Consumer behavior in China is complex and dynamic. China continues to urbanize very rapidly. It is estimated that 60 percent of the population will live in urban areas by 2020. This means that 100 million more people will become urban consumers. The per capita disposable income of these consumers has doubled since 2010 from about 4,000 U.S. dollars to 8,000 U.S. dollars in 2018. This reflects the extensive social, economic, and cultural transformations the country has been through over the last 30 years. With the coming of the Internet revolution, these changes have magnified and have shaped consumer needs and preferences in a way that would have been unthinkable a few decades ago. About 10 or 15 years ago, consumer behavior was much more contradictory and unpredictable. Launching a new product in the market used to be a much riskier undertaking. While the majority of Chinese consumers are not in the affluent or middle-income groups, there is a growing middle class that is fond of any sort of sophisticated imported goods. People in their late 20s and early 30s who live in urban areas are part of this growing middle class. They are better educated than their parents and tend to save less despite the fact that they earn sizable incomes. Although China’s economic growth has been slowing down in the past few years, these consumers are optimistic that their earnings and living standard will improve and increase over time. Young consumers prioritize value and quality over low prices. In the past, price and practicality were the main criteria Chinese consumers considered the most when buying products. As they are now becoming more sophisticated and move from mass market to stylish, high-end products, Chinese consumers have higher expectations and have become very demanding shoppers.
China counts more than 700 million monthly active users on social media and 300 million online shoppers. While, for some, online shopping remains a trend and an occasional pastime, for many, it has become a lifestyle. Understanding this rapidly evolving audience is essential—on and off line. Keep in mind though that, while e-commerce is about to experience unprecedented growth, traditional shopping and marketing have not died yet. Shopping in malls and stores is still popular, and many Chinese people even travel abroad to buy luxury goods. Shopping tourism is, in fact, another major growing trend in China.
To facilitate a staged rollout of infrastructure and urban development, the Chinese government introduced a ranking system in the 1980s. Cities were ranked by tier according to the government’s development priorities. Later, with a flourishing economy, this ranking started to take more criteria into consideration, including population, economy size, and political ranking. China’s first-tier cities are among the largest and wealthiest. Beijing, Shanghai, Guangzhou, and Shenzhen are all key industrial, political, and commercial centers. Second-tier cities are mainly provincial capitals and coastal cities like Wuhan, Tianjin, Chengdu, Xiamen, and Chongqing. Third-tier cities are medium-sized cities in each province, while a number of smaller cities are grouped into fourth-tier cities.
Classification of cities in China by the development level*
Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen
Nanjing, Hangzhou, Suzhou, Wuhan, Xi’an, Shenyang, Chengdu, Chongqing, Xiamen
Jinan, Hefei, Dalian, Harbin, Changsha, Zhengzhou, Shijiazhuang, Fuzhou, Taiyuan, Urumqi, Qingdao
Kunming, Nanchang, Ningbo, Guiyang, Lanzhou, Yinchuan, Nanning, Changchun, Baoding, Datong, Weihai, Shantou, Haikuo, Lhasa
* These designations change from time to time based on rapid economic change and the weighting of different criteria.
Present-day Chinese consumers regard shopping as a leisure activity. They do more online and offline research than their American counterparts before purchasing a product. They are demanding consumers looking for the highest-value product at the lowest possible price. Although Chinese consumers have a different purchasing behavior than their Western counterparts, they are beginning to become more alike. There are, in fact, a few characteristics they generally value most: the quality and trendiness of a product, as well as the quality and rapidity of customer service and delivery.
Another growing trend that has been ingrained into the younger generation of Chinese consumers is the status-building value of a product. Mianzi is a very important cultural factor in China and plays a major role in both social and business dealings. The term literally means face, but the most accurate translation would be personal honor. This concept commonly refers to the good reputation a person gets when they make wise decisions by avoiding mistakes or embarrassing situations. People give face to others, who receive it, by showing respect or by giving compliments. Given the extraordinary importance Chinese people attribute to reputation, it is imperative that this cultural factor is taken into account in any company’s marketing and sales strategy. Chinese consumers care a lot about the image they project to the outside world. Face—the primary currency of upward mobility—is rooted in status projection and generates societal acknowledgment for one’s ability to scale the socioeconomic hierarchy. Younger consumers are particularly brand-conscious and have a special preference for luxury products that allow them to build face or show off to their peers. Luxury products are often considered an investment because they are likely to be made of higher-quality materials.
