Made for China: Success Strategies From China’s Business Icons

284 Pages·2018·5.15 MB·English

by  Christian Nothhaft (auth.)

Christian Nothhaft
for

Made
China
Success
Strategies
From
China’s
Business
Icons
123
for
Made China
Christian Nothhaft
for
Made China
Success Strategies
’
From China s Business
Icons
ChristianNothhaft
Shatin,HongKong
ISBN978-3-319-61583-7 ISBN978-3-319-61584-4 (eBook)
DOI10.1007/978-3-319-61584-4
LibraryofCongressControlNumber:2017950081
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Why I Wrote This Book
In 1997, I decided to break ties with my home country, Germany, and move
to Asia.
Thereasonforthismajormoveemergedin1996whileIwasworkingfora
chain-store restaurant company as global development director. I was deter-
—
mined to prove my board members who had allowed me to consider
business in Asia but were not prepared to fund it with major company
—
money wrong. So, Iraised money from business partners in Asia to develop
fi
restaurant chains in ve Asian countries. Many of my friends thought I was
crazy togothere andstart abusiness. Butwhenthe businesses openedin that
— —
year, we were surprised by despite an Asian crises how many customers
fl ’
ockedtoourrestaurants,insomecasesspending2days worthofsalaryona
“ ”
mealwithfriends.Sowith Asiarising inmyhead,attheageof30Idecided
“ ” fi
to say goodbye to my ancé (to the initial horror of my family) and my
fi
friendsandsetupanof ceinHongKong.Thoughdevelopingbusinessacross
“ ”
Asia from Hong Kong was fun and exciting, the big elephant in the room
was always the massive potential consumer market in China.
In1996,ImadeseveralvisitstoChina,especiallyShanghai,atatimewhen
Pudong looked more like a swamp than a Global Finance District. Though
still in the early days, the place was bustling. I wondered: How long would it
“ ”
take before China happened?
In 1999, I decided to move to China in search of the answer and found
myself in a city in the middle of nowhere, initially producing food for the
export market but increasingly for urban Chinese who were getting used to
“ ”
what we in the West call supermarkets. Butthis was still in its infancy back
v
vi WhyIWroteThisBook
then, and business life was a seemingly never-ending cycle of navigating the
so-called planned economy. When I returned to Hong Kong around 2002 to
raise money to buy a coffee house chain and go to China with it (then the
number two player after Starbucks), the fundraising round mostly involved
convincinginvestorsthatChinesepeoplewouldonedaydrinkcoffee.Ifound
it challenging to bring the message of global trends across. More often than
“ —
not, I was turned down with the argument: Chinese people drink tea that
”
will never change. Looking back, it was an interesting learning experience,
given the fact that Starbucks now has 2300 stores in China and opens an
average of 300 new stores every year.
So, essentially by accident, in 2003 I found myself in Hong Kong working
’ fi
for Asias (then) richest man, trying to gure out how to sell wine and
electronic products to young consumers. Back then, wine was a staple for
’
Westerners, but not yet for young Chinese locals, as they didnt understand
the product, nor were they familiar with electronic products that constantly
changed,includingtheappearanceoftheiPhone.Duringthosedays,Inoticed
a major shift in how business was being done in China. Importers and state-
fl
owned monopolies became less prominent, and retailers rose to re ect cus-
fi
tomerswhowereincreasinglycon dentenoughtodemandchoicesandbetter
products. This caught my attention!
In2007,IaskedourcompanytomovemetoChinatoseewhatwecoulddo
fi
with a 200-store retail chain that we owned there. Having nally recognized
the market potential, I happily decided to move (together with my family),
offering my Hong Kong-born children (then aged 4 and 5) the perfect
—
opportunity to prepare them for the future new world order a world that
would speak both English and Mandarin.
Nineyearslater,that200-storeretailchaininChinahasgrowntoover3000
storesin450cities,withnearlyhalfofitssalescomingfromproductsiteither
makes itself or sells exclusively. From 2009, as we began entering the Digital
Age, our business evolved into consumer data collection, and today, we have
over 60 million customer connections in our rapidly growing digital ecosys-
fi
tem. Riding the rst wave of the consumer market, and focusing on female
consumers, the company grew rapidly by evolving along with its consumers.
