Made in China: 8 Insights into the Chinese Consumer
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A succinct overview of key factors influencing Chinese Consumer behaviour. China truly is a land of opportunity with 30 years of growth that have helped lift millions out of poverty, enriched a middle class that is expanding fast and created 2.7 million millionaires and over 250 billionaires (US$). Given this speed of change and the complexity of a country with a population of 1.35 billion, making sense of the consumer and market context is not just useful, it's vital for success. Even if you're not working directly with China, you may be feeling its growing influence. At Brand Genetics we're constantly working to understand the direction of change in global markets and identify the implications and opportunities for brands. To share some of our learnings the attached Speed Briefing outlines 8 key insights into the fast evolving world of the Chinese consumer.
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Made in China: 8 Insights into the Chinese Consumer
- 1. Made in China 8 insights into the Chinese Consumer and Market
- 2. Land of Opportunity China is the world's most populous country, with over 1.3 billion consumers. It is forecast to become the world’s second largest market by 2015 with the purchasing power to buy 14% of the world’s products. As companies look to take advantage of this opportunity there has been an exponential growth in the Chinese consumer’s choice of brands & products. In such a competitive marketplace, with increasingly savvy & discerning consumers, it pays to understand the context in which decisions are made if you want to get ahead of the pack.
- 3. 8 insights – with suggested implications - to help you succeed with the Chinese consumer:
- 4. 1. No ‘One China’ China is a vast country with significant regional differences in demographics, lifestyle, tastes and wealth. Some exceed the GDP of wealthy Western countries, others are barely third world. Equally, what works in one area of China, won’t necessarily work in another: even in ‘Tier 1’ cities like Beijing and Shanghai there are as many differences as similarities. Equally there is no such thing as the ‘Chinese consumer’ – some are savers, others spenders; some favour local brands, others foreign ones. Luckily, the sheer scale of the market means that targeting a niche in China is still a huge opportunity. IMPLICATIONS China cannot be treated as a single market – with significant disparities between regions and consumers. Brands must focus by segmenting consumers and localising their strategy.
- 5. 2. Constant conflict between Fitting in and Standing Out At the heart of Chinese society is a tension between fitting in with society and standing out as an individual. The roots of this conflict lie in Confucianism, which promoted a society where the highest virtue was to remain dutiful, but also believed success could lead to social acknowledgement. 60 years of communism has also driven a vision of service to the nation as a key pillar of identity. But, since the ‘Open Door’ policy, many Chinese consumers have started to seek the material satisfaction and personal status many international brands embody. IMPLICATIONS Brands need to understand how these underlying tensions affect their positioning, striking a balance between allowing consumers to express their individuality while maintaining their link to society.
- 6. 3. Aspiring to be Global, not Western The Chinese consumer is determined to be part of the new international order, which is synonymous with modernity and progress. However, being global doesn’t mean sacrificing Chinese heritage and national pride in favour of Western ways. There is a strong sentiment of national pride and the brands that do best in China adapt to local culture whilst offering ‘global benefits’: e.g. KFC has outdone McDonalds by adapting its menus to better suit local tastes; Lays potato chips have a Pepsi-Chicken flavoured variant – as Cola chicken is a common recipe in China. IMPLICATIONS Brands should craft their offering to assimilate with local culture, creating an offering that is global – and respectful of China’s rich culture - rather than remaining steadfastly foreign.
- 7. 4. Status Anxiety Status is key at every level of Chinese society as consumers seek ways to show they've arrived or belong to certain groups. As such Chinese shoppers account for 20% of global sales of luxury goods and are drawn to visible displays of status (e.g wearing white Apple headphones even if they don’t own an iPod) or via gifting. Even the poorest households (those on less than $1 a day) spend about 30% of their budgets on gifts and festivals. But there are signs the ultrarich are getting more subtle, avoiding overly logoed items that are “too flashy” and leaning towards brands such as Bottega Veneta, whose subtle design cues send signals to a smaller, select group of people who are in the know. IMPLICATIONS Luxury is an aspiration for everyone, but status is vital - brands that demonstrate prestige can be highly successful but expect tastes to move away from excessive ‘bling’ in the future.
