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Can Hong Kong Style woo Changsha consumers?

Just which Hong Kong products have a particular appeal for consumers in a typical tier-two mainland city? Packaged food, winter woolens, wine and health products, according to exhibitors at the Hong Kong Style Show in Changsha.

Photo: Hong Kong haute couture: clothing proves a hit in Changsha.
Hong Kong haute couture: clothing proves a hit in Changsha.

The huge potential of China's vast domestic market is an understandable lure for the vast majority of Hong Kong companies. Many of these companies, then, were only too keen to take part in HKTDC's Style Hong Kong Show, a travelling exhibition held in a number of mainland cities that offered a real chance to discover just which products had the most appeal for local consumers.

Based on the lessons learnt from the recent Style Hong Kong Show in Changsha, the capital of the south-central Hunan province, food is the key interest of the majority of consumers in this particular region. Just over half of all visitors (51%) to the event bought food items, followed jointly by household ware and garments at 12% apiece. No other sectors – including cosmetics, electronic products, fashion accessories, jewellery, watches, clocks and gifts – attracted more than 5% of the overall number of visitors to part with any of the cash.

Packaged food and the wonder of woolies

Hong Kong is rightly regarded as a true centre of gourmet excellence. It was no surprise, then, that many of the city's packaged food items proved just as popular at the five-day Changsha event as they had at many of the earlier locations. Throughout the course of the event, any stall selling food was besieged by an eager crowd. By the end of the show, all of the food shelves had been cleared, with biscuits and child-friendly snacks proving – perhaps unsurprisingly – the biggest hits.

In terms of clothing, those exhibitors selling woolen item and children's apparel were kept the busiest. The Queentex Garment Ltd stand, with its range of Cyber Planete brand childrenswear, was particularly busy, while the Evershine Cashmere Products Factory's Eureka-branded woolen garments were equally in demand.

The majority of the garments and accessories presented at the show were neither particularly trendy nor overly extravagant, with most of them tending to be practical and reasonably priced. As with all of the Style Hong Kong events, on-the-spot discounts were commonplace. The price of a Cyber Planete girl's dress, for instance, was just Rmb100, while purchasers of Eureka woolen garments enjoyed a 60% discount on the last day and a flat price of Rmb200 for any of its range of woolen scarves.

With the event fortuitously timed to coincide with the new season, sales people on the many clothing stalls were kept particularly busy. One of the staff on the Eureka stall confessed that the company had nearly run out of carrier bags, as well as all of the merchandise it had already sold.

According to the salesperson, cashmere cardigans had been the company's best seller, with long, brightly-coloured scarves also proving popular. Although the company had not invested in promotional activity in Changsha, word-of-mouth seemed to be enough to drive traffic to the stand, with a number of satisfied customers returning to buy additional items.

Signs of a healthy market

Products in the health sector also proved popular with attendees of the Changsha event. Among the most sought-after items were the Focus range of massage devices, including its multi-function massage chair and its neck and shoulder heated massage pad. The event went well for the company, with nearly all of its products being sold.

On the last day of the show, only a small number of display products remained on its stall, with even these being bid for by keen customers. According to Godwin Choy, the company's General Manager, pre-orders for its neck and shoulder heated massage pad were made available on site. Initially, this offer was restricted to the 10 first such pre-orders, but the popularity of the offer saw it extended to a further 10 items – all of which were, again, quickly snapped up.

The enthusiasm for many of the company's more costly healthcare items surprised some, given the comparatively low level of the typical household income in the area. The company's multi-function massage chair, for instance, cost Rmb10,000, even after a significant discount.

Overall, the discounts on offer proved irresistible to many would-be purchasers attending the event. With many of these discounts quite significant, this is perhaps unsurprising. Pre-orders of the Eureka heated massage pad, for instance, came with a free massage belt and cost just Rmb1,398, a significant saving on the Rmb3,396 usually charged for the two items together.

Despite the low prices on offer, Choy said many of the purchasers still insisted on haggling, an habitual practice for many mainland consumers. Knowing their penchant for bargaining, the company had adopted a strict fixed-price policy, leaving buyers with only the option of buying at that price or taking their custom elsewhere. It turned out to be a shrewd move, with many customers opting to buy even when no further discount was offered.

Another plus point - and a lesson that other would-be entrepreneurs would do well to bear in mind – was that Focus ensured that it offered a local repair and maintenance service for all of its products. With customers reluctant to purchase items that need returning to Hong Kong should any problems arise, Choy always secures local service contracts before exhibiting at any trade event.

Essentiale, a liver supplement, was another product that went the route of accepting pre-orders at a discount price. The success of the item – and of others in the same sector – is a direct reflection of the way many mainlanders have become increasingly health-conscious over recent years. This proved to be a development that a number of Hong Kong exhibitors were only too aware of. While the Changsha show reported disappointing sales of cosmetics and skincare products – well below the uptake at earlier events in Qingdao and Changchun – the interest in health products was reassuringly high.

