Over the past three decades China has seen an average growth rate of approximately 10% per year, leading to a boost in household wealth, and making it a significant focus for any company serious about Global expansion. Even now, with the pace of economic expansion slowing, China’s expected GDP growth of 6.5% ensures that it will remain a leading economic force in the world.
With offices in Beijing and Shanghai, Radius has successfully executed research to help our clients drive their businesses forward in China. In this first of a two-part Radius Report on China, we’d like to share some of our learnings about gaining valuable insights into the Chinese consumer.
Successfully navigating the Chinese market and arriving at meaningful strategies for your brand begins with understanding these 5 key characteristics of the Chinese consumer:
1. They are smart ‘value seekers.’ Many Chinese consumers search hard for the best deals, to make sure they get good value for their money. That means they will spend time researching products and comparing prices. Sometimes they even calculate per kilogram (or other applied unit) prices! But value for money is just one part of their attitude. Another key component is ‘Face Value’. For Chinese consumers, brands and products they use are very important in terms how they are viewed, or regarded, by others. This often matters more than how they feel about the brand or product itself. Brand in China is a reflection of what consumers want to be attached to and what they want their image to represent.
2. Their tastes are increasingly modern, but they are not becoming ‘Western.’ Traditional Chinese culture has a deep influence on the nation. Though the country’s economy and society are evolving aggressively, the underlying cultural blueprint has remained more or less constant. China is a Confucian society; most Chinese live a moderate lifestyle. They may yearn for Western life, but their behaviors remain distinctly Chinese. Brand flexibility, to craft the brand globally but not foreign to the Chinese consumers, is very vital to winning them over.
3. They have a consumption culture of ‘trading up.’ Driven by consumers’ aspirations to improve themselves, the way they live, and their perceived social standing, Chinese consumer spending often reflects ‘trading up’. In tier 1 and most tier 2 cities, the markets are mature for many categories in terms of penetration. This is particularly true for CPG categories. Further growth relies on consumers buying goods and services more frequently, and/or trading up to buy more expensive versions of items they already own. This can translate into opportunities for brand up-trading. For example, while the average growth rate of bottled water in China was 32% in 2014, high-end bottled water experienced a growth rate 3 times higher than low-end water.
4. They rely heavily on the online channel. In a recent report from the China Internet Network Information Center, there are 649 million online users and 557 million mobile online users. Approximately 39% of mobile users apply mobile payment. On one single day in 2015, November 11th, the volume of transactions was 91.2 billion RMB (or $14.1 billion) on Taobao. Taobao, Tmall, JD, Yihaodian are the most popular e-commerce platforms for Chinese consumers, and serve as important resources for them to both research and purchase brands and products. Rapid development of shopping applications on mobile devices, online payment systems, and logistics infrastructure has further enabled the growth of e-commerce by enhancing convenience and security. The Chinese could soon become among the most dedicated and sophisticated of online shoppers. Understanding online purchase pathways is critical for consumer-facing brands.
5. Their issues and mindsets are heavily influenced by their generation. Strategic marketing managers must look beyond the 80s generation and consider generational nuances of the younger generations as they seek to grow share in China. While consumers born in the 80s represent the bulk of spending today, it’s critical to tailor messages to those born in the 90s, and even the 00s, as well. Marketers should spend time learning about how these different generations make decisions, and what they aspire to in life. For example, the 80s generation is the most pressured since they are only children who bear sole responsibility in caring for their elderly parents as well as their own child. Hence, they seek information actively to help with their lives and entertain themselves. They pay a lot of attention to food, travel, and entertainment, to seek relief from daily life. The 90s generation has grown up with the internet. They spend a lot of time gaming. They pay a lot of attention on the most popular trends on the internet. Marketers will need to tailor marketing and communications strategies to these nuances and preferences to ensure success.