ROLAND BERGER STRATEGY CONSULTANTSIn depth knowledge for decision makersCHINESE CONSUMER REPORT 2012
2ForewordSignificance of Roland Bergers consumer surveyDeveloping trends in Chinas consumer marketTackling the challenges ...
3ForewordChina, after ratcheting up three decades of spectacular growth, is now the second-largest economy in the world.It...
4Over the past two years, the Chinese consumergoods market has experienced a series ofmajor changes:>A major consumer grou...
5of activity and purchasing behavior throughquantitative and qualitative research. Theannual Roland Berger Consumer Report...
6DevelopingtrendsinChinasconsumermarketThe results of Roland Bergers study show aChinese consumer market with four promine...
7“The generation born in 1990 is an emerging group that has shown increasingly strong purchase ability. The key is how toa...
8great financial pressure and a demandingwork schedule, which results in precious littleleisure time. Consequently, this s...
9Consumers aged between 17 and 24 have alower level of preference due to the followingtwo reasons:Weak brand awareness: Th...
10Consumers from different city tiers havesignificantly different spending behaviorBased on our survey samples from differ...
11Brand information is limited by the cityinfrastructure and environment, includinglocal retail formats. Consumers from lo...
12socialresponsibilitynaturepassionsimplicityvitalityclassiccomfort affinitysafetyexcitementfreedomfashion·coolsmartshoppi...
13Roland Berger experts believe that ifcompanies identify these consumers astheir target group, then leveraging theirresou...
14Experts discovered significantdifferences in online purchasingactivities of each consumer groupBy the end of 2011, there...
15In terms of city tiers, we observe that onlineshopping is less important to consumersfrom high-tier cities than for thos...
16Online shoppers have weaker productpreference than do consumers purchasinggoods through traditional channels, andplace l...
17Online shoppers have a purchasing ecosystemthat is more dependent on networks – bothprofessional and social. They are mu...
18TacklingthechallengesfacingcompaniesBecause of the disparity in ages, city tiersand household incomes, there is greatdiv...
19Channel strategyWith e-commerce developing at breathtakingspeed, knowing how to address onlineshopping has become a majo...
Roland Berger Strategy Consultants2012, all rights reservedBeijing	20/F, Tower A, Gateway Plaza, 18 Xia Guang Li, Dong San...
Upcoming SlideShare
Loading in...5
×

Chinese consumer report

741

Published on

La consultora Roland Berger Strategy Consultants ha publicado su informe anual Chinese consumer report 2012 que analiza los hábitos de consumo en China. El informe se ha elaborado en base a una encuesta realizada a 10.000 consumidores en 20 ciudades, para conocer sus hábitos de consumo en prendas de vestir, productos de cuidado de la piel, teléfonos móviles, automóviles y bienes de lujo

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
741
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
41
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Chinese consumer report

  1. 1. ROLAND BERGER STRATEGY CONSULTANTSIn depth knowledge for decision makersCHINESE CONSUMER REPORT 2012
  2. 2. 2ForewordSignificance of Roland Bergers consumer surveyDeveloping trends in Chinas consumer marketTackling the challenges facing companies
  3. 3. 3ForewordChina, after ratcheting up three decades of spectacular growth, is now the second-largest economy in the world.Its growth over the past 30 years is unprecedented in the modern era. The emergence of this new economicsuperpower brings with it a new set of Chinese consumers and global enterprises are seeking to satisfy thedemands of this burgeoning and increasingly sophisticated market.Roland Berger Strategy Consultants, which is the largest strategy consultancy of European origin, was amongthe earliest international strategy consultancy firms to establish a presence in China. Since 2009 Roland Bergerhas closely observed the buying habits and trends of Chinese consumers and has published a comprehensiveand systematic study annually since then. The survey this year covers 20 Chinese cities, ranging from first-tierthrough to fourth-tier cities. Some 10,000 consumers with different spending levels were surveyed to monitortheir consumer habits in clothing, skin care products, mobile phones, automobiles and luxury goods. As such,the survey provides an up-to-date synopsis for companies that focus on meeting the specific needs of Chineseconsumers.We observed four significant trends relevant to the Chinese consumer market this year. First, consumers born inthe 1980s and 1990s are a formidable consumer force, shaking up the retail sector. This generation of consumersis not captive to certain brands. On the contrary, they are easily influenced by advertising and constitute alucrative market segment for companies that develop innovative products. Second, the purchasing behaviorof consumers differs significantly depending on where they live, or more specifically, how big the city in whichthey live is. Brand loyalty continues to increase for consumers in first-tier and second-tier cities, so too productsthat answer emotional demands. Third, the monthly household income of 7,000 yuan has become a watershedof purchasing activity. Those with a higher income are more discerning: they gather more information about theproducts they wish to purchase and pay greater attention to spending on products that satisfy their emotionalneeds. Fourth, online shopping is witnessing a rapid