This is not an overnight phenomenon. In fact many companies have seen this coming for several years, and already have supply chains and stores across China.
Some American firms are doing well: their additional money year after year is coming from China. KFC for example, now operate over 3,000 stores in over 700 cities in China. McDonald’s has a similar pattern. Starbucks operates almost 1,000 stores.
European firms in the luxury business like Hermès and Louis Vuitton know that they cannot address all those markets because many cannot afford purchasing an item of their brand. However, they should be present to satisfy the new rich local Chinese.
Local consumers are upgrading their life styles such as switching from a glass of green tea to a Starbucks latte. Instead of wearing cheap bags, women are upgrading to a better brand, and men changing their pants for a new pair of Levis. This is the new level of Chinese consumerism, and this is where China’s future growth dynamic is coming from.
Growth is now coming from the 4th, 5th, and 6th Tier Cities
Chris Devonshire-Ellis, “The Rebalancing of China, India, and ASEAN in the Global Supply Chain and the Rise of the New Asian Consumer”, Speech in Beijing