CHINESE CONSUMER MARKETING GUIDE
China has maintained a strong attraction for foreign investment, with year-on-year growth seen in most consumption categories. China’s consumer market is rapidly rebounding and developing steadily in the post- pandemic era, and the long-term economic outlook is optimistic.
THE CONSUMER MARKET IN CHINA 2022
The total retail sales of consumer goods
The epidemic has not changed the trend of consumption upgrading. In 2020, the total retail sales of consumer goods decreased by 3.93% compared with 2019. But when it comes to the first two months of 2021, the total retail sales of consumer goods increased by 33.8%. “The total retail sales of consumer goods are expected to reach 55 to 60 trillion yuan in 2025 and expected to maintain an average annual growth rate of about 9.5% in the next five years” said Chi Fulin, executive president of the China Institute for Reform and Development, and that during the 14th Five-Year Plan period, “China will become the world’s largest consumer market for goods.”
Per capita disposable income
As the country that has recovered fastest from the epidemic, China’s per capita disposable income in the first half of 2021 was 17,642 yuan, up 12.6 percent in nominal terms from 15,666 yuan in the same period 2019, and up 12.0 percent in real terms after deducting price factors, showing a high growth rate.
Recovery consumer market
In May 2021, the consumer market continued to show a steady recovery as the policies and measures to expand domestic demand and promote consumption continued to exert momentum and the “Consumption Promotion Month” activity was successfully held in China. New types of consumption developed rapidly, with online retail sales of physical goods reaching 3.9 trillion yuan, up 19.9 percent year-on-year. Sales of smart, customised and health goods such as smart wearable devices, customised furniture and sterilised washing machines on e-commerce platforms increased by more than 60 % year on year.
Opportunities in consumer markets
At the same time, foreign investors are excited about the opportunities that China has seen in the recent two years in a number of markets, including e-commerce, security and productivity solutions, life sciences, energy efficiency, environmental protection and other areas related to climate change.
THE CONSUMER SPENDING IN CHINA
Per capita consumption expenditure
In the first half of this year, China’s per capita consumer expenditure was 11,471 yuan, up 18.0 percent in nominal terms over the same period last year, and 17.4 percent in real terms after adjusting for price factors, up 11.0 percent over the first half of 2019. The two-year average growth was 5.4 percent, and the two-year average real growth was 3.2 percent after adjusting for price factors.
Per capita consumption composition
In the first half of 2021, China accounted for the largest proportion of food, tobacco and alcohol consumption, followed by housing and transportation and communications. Per capita consumption expenditure on food, tobacco and alcohol was 3,536 yuan, up 14.2 percent, accounting for 30.8 percent of per capita consumption expenditure. The per capita consumption expenditure on clothing was 742 yuan, up 21.4%, accounting for 6.5% of the per capita consumption expenditure. Per capita consumption expenditure on housing was 2,649 yuan, up 7.5%, accounting for 23.1% of per capita consumption expenditure. The per capita consumption expenditure on daily necessities and services was 669 yuan, up 15.1%, accounting for 5.8% of the per capita consumption expenditure. Per capita spending on transportation and communications was 1,455 yuan, up 17.5 percent.
Evolution of Consumer Behavior in 2021
The experiential consumption scenario of phygital has become the new normal, with 61% of Chinese consumers shopping online daily or weekly and 53% visiting physical stores daily or weekly in 2021, both up 3% compared to March of the same year. The data shows that although consumers are increasingly choosing online shopping, offline physical stores still play an important role and continue to grow along with online channels.
More emphasis on sustainable consumption and environmental, social and governance (ESG), 74% of Chinese respondents (global: 55%) said in the survey that they are interested in buying products with environmentally friendly packaging or less packaging. The same percentage of respondents (global: 56%) would choose a product that is traceable and transparent about its origin.
CHINESE CONSUMER PURCHASE PREFERENCES
Popular items and trends for Chinese consumers:
1. More diverse clothing styles
Chinese consumers have a more diverse aesthetic appreciation for clothing. For example, Hanfu and JK clothing are popular in 2021, while Korean clothing and fashion brand clothing have the strongest sales performance.
2. Personalized products
Sales growth of personalized products on JD.com’s platform increased by 53% year-on-year in 2021. Trendy blind box sales increased by 883% in the past year. Chinese consumers enjoy the scarcity experience brought by the unknown and are keen to try new products.
3. Household beauty instruments and detailed beauty products
Sales of Yamen home RF instruments increased by 810% in the past year, and the beauty instrument category performed well in 2021. At the same time, for detail beauty, such as replacement lenses, cosmetic lenses, and body gloss products also have good performance in sales.
4. Home atmosphere products
For example, scented candles, projectors, bath balls (sales up 115% from last year), atmosphere lights (sales up 68% from last year) and other home products that bring happiness and sensory experience are trending well.
5. Health and fitness related products
Sales of health care products rose 45 percent from the same period last year, and more than 25 percent of the buyers were born in the 1990s, as younger Chinese become more health-conscious. With the further deepening of the concept of health and body shaping, the products featuring low fat and light food also enjoy good sales. For example, the average monthly sales of Wonderlab meal replacement milkshakes reached 906,000 yuan in 2021.
