China Consumers


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This is the presentation delivered on February 17 for a series of talks entitled China: the next five years

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China Consumers

  1. 1. The next generation of consumers in China Peter Cuthbert Marketing Strategist, MulvannyG2 Architecture
  2. 2. Outline: <ul><li>一 . An urban China </li></ul><ul><li>二 . The four cultural touch points </li></ul><ul><li>三 . New vs. Traditional consumers </li></ul><ul><li>四 . OCG-led industries </li></ul><ul><li>- Technology </li></ul><ul><li>- Luxury </li></ul><ul><li>五 . Things to consider </li></ul>Rendering by Frank Lo, MulvannyG2 Architecture
  3. 3. I. Urbanization in China
  4. 4. Rural to urban transition <ul><li>Traditionally a rural country. </li></ul><ul><li>Urbanized greatly since 1950. </li></ul><ul><li>600 million urban population 2010 </li></ul><ul><li>70% of the population will be urban by 2030. </li></ul>Above: The Fujian Power Headquarters nears completion; the developing skyline of Fujian, China. Below: Source: China Statistical Yearbook
  5. 5. Density map of China. Source: Wikipedia
  6. 6. Urban Vs Rural employment <ul><li>Urban employment +3.5% Rural employment -0.6% over the same period. </li></ul><ul><li>Project both figures and we’ll see more urban than rural employment around 2020. </li></ul><ul><li>These figures indicate a continued countryside to city transition. </li></ul>Source: China Statistical Yearbook 2008 10,000 persons Year Urban employment Rural employment 2010 32,482 46,794 2011 33,456 46,513 2012 34,460 46,234 2013 35,494 45,957 2014 36,559 45,681 2015 37,656 45,407 2016 38,785 45,134 2017 39,949 44,864 2018 41,147 44,594 2019 42,382 44,327 2020 43,653 44,061 2021 44,963 43,797 2022 46,312 43,534
  7. 7. Employment increases by sector <ul><li>Cities in China are moving away from labor intensive manufacturing. </li></ul><ul><li>High tech and knowledge intensive industries are become the main economic force. </li></ul><ul><li>Business, real estate services and info tech are growth industries. </li></ul>Urban employment index 2003=1.0 Source: China Statistical Yearbook 2008
  8. 8. II. The Consumer revolution in China <ul><li>Within the past 30 years Chinese consumers have changed greatly. From purely priced-based decision making to a savvy, discerning selection. Consumers are much more sophisticated. </li></ul><ul><li>They are still driven, however, by traditional cultural dimensions including: lineage, Guanxi, Face, and Position. </li></ul>
  9. 9. Chinese cultural touch points <ul><li>Lineage : Preserving the family. </li></ul><ul><li>Investing in children, through school and early adult life </li></ul><ul><li>Investing in older generations </li></ul>
  10. 10. Chinese cultural touch points <ul><li>Face and public opinion : Importance of prestige, honor and reputation. </li></ul><ul><li>- The concept of face is of Chinese origin </li></ul><ul><li>- It must be continually invested </li></ul>
  11. 11. Chinese cultural touch points <ul><li>Position : Refers to the etiquette that surrounds treating people with respect to their social stature. </li></ul><ul><li>China is a top-down country, and protocol is more important than in the US. </li></ul>
  12. 12. <ul><li>Guanxi : Importance of social capital. Calling upon others to provide favors or to resolve problems. </li></ul><ul><li>- The individual in western society is like a leaf on a tree </li></ul><ul><li>- The individual in Chinese society is like a spider web </li></ul>Chinese cultural touch points
  13. 13. Guanxi (Guan-she) 关系 Self – 自我
  14. 14. Guanxi (Guan-she) 关系 Family – 家 <ul><li>Closest relatives </li></ul><ul><li>Spouse </li></ul>
  15. 15. Guanxi (Guan-she) 关系 Familiar – 熟 <ul><li>Friends </li></ul><ul><li>Classmates </li></ul><ul><li>Colleagues </li></ul>
  16. 16. Guanxi (Guan-she) 关系 Stranger – 生 <ul><li>No particular relation </li></ul>
  17. 17. Guanxi Relationship (Guan-she) 关系 Individual
  18. 18. Guanxi Relationship (Guan-she) 关系 Guanxi
  19. 19. Guanxi Relationship (Guan-she) 关系 No Guanxi
  20. 20. Guanxi Relationship (Guan-she) 关系 No Guanxi Guanxi
  21. 21. Only Child Generation (OCG) Vs. Traditional Consumers OCGers – New consumers Traditional Coming of age in an era of unceasing economic growth. Came of age in an era of hardship. Liberal spending: low saving rate. Conservative spending: a culture of Savings, with a saving rate of 40%. No cultural resistance to credit cards. Cash is king. Psychological complexity behind purchases. Buy for Face, Position, guanshe. “ 货比三家 ” compare three shops mentality- decision making based primarily on price. Buy for Lineage. Tech savvy, always seeking the latest in technology and fashion. Will “make-do” with older or outdated products.