Who Is Buying?
As it has been already discussed, it is easy to see China as a single market, but a simple look at the population size and the country’s geography is enough to notice that it is a lot more diverse. China counts 56 ethnic groups. Therefore, levels of wealth and consumer preferences vary widely. One major factor in consumer diversity is the huge gap in income levels among and within different areas. First-tier cities, the ones with the highest income levels, are situated along the coast of China, going up the coast past Macau and Hong Kong. Considering all these population variations, consumer behavior in China follows rather uncommon and unpredictable patterns. About 65 percent of the international businesses operating in China have admitted that they had to adjust their product specifically to the Chinese market to suit local tastes and needs. Therefore, to maximize relevance and trigger loyalty, global brands must embrace Chinese cultural and operational realities.
Chinese culture is traditionally collectivistic as opposed to Western cultures, which have developed more individualistic characteristics. Whereas Western consumers’ sense of identity and self-worth is based on such characteristics as difference, uniqueness, and standing out from the crowd, Chinese consumers are community-oriented. Crowd is a word carrying positive connotations for them. The country has been categorized in the minds of many Western people as a copy nation. Chinese people like to copy, and they have proved to be very good at doing that. Their copying tendency is not merely limited to brands and products though. They copy trends and social behaviors. They like to copy each other. For Chinese people, being different and standing out means being excluded. Their identity and sense of self depend on how they are perceived by the group. If you want to be a member of the community, you have to follow certain practices and rules, and one of the major rules is harmonizing individual behavior with collective behavior. As a result, they tend to mimic peer behavior and usually follow what other people do, be it friends, family, or colleagues. The same applies to consumer behavior. In the later chapters, I explain the importance and ways of using local social media as a key online marketing strategy for creating virtual communities of e-shoppers.
Fashion-conscious young men and women belonging to the middle and upper-middle classes are usually the target market segment for most Western companies selling their products in China. If we try to define the average Chinese consumer in just a few words, we would describe a group of people belonging to the one-child generation, born between 1978 and 1990. This group represents approximately 300 million people. The e-generation is represented by younger consumers born in the 1990s. Those born after 1998 currently represent 260 million individuals. The one-child generation tends to be rather materialistic and shares a number of characteristics with Western consumers. Other behavioral aspects include the tendency to spend rather than save like previous generations used to do. Groups of young consumers follow current trends through the Internet and are more likely to spend large amounts on fashion, clothing, entertainment, and personal care items. Most Internet users—even those living in remote regions of the country—have broadband access, and mobile shopping is becoming an increasingly growing trend among them as well.
Young people are more likely to spend time and money online than older consumers. More than 90 percent of online shoppers are aged between 15 and 39 years. Most come from urban areas and have a monthly income of less than RMB 6,000 (989 U.S. dollars). About 29 percent are students, 18.3 percent are managerial and non-managerial white-collar employees, 17 percent are self-employed, and 11 percent are professional technicians. Female users account for almost 52 percent of all Internet users; they represented only 20 percent of the total Internet user population back in the early 2000s. While 3C (consumer, communications, and computers) products were aimed at male consumers a few years ago, the largest categories, mainly fashion and cosmetics, now target women. Chinese consumers generally opt for the lowest price and regularly compare prices between virtual and physical stores before purchasing. This is why, timely responsiveness to daily price changes is paramount for companies to keep competitive on and offline.
Emerging Consumer Groups
Chinese consumers are changing all the time. They are quite unpredictable. So are consumer groups. Emerging consumer groups introduce new consumption trends, and their growing influence must be constantly monitored.
