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17 June 2016

# Meet the Chinese Consumer

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## Contact us

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Accessing the Chinese consumer involves understanding the unique platforms and drivers of purchases. Chinese consumption patterns are no longer dominated by spendthrift attitudes and mid-market enterprises (MMEs) that previously shrank from entering China directly should understand three key factors enabling and driving the consumer: mobility (through mobile devices and around the world), quality, and lifestyle upgrades.

## Buying here, there, everywhere

China is the biggest smartphone market in the world, and to Chinese consumers, smartphones are far more than communication devices. Mobiles are used to purchase a wide array of products and services, play games, watch movies, and even invest. With mobile consumption expanding, smartphone purchases are slated to reach USD333.99 billion in 2015, totaling roughly half of retail e-commerce sales.

For MMEs without a brick-and-mortar presence in China, increased smartphone purchasing creates challenges and opportunities. Platforms like JD and Kaola will purchase goods directly from foreign brands, keep these goods in bonded areas and sell directly to individuals. This e-commerce niche is increasingly popular, as prices are comparable to foreign-bought goods. Additionally, consumers are reassured of goods’ authenticity by the reputation and guarantee of major e-commerce brands.

Meanwhile, Chinese customers are also leaving an expanded consumption footprint around the globe with fast-growing outbound tourism spending which reached USD107.6 billion in 2015. Chinese tourists are spending an average of USD917.3, up by 16.3 per cent over the same period last year.

International brands are finding that while the Chinese may be influenced in China’s borders, they may take brand preference and use it towards purchases abroad. To capture the mobile traveler, MME strategies can save dollars by integrating digital and physical presence. Setting up a domestic e-commerce presence is one method. A second is to work with global websites to increase reach in China through Chinese-language websites, such as apparel and accessories website, Shopbop.com. MMEs could also look in to consumer-based marketing within China to drive consumer preference at top travel destinations.

## Quest for Quality

Chinese spenders, particularly those who are buying for children, are increasingly quality and safety-driven. Food safety incidents such as the melamine-tainted milk powder scandal in 2008 have driven demand for safe and high-quality imported goods. This preference extends beyond food, through to children’s toys and products, pet products, kitchenware and pharmaceuticals.

"In our pyramid of luxury, we are seeing many consumers entering the premium product segment, even if it's at the base, through smaller purchases like Starbucks," says Erwan Rambourg, Managing Director and Global Co-Head of Consumer & Retail, Global Research at Bank of America Corporation. Whether these consumers are buying the products abroad or in China, through duty-free shopping zones, there are increasing numbers of shoppers entering the premium category.

Thus, if cementing a trustworthy and premium reputation is key to connecting with Chinese consumer demands, then MMEs should market their foreign-earned accreditations. For MMEs that do not have the brand-name leverage of multinational companies, incorporating European and US-standard certifications, awards and other forms of recognizable institutional marks of safety to marketing is a must.

## Becoming part of the new consumer lifestyle

But the evolution of Chinese consumer tastes and lifestyles takes time as well, and that impacts the growth of consumer segments that are new in China. "We are focused more on Beijing and Shanghai right now, as there is more of an expatriate market and more foreign-educated consumers, leading to more preference for Western designs," says Les Mandelbaum, CEO of Umbra, a MME homewares seller that targets the mid-range consumer.

In the meantime, foreign enterprises need to stay abreast of new trends among Chinese consumers, particularly healthy living, exercise and travel. For example, increased adoption rates of active lifestyles involving road trips and long-distance cycling journeys, products that once had little market demand are now growing fast. "As is the case in the US, relatively high obesity rates have led to the practice, or at least the purchases, of sporting goods, because consumers want to think they're living healthier lives than they actually might be," says Erwan Rambourg. In addition, as Chinese consumers become more exposed to Western lifestyles, the previously limited demand for products like skateboards to car seats to even ovens (not a traditional Chinese kitchen feature) will allow international MMEs that have established brands in these categories to leverage brand stories to coincide with Chinese consumer lifestyle changes.

##

1. http://www.wsj.com/articles/infant-formula-baby-business-in-china-is-growing-up-fast-1447619404
2. http://www.chinabusinessreview.com/understanding-chinese-consumers/print/
3. http://www.forbes.com/sites/jackperkowski/2014/09/25/chinas-growing-food-problemopportunity/

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