How China’s ‘consumer army’ of millennials will rescue the world economy

THIS idea failed in the US but is absolutely killing it in China. Someone needs to bring it to Australia, because it’s awesome.

Apple customers in Shanghai. Picture: Qilai Shen/Bloomberg

WANT to invite your friends around for dinner but don’t know how to cook?

Imagine if you could whip out your phone, connect with a local chef and have them come around and prepare you a restaurant-quality, home-cooked meal.

That’s the concept behind Chinese start-up Hao Chushi, which translates to “Good Cook”. The app launched in late 2014 and has attracted nearly $8 million in funding from hungry e-commerce investors.

The app has six pricing tiers, ranging from 99 yuan ($20) for a meal for four, 139 yuan ($28) for a family of six, 229 yuan ($46) for eight to 10 people, all the way up to 689 yuan ($140) for a high-end dinner for 17 guests.

Those prices don’t include the cost of ingredients, users are expected to have the required utensils in their kitchen — and the chef doesn’t do the washing up afterwards.

Users can filter by the type of cuisine they prefer — Sichuan, Hunan, Shandong, Guangdong — and chefs arrive kitted out, similar to Uber Black drivers, in aprons, shoes and chef’s hat, Tech In Asia reported.

The service is currently running in Shanghai, Beijing and Hangzhou, and founder Xu Yan said the funding round would be used to polish the service and expand into more cities.

Dong Tao, the Hong Kong-based managing director and chief regional economist at Credit Suisse, spoke of his experience with Hao Chushi to highlight the booming services sector reaping billions from a “consumer army” of tech-savvy millennials.

“E-commerce is absolutely booming and Chinese entrepreneurs are getting quite innovative,” he told The Economist magazine’s Australia’s Asian Future Summit in Sydney on Thursday.

“Last time I went to Beijing my friend invited me to dinner. I thought he was going to take me out to a restaurant, but instead he pulled out his iPhone and called a chef to cook for me,” he said.

“It was a fantastic dinner with a home kind of feeling, and he paid only about $US15. There are loads of these kinds of innovations in China popping up thanks to a few very large Chinese e-commerce companies.

“They have loads of money and are throwing it around, so e-commerce is moving very fast in China. This is [why] I feel confident that this productivity gain will come in the services sector.”

A shopper selects fruit at a department store in Beijing.

Those two factors — the affordability and the seemingly bottomless pockets of Chinese e-commerce investors — are exactly the reason similar concepts in the US have folded.

It’s also a classic case study in Chinese innovation: they may not do it first, but when they do they do it better, cheaper and faster.

Hao Chushi’s model is essentially the same as Kitchit, which shut its doors this month after five years in operation, and Kitchensurfing, which went under not long before.

Writing on the company’s website, Kitchit founders Brendan Marshall and Ian Ferguson explained that “while Kitchit’s business fundamentals have always been strong, our scale has been too limited to outshine the tumult around us”.

“Investment runways are finite, and unfortunately ours reached its end at a moment of substantial upheaval in the food-tech world,” they wrote.

In 2015, Kitchit was forced to shut down its original incarnation, and refocus on its cheaper offshoot, Kitchit Tonight. The original price points, typically between $US75 ($98) and $US125 ($164) per person “remained out of reach for most would-be users”, they wrote.

The lower price point of Kitchit Tonight, starting at $US39 ($51) per person, nearly doubled booking volumes in the space of nine months, but it was too late.

In China, it’s too early to judge the long-term success of Hao Chushi. But According to Credit Suisse’s Mr Dong, the only way for consumer spending on services like these is up.

By way of explanation, he tells an anecdote of a recent visit to China World Hotel in Beijing, a first-class hotel run by Shangri La. “I walked in at 3pm in the afternoon, there were no customers,” he said.

“There were four girls at the front desk, each of them playing with their new phones — each of them has a newer phone than I do. Somebody checked me in, ‘21st floor’. I carried my luggage to the lift, but there’s no 21st floor, the buttons only go from zero to 20.

“I had to come back and ask the girl at the desk. She said, ‘Sorry, I forgot, you take 20, go out, turn left and there’s stairs going up to the 21st floor.’”

The typical Shangri La way of doing things, Mr Dong said, is that “she’s supposed to take me there, ‘This is the remote control, this is the minibar, is there anything else I can help you with?’, and I would give her a tip”.

A Chinese model takes a selfie. Picture: Nicolas Asfouri/AFP

“Now, she would rather give me a tip and make me disappear,” he said. Rather than complain, Mr Dong said we should “embrace those born in the 1990s and 2000s”. “This is the new consumer army in China,” he said.

Dominic Ziegler, Asia Editor of The Economist, said the boom in e-commerce showed there was still innovation going despite restrictions imposed by government on free expression and access to digital services.

“I wouldn’t say this generation is significantly different from your generation here,” he said. “In that sense, Chinese are becoming more like people elsewhere in terms of the services they can access and the things they want to do.”

As experts debate the ability of the Chinese economy to navigate a “soft landing” as it makes the transition from manufacturing and exports to consumption and services, the issue of China’s eye-watering 260 per cent debt-to-GDP ratio has experts sounding alarm bells.

The International Monetary Fund recently estimated China may have as much as $1.7 trillion in “at risk” loans to borrowers who did not have enough income to meet their repayments.

Mr Dong said there was “a chance” of a soft landing to the credit bubble, but expressed confidence in the long-term cyclical change towards consumption.

“The Chinese economy over the next cycle will probably still look good, but the truth is in history since World War II, there’s no one single country that made a transition from a manufacturing economy to a service economy and maintained a 4 per cent-plus GDP growth,” he said.

Geoff Culbert, Australia & New Zealand president and CEO of GE, pointed out that even at 6.5 per cent GDP growth, that represents $700 billion every year.

“It’s an economy of $11 trillion,” he said. “Every two years they add the size of the Australian economy. So I don’t buy into the conversation that 6.5 per cent growth is problematic.”

And picking up any slack will be Mr Dong’s “consumer army”.

He believes China’s household savings will come down from current levels of around 28 per cent to “mid single digits” within the next decade and a half.

“They have very different consumption habits,” he said. “These guys have never seen a rainy day so they don’t save money. They’re basically Chinese consumers with an American passport.

“That’s where my optimism comes in the medium term — but either way China needs to go through this cycle.”

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