Should I launch my new product in Shanghai?

There is a lot of commentary about China’s lower tier cities making the biggest contribution to increasing retail spending. We wrote about it just last month. Whilst they present genuine opportunities for growth for consumer goods, brands shouldn’t blindly follow the high level data expecting smaller cities to always be the best bet. Like so much in China, the most appropriate target audience and geography is dependent on products, category and positioning.

For innovative, more premium brands with a genuine point of difference, higher tier cities like Shanghai are often the best starting point.

A little over a decade ago, when virtually every Chinese consumer preferred bubbles in their tea to their wine (most still do), over half of all champagne consumed in China was done so in Shanghai. Shanghai accounts for less than 2% of China’s population. Nowadays, Chinese consume an average of 12 cups of coffee per person a year. In Shanghai, it is 100-150 cups.

Shanghai is a wealthy city. If it was a country, its GDP would rank it in the top-25. Based on purchasing power parity (PPP), its GDP is 28% more than Switzerland’s. Shanghai salaries are the highest in China, and until they’re married, many of Shanghai’s big-earning young professionals still live with their parents, meaning a good share of their take home pay is used for discretionary spending.  

Shanghainese consumers have long been the most outward-focused in China. Just walking through the city’s vast neighbourhoods of European architecture, it is clear how much of the city has been shaped by foreigners. Even today, foreign companies account for a quarter of its GDP. Shanghai’s wealth, flight connections and relative ease of obtaining visas, meant that it was the first city to really embrace international travel; just ten years ago, almost one in five Chinese visitors to Australia resided in Shanghai for example. As a result, Shanghainese consumers are generally more aware of and open to foreign brands and lifestyles than other parts of China.

Although many Chinese may scoff at Shanghai’s excessive consumerism, it is likely they will follow many of the trends that started in the city. Shanghai’s adventurous and aspirational consumers are never too shy to try a new product or interest; much like champagne, coffee or even drinking yoghurt, it will often funnel out to other parts of China. That is why most foreign brands who have invested in R&D centres, located them in Shanghai. It is why China Skinny is based here in the heart of the city. It is why Shanghai is the obvious place to host the huge CIIE import expo this week.

There are two takeaways from today’s newsletter: 1. For many products, particularly more premium imported goods that are most likely to appeal to a sophisticated target audience, Shanghai can be the best city to launch in, before fanning out to the rest of China. Although it is a fiercely competitive market, a smart strategy and well executed campaign in the city is often the best place to start – China Skinny can assist with that. 2. Whilst many trends start in Shanghai, it’s well known that the city is often not representative of the majority of China. For those wanting to understand the true scope and opportunity of the China market, it’s valuable to visit and research other cities and regions. China Skinny can help determine which cities and assist with insights for those locations.

It is generally most effective focusing on specific cities in China, rather than trying to be everything to everyone. Even when selling primarily online, cities can be targeted by online communications and even supporting campaigns offline. Targeted marketing is the best way to ensure your brand and products are relevant in China.