By  Jay Mark Caplan

This is part of a series of posts ‘Demystifying Lower Tier China’.

In growing low tier cities, people are looking for different ways to spend their money. Why wait for international brands and franchises? Enterprising locals are already providing enticing new products and services.

Local businesses that establish new categories in low tier cities currently represent a small market. But these entrepreneurs are testing the waters, and when they succeed, leading trends.

We interviewed owners and managers from fitness centers, luxury salons, outdoor adventure tours, break dance studios, and cafes, as well as their customers and potential customers, to find out what makes new categories work in small cities.

Deluxe Individuality

No matter what new product or service arrives in low tier cities, a certain demographic is going to be attracted just because it’s something different.

“My friends and I been to every café and restaurant in Yiyang,” says He Xingwen (30), Yiyang native and foreign- educated marketing professional. “If Starbucks came, of course we would go there.”

The problem is the significant drop off in purchase when something else comes along.

So how do local entrepreneurs earn loyalty? By educating their customers in new behaviors, behaviors that create a sense of self worth and individuality.

Since when do low tier youth care about individuality? Low tier youth may tend to prefer blending in with peers to standing out, but that seems to change fast with marketization. In Xuzhou, where the retail scene is very developed, youth we surveyed valued being special, specifically having a special personal style.

And with rising competition for jobs, youth recognize the advantage of being fitter and finer than their peers.

Leading the way in the individuality trend are fitness and personal grooming. These categories give consumers a sense of self- improvement and personal identity without too radical a divergence from community standards. They also fit well with rising health and image consciousness.

Strong relationships category ‘teachers’ such as personal trainers and stylists have with their customers help local businesses enter the web of peer influence and foster long- term loyalty.

And what begins with services leads to products: trekking requires outdoor gear; working out requires athletic clothing; salon coups require better hair care products.

Collaborating with local service operators to push products is a promising channel.

Big City Style, Local Adaptation

Local entrepreneurs usually have the big city training and experience to bring modern urban services back to their hometown.

They also know that their customers need some familiar added value elements to make adopting new habits easier.

Ling Pao Total Fitness Gym has signed up more than 3000 members in just over a year, with plans to expand (the boss lives in Guangzhou).

“As our city develops, we should develop,” says Huang Qiu, manager of Ling Pao. “Exercise makes life better.”

But the gym represents a social place as well as a place to work out. So besides a broad range of exercise machines and fitness classes like yoga and spinning, Ling Pao features billiard tables and Internet terminals for clients that want to hang out.

SK Beauty is a salon franchise on the rise, actually expanding up a tier, from Yiyang to Changsha.

Of course SK’s top- tier trained stylists give sophisticated coiffures. Customers said the primary reason they pay the higher price is that they trust their stylist.

However customers can also indulge in online gaming or massage while they get a haircut, amplifying the premium feel of the salon environment.

Even European dining can improve appeal with added services. At Doradora Italian Restaurants in Xuzhou, customers can enjoy free salon services with their desert.

Aim High

Huang Qiu says her most important demographic is young adults age 20- 30. Young working adults have more money to spend than students, no children, and no campus facilities or student life activities to fill out their schedule.

And in low tier cities, the increased importance of personal relationships and family mean that older peers have more influence over their young buddies than in first tier cities.

So when aiming for the low tier youth market, aim high: mid- twenties to thirties is a sweet spot.

Filed under: Lower tier youth, So What?, China youth, Entrepreneurs, Jay Mark Caplan, lower tier cities, lower tier market, Lower tier youth