expansion. However, growth is not uniform across thedifferent consumer groups.These trends provide both tantalizing opportunities and challenges for consumer goods companies. Based on itsdeep understanding of this market, Roland Berger recommends companies to develop a three-pronged marketingstrategy. First, companies should position their brands in line with consumers values. Second, the marketingfocus and approach adopted by companies should be defined based on the target groups purchasing behaviorand it should exploit new marketing strategies such as smart phone and internet marketing. Third, given the fastgrowing e-commerce environment, companies must consider offering consumers online shopping opportunitiesand select the right e-commerce business development strategy.For almost thirty years, it has been Roland Berger’s honor to experience the rapid growth occurring in China asa result of the countrys economic reform and opening up to the outside world. Looking to the future, RolandBerger will continue to offer its full commitment to enterprises interested in participating in Chinas development,providing professional, innovative and localized consulting services for Chinese and international companies.We look forward to the prospect of making that journey with you.Member of Global Executive CommitteePresident, AsiaRoland Berger Strategy Consultants
  4. 4. 4Over the past two years, the Chinese consumergoods market has experienced a series ofmajor changes:>A major consumer group has emerged fromthe generation of Chinese born in the 1980sand 1990s who have now reached theirtwenties and thirties; the Chinese economyhas performed outstandingly during theGovernments 11th Five-Year Plan; third-and fourth-tier cities have seen a rapiddevelopment, with spending power in thesecities soaring.A large number of advanced foreign brands,technologies and products have entered theChinese market and are hugely influencinghigh-income groups in developed areas. Thedifference in spending attitudes seen in high-and low-income groups is accelerating as aresult.E-commerce has become a key domainsupported by the Chinese government; onlineshopping has developed into an emergingshopping channel, growing exponentially at aCAGR of 100% over the past three years.These changes provide new opportunities forChinese and international brands, distributorsand retailers alike. To make the most outof these developments, however, marketparticipants need to recognize and anticipatethe behavior of consumers in relevantsegments. This will be key to successfullyintroducing and deploying the mostappropriate marketing concepts.Roland Berger Strategy Consultants hasconducted a market survey of Chineseconsumers each year since 2009. The in-depthsurveys examine purchasing values, levelSignificanceofRolandBergersconsumersurvey
  5. 5. 5of activity and purchasing behavior throughquantitative and qualitative research. Theannual Roland Berger Consumer Report hasbecome a useful reference guide for domesticas well as foreign consumer goods companiesthat compete in the Chinese market.The surveys quantitative research is basedon a combined telephone and fixed-locationapproach, covering a total of 10,000 samplesin 20 cities, spanning from first-tier to fourth-tier. (See B.1)Five product categories comprising clothing,skin care products, luxury goods, mobilephones and automobiles were studied. Foreach category, a fair balance was made interms of product attributes and coverage ofproduct values.To achieve a balance of product attributes,the five categories included both those withstylish attributes such as clothing, skin careproducts and luxury goods as well as thosewith technological attributes such as mobilephones and automobiles.To ensure a balanced coverage of productvalues, the five categories covered a widerange of product values, including low-valueproducts such as clothing and high-value onessuch as automobiles and luxury goods.Our survey respondents were categorizedin the following dimensions: age, city tier,monthly household income, shoppingchannel, etc. Since we also examined thevalues and activity of consumers for each ofthese dimensions we can provide enterprisesoperating in China with additional meaningfulinsights.1).ThecitytiersarecategorizedaccordingtothecityclassificationmethodologyandmodeldevelopedbyRolandBerger.The quantitative research of Roland BergerConsumer activity level studySurveymethodology Telephone surveyConsumers’ behavior studyFixed-location surveyAll product categoryrepresentative consumersConsumers who boughtproducts from representativeproduct categories over thepast six months3076 samples 6937 samples20 cities:First-tier cities: Beijing, Shanghai, Guangzhou and ShenzhenSecond-tier cities: Chengdu, Foshan, Hangzhou, Qingdao, Xiamen,Shenyang, Shijiazhuang and ChangshaThird-tier cities: Jiujiang, Luoyang, Lanzhou, Zhuzhou and NanningFourth-tier cities: Jinjiang, Maanshan and MeizhouTarget groupSample sizeCities covered