As an aging society, China enjoys a relatively high life expectancy and a low birth rate. Thanks to higher living standards and advanced medical solutions, the average life expectancy has reached 75.7 years. It is, in fact, these higher living standards that led to a reduction in birth rates with the implementation of the one-child policy in the late 1970s. The government has recently moved to a policy allowing two children in some circumstances. However, China is still facing the problem of an aging population. It is estimated that, by 2050, the number of Chinese citizens over the age of 65 years is expected to reach 329 million. The growing population of senior citizens makes them an emerging group in the foreseeable future. Modern seniors are more willing to pursue a lavish lifestyle than previous generations. They are cultivating their own interests and enjoy traveling. About 25 percent of the Chinese travelers in 2017 were 60 years or above. These numbers reflect the huge potential for special services, such as travel packages designed for senior travelers. Health products and medical services are also in high demand by this group of consumers.
Single Young People
The economic growth in China has fostered development in education. Children are told from a young age that they need to study hard to get a well-paying job and secure a good living. In fact, since the late 1970s, education levels have continued to improve. Defying tradition, young Chinese are increasingly postponing marriage and childbearing. A big number are aiming for higher education levels, career advancement, and higher social status, while others think it costs too much to get married. Young Chinese are, therefore, more willing to stay single and spend time and money on themselves than their parents and grandparents. According to the estimates, the number of single Chinese adults has already reached 200 million. A number that is equivalent to the combined populations of Russia and the United Kingdom. Because they do not need to take care of a family, they can spend more time and money on entertainment and recreation with friends and colleagues. This growing phenomenon has boosted the importance of the singles’ economy. For example, single consumers may go to the cinema, KTV (karaoke), or to a restaurant alone. Places that offer solo seats and let them be part of a crowd without standing out will naturally be their first choice. Also, smaller apartments and tiny appliances for solo living are becoming popular with this group. It is interesting to notice that during the 2017 11.11 Shopping Festival,1 purchases of mini appliances rose by 92 percent and one person use sales went up by 190 percent. Also, sales of pet supplies and accessories went up 239 percent as single people sought companionship.
Another emerging consumption force are young males, especially the post-1995 generation. Unlike their grandfathers and fathers, they are more conscious about their personal image and believe that a tidy appearance is essential for job interviews and dating. As a result, they are willing to spend more on clothing and fitness. Young Chinese men actually spend an average of 24 minutes a day taking care of their appearance. About 88 percent of male consumers living in first-tier cities regularly check out fitness, fashion, and grooming information online, while 83 percent of those between 18 and 35 years think it is necessary to use skincare products and health supplements. A remarkable increase in male grooming products has been noticed, and the total consumption volume for male consumers is getting close to that of female consumers. Searches for men’s cosmetics more than doubled during Alibaba’s 2017 Singles’ Festival. The sales volume of such products is growing rapidly with the total market volume expected to reach 1.9 billion RMB (290 U.S. dollars) in 2019.
Female Luxury Buyers
Although the luxury goods market is female-dominated worldwide, in China, it is still male-dominated. In the past five years, however, consumption by women has been steadily increasing. JD.com, one of China’s leading online shopping platforms, reports that women’s luxury market is currently worth 2.5 trillion RMB and is expected to grow to 4.5 trillion by 2019. Luxury products like watches, handbags, and cosmetics are becoming more popular, especially among younger, educated women with high incomes. Affordable luxury brands have also gained popularity and managed to build a reputation for high-quality design with relatively affordable prices. Although women are now more willing to spend on luxury goods, they are still price-sensitive. They do thorough research before buying, they choose carefully and believe that interesting offers and discounts are worth waiting for.
To sum up, Chinese consumers are changing fast. They are trendsetters. They are demanding. They expect a lot. They know their power. They travel, study abroad, buy from overseas brands, and export their expectations far and wide. Whether your business is already serving Chinese customers or intends to do so in the future, it is important to understand how they think and buy. Remember that China’s main consumer force is made up of people between 15 and 39 years old. It is the 1980s and 1990s generations that make up the majority of online consumers. Most of them are university students, fresh graduates, young professionals, and young parents. They prioritize quality and value over low prices.
