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.
Made in China: 8 Insights into the Chinese Consumer
Made in China8 insights into the ChineseConsumer and Market
Land of OpportunityChina is the worlds most populouscountry, with over 1.3 billion consumers.It is forecast to become the world’s secondlargest market by 2015 with the purchasingpower to buy 14% of the world’s products.As companies look to take advantage of thisopportunity there has been an exponentialgrowth in the Chinese consumer’s choiceof brands & products.In such a competitive marketplace, withincreasingly savvy & discerning consumers,it pays to understand the context in whichdecisions are made if you want to getahead of the pack.
8 insights – with suggested implications - to helpyou succeed with the Chinese consumer:
1. No ‘One China’China is a vast country with significantregional differences in demographics,lifestyle, tastes and wealth. Some exceedthe GDP of wealthy Western countries, othersare barely third world. Equally, what works inone area of China, won’t necessarily work inanother: even in ‘Tier 1’ cities like Beijing andShanghai there are as many differences assimilarities.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 ofthe market means that targeting a niche inChina is still a huge opportunity.IMPLICATIONSChina cannot be treated as asingle market – with significantdisparities between regions andconsumers. Brands must focus bysegmenting consumers andlocalising their strategy.
2. Constant conflictbetween Fitting inand Standing OutAt the heart of Chinese society is a tensionbetween fitting in with society and standing out asan individual. The roots of this conflict lie inConfucianism, which promoted a society wherethe highest virtue was to remain dutiful, butalso believed success could lead to socialacknowledgement.60 years of communism has also driven a visionof service to the nation as a key pillar of identity.But, since the ‘Open Door’ policy, many Chineseconsumers have started to seek the materialsatisfaction and personal status manyinternational brands embody.IMPLICATIONSBrands need to understand howthese underlying tensions affect theirpositioning, striking a balancebetween allowing consumers toexpress their individuality whilemaintaining their link to society.
3. Aspiring to beGlobal, not WesternThe Chinese consumer is determined to be partof the new international order, which issynonymous with modernity and progress.However, being global doesn’t meansacrificing Chinese heritage and nationalpride in favour of Western ways.There is a strong sentiment of national prideand the brands that do best in China adaptto local culture whilst offering ‘globalbenefits’: e.g. KFC has outdone McDonalds byadapting its menus to better suit local tastes;Lays potato chips have a Pepsi-Chickenflavoured variant – as Cola chicken is acommon recipe in China.IMPLICATIONSBrands should craft their offeringto assimilate with local culture,creating an offering that is global– and respectful of China’s richculture - rather than remainingsteadfastly foreign.
4. Status AnxietyStatus is key at every level of Chinese society asconsumers seek ways to show theyve arrivedor belong to certain groups. As such Chineseshoppers account for 20% of global sales ofluxury goods and are drawn to visible displays ofstatus (e.g wearing white Apple headphoneseven 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 ongifts and festivals.But there are signs the ultrarich are gettingmore subtle, avoiding overly logoed itemsthat are “too flashy” and leaning towards brandssuch as Bottega Veneta, whose subtle designcues send signals to a smaller, select group ofpeople who are in the know.IMPLICATIONSLuxury is an aspiration foreveryone, but status is vital -brands that demonstrate prestigecan be highly successful butexpect tastes to move away fromexcessive ‘bling’ in the future.
5. The growth ofindividualistic shoppersChina has the world’s highest personal savingsrates (38% vs. 3.9% for the US) so there aremany careful shoppers who spend timeresearching purchases & rarely buy on impulse.But McKinsey has identified a growing wave ofyounger, urban consumers exhibiting more‘Individualistic’ behaviors. These consumerswant to express their individuality throughtheir purchases and as such are more self-indulgent in their choices. As forecasts suggestthere will be nearly 400m of these ‘Individualistic’consumers in China by 2020 they will be highlyinfluential trendsetters.IMPLICATIONSWhilst a majority remain carefulspenders who need rationalreasons to support purchases,brands can tap into a growth inindividualistic spending behaviour– satisfying wants, not just needs.
6. Huge investmentin ‘Little Emperors’The 34 years since the ‘One Child Policy’ wasintroduced have seen many unintendedconsequences: one of the lowest populationgrowth rates in the world, the ‘4-2-1 Problem’where 1 child must look after 2 parents and 4grandparents and a ‘shortage’ of girls. But italso means parents now focus all their effort andmoney on their one child.Parents put huge resources and energy intothe upbringing of their children, oftenspending 30% of household income on theireducation alone. Equally under such parentalpressure children look for opportunities toexpress their own hopes and aspirations, as wellas outlets for rebellion.IMPLICATIONSBrands offering real learning forchildren will attract parents. Butequally, brands providingyoungsters with a way to expressthemselves will appeal too.
7. Power to thewomenChinese women hold household purse strings,but they are attractive consumers in their ownright. The one child policy ‘freed’ many womenfrom ongoing childcare, leading to a muchhigher participation in the workforce (68% asopposed to 58% in the US or 33% in India) anda much smaller income gap than in manyemerging markets.Younger Chinese girls also have power –especially as they are more scarce (119 boys areborn for every 100 girls). Many parents believedaughters should be raised ‘wealthily’ toensure they marry the right sort of man. Assuch girls’ desires are pandered to and they enjoysharing what they buy both on and offline, usingon social networking sites such as Meilishuo orMogujie.IMPLICATIONSChinese women of all ages haveconsiderable spending power.Finding ways to appeal to them canbe a route to growth.
8. Connectingthrough Social MediaChina has the world’s most active social mediapopulation – 95% of Chinese living in Tier 1,Tier 2, & Tier 3 cities are registered on a socialmedia site (according to McKinsey). Even ruralareas are seeing a big uptake as cheapsmartphones provide greater access.On average consumers spend 46 minutes a dayon these sites – with uses changing as they growfrom teenagers, to students to professionals. Butforget Facebook: 80% of consumers researchpurchases on local Chinese social media sitessuch as Qzone, Weibo, Sina Weibo & RenRen.Yet only 6% of Western firms have a presence onthese sites.IMPLICATIONSChinese consumers are highlyconnected online – often usingsocial media to research and sharepurchases. Creating a strongpresence on the right sites is acrucial way for brands to engage
12Brand Genetics - Front End Innovation SpecialistsWe partner global brands who want to outperform the competition to identify next-generationopportunities 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 localpartners give us global reach, our experienced central team ensures consistent excellenceAustralia • 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 Kingdom12
13If youre interested in how we can help you build your competitive edge inChina, or other global growth markets, wed be delighted to talk furtherwww.brandgenetics.comTom Ellistom.email@example.com+44 (0) 7815 896 098Andrew Christophersandrew.firstname.lastname@example.org+44 (0) 7967 175 62313With thanks to our partners Ahead ResearchConsultants for their support & collaboration