Consumer Patterns, Preferences
By Gregers Lindvig
Tyres are not so different from other products when it comes to consumer patterns. In China, as well as in most other parts of the world, buying tyres is a necessary evil, and the factors involved in selecting a certain product are countless.Most of the time, consumers will visit a workshop in their vicinity, and select from what is on the shelves. Some products are there to be sold, while others are there to sell other products – the “fake choice” arrangement, or “unnecessary comparison,” if you will. “I personally wouldn’t go with this one”, the salesman says, “but this one, while being more expensive, will offer you…” – and the sale is made.
China is not so different from other countries when it comes to why a certain tyre brand is selected. The most common choice is “the one I have on my car now,” sharply followed by the one recommended by the sales guy at the shop. In many cases, they are the same brand, if it is offered by the shop. But, there are also areas where China is still different.
China is basically a market where you have any kind of consumer imaginable. Some go the small shop on the corner and haggle for hours to get the lowest price on the cheapest tyre, while others go to the Hollywood-looking service-station castles in their never-ending quest to spend more money. The first will wash your car for 5 CNY (approximately one dollar), while the latter will do the same wearing uniforms and white gloves for upwards of 300 RMB (app. $50).
Lack of knowledge and decent equipment in smaller shops keep them in the low end of the earning cycle, while you see the high-end shops wielding equipment with the same standards as the best service centres in Europe or the US.
So, already there we have a major segmentation. Low-income consumers will have single tyres changed while the high-end shops only sell pairs, and normally full sets. Balancing is not offered in the small shops, and rims often take a beating when tyres are changed – not the right place for your shiny alu rims. Naturally, the usage of the low service/low price shops increases as consumer type moves towards the small business segment, but we can pick that up in a later article.
The key to identifying Chinese end consumer decisions is an understanding of the average Chinese citizen’s idea of Chinese product quality and the concept of face. In general – and maybe not unjustified, looking at the history of quality issues in China – there is very low amount of trust in products made in China. As most Chinese will tell you, they tend to trust Chinese people less than any other nationality on the planet; with the exception of family, close friends, and personal network, of course – they rank in the opposite end. So, if they can afford it, they will buy an imported product, or at least a foreign brand produced locally.
Closely tied to this is the concept of face; it simply gives more face to show off your Michelin tyres than your Jinyu, especially if you have the car to match. But here also lies a conundrum. Chinese consumers prefer tyres with low noise and high level of comfort, according to recent market research, which is why locally produced Michelins or Continentals are actually quite different from European produced ones, which focus on safety/braking distance and fuel economy. But still, the imported product will always be favoured amongst Chinese that can afford it.
Because, after all, the segment of consumers for whom the largest challenge of the day is to spend enough money, is growing faster and faster – and they only look at the word “imported” and the price. This has spawned luxury options within all product categories, even automotive service and tyres. After all, you’re not fitting your Maserati Quattroporte with Chinese tyres – especially in China.
Catering for either the luxury segment or the low-end segment is fairly simple – you need to offer the most expensive products in beautiful surroundings (maybe even locate the service shop next to a fancy shopping mall, as long as you make sure that everybody passing by can see the vehicle being serviced) in the first case, and just offer the lowest price in the other case. Establishing the right setup for the large remainder of the consumers is the difficult challenge, and there are many small chains that have taken years to either get it right or go under.
Gregers Lindvig is General Manager at NDI China, part of the Denmark-based Nordisk Dæk Import A/S (NDI) Group. It focuses on sourcing the right Chinese tyre products for the right customers in the group’s worldwide distribution network