'Swarmonomics' and the Chinese shopper – seven things to learn

In the past four weeks we have seen two examples of swarm-style purchase frenzies by Chinese shoppers.

The first occasion was the panic-buying of common salt. Shoppers were under the impression that the iodine in salt could help in protecting them from the negative effects of nuclear radiation coming out of Japan following the earthquake-related nuclear emergency.

Stocking up on salt was also viewed as a good idea because some shoppers were convinced that the sea salt due to hit shelves in the coming months would have been polluted by the nuclear radiation, making it wiser to buy up stocks now. On a single day, around 4,000 tonnes of salt was sold in Zhejiang alone! Shops ran out of stocks, and when all the salt was gone, many zeroed in on soy sauce, due to its high salt content.
Calm had barely returned when another round of swarm-style purchasing hit the stores. This time it was laundry detergent.

Shoppers from Shanghai, Beijing, Hangzhou and Wenzhou, upon hearing that detergent prices were to go up soon, moved in hordes and wiped the store shelves clean. Shop shelves lay empty as wave after wave of anxious shoppers loaded their shopping carts with almost any pack of detergent that they could lay their hands on.

These two instances say a great deal about the attitudes of the average Chinese shopper. These attitudes include:

1. Uncertainty about the future: The average Chinese shopper is anxious about tomorrow. They are not sure what is going to come their way and want to do all that they can to pre-empt anything that might go wrong. Making oneself uncomfortable today only to avert negative effects of future uncertainty, no matter of how remote or far-fetched it might be, is not unusual

2. Low levels of trust: Chinese shoppers do not trust reactive information. Irrespective of the assurances from various other professional agencies about the price, quality and future availability of the products, shoppers were not convinced. They went on stocking up on these products as much as they could.

3. Risk aversion: Chinese shoppers are hugely risk-averse, especially in times of relative uncertainty. They do not like to

leave things to a stroke of luck; they want to ensure that they do the right thing for themselves and ensure that it covers any kind of potential risk.

4. Value consciousness: The large majority of Chinese shoppers will go to any extent to save money. 'Money saved is money earned' seems to be the shopping mantra for the masses that flock to supermarkets. This value consciousness is not just unique to China, but a theme reflected in other emerging markets. Shoppers in India are not very different. The sight of Chinese shoppers jostling for salt and detergent is reminiscent of the shopper stampede in India in 2006 when the Big Bazaar (a leading retail store brand in India) announced a three-day-long annual sale that offered a heavy discount on products across categories such as apparel, electronics and other consumables. Millions of shoppers came to buy, and in some of the cities police had to be called to manage the anxious mob of shoppers. Shoppers were worried that they might not be able to get the deal if they reached the store late or missed the first day of sale.

5. 'Swarm sense': The occurrence of a flash flood of shoppers is neither sense nor nonsense; instead it is swarm-sense.

This is propelled by a feeling that 'the crowd must be right'. There is complete lack of individual judgment in the purchase decisions, and this only becomes more pronounced in the event of insufficient proactive information from credible sources.

This swarm-sense is also similar to the way Indian masses reacted to the news of Ganesha (a Hindu deity) drinking milk in 1995 and again in 2006. Millions streamed into Hindu temples carrying their pot of milk to offer to the deity.

6. Connectedness: Rumours behind both the events were triggered largely by misinformation that spread through mobile phone messages and online microblogs. The speed at which the messages were spread and the scale of response demonstrates how modern-day communication technology has turbo-charged age-old word of mouth. This also shows the higher credibility of communication channels like mobile phones in such rumour-laden situations.

7. Post-fact society: At a time when we have access to multiple information sources and diverse perspectives, we do not get the truth; we only choose to believe one version of it. What might 10-15 years ago have been a journalist's dilemma about which version of a story to believe and write about, is now the dilemma of the average person. The only difference is that the average recipient of information might not always be conscious of the choices that he or she is making.

