This case explores the tremendous growth in the Chinese marketplace over the past decade and the projected future growth in the market. By 2020, China is expected to have some 200 million people in the middle- and upper-income categories, a prediction that has not gone unnoticed by Western retailers. However, based on the experiences of big players in the retail market including consumer electronics giant Best Buy and online retailer eBay, breaking into the market in China is not easy. Cultural and economic differences combine to make selling a challenge. Failure to recognize and adjust for these differences can lead to significant problems as Best Buy and eBay quickly found out.
Best Buy and eBay both made many missteps when they decided to do business in China. In the case of Best Buy, the company failed to recognize differences in price sensitivity between Chinese and American consumers. Also, higher rates of piracy in China meant that demand for Best Buys products was lower than in the United States, where piracy is not as common. Finally, the companys traditional mega-store aesthetics did not appeal to Chinese consumers. In the case of eBay, the company failed to recognize Chinese consumers preference for rival e-commerce company TaoBao and the unique advantage TaoBao had with its built-in instant messaging feature.
The experiences of both Best Buy and eBay in China clearly indicate the need for careful market research prior to entering a foreign market. Western retailers hoping to cash in on Chinas economic boom must recognize that strategies that have worked well in other markets may not be successful in China. Answer/discuss the following questions:
Will China maintain its strong economic growth in the years to come? Some suggest it will until 2050. What do you think?
If China will go from 17 million to 200 million middle- and upper-income people by the early 2020s, would the scenario presented by Best Buy not be applicable anymore? Would newly rich Chinese customers engage in this purchasing in the 2020s?
With Alibabas ownership of the very popular Tmall and Taobao online shopping systems (similar to eBay and Amazon) and its spread across the world, will a Western-based online shopping culture ultimately infiltrate China?
