The People’s Republic of China is arguably one of the most promising markets on earth. The fourth-largest country in the world has a rapidly expanding consumer market that’s constantly producing new opportunities for both local and foreign players. Since China joined the WTO in 2001, foreign firms have had regulatory barriers to entry increasingly lowered. But international companies can fail, even with an eager market and favorable regulation. Well-prepared management, key alliances, and a deep understanding of Chinese consumer behavior are vital to compete with good results.
In this article, we’ll offer a fact-driven primer to Chinese consumer behavior, and share actionable advice for integrating your brand into this leading market.
Chinese Consumer Behavior by Age & Income Group
As explained in “China & the World”, a 2019 report by McKinsey, the Chinese consumer sector is steadily growing, and the consumer profile of urban Chinese people is becoming increasingly similar to that of counterparts in major world capitals. It’s expected that, by 2030, China will have experienced a growth of 6 trillion dollars, equivalent to the expected growth for the United States and Western Europe combined. In this context, 58% of Chinese households will be mass affluent.
Nowadays, urban Chinese households spend approximately 25% of their income on food, having more disposable income than ever before. More disposable income correlates with a desire for more options when it comes to products and services. More disposable income also causes a greater output of tourists. In fact, China has the greatest volume of international travelers in the world.
But, of course, Chinese consumers aren’t a homogenous group. In order to get a better understanding of the Chinese consumer, we need to place them both geographically and within the history of China. Considering age, occupation and location, we can divide the Chinese consumer market into the following nine groups:
The Frugal Retired were born before 1960 and were mostly low-level workers at State-owned enterprises. They experienced thought political and economic times and didn’t receive systematic education.
The Wealthy Retired occupied higher positions at State-owned and State-funded enterprises. Used to better salaries and currently benefiting from better pensions than their counterparts, they’re still frugal but not as price-sensitive. Their consumption of entertainment and other non-essentials is often complemented with gifts from their children.
Those in their “Frugal Forties” grew up during the Cultural Revolution and currently work at privately-own, State-owned, or State-funded enterprises. With low to medium income, and both parents and children to care for, this demographic is very price-sensitive. The “Wealthy Forties”, their more affluent counterparts, will mind the price tag, but they’ll be willing to pay a little extra for premium quality products. This is key, in a market as competitive as China.
“The Thirties” and “The Twenties”, children of the “One-child” policy, grew up in a more prosperous China. And, being their parent’s only child, they’re used to being spoiled. They save less than previous generations, shop online quite frequently, and tend towards impulse purchases, favoring quality over low prices. The below-20 demographic, also referred to as “The New Generation” double-downs on the tendencies of the age groups above them, being further Westernized and responding particularly well to social media marketing. While they’re still dependent upon their parents’ income, they heavily influence their choices.
We should also be aware of two opposite consume groups that aren’t as defined by age as by location and status: Rural Migrant Workers and The Wealthy. The affluence of rural migrant workers into urban areas started in the 1990s, and is persistent to this day, with workers generally 25 and 45 years old living frugally in the cities, while working menial jobs and sending as much of their income as possible to relatives in their rural hometowns. Their consumption levels are quite below that of their natively urban counterparts.
The Chinese millionaire class is growing. As per a report by the Hurun Research Institute, the wealth of the country’s richest families is totaling over 128 trillion yuan. Wealthy Chinese consumers are concentrating in urban centers such as Beijing, Shanghai, and Hong Kong, and moving within an economy of premium products, international fashion retailers, and luxury supermarkets.
Remember, Chinese translation services are not optional. While there are more English speakers in China than in the United States, very few of them are truly proficient. Be aware of local linguistic preferences, and translate accordingly. Go beyond translation. Make sure your product is fully adapted to local trends and regulations as well. Partnering with an experienced localization company can be vital.
Consider the great firewall. While good digital marketing can make all the difference, consider that you can’t advertise to Chinese costumers on, for instance, Facebook. Learn more about China’s “great firewall”, which Chinese websites and apps your potential customers spend their time in, and work to find the correct approach.
Consider that, to the frugal consumer sectors (as well as to the whimsical shoppers in the younger demographics), even small discounts are powerful.