What can all this tell us as marketers and advertisers? We can definitely do well by acknowledging the importance of speed and timeliness of response. Such situations can be seen as moments of crisis and yet they can prove to be big opportunities for brands to come across as earnest and committed to a shopper's interest. For example, in the above two situations, consumer product brands could have gained a great deal had they stepped in early and reached out to shoppers; in the case

of the detergent frenzy they could have told shoppers about the company's commitment to provide the products at constant prices.

These two incidents also show the importance of opinion leaders in shaping people's behaviour. If brands identify the opinion leaders, especially those with clout in the online space, and supply them with complete information, they would be able to counter misinformation much faster and more effectively.

While shoppers are risk-averse when they lack credible information, marketers, in spite of having greater access to information, are not much different. They need to overcome this barrier. On this occasion marketers lost the opportunity to have a socially responsive stance, but there is nothing stopping them from doing that in the future.

What Can a Dinner Banquet Tell Us About Philanthropy & Luxury in China?

A few months back about 50 of China’s business and philanthropy elites came together for a 90-minute discussion over dinner. The venue was a mansion on the edge of Beijing - a gilded and karaoke-equipped rococo castle, modeled after the baroque 17th century Chateau de Maisons-Laffitte in France. The hosts were the billionaire philanthropic duo - Warren Buffet & Bill Gates. Media dubbed the dinner as the "Ba Bi" Banquet - after the Chinese transliterations of the host’s names. ("Ba Bi" incidentally is also the Chinese for "Barbie").

BaBi was hot in media much before it even happened. There were news reports about a business tycoon from south China pledging all of his fortune to charity after his death and motivating other Millionaires in China to come forward and contribute. There were reports that the attendees had requested the list of invitees not to be made public for they were afraid of attracting unnecessary attention to their fortune. There were also voices from China’s philanthropic circles that Chinese did not need to learn philanthropy from Americans etc.

But the string of events in the run up to Ba Bi and even after that, have more to tell us than just who pledged to donate and who did not. BaBi tells us a lot about the attitude of China’s super rich on two counts – one obviously is Philanthropy and the other less obvious but very evident is the attitude of China’s super rich towards luxury and indulgence.

What makes this rich group so important is its large & growing numbers. According to Shanghai-based analyst Rupert Hoogewerf China has 64 billionaires in US-dollar terms (second only to the United States) and at least 875,000 U.S. dollar millionaires. And these numbers are growing healthily. The disposable income of the richest 10% of Chinese families is 2008 was USD 20,500 – almost as much as 3 times the official government estimates. And this does not even include the total undisclosed income in China, which is estimated to be over 1.4 trillion (about the GDP of India!).

But in spite of this prosperity, for most of the Chinese the idea of charity seems a bit detached from daily life. While the total amount donated, as per Government records, has risen from $1.5 billion (RMB 10 billion) in 2006 to over $7.5 billion (RMB 50 billion) in 2009, it is still a negligible fraction of the $300 billion annually donated in the US, which is over 2% of the country's GDP. Also, only around 20% of China's annual donations actually come from individuals; the rest are made by private enterprises. In the US, for example this number is as high as 70%!

Contrast this attitude towards philanthropy with the state of luxury. In 2009, China alone accounted for 25% of the world's total luxury consumption, making it the second largest luxury market after Japan, whose GDP per capita is more than 10 times higher. And yet despite their consumerist instincts, the Japanese still appear to be more charitable in general than the Chinese. According to the 2010 World Giving Index, released by the Charities Aid foundation, 17% of the Japanese population has made charitable donations, compared to China's 11%.

What does all this mean? Does BaBi tell us anything more than what these numbers reveal? How?

BaBi was actually a terrific opportunity to glean insights about the China’s rich, their riches and their desire to give. Here are five things that I learnt from the much-publicized dinner.

1. Short history of prosperity & thus philanthropy in modern China: “I just started making money and now you want me to give it all up?”

