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This is how Chinese consumers continue to surprise us

The Chinese consumer landscape is made up of a multi-faceted set of consumer segments, each with unique characteristics that determine shopping habits.
Daniel Zipser

Advises Asian and multinational, consumer, retail and apparel companies on growth and performance, bringing deep expertise specifically on the Chinese consumer

Along with the rest of the world, I watched in awe on November 11 as the sales--$25 billion in just 24 hours--rolled in during the world’s largest shopping festival, Singles Day.

Singles Day came as we were in the final stages of writing our latest China consumer trends report – Double clicking on the Chinese consumer. Each year we survey 10,000 consumers to better understand the attitudes and beliefs that shape their decisions. The resulting report reveals four major trends that underpin consumer shopping habits and Singles Day proved the living embodiment of one of our themes: Consumer confidence has reached a record-high, but can it continue?

While the current climate may appear infallible, our report highlights several reasons to take a more cautious stance towards the future. From the very high levels of debt that the Chinese economy, and households, are taking on, to risings costs across education, real estate and elderly care; these represent both long and short term burdens on the budgets of Chinese consumers.

End of the Chinese consumer?

Our report looks beyond the headlines to understand what’s motivating millions of shoppers to spend such phenomenal amounts of money, despite what appears to be a gloomy horizon. One of the key observations to emerge from this year’s survey is that there’s no longer a typical Chinese consumer.

From the perspective of companies trying to tackle this incredibly large and complex market, China is not one country. And so, to accurately capture current consumer sentiment, our survey spanned 44 cities and seven rural towns and villages. We found that while some regions and sectors are in decline, some are enjoying double digit growth, so it’s critical that companies explore China by region and by category.

By digging deeper into consumer behavior, we started to see a multi-faceted set of consumer segments emerge, each with unique characteristics that determine their shopping habits. This fragmenting of the consumer landscape was evident across our other three major trends:

Consumers are more health-conscious than ever before.

Sixty-five percent of those surveyed said they want to live a healthier life and 40% said they exercise regularly. You can see evidence of this in the number of gym memberships— there are more than 15 million membership card holders in China today. Sports apps are also capturing an astonishing number of users, with over 65 million active users as of the end of 2016. The changing attitude toward health is also beginning to appear on the high streets in major cities as more and more international sportswear brands set up shop. Lululemon, for example, the yoga apparel specialist, has 10 stores in mainland China having only launched with three outlets in 2016.

But different consumers define health differently and this impacts their spending decisions and lifestyle choices.

The “post-90s” generation is emerging as a new engine of consumption in China.

Aged 17-27, these young consumers are working, earning money, and making decisions as to how they spend it and, crucially, they’ll account for more than 20 percent of total consumption growth between now and 2030, higher than any other demographic segment.

Within the post-90s segment we identified five sub-segments, the largest of which we call the “happiness seekers”. This group accounts for 39 percent of the post-90s generation, they’re primarily students who, despite concerns about supporting their parents financially later in life, are confident about their overall economic outlook.

They aren’t motivated by material possessions and, instead, see success as in terms of their own happiness (86 percent, compared with 43 percent of overall respondents).

Chinese consumers are taking a more nuanced view of global versus local brands.

Brand origin is not important to Chinese shoppers who, instead, have very clear expectations that they apply to local and foreign brands alike. In 9 of the 17 categories surveyed, respondents showed clear preference for local brands because they deliver in three areas – quality, service, and value.

While Chinese brands seem to have become credible competitors to their foreign counterparts, there are instances where imported brands are preferred–namely baby skincare, cosmetics and wine–where demand for better quality and well-known brands emerged as the key factors in consumer decision making. Interestingly, our survey also highlighted some confusion among consumers over brand origin and country of manufacture. Some Chinese consumers believe certain foreign brands to be Chinese, while others believe certain Chinese brands are actually foreign.

So, what does this all mean for companies planning their strategies in China?

Firstly, it’s critical to stay close to the consumer and that means understanding the very specific segments outlined in our report in order to market products with tailored messaging that will resonate with their attitudes and beliefs.

Secondly, be flexible. Succeeding in China requires companies to be agile. Trends come and go fast in China so rather than predicting what’s next, brands should be ready with a product when a trend hits.

Finally, I’m often asked ‘how confident are Chinese consumers?’ Confidence is an important market indicator for companies planning their next move. The answer, at least for now, is ‘very’ but, just as trends come and go, so can confidence.

When has China failed to surprise us?