- 8. 5. The growth of individualistic shoppers China has the world’s highest personal savings rates (38% vs. 3.9% for the US) so there are many careful shoppers who spend time researching purchases & rarely buy on impulse. But McKinsey has identified a growing wave of younger, urban consumers exhibiting more ‘Individualistic’ behaviors. These consumers want to express their individuality through their purchases and as such are more self- indulgent in their choices. As forecasts suggest there will be nearly 400m of these ‘Individualistic’ consumers in China by 2020 they will be highly influential trendsetters. IMPLICATIONS Whilst a majority remain careful spenders who need rational reasons to support purchases, brands can tap into a growth in individualistic spending behaviour – satisfying wants, not just needs.
- 9. 6. Huge investment in ‘Little Emperors’ The 34 years since the ‘One Child Policy’ was introduced have seen many unintended consequences: one of the lowest population growth rates in the world, the ‘4-2-1 Problem’ where 1 child must look after 2 parents and 4 grandparents and a ‘shortage’ of girls. But it also means parents now focus all their effort and money on their one child. Parents put huge resources and energy into the upbringing of their children, often spending 30% of household income on their education alone. Equally under such parental pressure children look for opportunities to express their own hopes and aspirations, as well as outlets for rebellion. IMPLICATIONS Brands offering real learning for children will attract parents. But equally, brands providing youngsters with a way to express themselves will appeal too.
- 10. 7. Power to the women Chinese women hold household purse strings, but they are attractive consumers in their own right. The one child policy ‘freed’ many women from ongoing childcare, leading to a much higher participation in the workforce (68% as opposed to 58% in the US or 33% in India) and a much smaller income gap than in many emerging markets. Younger Chinese girls also have power – especially as they are more scarce (119 boys are born for every 100 girls). Many parents believe daughters should be raised ‘wealthily’ to ensure they marry the right sort of man. As such girls’ desires are pandered to and they enjoy sharing what they buy both on and offline, using on social networking sites such as Meilishuo or Mogujie. IMPLICATIONS Chinese women of all ages have considerable spending power. Finding ways to appeal to them can be a route to growth.
- 11. 8. Connecting through Social Media China has the world’s most active social media population – 95% of Chinese living in Tier 1, Tier 2, & Tier 3 cities are registered on a social media site (according to McKinsey). Even rural areas are seeing a big uptake as cheap smartphones provide greater access. On average consumers spend 46 minutes a day on these sites – with uses changing as they grow from teenagers, to students to professionals. But forget Facebook: 80% of consumers research purchases on local Chinese social media sites such as Qzone, Weibo, Sina Weibo & RenRen. Yet only 6% of Western firms have a presence on these sites. IMPLICATIONS Chinese consumers are highly connected online – often using social media to research and share purchases. Creating a strong presence on the right sites is a crucial way for brands to engage
- 12. 12 Brand Genetics - Front End Innovation Specialists We partner global brands who want to outperform the competition to identify next-generation opportunities and create ideas with a genuine competitive edge. Our work takes us from Shanghai to Sao Paulo, Mumbai to Manhattan, Lagos to London: our trusted local partners give us global reach, our experienced central team ensures consistent excellence Australia • Canada • China • Egypt • France • Germany • India • Indonesia • Italy • Japan • Kingdom of Saudi Arabia • Mexico • Nigeria • Poland • RSA • Russia • South Korea • Spain • Thailand • Turkey • United States • United Kingdom 12
- 13. 13 If you're interested in how we can help you build your competitive edge in China, or other global growth markets, we'd be delighted to talk further www.brandgenetics.com Tom Ellis tom.ellis@brandgenetics.com +44 (0) 7815 896 098 Andrew Christophers andrew.christophers@brandgenetics.com +44 (0) 7967 175 623 13 With thanks to our partners Ahead Research Consultants for their support & collaboration