China, a country with a population of over 1.4 billion, is an enormous, rapidly developing market full of consumers that are changing right along with it. There are two consumer groups that are growing so fast, especially in the digital arena, that we can’t ignore them now or for the next ten years.
Young people in lower tier cities
According to CBNData, over two thirds of China’s population lives in lower tier cities, meaning Tier 3 or lower, including small towns and villages. In recent years, these lower tier cities have been showing huge market potential driven by the fast-growing economy and the changing consumption behaviour of its enormous population.
In particular, young people born in the 80s and 90s who are now living in lower tier cities constitute a huge consumer group. According to Quest Mobile, as of November 2019, there were over 200 million young people living in lower tier cities. Morgan Stanley’s Chief China Economist, Robin Xing, predicted that consumption in lower tier cities could triple by 2030, and that young people there would become the “dark horse” driving force of China’s consumption market for the next ten years.
Although young people in lower tier cities may not earn as much as their counterparts in more prominent cities, they benefit from lower living costs and a lower burden when it comes to housing costs. Some of them have already bought their own cars and houses. This means they have more money to spend. Statistics from Quest Mobile reveals that, as of November 2019, nearly one fourth (23.1%) of young people in lower tier cities spent more than 1,000 yuan (US$155.3) per month shopping online
The pace of life and work in lower tier cities is also slower, so young people there enjoy more leisure time for socializing and entertainment. CBNData’s report shows that, compared with their peers in higher tier cities, the young in lower tier cities generally spend more time on entertainment apps, especially short video apps and mobile games. They’re more easily influenced by social media and tend to go for goods that are popular on social media. Other statistics from Quest Mobile (cited by the CBNData report) show that, as of September 2019, nearly two fifths (38.2%) of users purchased products after watching short videos and almost 60% (58.8%) of this group are from lower tier cities.
At the same time, smartphones and access to the internet allow people in lower tier cities to keep up with the latest trends in higher tier cities, which is leading to consumption upgrades. They’re more open to new things and expect a higher standard of living. Overall, they’re now less price sensitive, more willing to spend and try something new, and put more emphasis on cost performance, product quality and the purchase experience.
The silver-haired generation
Another emerging consumer group is the silver-haired generation. According to the Seventh National Population Census, as of 1 November 2020, the number of people aged 60 or above in China reached over 264 million, accounting for 18.7% of the total population. This is a 5.44% increase compared with 2010.
While some see the elderly as a group that doesn’t use smartphones or interact on the internet much, the China Internet Network Information Centre’s (CNNIC) 47th China Statistical Report on Internet Development indicates that, as of December 2020, those aged 60 or older made up 11.2% of netizens nationwide, a 4.5% increase compared with only nine months ago.
Photo by Jaddy Liu on Unsplash
Rising digital literacy among the silver-haired generation can be attributed to a number of factors. These include the popularity of smartphones, improved education about smartphones (from their children and grandchildren and community workshops, etc.), as well as elderly-friendly functions on apps, like Alipay’s mini program designed for them that features a larger font size and popular functions such as supermarket discounts and a digital public transportation card. Improvements in offline infrastructure, such as offline pick-up stores for online purchases, have also made things easier for them.
Last year, Covid-19 accelerated improvements in digital literacy among the silver-haired generation. During the initial outbreak, they were told to stay home and refrain from going out, which made buying groceries and fresh produce difficult and eventually led more of them to go digital.
According to a report by AliResearch, the proportion of online orders made on Alibaba’s digital grocery chain app by users aged 60 or older, saw a year-on-year increase of 10% and their monthly per-capita expenditures were higher than those in the post-90s and post-00s age groups. Moreover, as of Q3 2020, the number of monthly active users for Taobao’s app aged 60 or older also saw the largest increase of all age groups, 29.7% higher than the average. In addition to food and fresh produce, they’re also buying healthcare products and home appliances. And they’re not just buying for themselves. They’re also buying for their grandchildren.
Smartphones are also allowing elderly people to reconnect with family, old friends and colleagues and to make new friends on apps like WeChat. They tend to trust acquaintances’ recommendations, so many seniors join WeChat groups made up of people living in the same neighbourhood where they can exchange information about the latest deals. They’re also consuming online content. Since most of them are retired, they have plenty of free time to read the news and watch short videos on their smartphones.
With growing mobile internet penetration in lower tier cities and rising digital literacy among the silver-haired generation, young people in lower tier cities and the silver-haired generation are showing high purchasing power and a great desire to buy. They’re two growing forces are set to reshape China’s consumption in the next ten years.
For more insights into China’s consumer groups, our new Q2 mega report has dedicated sections on 12 of China’s most important consumer groups, including Millennials, Gen Z, men over 40, super mums and dads, pet lovers and more.
If you want to know more about Chinese consumers and your target market, contact us for a consultation.