6. New energy vehicles
With the support of Chinese government policies, consumer cognition is improving and their requirements for intelligence are increasing. On JD.com’s online platform alone, the monthly sales volume of pure electric new energy vehicles has reached 176,000, becoming a general trend for Chinese consumers.
Products that Chinese consumers are not that interested in
1. Instant noodles
Master Kong and Uni-President, the two instant noodle leaders, both showed declines in their semi-annual reports for the first half of 2021. The emergence of new categories such as self-heated hot pot and rice noodles has also squeezed the traditional instant noodle industry.
2. Imported frozen food
Sales of imported cold-chain food products that periodically tested “positive” for the virus in early 2021 have dropped as a result of the epidemic.
THE DIFFERENT HABITS BETWEEN CHINESE AND WESTERN CONSUMERS
Because of the huge differences between Chinese and Western consumption habits, newcomers must understand the unique consumption patterns of Chinese consumers if they are to succeed in the Chinese market.
Different consumer segmentation
Different regions in China have different development rates and different consumption trends among regions. There are mainly differences in first-tier cities, urban and rural divisions, class divisions and age divisions. Consumption habits in the West are more similar in different regions, as the regions where urbanisation is widespread have developed more or less alike.
Different concentrated groups of consumption power
In the West, the strongest customers are relatively old people with stable homes and well-paid jobs. However, the strongest customer group in China is Generation Z. In China, Generation Z (born between 1996 and 2010) is particularly strong, accounting for 25 percent of new brand spending, even though it accounts for only 15 percent of the Chinese population.
Different shopping experience
1. Chinese consumers shop more frequently
First of all, the consumption frequency is different between the East and the West. Chinese consumers tend to frequent consumption, generally patronizing convenience stores and fresh food markets every day.
2. Chinese consumers are more dependent on e-commerce and digital payment
Mobile payment, such as Alipay and WeChat, is indispensable from street shops to big shopping malls. E-commerce is particularly well developed in China, where 90 percent of the market is done online, unlike western consumers who rely more on official websites.
3. Chinese consumers are very enthusiastic about online shopping
Meanwhile, the West, especially North America, has a lower shopping frequency, preferring to buy groceries for a week. In contrast to Chinese consumers who are keen on online shopping, 75 percent of European consumers choose to shop in physical stores. But in China there are 25 percent of Chinese consumers using their mobile phones to shop once a week.
CHINESE CONSUMER TRENDS IN 2022
New generation consumption trends forecast
In the post-COVID-19 era, young consumers (Gen Z and Gen X) still have high consumption expectations, including travel, fashion and non-essential consumption areas such as dining out. They are optimistic about their current economic situation and environment and are less price sensitive. They are also more likely than older groups to describe themselves as “digital”, “data-conscious” and “green” consumers. To win over this new generation of consumers, who are showing a tendency to be more ethical and picky, brands must articulate a meaningful value proposition and find opinion leaders or KOCs who embody the right brand value because they can build a steady connection with their target audience through user-generated content.
Silver generation consumption trend forecast
China’s senior citizens are also showing a trend toward higher digital abilities, and an e-commerce market targeting the elderly is likely to explode in 2022. China has about 1 billion internet users, of whom 11.2 percent are over 60 years old, and 26.3 percent are 50 or older, up from about 17 percent in March 2020. China’s “silver economy” expected to reach Rmb 5.7tn by the end of 2021, according to iMedia Research, representing huge opportunities for certain segments dominated by the elderly, such as home furnishings, cruise travel, anti-ageing products and robotic care.
Business development opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area
With the introduction of the two national key measures, the Guangdong-Hong Kong-Macao Greater Bay Area will see more business opportunities in the retail market, including the advantages of tourist islands, theme parks and other scenic spots, as well as the consumption upgrading demands of talent gathering and new shopping centers. In addition, Shenzhen’s plan to build an international Food Valley, the introduction of preferential policies to support e-commerce in many places, the development of consumer hubs, duty-free shops, the marine economy and digital economy will all bring great growth potential to the Guangdong-Hong Kong-Macao Greater Bay Area.
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While modern consumers across the globe have some common characteristics, Chinese consumers have a very different mindset and different shopping preferences. Chinese consumers are extremely digitally adept and have strong social media and online shopping habits. Chinese consumers trust their social connections and have the tendency to follow the recommendations of the influencers that they follow.
As the China market is coveted by brands from all over the world, Chinese consumers are more demanding and spoiled in terms of product quality, communication and engagement practices. It takes time to establish long-term connections with them.
Contact us to plan your consumer research and understand your brand consumer personas in-depth.
A social media presence is a must for brands and companies in order to reach Chinese consumers and establish a closer relationship with them. As Chinese consumers are spending more and more time on their mobiles, social media has become an important channel to connect with brands, get the latest updates and promotion offers, voice their opinions and shop. Brands need to treat their social media accounts as business branches.
Contact our team to discuss how to make your social media stand out.
The most common mistakes foreign brands make in China are misunderstanding the mindset of Chinese consumers, producing content that either doesn’t connect with or is actively rejected by them and failing to localize their content and marketing campaigns.
There’s more information about the most common reasons for PR crises in China here.
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Our team provides a variety of consumer research solutions to help your brand find out which of China’s almost one billion online consumers fits your brand and products.
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