Despite the slowdown in the Chinese economy, we are still opening 500 new
stores a year, while our Internet business has nearly doubled in size year-on-
year. Meanwhile, our China company has evolved from selling products to
—
creating its ownproduct brands withmany of themoutperforminginterna-
tional competitors in terms of sales and growth. In some product categories,
’ fi
itstheleaderinitsmarket,withthenextlargestcompetitorbeingabouta fth
of its size.
WhyIWroteThisBook vii
fl
In2014,Ibegantore ectuponwhetherwewereanexception.Idecidedto
investigate other leading Chinese companies to better understand how they
have grown, what opportunities they see, and how they implement their
strategies for success. I was also keen to discover the biggest success stories in
theconsumermarketandidentifytrendsworthinvestinginanddevelopingas
aconsumer business likeours inChina. Inthisbook,Iattemptto summarize
them as four consumer Mega Stories: face (customer individuality), family,
food, and fun. In fact, I have structured the book accordingly.
The Internet and mobile space currently continue to grab the headlines.
However, it is my conviction that the next phase of the consumer market in
— —
China belongs to the product makers. So for this book I was particularly
interestedininterviewingproductmakers,brandowners,andphysicalretailers
withapresencethroughoutChina,tohearandlearnfromtheirstories.Given
the insular nature of traditional companies, and especially their founders, I
fi
fearedthiswouldbeextremelydif culttoachieve.Butitwasalsoanintriguing
challenge, especially since more Chinese companies had become engaged in
mergersoverseas,andIwantedtounderstandwhattheobjectivesbehindsuch
bold and sometimes puzzling moves were.
To put the stories of how Chinese companies came to be leaders in their
fi
respectivemarketsinperspective,we rstneedtounderstandhowtheChinese
fi
consumermarketgottowhereitistoday.Thisbook,therefore, rstdescribes
someofthekeydriverschallengingtheentrepreneursinterviewedforthisbook
(andformyselfinthemarket); itthenexplorestheevolutionoftheconsumer
generationsinChinaoversuchashortperiodoftime,andthecompetitionto
keep up with ever-changing consumer demands, as well as the disruptive
emergence of e-commerce, which is breaking up traditional distribution
channels, fueling competition and enabling smaller companies to compete
with bigger players.
“ ” fi
Before we get going with our stories, rst and foremost, I need to thank
the interviewees for making time in their busy schedules and for being both
straightforward and open-minded in our often-lengthy conversations. To
those interviewees who I have known more closely for several years, a big
thank you for also being my competitors and teachers on how to run things
wellinChina.Besidestheintervieweesthemselves,manypeoplewhoIcherish
were involved in setting up the interviews. I would like to thank my personal
network, my friends, including Yue Sai Kan and Danxia Chen, for helping
with introductions and explaining the sincerity and value of this project in
their business networks. Also to Catherine Yang who worked for me in a
freelance capacity, which included helping to write some chapters, thus
keeping my mind free to run the company, while not drowning in this
viii WhyIWroteThisBook
“ ”
weekendproject. AlsoaspecialthankyoutoMatthewCrabbeofMintel,an
expert with a 30-year business record in China and vast experience with
Chinese consumer market numbers (and a truly up-to-date trend expert),
and to Yuhan Shi, my passionate coeditor (ex Bloomberg Businessweek),
who helped me to complete this effort. Both not only served as critical
sounding boards but also helped with the editing. A big thank you to Anson
BaileyandKeithWong(bothatKPMG),whowerekindenoughtoofferhelp
with data for the various chapters. In the process, I was able to learn to
’
appreciate KPMGs data and network power in China. I would also like to
thank my copy editor Matthew Fentem for helping me turn this into a
—
cohesive book, and the folks at Springer Editor Prashanth Mahagaonkar
— fi
and Nils Peter Thomas for not giving up on a rst-time writer.
