Chris Devonshire-Ellis: In China, White Goods Become Red

Op-Ed Commentary: Chris Devonshire-Ellis

Jul. 30 – As the central government encourages a re-balancing of the economy towards more domestic consumption, companies are finding subtleties of selling in China that will shape the way forward for foreign manufacturers doing business here. Gone are the days when a manufacturer would only sell within a region, now the focus is on getting goods to China’s massive rural population; some 900 million people, or three fourths of the total consumer market.

This means that long held wisdom in international and even China sales is being remodeled and, in some situations, rethought. Take Haier for example. Long China’s largest manufacturer of white goods – everything from washing machines to air conditioners to freezers and television sets – they are the archetypal white goods manufacturer. In a delicious twist of irony, they are finding that rural Chinese consumers prefer their products in a more auspicious shade of red. White is a color associated with death and funerals in Chinese culture. Superstitions die hard in the countryside, and red is considered a lucky color linked to fortune and wealth.

It’s not just the color scheme that is changing. Manufacturers are also listening to rural consumer needs and demands. As most of China’s rural population is centered in the agricultural industry, problems encountered there are different from those in the cities. Rats, for example, love to chew through electric cables and sometimes even make nests in the backs of refrigerators and other similar products. That’s not a problem on the 20th floor of an apartment block in Wuhan or Shanghai, but can be a serious matter out in the countryside.

Haier’s response was to strengthen the backboards of their products and provide tougher, rat-proof cables. It doesn’t stop there either. Innovation long called for by the government to encourage sales to China’s internal regions has also had to apply in cases where rural habits would have been treated with disdain in the past.

Step forward then, Haier’s current star of the red goods production line, the combined washing machine and potato cleaner. The device was designed based on a complaint made by a farmer on dirt clogging the washer. Haier investigated and found he’d been washing his laundry and vegetables in the same machine. Rather than tell him to stop using it for agricultural purposes, they looked into the matter and found the habit was common. Enter a new, tough, hybrid model that can do double duty for laundry and potatoes.

Things can also go wrong if attempting to sell to China without spending time to research. I recall the entire serving staff of a Shangri-La outlet in Shenzhen going on strike after a redesign of their uniforms. Opting for an American baseball-inspired uniform – the outlet was a beer and burger joint – the baseball caps were a shade of green. The staff rebelled; refused to wear the uniforms and was even threatened with contract termination until it was pointed out to the management that “wearing a green hat” is a euphemism for a cuckold. In this case, it pays to listen to the end user.

Language also rears its head here. China has seven languages on its banknotes, including Braille; denoting the country’s significant tribal legacy. The more one examines rural areas, the more likely local dialect is going to become part of the equation. China’s wealthiest province, Guangdong, doesn’t even speak Mandarin. It is Cantonese that is spoken there. Just last week, mass protests erupted in Guangzhou after suggestions were made that the local TV stations must start to broadcast more programs in Mandarin. Local pride and customs matter in China, and effort must be made to understand them to avoid embarrassing mistakes and ensure that local habits can be catered for in imaginative and potentially lucrative ways.

Sales potential in rural areas is more attractive to manufacturers because its has been boosted by the government’s stimulus plan. The Ministry of Commerce raised the upper price limit for subsidies in purchasing higher-end products for farmers to get them to spend more on higher quality and efficient equipment. This is driving the rural economy forward, and should be a sales opportunity for foreign investors to consider if they are serious about selling in China.

Chris Devonshire-Ellis is the principal and founding partner of Dezan Shira & Associates, establishing the firm’s China practice in 1992. The firm now has 10 offices in China. For advice over China strategy, trade, investment, legal and tax matters please contact the firm at info@dezshira.com. The firm’s brochure may be downloaded here. Chris also contributes to India Briefing , Vietnam Briefing , Asia Briefing and 2point6billion

3 Responses to Chris Devonshire-Ellis: In China, White Goods Become Red

Hugo says:

July 31, 2010 at 2:09 am

Seeing that the term “white goods” was coined by an American department store (Sears and Roebuck) certainly it is related to some American custom.

Since China has a clearly different folklore from the US, specifically an estimation by the red color, I see no meaning in give continuity to the American original appellation.
Chris Devonshire-Ellis says:

August 1, 2010 at 11:07 am

Thats exactly my point Hugo, and considered ‘standards’ when it comes to China, not just in consumerism but alsom in politics and culture are starting to shift because of Chinese cultural preferences. I concentrated on the sales and marketing aspect where a new type of thinking is eveolving to sell to rural communities. America and Western Europe lost those sensibilities 60 years ago, but there are becoming increasingly valid again for the rural Chinese, Indians, and Russian, Africa and South American markets. “Selling Rural techniques” will become a major commercial strategy in getting products to these new emerging markets, and its companies that consider and adopt such policies that will prosper. – Thanks Chris
Chris says:

August 2, 2010 at 1:38 pm

Actually with the spread of Guomei, Suning, Walmart and other big retailers into 3rd & 4th tier cities and even into towns, pricing and price transparency getting much better for rural consumers. Once upon a time, they were gouged for sub-standard product by local dodgy retailers, overpaying for shoddy goods.

Over the past 5 years the move by domestic retailers targeting lower tier cities, small town and rural markets has absolutely changed the rules of the game.

In these markets, prices are now much lower, goods of national standard and service much improved. Consumers also much more savvy.

I’m not convinced that fridges will become uniformly red (haven’t seen too many of these in rural houses), but it is certainly true that manufacturs have focused on good quality models that hit key price points in rural areas.

The tax refunds on whitegoods rolled out last year for rural residents have resulted in an absolute boom in sales. I would estimate that the overwhelming beneficiary would be domestic enterprises, with few foreign manaufacturers having models meeting the maximum.