• over 60 percent of Taobao shoppers belong to the 25–35 years age group,
• over 70 percent come from urban areas and have average monthly revenues of RMB 5,000,
• 30 percent are students,
• 18 percent are white-collar workers,
• 16 percent are self-employed,
• 12 percent are professional technicians, and
• 58 percent of the Internet users are women (they used to represent only 20 percent of the total number of users 15 years ago).
Most offline consumption comes from first- and second-tier cities and other urban areas with high per capita income. On the other hand, when it comes to online consumption, second- and third-tier cities account for an increasingly big share. Although consumers from second-tier cities earn nearly as much as those in first-tier cities, they have fewer options for offline shopping, so they tend to purchase online to fill this gap. Also, compared to first-tier cities, consumers from second-tier cities have more free time to spend shopping online, which translates into greater opportunities for online retailers in these emerging niches. Consumers above 60 years of age also make up 11.2 percent of online consumers. They have more money and time at their disposal after retirement and are a rapidly growing segment of the Chinese population.
Source: Fung Business Intelligence Report, 2016.
Number of online shoppers in China 2006–2017
Infographic courtesy of China Internet Watch
What Are They Buying?
The latest data from the national Bureau of Statistics shows that, in the first half of 2017, consumption not only accounted for 65 percent of China’s economic growth, but also made up 58 percent of the total GDP. Retail sales have grown at double-digit rates for years, and online sales specifically have increased from 3.8 trillion RMB in 2016 to 5.6 trillion RMB in 2017. Brick-and-mortar vendors experienced huge growth in the sales volume as well. It is clear that Chinese consumers are buying more. The question is: what are they buying and how? Robust economic growth and wealth are usually followed by change in purchasing priorities and consumption behavior. Indeed, there has been a clear shift from daily necessities to a wider group of products, which is accompanied by a remarkable trend toward guilt-free consumption of expensive premium products.
Hi-Tech and Digital
Young Chinese consumers are much more tech-savvy than previous generations. They pay attention to trends and look for the latest tech products and newest models to satisfy their needs for fashion and practicality. A third of Chinese consumers own home or wearable tech products. Purchases of wearable devices and smart household products increased by 22 percent and 20 percent, respectively, in 2017. In terms of high-tech products, virtual reality (VR) is another market with a huge potential. Key domestic digital firms like Tencent and Alibaba will continue to invest heavily in VR in the coming years. VR is already integrated into a variety of industries in China. Retail sales of imaging devices such as VR devices and drones have grown from 650 million RMB in 2016 to 1.6 billion RMB in 2017.
Companies seeking e-commerce opportunities will have to tailor their strategies to account for the special needs and unmet demands of the modern consumer. Brands that will be able to meet the needs of Chinese consumers for better quality and service, will be the winners in an increasingly competitive environment. E-tail will develop rapidly across all product categories through 2018, but the growth potential will vary by product category. Some products are gaining popularity, and they will more than double. One such example is digital cameras. Back in 2010, fewer than 15 percent of the e-shoppers bought cameras online. This number is about to reach 48 percent in 2018, given that a significant number of consumers claim that a digital camera is included in the list of the next three items they plan to purchase online.
Some categories will still enjoy further growth as consumers transfer a larger proportion of their spending from physical stores to e-commerce sites. The casual wear category is also experiencing a significant growth. Apart from casual wear, the categories that are growing faster in terms of online sales are travel, consumer electronics, and cosmetics. In skincare and cosmetics alone, online sales have exceeded combined sales in the United States, the United Kingdom, and Japan to reach over 18 percent of the total retail sales in China. This growth is expected to remain in the double digits, at least for the next five years.
Before entering the Chinese e-commerce sphere, it is important that you have a very clear idea of what your target consumer group wants, what product and service value they expect, and how standards are different from the market(s) your company is used to working in. There are numerous cases of large companies with a successful sales record in Western countries that neglected to adapt to the requirements of the Chinese market, and in the end, failed, eBay being only one famous example among many. A wide variety of products are being made available every day in the Chinese online marketplace. 3C products are the most popular categories for e-commerce in terms of spending in China. The six highest growth categories include fashion, cosmetics, 3C, home appliances, daily necessities, food, and baby products.
