Welcome to China's China

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Chengdu's car-crazy locals chalk up their carefree spending habits to the city's more laid-back atmosphere. It's China's L.A.; the stressed-out Type A lifestyle is, like, so Shanghai. But also at work is their desire to catch up to China's wealthier metropolises. Like many nouveau riche, people in Chengdu have got into a keeping-up-with-the-Wangs mentality. Jin Jin, 27, a staff member at a local university, says he spends 10 times more each month than he did two years ago, especially on branded sportswear from Nike, Adidas and Reebok. "The reason I do this is because I cannot make my girlfriend think that I am poor," he says.

Still, capitalizing on all this new spending isn't automatic or even easy in a country of 1.3 billion. "I don't think that it has ever been more difficult to go national than in China," says William Ghitis, president of global apparel at Invista, the maker of Lycra. One hurdle is the logistical nightmare created by China's sheer size. Motorola has tripled the number of its sales outlets, to 30,000, in just the past 18 months to penetrate deeper into interior markets. Chapman-Banks says it often takes weeks to get new phones to these outposts. Then there's the challenge of organizing marketing efforts and training salespeople in such far-flung locales. "This is the most complex market I've ever worked in," he says.

Another problem is staffing. Cities like Chengdu don't have enough managers with global experience. HSBC, a company with a vast history in China, opened a branch in Chengdu in 2005 to service corporate customers. It would like to begin retail-banking operations in the city, but a dearth of local talent is one factor holding it back. "It is not easy to find staff who are familiar with foreign operations but also have a good understanding of the local market and customs," says Henry Han, manager of the Chengdu branch.

Many foreign consumer companies are undaunted by such problems, and competition between them is heating up. Helena Tan, general manager of a Buick dealership in Chengdu, says that when she first started managing the business eight years ago, she had three competitors. Now Tan is fighting it out with 15, from Nissan, Toyota and Volkswagen to local players like Chery. Tan provides all kinds of extras to keep Chengdu drivers in Buicks, such as handing out hair dryers, rice cookers and other gifts to car buyers and computer games to entertain those waiting for auto repairs. "A few years ago, customers would come in with bags of cash begging you to sell them a car," Tan says. Those days are over.

The secret to success in cities like Chengdu is going local. French hypermarketer Carrefour, which opened its fifth outlet in Chengdu in January, overhauled its prepared-food department to cook up the chili-laden specialties favored by natives, including marinated rabbit heads and roasted duck jaws. Samsung reopened its operation here in 2004, but it is going native. Shoppers in China's west, says Ko You Chan, Samsung's managing director for the western districts, usually expect a small gift when they make a major purchase. So Samsung liberally doles out free DVDs and other goodies. Result: sales of Samsung consumer electronics were up 50% in the region in 2006. The lesson, says Ko, is that "it's not easy to control everything from Beijing."