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September 17, 2011 Crazy Sales Promotions in Shanghai

       As anyone who has recently ridden public transport or watched local television can surely attest to, advertising in China can often be far from subtle. With few established local brands and consumers unsure of what they truly want, advertisements often consists of ad nauseum in-your-face touting of a given product’s many fantastic features. However, with so many distributors vying to sell almost identical products and low brand loyalty, this strategy can be of limited efficacy. Thus, for countless vendors of consumer goods, this leaves but one lower common denominator on which to compete: price.

       And compete they do, offering all types of unfathomable discounts surely rendering them unable to cover marginal costs. Advertisements bear such titles as “Charge 100, refund 100.” Lucky drawings and free gifts have become de rigueur in the retail sector. Consumer electronics outlets Suning and Gome have been at the forefront, offering some 3.8 billion RMB in discounts to consumers. 360buy.com has been particularly aggressive, offering all types of red-hot, limited time offers. Heavy discounting of this variety has precipitated a race to the bottom among retailers of all stripes.

       The recently-concluded Shanghai Shopping Festival is a case in point. Suning invested 300 million RMB in promotion and offered a “ 0 down, 0 interest, 0 fee” special on white goods. Paradise, another local retailer, was giving discounts to anyone able to present marriage certificates. The retailer also boasted such promotions as 5000 RMB vouchers, a drawing for a tablet PC, and subsidies on additional purchases for signing renovation contracts. For many industry insiders, “Gold September, Silver October” is of particular significance, making it a season too good to be passed up.

       The October 1st national holiday is poised to be another major retailing event, replete with a plethora of crazy promotions. Shi Yi, as the national holiday is known, has an illustrious history of shopping specials for women and this year will be no exception. Drawings for free iPads, gifts for purchase, and mail-in cash back arrangements will all be on the table. Some 3000 supermarkets and

hypermarkets participated in the promotion, all aggressively vying for consumers. From now until October 10th, Brilliance Shanghai City shopping center will offer numerous promotions, including a VIP card offering numerous gifts and deals at such venders as Sephora, Pizza Hut, and Ajisen Ramen.


The promotions are indicative of a much larger marketing trend in China. Geng Cui and Qiming Liu have found that although household income does play a role in distinguishing market segments, value orientation and lifestyle largely dictate purchasing behavior. Therefore, although Chinese consumers are seeing rising incomes, they are primarily concerned with value and are likely to seek the best bang for their buck. A 2009 McKinsey study found that price is a primary concern and that most Shanghainese consumers prefer well-known brands, rendering store differentiation all but meaningless. The exponential growth of online retailers such as Taobao, Alibaba, and 360Buy.com is solid evidence of the continued reach for value, engerdering heavy discounting from ‘brick and mortar’ retailers.

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