  6. 6. 6DevelopingtrendsinChinasconsumermarketThe results of Roland Bergers study show aChinese consumer market with four prominentfeatures, namely: the huge potential fromyoung consumers; increasing purchasingactivity from consumers in low-tier cities; thesubstantially improved spending power ofhigh-income consumers; and a rapid uptakein online shopping. Among these features, thefollowing ten observations deserve particularattention:Consumers aged between 25 and 34 yearsare the most active – this was notable in allobserved categories. Like their peers in otherparts of the world, consumers between 17and 24 years in age are also active buyersof clothing, skin care products and mobilephones. Consumers in this age bracket wereborn and grew up in the 1980s and 1990s, atime of unprecedented prosperity in modern-day China.Consumers aged between 17 and 24 yearshave not yet developed their own brandawareness and display relatively impulsivepurchasing behavior. Compared with olderconsumers, they have a lower level ofproduct preference, pay more attention to thevisual appearance of products and are easilyand significantly swayed by distributionchannels.Consumers from second-tier cities deserveextra attention, as they are active in thepurchase of luxury goods and automobiles.Consumers from low-tier cities are moreactive in the purchase of daily necessitiessuch as clothing, skin care products andmobile phones, but remain cautious aboutbuying big-ticket items.Compared with first-tier and second-tiercities, consumers from low-tier cities have alower level of product preference. On the onehand, this is certainly due to the limited typeof local retail formats on offer. On the otherhand, local consumers do not have fixedbrand awareness and are more willing to payfor the partial functionality of products.Consumers from first-tier and fourth-tier citiesboth favor branded products, but for differentreasons. Consumers from first-tier cities aremore cognizant of brand connotation, whilethose from fourth-tier cities are swayed bybrand popularity.The monthly household income of 7,000yuan is an important watershed of spendingpower: families with a higher income aremore active in the purchase of clothing, skincare products, mobile phones, automobilesand luxury goods.Consumers with a monthly household incomeof over 7,000 yuan have strong productpreference. They are usually more active inacquiring brand and product information.The higher the city tier, the less importantonline shopping is to consumers. Thismight be explained by the wide-range ofchoice consumers in higher-tier cities have.Consumers in first-tier cities have diverseshopping channels and retail formats attheir disposal and do not have to go online.However, it is noteworthy that consumers infirst-tier cities that do shop online have thehighest purchasing activity level. This meritsthe attention of enterprises doing businessin China.Online shopping is less important forconsumers with a monthly household incomeof over 10,000 yuan than it is for middle- andlow-income families. However, upper-incomehouseholds are quite active in buying dailynecessities and luxury goods online.Online shoppers, when compared totraditional shoppers, have a lower productpreference and are less likely to regard thebrand as the primary consideration whenmaking purchasing decisions. The mainreason for this is that online shopping hasreduced the cost of comparing product
  7. 7. 7“The generation born in 1990 is an emerging group that has shown increasingly strong purchase ability. The key is how toacquire these consumers? Lining’s high-profile attempt of transformation now appears to have failed. So what is the mostessential difference in terms of spending behavior between the generation born in 1990 and other generations?”---an executive from a popular domestic casual wear company“To obtain the young consumers would mean acquiring the future of the Chinese market. But the challenge remains inmeeting the strong demand of young people in their twenties in terms of brands and products.”---an executive from a popular domestic personal electronic products companyperformance, price and user evaluations.Meanwhile, the unlimited shelf spaceof online shopping sites has providedconsumers with more choices, furtherreducing the cost of conversion.Young consumers have the most activespending behaviorIn this study, we conducted quantitativeresearch on consumers values based on ourexclusive RB Profiler tool. On the analyticaldiagrams shown in C.1, values stronglyapproved by the consumers are representedas dark blue, while the strongly disapprovedvalues are represented as dark red.When assessing the spending of differentage groups, Roland Berger experts observedsignificant differences in values betweenyounger and older consumers: youngerconsumers under 34 years of age haverelatively emotional-based values whenspending, with a common pursuit of what ourtool calls vitality and passion. They do notfocus on value for money. This is especiallyapparent for those aged between 17 and 24,who pay more attention to carefree and thrillvalues. On the other hand, consumers agedbetween 35 and 59 years show a preferencefor rational-based values. Restrained mainlyby income, their values tend to focus onquality and personal efficiency. (See C.1)The environment consumers grew up in closelyrelates to differences in values. The youngerpopulation, comprising the generationsborn in the 1980s and 1990s, grew up in anenvironment of abundance. In sharp contrastto their older peers, the younger population isaccustomed to having access to a wide rangeof information channels. As most of them havenot yet assumed family responsibilities, theirvalues when spending are more emotional-based and they pursue self-bettermentgoals. Those who are over 35 years of age aregradually assuming family responsibilities.This sandwich generation contends withComparison of values when spending of different age groups17 to 24 years old 25 to 34 years old35 to 44 years old 45 to 59 years oldSource:RolandBergerconsumersurvey;RolandBergeranalysissocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomizedsocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomizedsocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomizedsocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomized
  8. 8. 8great financial pressure and a demandingwork schedule, which results in precious littleleisure time. Consequently, this sandwichgeneration attaches greater importance toshopping efficiency, rational spending andvalue for money. These consumers rarelymake impulsive purchases.Due to their financial independence andoptimistic perception of spending, people agedbetween 25 and 34 have become the mostactive consumers in the Chinese consumergoods market. People aged between 17 and 24are also active in some categories, particularlyhigh-tech electronic products represented bymobile phones and certain fashion productssuch as skin care products and clothing. (SeeC.2)In terms of spending behavior, people agedbetween 17 and 24 have less purchasepreference and are easily influenced bychannels, especially when buying low-valueproducts such as clothing. The purchasepreference for people older than 24 years isnoticeably higher, as seen in all the productcategories. (See C.3)17 to 24years old25 to 34years old35 to 44years old45 to 59years oldComparison of spending intensity2)of different age groupsclothing skin care products mobile phones automobiles luxury goods2)Spending intensityreferstothedifferencebetweentheproportionofthenumberofpeopleinspecificgroupsbuyingaparticularcategory(proportion1)andtheproportionoftheoverallnumberofpeoplebuyingfromthiscategoryoverthepastsixmonths(proportion2); Theformulaofspendingintensity=(proportion1/proportion2)–100%Source:RolandBergerconsumersurvey;RolandBergeranalysis17 to 24years old25 to 34years old35 to 44years old45 to 59years oldComparison of spending preferences of different age groupsclothing skin care products luxury goods mobile phones automobilesSource:RolandBergerconsumersurvey;RolandBergeranalysis
  9. 9. 9Consumers aged between 17 and 24 have alower level of preference due to the followingtwo reasons:Weak brand awareness: These consumers,including students and those new tothe workforce, have not yet completelydeveloped a brand awareness. (See C.4)Despite having a higher budget, they are themost unwilling to initiate a brand upgrade.Impulsive spending patterns: Influencedby their consumption values, consumersaged between 17 and 24 are more willingto pay higher amounts for products that arevisually appealing, while older consumersattach more importance to value formoney, practicality and product brands.Certain marketing strategies such asproducts displayed in certain channels, trialexperiences and promotion by sales personsmay influence the purchasing decision ofyounger groups, especially those between17 and 24 (See C.5).To attract young people—the future consumingforce of China – companies, especially thosein the high-tech, clothing and luxury goodsindustries, need to get creative. They need tostimulate the purchasing demand of youngconsumers from various angles, includingmaking their products more visually appealing,better using marketing channels, and strivingfor more effective brand communication.17 to 24years old25 to 34years old35 to 44years old45 to 59years oldComparison of different age groups and their willingness to upgrade product brandclothing skin care products luxury goods mobile phones automobilesSource:RolandBergerconsumersurvey;RolandBergeranalysis17 to 24years old25 to 34years old35 to 44years old45 to 59years oldclothing luxury goods mobile phones automobilesSource:RolandBergerconsumersurvey;RolandBergeranalysisComparison of different age groups and their willingness to upgrade product appearance
  10. 10. 10Consumers from different city tiers havesignificantly different spending behaviorBased on our survey samples from differenttiered cities, Roland Berger experts observethat consumers from first-tier and second-tier cities pay more attention to passionand service values. Particularly first-tierconsumers pursue trendy, innovative pro-tech and personal efficiency values anduse less income restraint when buying goods.Consumers from third-tier and fourth-tier citieslean toward rational spending using higherincome restraint. (See C.7)Consumers in first-tier cities whoseexpectations go beyond having basicfunctions satisfied are more likely than otherconsumers to buy luxury goods and skincare products. They have a higher spendingintensity. Consumers from second-tier citiesare relatively active in the purchase of luxuryitems. Brand manufacturers would be wisenot to ignore this burgeoning – and potentiallylucrative –trend. The leaning of consumersfrom second-tier cities for automobiles isa finding that deserves special attention.Consumers from second-tier cities displaythe most active spending pattern for cars. Thehigh market penetration and worsening trafficenvironment in first-tier cities have restrainedconsumers demand for new cars or forupgrading their old ones. (See C.8)According to the purchasing behavior analysisrelating to product preference, the lower thecity tier is, the lower the consumers purchasepreference is before going into stores.Consumers from first-tier cities have thestrongest purchase preference before goinginto stores, while consumers from fourth-tiercities have the weakest purchase preference.The gap is most apparent in the high-valuecategories. (See C.9)The low purchase preference of consumersfrom low-tier cities is based on two key drivers:“The first-tier and second-tier household appliance markets already appeared saturated in 2011, while the third-tier andfourth- tier markets have become the focus. However, consumers from third-tier and fourth-tier cities have an elusiveperception and spending behavior. So the experiences of the first-tier and second-tier markets cannot be easily replicated.”