Because of China’s socialist background and the fact that wealth China is so new, the notion of government’s role versus philanthropy is still not fully developed. Historically, especially before 1949, China’s wealth was based, in one way, on familial wealth & power via heirlooms, bequeathments and hereditary titles. China comes from an Imperial, agrarian society, where power and social status is based on familial wealth. Modern Chinese society continues to have many aspects that still emphasize family wealth. We see this today in the continued inadequacy of China’s social welfare system, where Chinese parents still need to save all their wealth in order to pay for the education, and buy real estate for later generations.

It is thus rather unrealistic to expect all of China’s Millionaires to become super-givers soon. After all most of them are the first generations of millionaires. After so many years of penury, it is only natural for them to want to hold on to their newly acquired wealth.

Short History of Luxury: “I have it and I want to flaunt it..”
From a luxury standpoint - we cannot expect China’s rich to start appreciating the nuances and subtleties of super luxury products and services. They have earned it recently and they would want to show it. A Chinese expression “大气” or da qi (the big and glorious) captures their state of mind rather well. Thus luxury that helps them demonstrate their achievement and success will do better than the classic understated luxury.

2. No Philanthropic Role Models: “I should give all my money for ‘noble’ causes like whom?”
Bill Gates and Warren Buffett have had historical precedent from such past American philanthropists as Carnegie, Rockefeller, and Ford. China does not have many distinct philanthropic heroes in its own history. It will take time for China to have it’s own super-rich philanthropists. While people like Jet Li are already doing this in some way – there is still a lot that needs to be done to create social icons out of givers.

No role models in Luxury: “Unique style, like whose?”
From the luxury standpoint as well, there is a long way before China established its own set of luxury role models. There are still not many rich and successful men and women who have a distinct style that could inspire the other rich to develop their own unique style or get inspired by a new Chinese model of luxury and style. Today majority of role models in luxury and style are from the west and the choice of products of these luxury icons is emulated for their novelty and badge value rather unique resonance with one’s personal style.


3. Limited reliable ways to contribute to the society: “There is infrastructure to spend but limited infrastructure to give”
"If my donation doesn't end up helping the needy I'd feel cheated, to me it's not a question of money," said Cao Dewang, CEO of Fuyao Group - the biggest glass manufacturer in China- in a recent interview with CCTV. The news channel went on to say that Cao pledged to donate RMB 200 million to 100,000 low-income households via the China Foundation for Poverty Alleviation, a non-profit charity overseen by the government - but would do so only after signing a detailed contract to ensure that his money falls into the right hands. Jet Li is also quoted to have said in a recent interview that, “The main reason [why Chinese are skeptical about donating] is because there is an inherent mistrust in giving your money to any third party to pass it on. They’re convinced that for every 100 that they give, the end party won’t receive anything near that 100.”
The lack of a robust and matured ‘infrastructure to give’, accentuates concerns about giving in general.

Shop for status not style: “It is expensive and everybody knows that – that’s enough for me..”
From luxury’s perspective, Mainland and Hong Kong shops are loaded with the most exotic in luxury with brands that boast of steep price tags, ironically they are all picked up from the shelves just for that reason viz. - the price and the exotica rather than a brand’s unique ability to pronounce one’s personal style. There is infrastructure to spend but there is no infrastructure to understand the nuances of luxury and then spend in a way that reflects personal taste.

4. A different kind of philanthropic instinct: “Pragmatic Philanthropy that makes people self-reliant”Billionaire Guo Jinshu told Xinhua recently "In China, an entrepreneur's top responsibility is to keep his own business sound, to fulfill taxation payments, and create jobs. This is also out of a philanthropist heart." Guo’s remarks remind us of the old Chinese adage “if you feed the poor – you feed him today, if you tell him how to fish you feed him for a lifetime.” There seems to be a more pragmatic outlook towards philanthropy among some quarters of the Chinese rich. While the pragmatism is real – there are still not many avenues to help people donate this way.
Another cultural factor is the need to not talk about how much one gave out. Some of the media reported that the billionaire duo, were not well received in China because they publicized their charity efforts. This is not always the Chinese way of giving – “if you give, you don't really need to announce it."


