Reasons Behind China’s Unique Consumer Behaviour

Few markets have experienced changes in the way that China has over the past few decades.  

Just 35 years ago, more than four in five Chinese were living in the countryside, typically tending small, family-sized plots with animals and crops.  Now around half of the population live in city apartments, surrounded by conveniences that they could have only dreamt of a generation ago, and earning over three times what they would if they still lived rurally.  Since 1990, China’s average incomes have grown more than 10-fold, and those extra earnings usually only need to support one child, unlike the large families a few decades earlier. 

China’s social changes are almost matched by its market transformation. There were no foreign FMCG brands in China until 1979 when Coca Cola launched in the Middle Kingdom, although it was only allowed to sell to tourists.  Nowadays, China has truly become internationalised with products from Italy’s Moleskine stationary, to New Zealand apples, to Belgian beer all vying for China’s lucrative consumers’ wallets.  More than 500 new products launch every day on average in China.  

How Chinese learn about products and services has also transformed.  Until recently, propaganda messages made up the lion’s share of marketing in China.  Most consumers learnt about things through the traditional state-run media channels such as radio, newspapers and later, television.  Now the average urban Chinese consumer is bombarded by advertising messages across a wide range of mediums, unrivalled in other markets.  

China’s 668 million Internet users have become the most rampant users of social media and ecommerce globally, using online channels more than any other medium for research before and after buying things.  In addition, over 100 million Chinese travel and study abroad each year, and together with the networks they influence, have created a massive consumer population that is more aware, astute and internationally-minded than ever before.

Such remarkable social, economic and market changes have created a unique consumer class.  Their consumer journey and retail market are unlike the West and other Asian markets.  But there are also a number of fads, social habits, fashion trends and food that are a result of this dramatic change and China’s unique culture and history.  We’ve listed a few to give you a taste of just how different some Chinese consumer trends are. We hope you enjoy this week’s Skinny.

 Chinese Consumers

Buzzwords: Unique Chinese Consumer Trends: Those unique fads, social habits, fashion trends and food that all make China a little more interesting.

4 Strategies For Reaching The Chinese Consumer: As consumerism becomes more entrenched in China, companies will have to 1) segment more and more precisely; 2) extend modern trade channels and distribution networks to reach consumers outside the biggest cities; 3) communicate benefits of products that are unfamiliar to consumers; and 4) develop the products and services that are underpinning increases in consumer spending, and which remain relatively scarce in China.

Italy’s Luxury Firms Set Their Sights On China: On the back of a 44.7% increase in net income for the first half of 2015, high end notebook maker Moleskine will open most of its new stores in China in the second semester, a market it describes as “very interesting”.

19,470 Firms Sign Up For Three New FTZs: Three months since free trade pilot zones were launched in Tianjin, Guangdong and Fujian in April, almost 20,000 firms had signed up.

Big Brands Like Michael Jordan Are Still Losing Trademark Battles In China; Here’s How to Win: If you’re planning to launch a legal challenge against a trademark squatter in China, don’t delay, and register your Chinese brand name if you have one.

 Internet & Ecommerce

PayPal Aims to Connect More US Merchants with Chinese Consumers: One of two pieces of research by Paypal studied how Chinese consumers learn about products they purchase cross border. Search engines were the most common way, followed by word of mouth and social media.  Alibaba has just recruited a former vice chairman at Goldman Sacks to lead its cross border drive.  The company has partnered with Kobe Bryant to sell his documentary and products on Tmall.  

Apple Loses Top Market Share In China As Xiaomi And Huawei Take Over: After leading for two quarters, Apple has been beaten out of the top spot for market share in China by Xiaomi at 15.9% and Huawei at 15.7%. Apple’s share was estimated at 12.2%.

 Food & Beverage

What’s Going Wrong With Chinese Juice?: After accounting for 61% of global juice volume growth between 2009-2014, the volume of juice sales declined last year, with value only slightly growing. A few big safety scandals didn’t help.  There has also been an overall shift to healthier beverage options with better ingredients such as fortified/functional juices and reduced sugar juice.

China’s Top Wine And Beer E-Tailer Nabs $80M Funding To Get Everyone Drunk: Jiuxian adds $80 million funding to take its total funding to $225 million since 2011. It comes at a time when China overtook Japan to be the top consumer of Belgium beers in Asia, with imports growing 140% last year and 850% since 2008.

 Chinese Tourists

Ctrip Goes On A Round The World Trip: China’s largest online travel agent faces challenges in expanding globally, in addition to more aggressive domestic competitors backed by the big boys such as Tencent and Baidu. 53% of Chinese travelling internationally book on websites or over apps.

 Fashion

Fakes Are Costing Europe’s Fashion Industry 10% Of Its Sales And Thousands Of Jobs: Two thirds of the worlds fakes are said to originate in China, with Chinese counterfeits are estimated to cost European fashion brands €17.5 billion ($19.2 billion) a year and result in 242,000 lost jobs according to OHIM. Italy is the hardest hit, followed by Spain, the UK, Germany and France.

 Beauty

Chinese Consumers Most Satisfied With Their Looks Among Asians: 9.8% of Chinese consumers are completely satisfied with their looks, while 44% are fairly satisfied, making them the most contented among the AsiaPac countries surveyed by GfK.

 Banking

China’s Once High-Flying Internet Money Market Funds Are Now Barely Better Than Traditional Banks: Interest rates on Internet funds are less than half what they have been since 2013. In early 2014, Chinese International Capital Corp estimated that online money-market funds could soak up 8% of total consumer deposits in three years. Jack Ma’s Yu’ebao, is the market leader with more than $98 billion in assets and 200 million users to date.

 Auto

Chinese Consumers More Upbeat On Buying Cars: Despite the slowdown of car sales in China, 20.7% of respondents in an MNI Indicator survey said they were planning to buy a car in the next 12 months – the highest rate since the series began in March 2012.

 Luxury

Luxury Consumer Price Index Falls For First Time In Eight Years: Price declines in luxury properties, overseas trips and products drove the overall luxury price index down 1.8% this year according to Hurun. Yachts and private jets witnessed the largest price drops of 10.5%, as a result of foreign exchange differences.

That’s the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.

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