---an executive from a large-sized domestic household appliance retailer“In the third-tier and fourth-tier markets, channel features have significant differences, and consumers have differentpurchasing power. A big issue is how to quickly and accurately grasp their spending habits.”---an executive from a large-sized international household appliance brand manufacturersocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomizedsocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomizedsocialresponsibilitynaturepassionpurismvitalityclassictranquil affinitysecuritythrill/entertainmentcarefreetrendy·coolsmartshoppingservicequalitytrusttotal costinnovativepro-techpersonalefficiencycustomizedFirst-tiercitiesSecond-tiercitiesThird-tiercitiesFourth-tiercitiesclothing skin care products mobile phones automobiles luxury goods2)Spendingintensityreferstothedifferencebetweentheproportionofthenumberofpeopleinspecificgroupsbuyinggoodsfromaparticularcategory(proportion1)andtheproportionoftheoverallnumberofpeoplebuyinggoodsfromthiscategoryoverthepastsixmonths(proportion2); Theformulaforspendingintensity=(proportion1/proportion2)–100%Source:RolandBergerconsumersurvey;RolandBergeranalysisComparison of spending intensity2)of different city tiersFirst-tiercitiesSecond-tier citiesThird-tierand fourth-tier citiesSource:RolandBergerconsumersurvey;RolandBergeranalysisSpending values of consumers from different city tiers
  11. 11. 11Brand information is limited by the cityinfrastructure and environment, includinglocal retail formats. Consumers from low-tier cities receive far less brand informationthan those from first-tier and second-tiercities, and brand awareness is not yet fullydeveloped.Consumers from low-tier cities value thefunctional features of products such asclothing material, marketing results ofskin care products and mobile phoneconfiguration more than appearance, designand craftsmanship. These consumers do notmerely pay for the high brand premium.Another noteworthy phenomenon, revealedin the results of the survey, is that consumersfrom fourth-tier cities attach greaterimportance to brands than those from second-tier and third-tier cities. However, theirsuperficial attachment should be differentiatedfrom that of first-tier city consumers. The latterattach greater importance to the intangibleelements of a brand and have for example afiner recognition of what a brand stands for.(See C.10)An increasing number of top brands and large-sized domestic and international retailersare entering third-tier and fourth-tier citiesin the hope of seizing the opportunitiesthat are arising there. It is the surge in percapita income in these cities and increasingurbanization that attracts these retailers.In terms of brand building, Roland Bergersuggests interested players should try toimprove their brand reputation and awarenessin a first step. In a second step they shouldemphasize their products high value formoney through marketing campaigns.Moreover, in terms of marketing informationchannels, companies must be aware thatdue to media development and networklayout, the way consumers from third- andfourth-tier cities get product informationFirst-tiercitiesSecond-tiercitiesThird-tiercitiesFourth-tiercitiesclothing skin care products luxury goods mobile phones automobilesSource:RolandBergerconsumersurvey;RolandBergeranalysisComparison of purchasing preference of consumers from different tier citiesFirst-tiercitiesSecond-tiercitiesThird-tiercitiesFourth-tiercitiesAmong consumers from the same-tier cities, the most important reasons for previous product purchases (brand, %)Source:RolandBergerconsumersurvey;RolandBergeranalysisComparison of brand awareness of consumers from different tier citiesclothing skin care products luxury goods mobile phones automobilesComparison of the main channels used to convey product information to consumersin different tier citiesFirst-tier citiesSecond-tier citiesThird-tier citiesFourth-tier citiesPeer groups recommendationStorefront/display windowFashion magazinesEntertainment newsTV commercialsOutdoor advertising/billboardsOfficial brand websiteE-commerce websitesRecommendation ofprofessional clothingwebsites or online channelsUser evaluation on the InternetWord-of-mouthmarketingTerminalmarketingHigh-altitudemarketingNetworkmediadiffers significantly from the channels usedby consumers in first- and second-tier cities.Consumers from third- and fourth-tier citiesare more influenced by recommendationsand endorsements from their peer groups, TVcommercials, outdoor advertising/billboardsand recommendations from specialized onlinechannels.Well-established approaches such as word-of-mouth marketing and outdoor billboards willprevail and continue to be effective. (See C.11)