The top three product categories for e-shopping that account for 70 percent of all online purchases are (1) apparel, (2) leisure and education, and (3) household products. They are followed by transportation and communications and personal items and health care. Organic products and premium-quality fresh food are also currently in high demand. A category of consumers are still reluctant to shop online for four significant reasons: (1) lack of physical contact with the product, (2) concern about after-sales service, (3) too complicated online payment system, and (4) not owning a debit or credit card. It is important to mention though that the number of online users who decide to buy online has increased dramatically over the past five years, thanks to the creation of sophisticated online platforms, detailed ranking and review systems, and user-friendly payment methods.
Source: McKinsey China Insights, Macroeconomic Model Update.
Health and Wellness
Chinese people are about to develop a new attitude when it comes to health and well-being. This is not only reflected in shopping trends for daily life necessities such as food and clothing, but also in the new level of consciousness they are about to develop about their overall physical health. China has experienced a number of food safety scandals since 2006. These incidents have involved fake food items, improper use of ingredients, unsafe additives, unhealthy production, and food-processing methods and contaminations. The food products affected have included meat, cooking oil, eggs, noodles, tofu, tapioca, with the most serious being the 2008 milk scandal, including baby formula. As a result, Chinese consumers have grown particularly suspicious when it comes to food quality and product safety. They trust overseas suppliers more and prefer to buy items online or directly from foreign sources when possible. Chinese parents have shown distrust in baby formula and milk products made in China and prefer to buy imported milk powder from the United States and Australia or from Hong Kong and Macau. On the other hand, the booming number of senior citizens adds to the high demand for health supplements and products. An increasingly common gesture is to offer health supplements as gifts to parents and grandparents on special occasions such as birthdays, family celebrations, and festivals. Growing health concerns have also boosted sales of smart devices like watches that count steps or measure heart rate and electronic scales that calculate muscle and body fat. Searches for fitness equipment more than doubled during the 2017 Singles’ Festival.
Pollution problems in first-tier cities have also contributed to Chinese consumers pursuing healthier, greener lifestyles. Less labor-intensive work and more personal time also mean that people are more concerned about fitness and well-being than ever before. The number of people pursuing fitness has exceeded 10 million in 2017. This number has maintained an average growth of 10 percent in the past few years. An increasing number of young people, especially the younger ones, hold gym memberships and hire personal trainers for one-on-one coaching sessions. They use fitness apps to create detailed fitness plans, follow instructional videos, and attend fitness courses. This massive trend is also reflected in the popularity of WeRun, a step tracker application within WeChat that includes a ranking system among other features. The number of daily active WeRun users has now reached 115 million with an annual growth of 177 percent.
Entertainment and Tourism
With more disposable income, Chinese consumers are naturally spending more on entertainment. They visit restaurants, cafés, cinemas; they go to KTV (karaoke) more often, and travel more. Travel and entertainment now represent 11 percent of the monthly household spending, which represents twice the amount recorded in 2011. Tourism has witnessed an outstanding growth. Chinese people are traveling more than ever before. National travelers accounted for 4.4 billion in 2016 with an annual growth of 11 percent. Among them, a growing number shows a strong willingness to travel abroad. Outbound travelers hit a record high of 122 million, with a year-on-year growth of 4.5 percent. This segment still holds a huge potential. Chinese travelers are also adopting Western travel habits. Instead of just going sightseeing and shopping, they are more willing to engage in in-depth experiences of local, authentic lifestyle and culture. Custom-tailored travel services are a growing trend. Many are moving from five-star hotels to boutique hotels or AirBnB homestays, while bespoke and VIP tours are also growing in popularity.
Luxury and Premium Products
The impulse to show status with premium products is very strong in China. You are what you wear and many also believe that high-quality products improve their lives. Luxury products are a key high-end with an astonishing growth. In 2016 alone, 7.6 million Chinese households were estimated to have purchased luxury goods, each spending an average of 72,000 RMB (approximately 12,000 U.S. dollars) per year. This is twice what households in legacy luxury markets like France and Italy spend on luxury goods. In 2017, the market witnessed an incredible growth reaching a total market size of about 24 billion U.S. dollars. The major reason is that a growing number of fashion-savvy Chinese consumers have started to shop more online, which has contributed to the sales growth. The luxury market is still due to grow in volume and importance. The number of Chinese millionaires is expected to surpass that of any other nation in 2018. By 2021, China is expected to have the most affluent households in the world, while by 2025, the number of Chinese luxury consumers is expected to reach 150 million.
