Written by Niv Schwartz & Svetlana Konovich
‘Xiachen’(下沉) means to sink or submerge. Over the past few years, it has become a popular term in business, meaning ‘sinking marketing’. This means that marketing efforts are adapting to ‘sink’, move down into lower tier markets, and lower tier cities which in the average salaries are relatively lower.
This mostly refers to third tier cities. Chinese tier system differentiates between cities in aspects such as population, business opportunities, consumer behavior and more.
Companies who are looking for starting a business in China look up to the big and developed economic cities such as Shanghai and Beijing. Nowadays, things are changing fast and smaller, less known cities are taken into consideration as well.
According to JD.com, more than 70% of its new users came from third- to sixth-tier cities, during 2019 Q4. Another example is the huge success of Pinduoduo in smaller cities. The interactive e-commerce platform is listed on the Nasdaq Stock Market in New York and is valued at over $114 billion dollars. In recent years, it put much effort in expanding its users base there.
China is a huge country in size and therefore each geographical area has different and diverse characteristics in terms of consumption, supply, demand, and consumer nature. Consumers living in Shanghai are different from those living in Wuhan, considering language dialect and local customs, and both places require accommodation.
These small cities, usually not taken into account by Western companies – have become a significant player in the Chinese economic playground. Many experts believe this trend will to continue for years to come, and the Chinese government relies on it and support it for its national macro-economic plans.
Furhermore, brands face a lot of competition in the bigger cities as their residents are overwhelmed by information and commercials from everywhere – making it difficult for western brands to penetrate and flourish in.
Moreover, different lifestyle and more leisure time in lower tier cities, as opposed to the busy life schedule and luxury consumption habits in first tier cities, may present unique market opportunities for many western products.
In order to achieve success in the Chinese market, one needs to know about the unique and new business.
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