  12. 12. 12socialresponsibilitynaturepassionsimplicityvitalityclassiccomfort affinitysafetyexcitementfreedomfashion·coolsmartshoppingservicequalitytrusttotal costinnovativetechnologypersonalefficiencycustomized“The Target consumer groups spending ability is the key to companies’ profit, influencing a series of strategic issues such asbrand positioning.”---an executive from a well-known domestic food company“The consuming habit of the high-income group seems different from that of the low-income group. We are perplexed:what is the most efficient way to convey our brand information to them?”---an executive from a domestic cosmetics companyA monthly household income of 7,000yuan is the watershed for purchasingactivityA close analysis of consumers from differentincome groups shows Roland Berger expertsthat Chinese consumers values differsignificantly, with a monthly householdincome of 7,000 yuan as the critical point.Restrained by their income, consumerswith a lower income lean toward rationalpurchasing decisions, while consumers witha higher income lean toward more emotionalpurchasing choices. (See C.12)While the main consumer groups varyaccording to the categories of consumergoods looked at, consumers with a monthlyhousehold income of over 7,000 yuan havestrong spending intensity in all categories.(See C.13)In terms of purchasing behavior with respect toproduct selection, consumers with a monthlyhousehold income of over 7,000 yuan havesignificantly stronger product preferences andare relatively unaffected by the channels. (SeeC.14) This is mainly because their initiativein gaining product information has led themto develop a product preference much earlierthan other consumer groups do. (See C.15)Comparison of purchasing values of consumer groups with different income levelsMonthly household income under 7,000 yuanSource:RolandBergerconsumersurvey;RolandBergeranalysisMonthly household income over 7,000 yuanComparison of spending intensity2)of consumer groups with different income levels2)Spendingintensityreferstothedifferencebetweentheproportionofthenumberofpeopleinspecificgroupsbuyinggoodsfromaparticularcategory(proportion1) andtheproportionoftheoverallnumberofpeoplebuyinggoodsfromthiscategoryoverthepastsixmonths(proportion2); Theformulaforspendingintensity=(proportion1/proportion2)–100%Source:RolandBergerconsumersurvey;RolandBergeranalysisclothing skin care products mobile phones automobiles luxury goodssocialresponsibilitynaturepassionsimplicityvitalityclassiccomfort affinitysafetyexcitementfreedomfashion·coolsmartshoppingservicequalitytrusttotal costinnovativetechnologypersonalefficiencycustomized
  13. 13. 13Roland Berger experts believe that ifcompanies identify these consumers astheir target group, then leveraging theirresourcefulness in gathering informationcould serve as a shortcut. For example, toget information on clothing products, thehigh-income group (monthly householdincome of over 7,000 yuan) prefers socialand professional networks and paper media,especially professional magazines, officialbrand websites and professional consumergoods websites. These channels are prompt,professional and interactive. Brands can carryout targeted brand publicity and marketingactivity through these channels in order tomore accurately convey brand elements andproduct attributes. (See C.16)Comparison of purchase preferences of consumer groups with different incomesSource:RolandBergerconsumersurvey;RolandBergeranalysisclothing skin care products luxury goods mobile phones automobilesComparison of the initiative of gathering product information of consumer groups withdifferent incomesSource:RolandBergerconsumersurvey;RolandBergeranalysisclothing skin care products luxury goods mobile phones automobilesComparison of the channels for consumer groups with different incomes to gather clothinginformation activelyPeer groups recommendationStorefront/display windowProfessional magazinesOfficial brand websiteSearch for the brand’s releasedinformation on the InternetRecommendation of professional clothingwebsites or channels on the InternetSearch for the branded products one-commerce websitesActively search for the user evaluationof the brand on the InternetWord-of-mouthmarketingTerminalmarketingPaper mediaNetworkmediaMiddle- and low-income consumersHigh-incomeconsumers
  14. 14. 14Experts discovered significantdifferences in online purchasingactivities of each consumer groupBy the end of 2011, there were over 150million Chinese online shoppers, accountingfor 35% of Chinese netizens. The rise ofChinese online shopping is the result ofthree factors: the internet penetration ratehas increased steadily every year; there isa greater acceptance of online shopping aspurchasing perception changes; and thegradual increase in high value categories ofonline shopping goods provide a wider rangeof options than before.Roland Berger experts observe that onlineshoppers lean toward emotional-basedspending, are more sensitive to price, andpursue fashion, excitement and vitalityvalues from their purchases. They are sensitiveto new things, love life and enjoy life changesand an uninhibited shopping atmosphere. (SeeC.17)In terms of age patterns, the younger theconsumer group, the more important onlineshopping is to them. This is also due tothe unique living environment and familybackgrounds of the generations born in the1980s and 1990s. This consumer group grewup with the internet and forms the main bodyof internet users in China. They prefer onlineshopping. This new spending pattern hasgreater relevance to them than it has for theolder consumer groups. (See C.18)“E-commerce is an important part of future retail formats. However, if it operates under traditional retailing methods, a largenumber of consumers will be lost. We urgently need to figure out the main characteristics of online shoppers.”---an executive from a large-sized domestic household appliance retailer“The annually increasing channel profit has led to high costs for companies. E-commerce may become a new source ofprofit growth, building a platform that fosters close communication between companies and consumers.”---an executive from a domestic cosmetics companyComparison of Purchasing values of consumers from different channelsSource:RolandBergerconsumersurvey;RolandBergeranalysisConsumers from traditional channels Online consumersThe importance of online shopping to consumers of different age groupsSource:RolandBergerconsumersurvey;RolandBergeranalysis17 to 24years old25 to 34years old35 to 44years old45 to 59years oldIn the same age group, the proportion of three purchasing channels most frequently used by consumersexcluding/including online shopping [%]Excluding online shopping Including online shoppingsocialresponsibilitynaturepassionsimplicityvitalityclassiccomfort affinitysafetyexcitementfreedomfashion·coolsmartshoppingservicequalitytrusttotal costinnovativetechnologypersonalefficiencycustomizedsocialresponsibilitynaturepassionsimplicityvitalityclassiccomfort affinitysafetyexcitementfreedomfashion·coolsmartshoppingservicequalitytrusttotal costinnovativetechnologypersonalefficiencycustomized
