Serving the new Chinese consumer

An epic battle is under way for the hearts and minds of China's consumers, residing as they do in the world's fastest-growing market. Companies commit vast resources to build brands, with few assurances. And as some Chinese become sophisticated shoppers, tens of millions of less experienced but no less avid consumers are joining the fray every year. A sharper understanding of the differing needs and diversity of the Chinese consumer can give foreign and domestic companies an edge in building strong, profitable brands.

Over the past decade, retail purchasing has grown by about 13 percent a year. The rush to stake a claim has led to a proliferation of brands from new entrants and established players alike: a typical hypermarket in China may offer around 40 brands of shampoo and conditioner (compared with 15 in the United States) and more than 20 different toothpastes (compared with 9). The available selection of big-ticket products is also rapidly expanding. In 2000, there were 9 automotive brands on the Chinese market and by 2005 there were more than 40; during the same period, the number in the United States remained steady at about 45 to 50.

Meanwhile, marketing...