Damian Holmes

China was only acutely affected by the Global Financial Crisis but the market has over grown some market sectors such as residential and  high end hotels this is due to the Expo and also some of the 2009 stimulus money entering the development market. Currently the government is increasing the use of financial instruments and tools to cool the residential market. Also recently over the last week or so the Shanghai stock exchange is correcting not due to the Greece and Euro issues but the market got to hot to fast with P/E ratios and share prices rising too quickly so a correction was imminent. So the China market is somewhat decoupled from the rest of the world.

The Chinese stock market is often one of the only investment outlets for people to place their cash and as property was going off and the government was making it increasingly harder to invest in property, money went into the stock market too quickly now the market is correcting people are moving to gold as a safe haven.  So where to from here is the question on many people’s minds as money starts pouring into gold?

Well my guess is that Chinese can only invest so much in gold and the stock market and the investors will start to move towards domestic consumption but will continue to move more money offshore to cheap property in the USA and Europe hoping that the price of property will rise over the next few years quicker than the yuan appreciates.

Domestic consumption will be fueled by creating new retail centres. Although commercial office space will continue to flow along but the supply is currently too high for the requirements of many cities however, retail has lagged with retail mostly only developed as street front shopping with stores usually only 20-50 square metres therefore more energy will be heading towards developing retail shopping centres with anchor department stores.

Shanghai, Shenzhen, Guangzhou and Beijing are currently already catered for with many retail centres areas with a wide variety of configurations. Therefore, developers are now shifting focus to cities such Hangzhou, Suzhou, Wuxi, Ningbo, Qingdao, Tianjin, Xiamen and other Tier 2 & 3 cities along the coast as retail demand is growing fast with brands already having distribution and logistics networks along the coastline of China.

I also see more and more companies looking to invest in new distribution companies to import products from abroad for domestic consumption or partner with existing companies to create new distribution channels. Although there is a big focus in China on luxury brands with numerous stores opening across China and especially in Tier 1 cities such as Shanghai and Beijing. However there is a middle class with increasing wealth that often doesn’t see the value in luxury brands and these consumers are the ones pushing the growth of such retailers as H&M, Zara and car companies such as Buick, VW and Ford. The middle class realise that they can’t afford the BMW’s and Louis Vuitton bags but they can purchase well known good quality foreign brands. I see more and more American & European brands entering the market to fill the gap between the local stores and the High end shopping malls with smaller shopping centers with middle range tenants & product that are fashionable but not overly expensive.

Contact Damian via email damian@damianholmes.com or phone +86 15000919590

Recently, I went to my local Xinjiang Noodle shop for lunch. I ordered my usual and sat down inside on a stool. As I sat there looking around at the full tables, I wondered why is it so many people come here. Now to explain the scene, Xinjiang Noodle shops often have three or four large pots of water boiling away and someone inside the door making noodles and passing them to outside to be cooked.

So why do people come here? This shop is not elaborate and some would say not that hygienic – so why is it that its full at lunch and dinner? Is the location? Is it the price? Is the food?

Honestly, I think it is a combination of factors – price, food, authenticity and drama.

The Price
The shop is a ‘cheap eat’, however there are several restaurants in the area that are just as cheap. That being said if they charged more than 15RMB(about $2.00USD) they would loose customers quickly.

The Food
Xinjiang food is different from most Chinese food and noodles are speciality so people come for the noodles.

The Authenticity
The shop is authentic with pictures of animals and fields in Xinjiang on the wall, but the people is what makes it truly authentic.

The Drama
People watch the guy make the noodles for each order from the dough they made in the morning. You see and hear long thin noodles being banged and twisted on a table or watch him carve wide noodles from dough with a blade flying into a pot of water as he yells at the waiters inside who are joking with each other.

The noodle shop has no pretences, no veneer, nothing hiding the process from the customer, we can see, smell, and hear our noodles being made.

So what can we learn from the Xinjiang Noodle Maker? Authenticity and drama are key to attracting customers time and time again. Too often in business we hide the process or core ideals from the customer because we are fearful that they might not like what they see. However, we could generate more business if the customer could smell, hear, and see how authenticity of your brand.

How does this apply to you business? Think of all the examples of businesses that create authenticity and drama. I can think of a few other examples:

• chocolate/icecream/waffle shops who show people making the process of  creating their product
• whisky distilleries and vineyards  who give guided tours from above the working floor on gangways
• museums and art galleries showing experts restoring pieces
• nurseries showing plants in hot houses or trees at different stages of production
• film studios opening lots with people on set
• milk tea shops in Malaysia
• Richard Branson’s many PR stunts – although showy they are authentically Virgin
• car companies giving guided tours of  factory floor

there are many more examples. So the question is how can you create drama and authenticity for your customers? Does your production process enable you to showcase your product? Can you create drama that represents your companies brand in an authentic way? Can you create a unique experience for customers? Can you get someone passionate from manufacturing or engineering to attend a trade show rather than just sales people?

Of course, you have to careful when applying this idea across a whole brand as it can loose its authenticity. There are some examples where this has occurred with a brand making an authentic and dramatic experience into a formula which is then scaled across a brand that has then lost its appeal with the customers as it became too ubiquitous.

Got any comments or ideas? Email me – damian@damainholmes.com