Savvy, single, green, trendsetting, fully connected: the five consumer groups shaping China’s future

New study predicts consumers will be spending a staggering US$1.8 trillion yearly by 2021 on their daily essentials and lifestyles

PUBLISHED : Wednesday, 28 June, 2017, 9:39am
UPDATED : Wednesday, 28 June, 2017, 11:55pm

Chinese consumers will be spending a staggering US$1.8 trillion yearly by 2021 on their daily essentials and lifestyles, and will fall into five clear profiles, according to new joint research published today.

That spending total will be the same amount spent by Germans, and represents a quarter of all consumption growth in major economies, according to the report from Boston Consulting Group (BCG) and AliResearch, the research arm of Alibaba Group.

The study shows mainland consumption grew 10 per cent last year and has not been affected by the macro economic downturn.

However, the “Five Profiles that explain China’s Consumer Economy” report said companies now need to abandon their past use of simple classifications of customers, such as age and gender, for instance, as customers have become a lot more diverse and sophisticated in their buying habits.

“A lot is changing in China, but the fundamental story is one of very strong growth, right through to 2021,” Jeff Walters, a partner at BCG and co-author of the report, told a media briefing in Dalian this morning – on the second day of the three-day World Economic Forum, being attended by more than 2,000 high-ranking participants from around the globe.

“This market is growing by trillions of dollars, and companies that take the right steps, today, will set themselves up to win over the long term.”

A rising middle class, a younger population, and the rapid development of e-commerce are seeing more people buying online and has led to more aggregate spending on higher-quality products, Walters said.

Within just four years, he said 90 per cent of all purchases in China will involve digital at some point in the process, including browsing, comparing prices, or making the actual purchase.

Gao Hongbing, dean of AliResearch and vice president of Alibaba Group, said the internet is now the biggest influence on buying habits in China. Alibaba owns South China Morning Post.

“The popularity of the internet is highly influential, as consumers rely heavily on it for all kinds of goods and services. We also believe the rising trend of a seamless convergence between the online and offline worlds will become an important driving force for the growth of consumption in future,” Gao said.

Companies that want to capture those trillions of dollars worth of spending, the report said, will have to go “deeper” into understanding their customers and their specific needs.

But according to the research, five new profiles of the typical China shopper are developing:

1. The “savvy” shopper

Globalisation, technology and rising incomes has created a group of far savvier shoppers in China today than in the past, as they can now effectively “shop anywhere in the world” to evaluate branded products, from online websites, or luxury malls in the country’s major cities.

Companies are already racing to offer more product choices, and the traditional consumption boundaries of age and gender are disappearing.

Chinese men in tier-one cities now spend nearly half an hour a day on grooming, for instance, and 88 per cent access grooming and fashion information online. Chinese men in 2015 spent 24 per cent more on skin care than in 2014.

Older generations of Chinese, too, are now spending more on travel than ever before, but they are also becoming more adventurous in their spendings, such as on sports gear, yoga and running.

2. The singleton:

China’s single population is growing fast. 21 per cent of urbanites older than 35 are single, up from just 4 per cent a decade ago.

This trend means growing demand for smaller products and those items suited to single living, such as furniture designed for one-person apartments, smaller appliances such as mini freezers and food sold in smaller portions, like prewashed and chopped vegetable that are easier to cook.

3. The eco-conscious

Chinese shoppers are increasingly aware of environmental issues and sustainability because they want their products to be as good for them, as they are for the planet.

AliResearch found that 66 million customers on Alibaba’s China retail marketplaces bought five or more environmentally friendly, or “green”, products in 2015, up from just 4 million in 2011. And they were willing to pay a third more for them. To capture these customers, the study warns companies will have to adapt in all kinds of ways, such as cutting down on excess packaging and encouraging the recycling of their products.

4. The passionate trend setter

Chinese consumers are spending on a wider ranging of interests, especially those that are exclusive, stand out from the crowd, and can enrich their lives.

Travel is also a major focus for this group of spenders. In 2015, half of Chinese travellers visited Japan and South Korea, but that footprint is now expanding to more exotic destinations in Africa, the Middle East, and even the North and south Pole.

5. The connected consumer

E-commerce is a lot more developed in China than many other markets because of the nation’s strong digital infrastructure. The Chinese population becomes more connected every year, with the total number of active mobile internet users quickly approaching the 1 billion mark, currently at 927 million.

As a result their lifestyles are changing. As an example, the massive growth in digital entertainment means more people are likely to stay at home and socalise with friends than go out. The massive rise in the games and animation industry among younger Chinese people is solely the result of their being easily accessible online.