Photo: Grape demand: red wine.
Grape demand: red wine.
Photo: A Eureka moment...
A Eureka moment...

Mainland consumers have developed a particular interest in certain health supplement sectors, notably anti-oxidants, immune system boosting treatments and anti-ageing solutions. In light of these predispositions, it was no surprise that the liver supplements and anti-oxidants showcased at the event quickly sold out. One canny exhibitor even went as far as offering pre-orders of the ALA Detox liver supplement as a way of driving traffic to his stand.

With liver supplements being of particular benefit to smokers and drinkers, it was perhaps telling that imported wines were among the other most popular items featured at the event. Over at the Smart Wine stand, its stocks were soon depleted, with its French Saumur red and French Bordeaux red both selling out quickly. Most of the wine purchasers at the event opted to buy in bulk, with purchases of six or more bottles proving the norm.

Changsha consumer characteristics

For those familiar with the way of life of local Changsha residents, the above buying patterns will come as little surprise. According to Yang Lan, Marketing Manager of the city's New World Department Store, the local populace is keen on leisure, entertainment, food, drink and visiting bars. At the same time, they are also committed to staying fit and healthy.

At present, Yang's store stocks 10 lines of Hong Kong products, though not all of them have proved a hit with the locals, particularly the more formal attire. Explaining the comparative unpopularity of this particular range, Yang said the locals are more inclined toward leisurewear, with even office workers not given to wear business attire on a daily basis.

As this penchant for leisurewear mainly focuses on comfortable and simple clothing, it is not only the sales of more formalwear that suffers.  As a knock-on, demand is also low for the more extravagant accessories and cosmetics.

Keeping in line with its preference for leisure and indulgence, Changsha has long been well-known as a centre for foot massage. According to local newspaper reports, there are around 4,000 foot massage parlours in the city, as well as more than 400,000 masseurs – a clear explanation as to why massage devices were so much in demand at the show.

Typically, Changsha residents will enjoy a visit to a foot massage parlour whenever time allows. The massage culture is so engrained, however, that many are also keen to buy a massage device for home use.

As well as their love of muscle and tendon manipulation, Changsha people are also known for their love of drinking. In the Wuyi commercial district – the city's busiest business area – is a bustling Bar Street, where drinking establishments, karaoke bars and late-night snack shops are open from 10 pm to 2 am. As another testament to the city's lively leisure culture, the ID Mall, a mega-shopping complex, complete with leisure, cinema and catering facilities, opened in May 2012.

The routes to success in Changsha

With the mainland's second and third tier cities tipped to be increasingly significant markets for overseas exports, Changsha offers an interesting insight into the potential these expanding urban areas have for Hong Kong companies.

Changsha is designated as a tier two city and saw its total retail sales value for consumer products reach Rmb212.6 billion in 2011. According to figures from the foreign trade department of the Changsha Commerce Bureau, the city imported a total of US$9 million worth of Hong Kong products between January 2012 and September 2013.

At the local Changsha Style Hong Kong Event, attendees typically spent only Rmb300 per head. In terms of overall business, then, the spend in certain sectors was less than might have been hoped for.

In light of the above figures, it seems that cities such as Changsha will prove something of a challenge for many Hong Kong companies. Despite this, the mood among most exhibitors was largely upbeat.

With the majority of exhibitors targetting this market for the first time, their primary objective was brand promotion and market evaluation. According to a survey conducted by the organisers, around 25% of the exhibitors indicated that they had either appointed local agents or established new sales points in Changsha as a result of the show. By using the show as a barometer of local tastes and practices, many exhibitors felt better placed to adjust their product and service portfolios to better align with local preferences.

Interviewed by HKTDC Research, Liu Fei, Director of the Commercial Services Division of the Hunan Provincial Department of Commerce, emphasised the importance of building a brand locally in order to succeed. He said, as long as a product – even a relatively expensive one – has built its brand, then the natural curiosity of Hunan people will drive them to try it. Citing Häagen-Dazs ice cream as a prime example, Liu said that, even though the brand came at a premium price, it was still being widely bought across Changsha.

According to Liu, Hong Kong companies can utilise a number of channels to build their presence locally. Firstly, he advised that they participated widely in regional trade fairs and launch promotions, while looking to establish sales point in the appropriate department stores. In additional moves, they should also consider appointing a dedicated Hunan agent and look to secure the services of a promotional company to push their brand on-site in hypermarkets.

While Changsha's per capita spending is currently around Rmb20,000 per annum, the director predicted this figure would soon be as high as Rmb35,000, a huge growth and one of particular appeal to Hong Kong exporters.

Photo: Opened in 2012, Changsha's ID Mall underlines its consumer potential.
Opened in 2012, Changsha's ID Mall underlines its consumer potential.

The Style Hong Kong Show Changsha took place from 31 October to 4 November 2013.

Cheung Kit Fung, Senior Editor

Content provided by Picture: HKTDC Research
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