How Are They Buying?
With the expansion of e-commerce and technology, Chinese consumers are gradually decreasing their purchases from brick-and-mortar stores and turn to e-commerce platforms more and more. In China, social media also serve as search engines. One of WeChat’s major goals for 2018 is to improve its search function accuracy. With WeChat Search, users can see the engagement between other users and brands, they can access recently published content by their favorite brands, and read comments on their favorite posts, articles, and official accounts. Other major social media platforms like Weibo, Douban, and Zhihu are often used to find product information and user recommendations. Let us now take a look at how Chinese consumers shop online and which are the steps they follow from pre-purchase, through purchase to post-purchase.
Doing online search before purchasing has become common practice in many parts of the world. China is no different. Price, quality, and similar products are compared before consumers decide on which product to buy. In addition to domestic search engines like Baidu and Sougou, Chinese consumers search on e-commerce platforms like Taobao, JD.com, Xiaohongshu, and so on. For niche categories, there are vertical social platforms like qyer.com for travel and Babytree for parenting and childcare products. The search results are updated in real time and customized based on data such as the user’s search and browsing history, as well as their location. This process often leads directly to purchases. Recommendations often appear as display ads, and platforms also show product and brand suggestions that, very often, are spot-on. While few Western consumers say they would purchase an item after seeing its ad, a third of Chinese consumers admit they would purchase it after seeing the ad. This type of advertising drives exceptionally high click-through rates and longer visits on the advertised platforms.
Reviews and Peer Recommendations
Chinese consumers check product information and read peer reviews from other customers and professional bloggers, while those following celebrities on social media are likely to buy products they showcase or recommend in their videos. Users take comments and product reviews very seriously. Almost half of them leave reviews and comments about items they bought, whereas Western consumers are less likely to do.
See Now, Buy Now: Live Demos
The see now, buy now function offers a more memorable experience for viewers and customers and leads to more sales conversions. Live streaming has become a hit since 2015 in China, and e-commerce platforms like Tmall developed a live streaming function that allows vendors to showcase their products to potential customers in a more memorable and eye-catching way. These live demos allow viewers to ask questions about a specific product and interact with fellow viewers through comments. Sellers display their products, demonstrate how they can be used, and answer customer questions. If a viewer is interested in a product, they can simply click the item on the screen and purchase it immediately.
Buy What You See!: Social Media Marketing
Users have the possibility to shop directly on social media platforms like Weibo and WeChat. These platforms allow users to embed product links from partnered e-commerce platforms. On WeChat, for example, you can embed direct links to product pages from Taobao.com, JD.com, and so on. Whenever people see something they like on these platforms, they can buy them immediately by simply clicking on the embedded links that are displayed. The Buy What You See function takes product placement to the next level, making the path from discovery to purchase as smooth and natural as possible.
Mobile Payments and Immediate Distribution
By speeding up the online purchase system, fast and safe mobile payment options are a key factor behind the increasing popularity of online shopping in China. Alipay and WeChat Pay are the most widely used mobile payment tools, developed by Alibaba and Tencent, respectively. Users can make purchases and complete payments by using their fingerprint or a password to confirm payment. Money is then automatically deducted from their digital wallet or from the bank account they have linked to their digital wallet. In 2017, Alipay introduced more advanced security measures, such as facial recognition, to ensure safety during transactions. Once the payment is completed, express delivery service providers such as SF express, Cainiao, and JD Logistics play a crucial role in timely distribution. Logistics has evolved into a very transparent process, and packages can be monitored online with a tracking number. In first-tier cities, orders can be delivered within 15 minutes of the order being placed.
