While many global consumer companies believe that succeeding in China is an imperative for the future, most have concentrated on simple footprint expansion and near-term opportunities at the expense of understanding the broad changes Chinese consumers are currently undergoing, according to a report by The Boston Consulting Group (BCG).
The report, entitled 'Winning the Hearts and Minds of China's Consumers', suggests that if companies want to be long-term winners in the country's fast-growing consumer markets they will need to focus on securing a marketing advantage through better consumer insights and segmentation, as well as by developing superior product offerings and emotional brand affiliations.
Two main shopping trends in particular are emerging as major drivers of Chinese consumption: trading up and treasure hunting. This finding was based on a survey of over 4,000 Chinese consumers across 13 cities, as well as focus groups, home visits, and 'shop-alongs'.
According to Hubert Hsu, a BCG senior partner in Hong Kong, and co-author of the report, "Armed with better insights into consumer behaviour, a relatively small player could leapfrog the competition and usurp a market leader's position with remarkable speed. Today's leaders must anticipate consumers' attitudes or risk losing ground to competitors."
Among the report's other key findings:
- Generational differences pose challenges
Because China is changing so quickly, generations only a decade apart have grown up in quite different circumstances, and this has created some striking cross-generational disparities.
- Trading up beats trading down
The percentage of Chinese consumers who are planning to increase their spending in the near future is more than six times that of those who will spend less. That is a much wider spread than in either the United States or Western Europe.
- Brands matter more than in the West
Half of the Chinese who trade up said they would purchase a product because of its brand name, while only 33% in the United States and 20% in Western Europe would do so.
Avoid simplistic views
The report warns that marketers should beware of taking too simplistic a view of Chinese consumers' attitudes toward spending. Decades of rapid change have brought stress and insecurity, and a greater percentage of Chinese report such feelings than do consumers in other countries.
"Not only does China's market represent a variety of demographic segments with divergent cultural experiences, but the segments are constantly shifting," explained Carol Liao, head of BCG's centre for consumer insight in Asia. "To anticipate the shifts, it is critical to develop an intuitive understanding of how customers think and feel about their lives, keep a close watch on consumption trends, and focus on building sustainable brand loyalty."