  15. 15. 15In terms of city tiers, we observe that onlineshopping is less important to consumersfrom high-tier cities than for those from low-tier cities. (See C.19) Consumers from first-tier cities, in particular, have a large numberof shopping channels at their disposal owingto the diversified and fully developed retailformats nearby such as shopping centers,department stores, category specialtystores, brand stores, outlet discount stores,hypermarkets, supermarkets, conveniencestores, and wholesale markets. Onlineshopping is less important to them.On the other hand, online shopping, comparedto other channels, is the most active channelamong shoppers from first-tier cities, which isevident in many categories, including clothing,skin care products, mobile phones and luxurygoods. (See C.20)In terms of household income, the higherthe household income, the less importantonline shopping is. Presently consumersare attracted to online shopping because ofthe low prices, which has limited appeal forfamilies with higher purchasing power. (SeeC.21) However, there is an exception. Thegroup with a monthly household income ofover 10,000 yuan is significantly more activein online shopping for skin care products andluxury goods than other groups are. (See C.22)The importance of online shopping to consumers from different city tiersSource:RolandBergerconsumersurvey;RolandBergeranalysisIn the same city tier, the proportion of three purchasing channels most frequently used by consumersexcluding/including online shopping [%]Excluding online shopping Including online shoppingFirst-tiercitiesSecond-tiercitiesThird-tiercitiesFourth-tiercitiesComparison of online shopping activity among online shoppers from different city tiersSource:RolandBergerconsumersurvey;RolandBergeranalysisIn the same city tier, compared to other channels used by online shoppers, the intensity of online shopping [%]clothing skin care products mobile phones luxury goodsFirst-tiercitiesSecond-tiercitiesThird-tiercitiesFourth-tiercitiesComparisonoftheimportanceofonlineshoppingtoconsumergroupswithdifferentincomesSource:RolandBergerconsumersurvey;RolandBergeranalysisIn a group with the same income, the proportion of three purchasing channels most frequently used byconsumers excluding/including online shopping [%]Excluding online shopping Including online shopping
  16. 16. 16Online shoppers have weaker productpreference than do consumers purchasinggoods through traditional channels, andplace less emphasis on the product brand.This is mainly because online shopperscan quickly compare the performance andprice of products on different websites.They do not frequent different stores inperson, which reduces the cost – time – ofshopping around. Moreover, online shoppingprovides consumers with transparent productinformation, letting them see the performanceof products and its parameters. Moreover,they have access to reviews. That is, they cancommunicate online in real-time about theiruser experience with other online shoppers.The distinction and attraction of a particularbrand of product is thus diminished.A greater factor influencing choice is thatonline shopping, unlike individual stores, isnot constrained when displaying goods bythe physical space available. Online shoppingprovides consumers with many replaceableand complementary categories, creating andencouraging spontaneous shopping demandand appealing to consumers delight in pickingproducts. (See C.23)TheactivityofonlineshoppingamongconsumergroupswithdifferentincomesSource:RolandBergerconsumersurvey;RolandBergeranalysisIn a group with the same income, compared to other channels used by online shoppers, the intensity ofonline shopping [%]Skin care products luxury goodsComparisonofconsumers’purchasepreferenceofallchannelsPurchase preference [%] Primary consideration ofpurchase activity [brand, %]Consumers of traditional channelsOnline shoppersClothing skin careproductsmobilephonesClothing skin careproductsmobilephones
  17. 17. 17Online shoppers have a purchasing ecosystemthat is more dependent on networks – bothprofessional and social. They are muchmore active in gathering information thanconsumers of traditional channels, and theygain their information mainly from onlinechannels. (See C.24)Clothing skin careproductsmobilephonesThe proportion of consumers active ingathering information [%]Consumers of traditional channelsOnline shoppersChannels of actively gathered information (taking clothing as an example, %)ComparisonofthechannelsforconsumersofallchannelstoactivelygatherinformationOthers peoples recommendationBrand storefront/display windowProfessional magazinesOfficial brand websiteSearch for the brand’s releasedinformation on the InternetRecommendations of professionalclothing websites or channelson the InternetSearch for the branded productson e-commerce websitesActively search for the user evaluationof the brand on the InternetWord-of-mouthmarketingTerminalmarketingPaper mediaNetworkmediaOnline shoppersConsumers oftraditional channels