After buyers receive the product they purchased, most e-commerce platforms encourage them to rate the product and their overall shopping experience and add comments that will be used as a reference for future buyers with respect to the quality of the product. They also answer questions from prospective buyers about their experience with a similar product. If they feel dissatisfied with the product, buyers often contact the brand’s social media account. Customers can submit enquiries or make complaints directly by leaving comments under the seller’s most recent posts or by simply sending a direct message. This is usually far more efficient than making phone calls or writing a formal e-mail. Professional bloggers post daily product reviews on social media, sharing their consumer experience and talk about the pros and cons of a particular product and often compare it to competitor products.
Weak Brand Loyalty
Chinese shoppers are far from being loyal to brands. Rather, they are adventurous and open to new brands and products. They are easily attracted by innovative offerings and creative multimedia content. A recent study revealed that about three-fourths of Chinese respondents turned to new brands and products in 2017. At the same time, a growing number of brands are entering China. As a result, this has given way to an even more fragmented market. Existing established brands are, therefore, at risk of losing once-loyal customers.
The Weight of Heavy Spenders
Consumerism is already a phenomenon in China. The more familiar Chinese netizens become with online shopping, the more money they tend to spend. People in Beijing and Shanghai have a disposable personal income (DPI) level of more than 62,000 RMB per year (approximately 18,300 U.S. dollars), while Tianjin and Shenzhen closely follow behind with more than 38,000 RMB per year (approximately 6,000 U.S. dollars) of DPI. Chinese e-shoppers can be divided into four separate consumer segments according to how much of their disposable income they spend online. They range from light spenders to moderate to heavy then to super-heavy.
It is important to notice that 7 percent of online consumers account for 40 percent of the total online spending. These are the super-heavy spenders. They spend more than RMB 10,000 (1,700 U.S. dollars) per year on online shopping. Light spenders spend no more than RMB 1,000 (165 U.S. dollars) per year. They represent 60 percent of total e-shoppers and account for less than 15 percent of the total online spending. The heavy spenders’ segment engage in a larger number of transactions and their purchases include a wide range of product categories, whereas light spenders’ purchases focus mostly on the apparel category. Super-heavy spenders buy on average 175 items and engage in 50 transactions per year. On the other hand, light spenders buy 22 items on average over the course of 10 transactions per year.
Chinese consumers become increasingly heavy spenders as they accumulate more wealth. A pleasant shopping experience is a major driving force for online spending. Very wealthy shoppers with little e-shopping experience normally spend 60 percent less than experienced middle-class shoppers. Over 70 percent of the super-heavy spenders come from the middle and affluent classes and have been shopping online for more than six years. It normally takes affluent e-shoppers four to six years to become super-heavy spenders.
Although bargain hunting is an essential part of the whole online shopping adventure for them, these consumers are increasingly looking beyond discounted products. They actively look for branded, unique, premium-quality products that are often not available offline. They tend to be emotionally attached to online shopping, and they value better customer service, convenience, speed, and the fun part of shopping online. E-shopping has become more of a pastime, not to say a hobby, for them. Another characteristic of this group is that they are very likely to go shopping online without having any specific product in mind. Taking into consideration their greater propensity to make an unplanned purchase in order to fulfill their emotional needs, this growing segment will soon become the target group of many brands. Also, considering the strong emotional ties that Chinese consumers have with shopping, it is essential to attract them with unique value propositions that go beyond mere low prices. In a few words, the best way to attract super-heavy spenders is to make them feel special by focusing on quality and customer service. Meeting the emotional needs of super-heavy spenders will be the key to brands’ future success in the Chinese e-merging market. Companies can achieve this by offering customers a fun shopping experience or by giving them the feeling that they are learning something through the whole process.
Source: China’s National Bureau of Statistics, 2017, EUSME.
Source: China’s National Bureau of Statistics, 2016–2017, EUSME.
1 The 11.11 Shopping Festival is China’s Black Friday. The festival was first launched by Alibaba in 2009. The festival is a huge sales and entertainment event that is known by a variety of names such as the Double 11 Shopping festival, the Singles’ Day Countdown Gala, the Double 11 Countdown Gala, and so on.