Thomas White Global Investing
China
China Stamp
February 11, 2011
A Postcard from the Asia Pacific
China: Discount Shopping Craze Rises

Discount coupons

Companies like Chinese fast-food chain Yonghe to global multinationals like Nike and DaimlerChrysler are offering discount coupons and cards to lure the Chinese consumer.

They are called the ‘coupon generation,’ these young shoppers who collect discount vouchers and coupons with a zeal that sarcastic observers have called almost ‘cultish’ in communist-ruled China. But underneath the sarcasm, China’s next generation of shoppers are quietly influencing the way a billion people choose to shop. And that alone can change marketing dynamics the world over.

U.S. readers would be familiar with the phenomenon called Groupon. The company is desperately trying to expand its global presence and China is an obvious target. China already has a Groupon clone and reports in the Chinese media claim that the original Groupon is planning a joint venture with Tencent, one of the largest media portals in China. Groupon has serious competition though. Beijing News claims that there are 2,612 collective buying websites in China. That is a staggering figure even for a nation with over a billion wallets, and illustrates just how fast the coupon craze has spread. And interestingly, it’s the young Chinese who are driving the craze.

Truth be told, the typical discount shopper in China is between 18 to 35. These are young shoppers who haven’t experienced the stark poverty of China before its economic reopening in the 1980s. But even with rising incomes, the Chinese pride themselves on being frugal. It’s a national characteristic that has seeped into the country’s psyche and has spawned an entirely new business. Goldman Sachs estimates that China will overtake the U.S. as the world’s largest consumer market by 2020. Just how much of this shopping would be contributed by discount coupons? Coupon kiosks have mushroomed across China’s subways, supermarkets and shopping malls.

While companies are rejoicing in this new craze, it’s not a win-win situation for all. KFC China had to face the wrath of angry Chinese customers in April last year when it refused to accept 50% off discount coupons, stating they were fake. While KFC had authorized Taobao, China’s largest e-commerce site, to provide the coupons, other sites quickly offered the same deal on their websites, albeit without permission, KFC explained in its decision to invalidate the coupons. That reasoning didn’t satisfy irate customers who had printed the coupons in good faith. And it doesn’t pay to anger the Chinese consumer. The fast food giant had to later issue a heartfelt apology, stating that it ‘did not handle the issue properly,’ and that it was ‘inappropriate’ to reject the coupons printed from other websites.

Blips like these though will not worry the retailer in China. If this coupon craze continues in its addictive frenzy, then retailers have a whole new market of shoppers who are buying products not because they NEED it, but simply because it is a good deal. Certainly, a good bargain for the consumer is also a good deal for the retailer. And really, who doesn’t love a good deal?

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