  22. 22. Population growth and proportion <ul><li>20 to 44 year olds compose the highest proportion of the population for the foreseeable future. </li></ul>China Statistical Yearbook
  23. 23. What the urban Chinese are buying China Statistical Yearbook Out of 100 families
  24. 24. III. OCG-led industries Focusing on technology and luxury. These are two OCG-led.
  25. 25. Internet <ul><li>Internet penetration is 28% of the total population=US population </li></ul><ul><li>Expected to double in three years. </li></ul><ul><li>Online services are to grow at an annual rate of 50% . </li></ul><ul><li>Other growing segments are search, ad and e-commerce. </li></ul>
  26. 26. Internet <ul><li>More people are looking on line as a source of entertainment. </li></ul><ul><li>Economic downturn sped up process. </li></ul><ul><li>B2C has increased greatly as people are finding e-commerce a good way to find products more cheaply. </li></ul>Above: Internet bars are ubiquitous in many of China’s back alleys. Below: Typical scene of an internet bar interior. Most patrons use internet bars to play online games.
  27. 27. Online gaming <ul><li>Massively multiplayer online role-playing games (MMOPGs) generate nearly $3bn in China,79% of the country’s online market. </li></ul><ul><li>Generated $106 mn in exports to China. </li></ul><ul><li>Major game producers are all listed on the NASDAQ. </li></ul>Clip from World of Warcraft. MMOPGs are a new cultural phenomenon in China.
  28. 28. Online gaming <ul><li>A few NASDAQ-listed Chinese tech firms </li></ul><ul><ul><li>The9 Limited - Gaming </li></ul></ul><ul><ul><li>Perfect World - Gaming </li></ul></ul><ul><ul><li>Netease - Gaming </li></ul></ul><ul><ul><li>Baidu - Search </li></ul></ul><ul><ul><li>Sohu – News/search </li></ul></ul><ul><ul><li>Sina – News/search </li></ul></ul>
  29. 29. Online gaming <ul><li>Few western game producers have much of a market in China. World of Warcraft exception. </li></ul><ul><li>Chinese gamers tend to enjoy games that draw upon Chinese traditional imagery. </li></ul><ul><li>“ Romance of the three Kingdoms” and “Journey to the West” </li></ul>The cartoon shows a mother calling out for her son in an underground internet bar. Illegally run internet bars are where a great deal of online gamers spend their time.
  30. 30. Bulletin Board Services <ul><li>Still the mainstay of social networking in China. </li></ul><ul><li>Approximately 3 billion registrants. </li></ul><ul><li>61%use BBS a source for information prior to purchasing. </li></ul><ul><li>47% purchased a product directly from a BBS site. </li></ul>Tianya is one of the most influential BBSs in China. Source: iresearch
  31. 31. Bulletin Board Services <ul><li>Can work with other social networking: </li></ul><ul><li>Social networking is personal in format </li></ul><ul><li>BBS is topical in format </li></ul><ul><li>The two can help each other moving forward. </li></ul>Discuz! Has a topic for all seasons. The site was founded in a college dorm room. The owner is now one of China’s super-rich OCGers worth several hundred million dollars.
  32. 32. Luxury <ul><li>Chinese are some of the biggest consumers of luxury. </li></ul><ul><li>Asian market accounted for 80% of the luxury segment growth over the past year. </li></ul><ul><li>The West has only accounted for 2% of luxury’s growth. </li></ul>
  33. 33. Luxury <ul><li>Apparel and accessories </li></ul><ul><li>Cosmetics </li></ul><ul><li>Jewelry </li></ul><ul><li>Fine wine and liqueurs </li></ul><ul><li>Autos </li></ul><ul><li>High-tech </li></ul>
  34. 34. Luxury <ul><li>The vast amount are (OCGers) 20-30’s </li></ul><ul><li>White collar office worker </li></ul><ul><li>Average salary between $400 – $1,500 (US) </li></ul><ul><li>Will spend a large portion of salary on luxury. </li></ul>Shanghai’s Nanjing West Road. China’s premiere shopping street.
  35. 35. Luxury <ul><li>Super-rich 825,000 >$15m (over a million millionaires) </li></ul><ul><li>Average age 39 (OCGers) </li></ul><ul><li>15 years younger that their western counterparts. </li></ul>
  36. 36. <ul><li>China is urbanizing at an alarming rate. By 2030 China will have an urban billion=70% of the population. </li></ul><ul><li>Remember the four cultural touch points: Lineage, Face, Position, and Guanxi (guan-she) when marketing in China. </li></ul><ul><li>OCG-led industries will rule China’s retail sector </li></ul><ul><ul><li>- Online - Market to BBS users </li></ul></ul><ul><ul><li>- Fashion – Maintain brand quality, selection and choice. </li></ul></ul>Things to consider…
  37. 37. 谢谢! Thank You!