China is the world’s second largest economy, and their middle class is growing by the day. So those companies managing to join the Chinese economy are likely to rapidly increase their volume of business quickly if their product hits the sweet spot. In 2012 the upper-middle class in China made up about 14 percent of households in urban areas. Analysts believe that by 2022, that number will rise to approximately 54 percent. That allows for a lot of growth.
But breaking into the economy is not easy. The Chinese President, Xi Jinping, keeps a tight control on who does business in his country as well as whether there is competition for that outside company from a local one, and if the company brings positive press and views to the Chinese people.
But even with the various hoops, an outside company needs to jump through, some are doing well and in the process increasing their net sales and the value of their companies. Who are a few companies managing to do so? Here are three of them.
Nike’s run in the Chinese economy has had a few bumps, but over the last two years, their sales in China have grown reaching $3 trillion for fiscal year 2015. Nike has been working hard to market and brand their products in a way to make them desirable to the Chinese and it seems to be paying off for them.
In greater China (including Hong Kong and Taiwan) by the end of 2015, Apple saw 87 percent year-over-year growth for their 2015 fourth quarter. It’s all due to the iPhone. China, like many other places, seems to have a lot of Apple-Mac fans because all the other Smartphone manufacturers from outside of China lost ground during 2015. For Apple iPhone, their top-tier price and even better reputation are the driving force for their soaring Chinese sales.
Apparently, the Chinese in urban areas really love their high-quality made-to-order cup of coffee. Already with 1,800 stores in China, they have plans to open an additional 900 in the near future. Their rate of growth was especially evident during 2015’s third quarter when they averaged one and a half new stores opening per day. China now has 8 percent of the total Starbuck stores in the world. The last quarter of 2015 they had year-over-year growth of 110 percent making $652 million during that quarter in the Chinese market.
Not all brands do well, and many are pulling out of the market because their brands are not selling well enough – Yum Brands (including KFC) are leaving the market, while General Mills will be focusing more on high-end products in the future. The key to much of the success seems to focus on what consumers feel are top-notch products – status buying for a growing upper-middle class.