’
The thoughts behind and shared in this book wouldnt be here were it not
fortheexperienceIgainedwhilebuildingourcompanyinChina.Therefore,a
big thank you to my team for the many years of innovation and maintaining
“ ”
the start-upspirit (thesecretrecipeforsuccessinChina),evenafter10years.
Also, a thank you to my competitors and suppliers for challenging our
company and me for the last 10 years. In doing so, you have been great
teachers every step of the way!
Mostofall,Iwouldliketothankmywifeandchildrenforputtingupwith
my pursuing this at times seemingly endless project and consequently having
to do without me on many weekends while we were out interviewing or
writing. I hope this book serves as an inspiration to my children (and my
teamatthecompany):tolearnfromotherseveryday,toembracechangeevery
fi
timeitarises,toseetheopportunitybehindeverychallenge,andtoalways nd
unique ways to move forward. (Tip: Ideally ways that are hard to copy!)
Hong Kong Christian Nothhaft
June 2017
Contents
’
Part I Chinas Customers and How to Lead the Trend with Them 1
’
1 Understanding Chinas Consumers 3
’ —
The Background: History Wont Repeat Itself From a Planned
’
Economy to the Worlds Largest Consumer Market in One
Generation 3
’
The Driver: Chinas Six-in-One Consumer Generations 6
The GenRed Consumer (Born 1959 or Earlier) 7
–
The GenRise Consumer (Born 1960 1969) 10
–
The GenPC Consumer (Born 1970 1979) 11
–
The GenNet Consumer (Born 1980 1989) 13
–
The GenMobile Consumer (Born 1990 1999) 15
The Accelerator: e-/Digital Commerce Accelerating Consumer
Desires 16
Evergreen Stories that Sell: Face, Family, Food, and Fun 19
2 The Leaders Behind the 21 Made-for-China Success Stories 21
The Face: Accelerating Customer Individuality 22
’ —
Inspiring Consumers Dreams and Styles: Modern Media
Thomas Shao 22
—
Getting that Dream Job: Tarena Han Shaoyun 22
—
Diversifying the Product: GreenTree Inn Alex Xu 22
—
Brand to Platform: Daphne Eddie Chen 22
—
Boutique Is Beautiful: Grace Vineyard Judy Chan 23
ix
x Contents
—
High Above the Rest: Toread Wang Jing 23
The Family: Enhancing Quality of Life 23
—
Reaching More Households, Offering More Products: Suning
Zhang Jindong 23
—
Households Upgrading Appliances: Haier Zhang Ruimin 23
—
Home Style Dreams: Kuka Gu Jiangsheng 24
—
FMCG Premiumization: Liby Chen Kaixuan 24
—
Medical Care Going Private: BYBO Li Changren 24
—
Protecting Lifestyle and Loved Ones: NCI Kang Dian 24
The Food: Aspiring to a Healthy and Fashionable Diet 25
—
Brand Trust: Yili Pan Gang 25
—
Supermarket Sophistication: Yonghui Zhang Xuanning 25
—
Urban Fast Food Formats: Gil Wonton Zhang Biao 25
—
Better Booze: Jing Brand Wu Shaoxun 25
—
Turning TCM Classics into FMCGs: GZ Pharma
Li Chuyuan 25
Fun, Entertainment, and Leisure 26
—
Curious About the World: Ctrip Fan Min 26
—
Eater-tainment: Hai Di Lao Zhang Yong 26
—
Chinese Hollywood: Wanda Wang Jianlin 26
—
Home Entertainment: TCL Li Dongsheng 26
Part II The Face: Accelerating Customer Individuality 29
’
3 Inspiring Consumers Dreams and Styles: Modern Media 33
4 Getting that Dream Job: Tarena 43
5 Diversifying the Product: GreenTree Inn 53
6 Brand to Platform: Daphne 65
7 Boutique Is Beautiful: Grace Vineyard 75
8 High Above the Rest: Toread 85
Part III The Family: Enhancing Quality of Life 95
9 Reaching More Households, Offering More Products: Suning 99
10 Households Upgrading Appliances: Haier 109