  18. 18. 18TacklingthechallengesfacingcompaniesBecause of the disparity in ages, city tiersand household incomes, there is greatdivergence among Chinese consumers interms of purchasing values, intensity andbehavior. A blanket approach to marketingdoes not work well in China. Companies thatwish to be successful in Chinas consumermarket should first recognize the diversity ofthis countrys consumer base. The RB Profilertool highlights just how different the needsand values of different consumer groups are.Only after understanding this can companiesdevelop a strategy to make their advertisingand marketing promotion more efficient andeffective. At the same time, top brands andretailers must find a way to create synergiesbetween their online and offline business,especially given the quick rise of e-commerce.Brand managementDifferentiated brand positioning is thefoundation of brand management. Companiesshould first fully understand the intrinsicvalues and purchasing behavior of differentconsumer groups in China. Products belongingto different categories are also different interms of functional and emotional demand.Companies should position their brands basedon these differences. For example, consumersfrom low-tier markets still have relativelyrational purchasing values and they do nothave fixed brand awareness. They are willingto pay for a products brand-associated partialfunction. Brands entering low-tier cities thusneed to quickly build their brand awarenessand highlight the value-for-money feature oftheir brands and products.Marketing promotionCompanies should use the strength of brandpreference as their guide to determine thefocus of their marketing promotion. Whenaddressing consumers that have strong brandand product preference prior to purchasing,companies should highlight the unique valueof the brand. The aim of this is to strengthenthe consumers brand identification. Whenpromoting their goods to consumers with lowerpurchase preference, companies should focuson the price, channel coverage and channelmarketing of their products instead of ramping-up brand promotion.It is important that companies carry outdifferentiated marketing based on target groupvalues and the preferred information channels.For example, when marketing to consumersthat actively gather information, brands shouldtry to leverage the information channels usedsuch as networks and paper media. It mightbe particularly useful to focus on professionalmagazines and official brand websites. Similartarget groups include online shoppers, whohave a purchasing ecosystem that is morenetwork-dependent, and those who are moreactive in gathering information from onlinechannels such as online shopping websites,official websites and vertical informationportals.The internet and especially mobile internetundoubtedly provide more effective extendedchannels. They have attracted many brandsbecause of their wide audiences, high valuefor money and fast speed. But brands haveto fully grasp the special features of networkmarketing especially content-center andthe influence of endorsements by socialcelebrities. Rather than viewing onlinechannels as an extension of their traditionalmedia placement strategy, they need to learnhow to maximize the use of network media.
  19. 19. 19Channel strategyWith e-commerce developing at breathtakingspeed, knowing how to address onlineshopping has become a major question markfor companies. Roland Berger believes thatmarket players need to fully assess twodimensions before taking any action: theimportance of online shopping to a targetconsumer group and the activity level of onlineshoppers. Roland Berger recommends thatenterprises consider the following four optionswhen developing an online shopping channel:(See D.1)Focusonthegroupthatactivelyshopsonlineandviewsonlineshoppingpositively;quicklyandpreemptivelyseizethismarketopportunityProvidedifferentiatedproductsspecificallytothoseactiveinonlineshopping,whiletakingthetimetodeveloptheonlinechannelGraduallypromotethepositivecannibalizationofonlineshoppingtophysicalstoresConsiderintroducinganonlinechannelatalaterdateDevelop online shopping as a keychannel. Any hesitation may cause theloss of the market shareProvide differentiated productsspecifically to those active in onlineshopping, while taking the time to developthe online channelGradually promote the positivecannibalization of online shopping tophysical storesThe Online channel is not thedevelopment focus at the present timeDevelopment strategy of online shoppingHighHighLow The importance ofonline shoppingActivitylevelofonlineshoppersLuxury goods forhigh-incomeconsumers fromfirst-tier citiesSome categoriesfor 16- to 24-year-old consumersFor people over45 years oldConsumers fromthird-tier andfourth-tier citiesDevelopmentfocus:Differentiatedtreatment:Carefulcultivation:Nointerference:
  20. 20. Roland Berger Strategy Consultants2012, all rights reservedBeijing 20/F, Tower A, Gateway Plaza, 18 Xia Guang Li, Dong San Huan North Road, Beijing, China, 100027 Tel :+86 10 8440 0088Shanghai 23/F, Shanghai Kerry Centre, 1515 West Nanjing Road, Shanghai, China, 200040 Tel: +86 21 5298 6677Guangzhou10/F, 8 Linhe Zhong Road, Guangzhou, Guangdong, China, 510620 Tel: +86 20 2831 7508Hong Kong 16/F, Nexxus Building, 41 Connaught Road, Central, Hong Kong Tel: +852 3757 9480Taipei 37/F, Taipei 101 Tower, 7 Xinyi Road, Section 5, Taipei, Taiwan, 110 Tel: +886 2875 82835infochina@rolandberger.comwww.rolandberger.com.cn

×