China: Deep Pockets and Digital Trends Drive Consumption

China: Deep Pockets and Digital Trends Drive Consumption

China: Deep Pockets and Digital Trends Drive Consumption

For foreign companies targeting the deep pockets of China’s growing middle class, understanding demand and consumption habits are Key.

The future of consumption in China is digital, consumer-driven and aided by safe and secure mobile payment systems, according to attendees of the 3-day annual World Economic Forum last week.

The Chinese consumer market is the 2nd largest in the world. Over the next 5 years it will continue to drive global growth, adding the equivalent of another Germany or Japan to the global marketplace.

About 75% of Chinese consumers plan to maintain or increase their spending in Y 2016, down from 81% in Y 2015, according to a recent survey by Boston Consulting Group (BCG).

While growth in the size of the Chinese consumer market will slow, the growth in value is projected to increase as the expanding upper-middle class demands higher-cost, higher-quality goods and services, according to Tomas Casas i Klett, Director of China Competence Center at the University of St. Gallen.

The 2 principal drivers of growth are increased disposable income and a willingness to spend more, led by the upper-middle class and affluent households, younger consumers, and those employed in high-paying services, the BCG survey showed.

China’s “Millennials” are growing quickly in both numbers and income. Those aged 18 to 30 years old will likely make up more than 33% of the urban population by Y 2020. Their consumption is growing at 14% annually, 2X the pace of those over 35.

Young Chinese are digitally savvy and globally aware.

New trends will emerge as they become a consumer force.The young generation’s share of total consumption is projected to increase from 45 to 53% by Y 2020.

Digitization is transforming Chinese consumer behavior. China has the world’s largest online consumption market. Traditional brands that fail to embrace technology suffer.

The sharing economy is gaining ground in China as trust grows due to verification and user review systems, better credit infrastructure and harsher punishments for dishonest behavior, according to Yao Jinbo, CEO at 58.com, a leading Chinese online classifieds market.

While growing e-Commerce has created challenges for traditional retailers, there are still opportunities, according to Yan Xuan, President of Greater China with market research firm Nielsen.

Yan pointed out that convenience and specialty products are emerging areas for Chinese consumers. Convenience stores in China had nearly double digit growth last year, with Shanghai residents making an average 15 trips per month.

A BCG report showed that infant and baby products, consumer electronics, and financial services remain the top three categories for Chinese consumers looking to upgrade in quality, while personal-care products and travel are moving up the list.

Have a terrific week

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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