5. Sense of insecurity both physical and financial: “If people come to know that I have enough to start giving, I might not there to be able to give tomorrow..”
It is interesting to note how every week, local newspapers in China publish pictures of the country’s lottery winners showing up to claim their oversized checks in disguise. Almost all the winners resort to some kind of mask to hide their real identities for the fear that if they get recognized they might not be left alone to enjoy the newfound money. Many people are said to have hidden the windfall even from their family members and continue to lead their normal life. There is threat perception about being identified as someone who can cough up money when needed.
People no matter how prosperous – want to ‘lie low’ and keep off the radar. They do not want to attract attention for they are not confident about their security. This insecurity comes in part from the fear of have-nots – who might be simmering with discontent and the other part comes from scrutiny by Tax and other regulatory bodies.

Camouflage fortune by harping hard work and performance instead: “Make me look like a self-made success, not just rich and privileged”
This is one of the biggest challenges for luxury marketers. As the luxury buyers get increasingly insecure about their personal and financial wellbeing, luxury purchases will get impacted sooner or later. The need for showing off one’s wealth will collide with the need to lie low. Volks Wagen’s (VW) Phaeton is a great example of the need for understated luxury but for entirely different reasons. Phaeton is priced between RMB1-2 million but looked like a big Passat to many (a mid priced car from the same stable). The brand became a laughing stock on Internet with many jokes around it about being a high priced mid-range car. Not withstanding this the car still sold very well in Northwest China for exactly the same reasons – with its high price and plain vanilla looks – it was the designated as a“service car” of the local officials and the Army who did not want to be seen wasting tax payer’s money on luxury cars.
Buyers might need to exercise restraint while purchasing brands that give out the story of their bank balance. While symbols and imagery that connote fortune, power and status has traditionally been the mainstay in luxury advertising in China, it might need to acquire a new avatar that focuses on success and achievement from performance & hard work rather than just glory & big fortune.

BaBi was only a dinner banquet but it has a lot to say about the large and growing number of the Chinese super-rich. While this group is an extremely profitable source of growth for luxury marketers, it has its unique characters. It is vital to understand the real nuances of Chinese Philanthropy & Luxury for greater impact in future. And by the way, understanding the Chinese rich might not always require a one-on-one interview!

Unusual is ok as long as it is an Offer

While in Chengdu for the recent National Day holidays I thought of checking out the departmental near my hotel. I had not walked for more than two minutes inside the electronics section of the store, when I reached an island display announcing a Bag of Rice or a Bottle of Cooking oil as a free gift with every purchase worth more than RMB 500. This was in the middle of names like Nikon, JVC, Panasonic, Philips, Sony, Apple etc.
A very pragmatic promotional offer I should say. Despite the fact that the department store was not necessarily a value destination – the promotions were very down to earth



This unique offer reminded me of something that I witnessed almost six months back while I was in a similar departmental store in a smaller town close to Kaifeng in Northern China. There I was greeted by something even more unusual – I saw a colorful starburst announcing Tide Detergent Powder being given out free with second hand DVD Players.



If I were to speculate a few inferences from these two separate observations, I would say that just like the Indian shopper – the Chinese shopper loves offers. As long as there is a promotional freebie attached to a product being sold – no matter how unrelated it might be to the product– the shopper will pay attention. This also reminds me of what my ex-colleague and good friend - R Narayanan once told me about China- “China can be a market for the most unusual of products.” I would now add by saying – “China can be a market for the most unusual promotional offers.”

This also makes me think about looking at promotional offers through a wider lens. Instead of getting stuck in the more conventional- brand or category related paradigms, we can actually open ourselves to ideas that are pragmatic or simply unusual.

The way we keep it, is what it is..

While traveling through central China, I observed these two unexpected ways of ‘parking’ mobile phones on at work.

Watch the waitress below as she has the phone sitting in the apron















And look at this durable store sales girl – who has her phone in a wrist band on her left hand.
Perhaps none of these two ‘mobile hangars’ are new. May be all of them have been around for a while.
I am trying to draw a parallel, with other things that we would be comfortable to sport this way? The answer to this question can shed some light on how the person relates to the device. For example the restaurant girl in the apron could well have some peanuts as snacks in her pocket – it was not for that mobile phone. Does this mean that mobile usage for her is a proxy for snack or snacking? Is it for those in between moments when one wants a quick break and then get back? Perhaps it is.

