Chinese consumer behavior seems to change faster than in other markets. Increasing exposure to and integration of social media in daily life play a significant role in this rapid change. The market can also be quite complex as different groups and regions have different needs and may experience different trends. With their increasing consumption and purchasing power, understanding the preferences and mindsets of Chinese consumers is the key to the China market. This article will shed some light on Chinese consumer behavior.
1. Chinese Consumer Demographic
China’s main consumer force is made up of people in their late 20s and early 30s. They’re called the “post 80s” generation; those born between 1980 and 1989. They not only buy things for themselves but for also for their parents and children. China Business Review Report indicates that many consumers in this group will be the key consumers in the next decade. They’re generally better educated, tend to save less, spend more on entertainment than their parents and often shop online. They prioritize value and quality over low prices.
Most consumption comes from first and second tier cities, such as Beijing, Shanghai, Shenzhen, and other urban areas in China with high per capita income and strong purchasing power. According to the outline of the government’s 13th Five-Year Plan, it’s estimated that 60% of the population will live in urban areas by 2020, which means 100 million more people will become urban consumers. There’s a huge sales potential for brands.
↑ Population distribution of working-age consumers in China. Source: McKinsey Global Institute.
2. Product Variety
In the past, function and price were the factors Chinese consumers cared about most. However, consumers are becoming more sophisticated and are increasingly taking a variety of criteria into account. They’re trading up from mass market products to premium products. As living standards improve, people are focusing more on products with high quality and good taste.
For example, Chinese consumers are more health conscious and concerned about food safety issues so health food consumption is increasing. In terms of general categories, the top three consumer goods groups that people purchase are food and beverage, clothing and electronic products.
↑ Chinese consumers increasing desire premium products. Source: McKinsey 2016 China Consumer Report.
3. Global Brands vs Local Brands
The market is saturated with international brands and local brands. Consumers are becoming more and more picky and have higher expectations. Consumers formerly made choices based on the popularity of a brand but now, more attention is paid to personal preference and value. For beverages, local brands are more popular, but most consumers trust foreign brands when purchasing childcare and cosmetic goods. According to Nielson’s 2016 Consumers Report, 53% of respondents tended to buy international brand cosmetics, while only 19% of people would choose local brands. Due to status perceptions, Chinese consumers sometimes choose luxury brands for gift giving.
↑ Top 30 Chinese Global Brand Builders. Source: BrandZ™
4. Word of Mouth
Moreover, opinions from other consumers seem more important than before to influence purchasing decisions. By only spending a few minutes on reviews and comments on e-commerce apps, consumers can find out about the product and service. Social recommendations are more powerful than traditional advertisements. What’s more interesting is that when Chinese consumers buy online, they value other fellow shoppers’ opinions more than key opinion leader’s opinions. Therefore, brands need to pay attention to their reputation and maintain positive word of mouth.
↑ Top 30 Chinese Global Brand Builders. Source: BrandZ™How China e-commerce shoppers value recommendations Source: TMO Group
5. Retail Channels
China has more than 700 million monthly active users on social media and 300 million consumers shopping online using sites such as TaoBao, Tmall, JD, and Xiao Hong Shu. Mobile payment systems like Wechat Wallet make online shopping easy. It’s become a trend for some and a lifestyle for others. The data from SMO Group indicates that in 2015, of every 10 RMB spent on consumer goods in China, 1.3 RMB were from e-commerce.
E-commerce has taken off, but traditional shopping and marketing hasn’t died. Shopping in malls and standalone stores is popular and many Chinese people even go abroad to buy luxury goods in person.
↑ Online shoppers are more likely to visit a physical store before making a purchase than shoppers in physical stores to visit an online store. Source: McKinsey 2016 China Consumer Report.
Understanding your target audience is essential, on and off line. Designing marketing strategies that fit your target user’s needs and preferences can make all the difference.
How does consumer behavior differ among groups and regions in China? What are the differences between impulse buyers and rational buyers? How can you adapt your brand to the changing Chinese market? If you have any queries or want to know more about Chinese consumer behavior, please leave a comment.
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