US style stores in China will be a big strategic business mistake. China is not USA. It has a different historical experience and its rising middle class folks are not as wealthy, more frugal, evaluate essential and luxury expenses with a different set of criteria, and expect sellers to understand customer needs and offer good service.
As with past and future failures in transplanting wholesale western economic management, political systems, religious beliefs, culture and frameworks into totally different societies, Chinese and foreign sellers must be able to capture what Chinese consumers really need and willing to spend on. Marketing pitched at customers' priorities and preferences is the principle that works. Success comes to those who could adapt quickly with their offerings.
China is counting on rising domestic demand from this rapidly growing segment. So, too, are Western exporters, faced with anemic growth in Europe and North America.
But China's middle class isn't Charleston's. Western companies have misjudged Chinese shoppers' priorities and clumsily tried to export U.S.-style stores.
The potential buying power of China's middle class is vast. About 247 million Chinese, 18.2% of the population, qualify as middle class, meaning their households spend between $10 and $100 a day on average, according to Brookings Institution economist Homi Kharas.
If current patterns continue, the number will soar to 607 million by 2020, and spending by China's middle class will rival that of the U.S., after adjusting for inflation and purchasing power.
The trend has the potential to remake China. With export markets weakening in Europe and the U.S., economists say, Beijing needs to lift spending by its own middle class or risk that growth will slow sharply. Steady middle-class growth also could help China's trading partners, bolstering a market for computers, cars and trendy clothing, as well as for commodities such as copper, oil and cotton.
China already is the world's largest market for some middle-class emblems, including cars, personal computers and smartphones. And multinational companies show no signs of taking their feet off the gas.
Growing sophistication among some Chinese middle-class customers has led Five Star to upgrade in some cities. The Qingdao store has higher-priced electronics than older outlets—for example, cameras and high-definition video equipment for a first voyage overseas or a road trip across China.
With brighter lighting, additional seating and customer-assistance stations, the store in this port city of 8.4 million people also has more of the trappings of a stateside Best Buy.Following its parent's lead, Five Star opened a small research department last year to conduct consumer surveys. When it learned that some customers considered the chain stodgy, Five Star developed a new icon: cartoon characters that appear to be drawn by Hollywood animators.