For the sales girl at the durable store – the wrist band could well be a way to keep some money or an expensive jewelry article that she cannot wear at work, and does not want to leave in her shoulder bag which she brings to work. Does this mean that for her the device is an expensive item that needs to be protected and yet carried around? Perhaps yes.
I do not have a picture to show but if you go to any Indians wedding – the chances are that you’ll see parents of the bride or the groom carrying a small hand bag to keep the small but expensive gifts given by the attendees. It is a small rectangular bag with multiple zippers, usually made of leather or Rexene.
It is amazing to observed how people find various ways of intuitively organizing their things around them – intuitive orderliness if you like. This intuitive orderliness says a lot about how things fit into people’s lives – fascinating!

Meaning is empty without Belief

Look at these two pictures. I captured these two moments at Luoyang (a place of great historic significance in China). The girl is sitting atop a lotus and trying to mimic the Buddha pose, just for fun. Her friends, who are not in the frame, were clicking and cheering her. The man is looking at a very old rock carving of Lord Buddha as he takes a drag and reflects (perhaps).
This shook me, more than many of my Chinese friends – may be because the beliefs imbibed in me from childhood about paying respect to God. However if I were not aware of the concept of God, or may be not aware in the way I have been told, then this statue would not have been anything more than a relic of historical value or a beautiful creation that has been preserved. And may be I would also be sitting atop the lotus with my shoes on, doing something similar.
I do not intend to pass a value judgment on anyone here but I believe it is worthwhile looking at things from the other person’s point of view before classifying their behaviour as good bad or anything else. To me things or people do not mean anything without being founded on an underlying belief. A belief, in turn, is based on knowledge and experience. To be able to have an objective point of view about anyone, we perhaps need to make an attempt to tap into their experiences and knowledge and then things look a lot simpler to understand and relate to.
I am not well read so I do not know how many religions already say something like this, but to me this is the biggest religion.
There is no walk like trying to walk in another man’s shoes for a while..
When I step back and look at this from the consumer understanding perspective– the analogy of walking in another man’s shoes comes in very handy. When I try to fathom the knowledge and experiences of the person who I am speaking with I start looking at the world as s/he sees it.
The intersection of the way he looks at the world and the way we as consumer behaviour professionals look at the world is the place where insights opportunities and breakthroughs live.
This sure is an amazing experience!

Observation, Intuition & Tactics

Watch these young men and women in red. They are at the Hangzhou railway station on a hot summer morning – when the sun can almost burn you. These people are selling Hangzhou-Shanghai bus tickets.
(Hangzhou is a popular travel destination in China, it is also the birth place of the famous Chinese silk among many other specialties that it has to its credit).
There is a train between Hangzhou and Shanghai almost every 40 minutes. Thus it would be expected, that selling bus tickets would be rather difficult given the good frequency of trains. Yet these salesmen have found a novel way of doing it. They appear around the train ticket office immediately after one train leaves and continue to be there, selling bus tickets up until 15 minutes before the next train is expected to leave. They have figured out that a sizable chunk of passengers does not like to wait for more than 15 (bus frequency is about one every 15 minutes).

They did not seem to use any technology tool to derive this conclusion however they have intuitively found a way of sequencing the frequency of bus service between the two cities. And to top it all it seems to be working fine.

To me it offers two fundamental learnings for business:

1.Keen observation and intuition helps develop a smart product or service

2.Flexibility & agility is critical as we place our product or service in the market

I am reminded of what I recently read in “Radical Evolution” by Joel Garreau, “Amateurs talk strategy, professionals talk logistics.” In fast growing markets like China and India and in times of rapid technology change, agility is an imperative. There is a lot that these ingenious everyday entrepreneurs on the street, can teach us form their daily stories of survival and growth through their bottom up tactics.

