“Taste for Fast Cars and Whisky Casts China’s Women in New Light”

Here’s a very interesting blurb from my friends as HSDent Research, and it continues the look at demographic realities and the impact on economies, ours and others.

“Taste for Fast Cars and Whisky Casts China’s Women in New Light”

Financial Times, July 5, 2011

The headline above will no doubt cause more than a few readers to do a double take.  Sports cars and expensive scotch tend to be the conspicuous consumption choices of well-to-do men in their 40s and 50s.  But  China is a place where Western gender marketing stereotypes simply do not hold.  Chinese women are major buyers of Scotch whisky and exotic cars, while Chinese men fancy high-end face creams and “man purses.”

The Financial Times reported that Johnny Walker is popular enough with Chinese women to alter the parent company’s marketing strategy.  Diageo, the British company that owns theWalker brand, is taking a “gender bilingual” approach.  Not to be outdone, Italian performance carmaker Maserati says that 30 percent of its sales inChina are to women, compared to 2-5 percent inAmerica andEurope.

At the same time, men represent 45 percent of the $1.7 billion market for luxury bags and accessories inChina, compared with 15 percent worldwide.  Chinese men are very particular about their appearance and consider proper grooming and dress essential to career success.

I bring up these little anecdotes to make a very serious point.  Consumer demand in theUnited States and Europe remains deeply depressed.  While the retail economy has improved markedly from the pits of the financial crisis, retailers still have very little pricing power.  They can move the merchandise, but only if they run perpetual sales.  

We can’t expect conditions to improve any time soon.  The primary driver of the world economy over the past thirty years—the American and European Baby Boomer generation—is now desperately trying to save as much as possible for retirement.  Their children, the Echo Boomers, will be a major economic force to be reckoned with—eventually.  But for now, they are still too young and their incomes are too low to compensate for the financial retrenchment of their parents. And no amount of fiscal stimulus, deficit spending, or quantitative easing is going to change this.

So what are we to take away from all this? 

Companies, investors, and professionals who want to be successful during these difficult economic times need to look beyond their traditional comfort zones.  Be prepared to try new techniques when the old ones that were reliable in the past no longer perform as expected.

The Western cosmetics and handbag companies who first targeted Chinese men—and the Scotch distillers and performance car makers that targeted Chinese women—were clearly operating outside of their normal comfort zone.  But in doing so, they found profitable new ways to grow their businesses in an otherwise difficult economy.

We can’t all sell our wares in China, of course.  But we can dip deep into that reservoir of creativity that makes the American capitalist system work.

 

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Economics 101 and Potato Chips

Economics 101 and Potato Chips     

Potato chips?  Yes, potato chips.  Let me connect the greasy dots.

There are very interesting demographic studies that prove to be very predictable when it comes to human behavior, especially concerning the buying habits of us all.

 On average, couples marry and have children at age 28.  Children consume the most food at age 14, especially potato chips and salty snacks. This fact is not lost on the food industry.  Therefore you can expect that the most potato chips and salty snacks will be purchased by a family household at age 42.  So the grocery stores in neighborhoods with a younger demographic will have more potato chips than a store in a more mature neighborhood.  At least that’s the theory, so I decided to test it out.

We went to the Bashas’ store onScottsdale Road at the western edge of Grayhawk and measured the linear feet of potato chips and salty snacks.  We also went less than 4 miles to the AJ’s  Fine Foods store at  Pinnacle Peak and Pima and did the same thing.  A note for those of you not living in the valley, these stores are owned by the same parent company, with Bashas’ being the more family oriented store and AJ’s Fine Foods targeting a much more affluent and older demographic market segment (and it is a smaller store).  Here’s what we found. 

The Bashas’ store had one major aisle for chips, a secondary area for them, and at least 4 end caps and several small displays all over the store.  The total linear feet of potato chips and salty snacks was over 900 feet.

TheAJ’s Fine Foods store had one shelf area and one end cap.  That’s it.  The total linear feet of potato chips and salty snacks was 270 feet.  Less than one-third the size.  Seems to prove out the theory.

 Believe me, if the older shopper at AJ’s Fine Foods was buying a lot of potato chips, they would have the shelf space to accommodate it.  But it’s the younger family that’s buying and the food industry knows it. 

 These very predicable ,demographic trends come in to play in many more obvious ways, and I’ll be elaborating on them in the weeks and months ahead.  And they are having a profound impact on our economy now and into the future.

 

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