreign brands while at the same time strengthening themselves. Italy has offered up three fashion labels to Chinese sources – Lotto went to Li Ning, the Sergio Tachini tennis brand was acquired by Hembly and, perhaps most successfully, China Dongxiang took the rights to Kappa. Cashed-up Chinese firms are also buying into their global sales channels. Little-reported earlier this year was Chinese clothing manufacturer Bosideng’s acquisition of Greenwoods, a UK menswear retailer that was an early casualty of the recession. Greenwoods was a major sourcer from Bosideng, and now the Chinese company owns 87 of its customer’s 92 stores, saving 556 UK jobs while securing future orders that will keep Chinese factory workers employed.

– We have been working with a number of retailers lately on improving their recycling of wastepaper, card and packaging. Although Chinese businesses are still buying recycled paper, they are not doing so in the same quantities as before the economic downturn. Waste paper is a bargain – US$100 a metric ton as opposed to US$500 a metric ton for virgin pulp. However, prices peaked in August 2008 and have since dropped by between 50-70%. The days of US$100 a metric ton are long gone – recycled mixed paper now goes for as little as US$28 per metric ton. While those committed to recycling are still by and large carrying on, for many of the less committed it just got less worthwhile to go green.