At the face of it

Spot the driver in the picture that you see here, can you? Unlike India where it is much easier to tell the server from the one who is being served, in China it is very difficult. Usually you cannot tell who is who, at least in big cities. Because if the driver is wearing very clean, contemporary clothes and shoes, if he is busy keying in stuff into his PDA with the stylus and then we all sit together to eat, it becomes virtually impossible to tell one from the other. I am sure it might not be as difficult to tell the difference for people who know the language but sometimes (only sometimes) not knowing the language helps in gaining a point of view. Sometimes not knowing the answer is useful, because it helps you wonder constructively.

Coming back to the difficulty in telling one from the other, I think this a great sign. It means that the society is progressing at a pace wherein in there is lesser disparity, at least in some ways and some places. I am sure there is a long way to go but at least things seem to be moving in the right direction.

Now look at these two men below. Almost a contrast to the big city driver in their looks, aren’t they? Before you conclude that this is a ‘home theatres for the homeless’ kind of situation, I must add that these two men, staring at the bikini clad women on the screens, are sitting in an electronics super store in a tier 4 city in China and the sales woman is helping them choose the LCD TV that they should buy.
Surprising? Well, not really. In terms of money some farmers might be making as much if not more than the driver on the right in the picture above, however their expenses seem to be much less in the village. Add to it the price of a Chinese LCD TV does not make you mortgage anything to be able to own it!

I am sure the readers here would have read many stories about the poverty in rural China. However I feel that no picture is ever complete. If that is a reality, this is another reality. The way I look at these two examples is that technology adoption is moving down the economic pyramid. This is a great sign. I believe that technology adoption would further speed up the process of bridging the gap between the haves and have nots. Also, to me development (especially in a large country like China) cannot be a high precision activity. There will always be difference in the levels of development across regions and across occupations. However it is important to note that there is movement in the right direction and that to me is a very promising reality!

The buzz around busy-ness

How are you doing?
Too much work man..!

How are you?
Surviving..

How is life?
Do not ask..

How does the day look?
Just too busy..

How was the day..?
Mad-hectic!

Where are you going?
Just running to wind something up

Have you seen this film?
Who has the time..!


Almost everybody is busy; everybody at any given point in time seems to be the most important person in his work area. The whole world (at least India and China) seems to be working very had, keeping super-busy ..or is it really?
Increasingly as I meet people talk to them and observe them doing their day to day work I get a feeling that more than being really busy people find if ‘fashionable’ ‘cool’ ‘appropriate’ to say that they are busy.
Only people who are not heading anywhere, ‘pop phrase for this group is ‘losers’, have all the time under the sun. In other words if you are busy you are successful and if you have time for yourself, may be you are drifting. This is true especially for the younger to middle management cadre. As one gets more experienced one begins to talk of work life balance etc. but at the bottom and in the middle of the pyramid – balance is not a virtue yet.
Humans are a strange set of people when we do not have as much work, we create a perception of work and when we really have a lot of it to do we talk to ‘work-life balance’!
Many young people even sit at work for long hours because the infrastructure is far superior at the place of work than home. From air-conditioning to broadband, gym/health club, coffee, TV/ Massage Chair, food and the works (Google is a pro at making office so much home that you visit home and live at work!).
Add to this, the heightened sense of busy-ness arguably has a High Hedonistic Impact on Purchase and Consumption behaviour. Since we are constantly telling ourselves and the world around us, how busy and occupied we are – we at some level are constantly gearing our self for rewards that are precluded by beliefs like ‘life starts after work’ or ‘I deserve to gift this to myself’ or ‘I have earned this indulgence’ let me do it for myself.
Self gifting is going to be a big market in these two otherwise high guilt societies.

I do not know if increased ‘perceptual busy-ness’ always translates into better ‘business’ but this behaviour/attitude is definitely helping grow the market for some of the products/services viz. eating/ drinking or hanging out, fashion, personal products to name a few ..
For now being busy looks like being successful and marketers are not complaining!