'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!

This or That?

In this game or in that moment?
This picture that I have chosen to share is perhaps extreme. People tend to be less ‘gadget oriented’ when they are in an intimate situation with their partner. This is especially true for girls. However by showing this extreme gadget fixation, I want to draw everyone’s attention to the fact that everyday – knowingly or unknowingly – all of us are trying to balance the two worlds that we belong to.
If I were to take this picture as a reference – I would say that one of these worlds is represented by the game on this girls’ PSP and the other world is represented by the man who is accompanying her at this moment.
Beyond this picture – the two worlds are usually represented in more ways viz. the song on my MP3 player over the sounds of the place that I am in or the text message I am typing or reading and the call that I am making or taking and the people around me at that moment, or the file my laptop and the quality of ambience in the café where I am sitting.

Knowingly or unknowingly we are switching between two worlds more often than we realize. And more often - than we realize – we perhaps are choosing one over the other.

The more communication, entertainment & work we carry with us, the less communication, entertainment and work we want from our immediate environment. There, of course, could be an exception to this – if the communication, entertainment and work that we carry with us are location sensitive.
However – up until that happens, we would continue to be influenced more by what we carry with us and less by what is around us.

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!

Nokia Charger

Your best friend comes over to meet you after a long time, and before anything else he asks you, “Hi! Tere paas Nokia ka charger hai (Do you have a Nokia charger?).”

You get a call from your friend and before asking, “How are you?” he asks, “Where are you?”

On one side I am intrigued by the changing nature of our pleasantries and on the other I am surprised by our growing and insatiable desire to keep in touch with people. Even if it effectively means ‘sacrificing our presence’ at a place (and this sacrifice is not necessarily for ‘work’).
Someone has rightly mentioned, “being always accessible, makes us inaccessible”.
In times of Continuous Partial Attention (CPA) in place of being committed to people or places ‘we are committed only to being communicated with’.

There are people who are self-confessed net addicts wedded to their web mail account. They keep checking their mails throughout the day, even when nothing urgent is happening; they are in a constant state of ‘updation’!
As Steven Johnson has rightly pointed out - Aimlessness is the price we pay for interactivity. This is what seems to be happening with the click-happy young folk.

‘Continuous mediation by mail’ or any form of communication, including mobile phone, also interrupts flow of thought. As people connect more, they tend to behave more like ‘nodes’. These nodes ‘expect inputs and can interact’ but are not much of a ‘hub’ that ‘generates output’.

Contrary to common perception that communication expands social circle, our people preferences are actually getting solidified into sharply defined groups and many of us are beginning to be less inclusive than ever.
No doubt there are virtual communities, that are giving an entirely new meaning to socialization in cyberspace, but for people who are not seeking to connect with strangers on the net– hi fidelity has brought about privacy of highest order and ended up defining interest groups much more sharply than ever before.
It is only ‘wonderers’, who seem to be drifting in the open cyberspace. These ‘wonderers’ are wanting to align with some group or individual and many a times end up extending their communities in real world into the cyber space. So they end up scrapping the same set of people that they are anyway writing and forwarding e-mails to and keep exchanging texts with. I am sure you’d have been accosted at least once by someone you meet everyday, with something like, “Hi, how are you? Did you read my scarp?”

‘Scrap’ is one more thing that has gotten attached to an already over-bloated list of things that a user needs to keep checking (Email – personal & official, mobile text, voice mail, home mail box, missed call list and so on and so forth).
With so much communication happening, so much more to be said and so many mail and message boxes to be checked, can you really blame your friend for asking for a Nokia charger? ; )