Best Buy and eBay in China
Q1: Will China maintain its strong economic growth in years to come? Some suggest it will until 2050. What do you think?
It is noticed that technology and business aspects are evolving at a very high rate. Due to this, I think it will be easy for China to maintain its economic growth. According to me, a time will come when the economic growth rate will slow down just like the case of the United States. The high economic growth rate has been maintained because all the other countries are interested and some have already established businesses in China. This will not always be the case as the rate will eventually slow down.
Q2: If China will go from 17 million to 190 million middle-income people by the year 2020, would the scenario presented Best Buy in 2006 not be applicable anymore? That is, the culture shock in 2006 was that the Chinese would not pay for Best Buy’s overly expensive products unless they are a brand like Apple. Would newly rich Chinese customer engage in this purchasing behavior by 2020?
This may not necessarily be the case. So many cultural beliefs have been established at a merely early age and adopted from generation to generation. I think that they may readily accept to pay more for specific commodities or brands which may not necessarily be an Apple brand. I believe that the newly rich will still engage in this spending by the year 2020.
Q3: With Alibaba’s ownership of the popular TaoBao online shopping system (similar to eBay and Amazon) and its spread across the world, will a Western-based online shopping culture ultimately infiltrate China?
I do think that there is a high possibility of it infiltrating China, especially one resembling the Amazon. Due to the fact that there are already many China based businesses that offer their products through Amazon, I can see this company readily infiltrating China.
Q4: Reflect on the changes in China. Can the country continue to be a manufacturing floor for the rest of the world as more Chinese move up in their income categories? What are the implications of the country’s incredible growth?
As more and more Chinese people have joined the middle-income category, the culture shock that happened back in 2006 is not going to be repeated. On the other hand, the implications are going to be that the nation are going to be empowered in terms of the GDP and the population gaining more of a purchasing power and money.
Q5: What can other companies that are considering investing in China learn from the experiences of Best Buy and eBay?
While investing in China, other investors should know that Chinese people are not going to pay for goods and services that are expensive and they are not a famous brand. For example, they are not going to buy expensive products from Best Buy but rather spend it into something that has a name like Apple. On the other hand, Investors have to develop and create a specific business model for the Chinese market to avoid the culture shock that happened with eBay and Best Buy.