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

July 30, 2010 Posted by Chris Devonshire-Ellis Reading Time: 4 minutes

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