After years of economic boom, China is going through structural changes that drove consumption down for a while. Yet, despite the lower pace, the economy is expected to grow to $6.5 trillion by 2020. This is mostly due to three main trends that are shaping the future of China: new channels, new consumers and new interests. BCG and Alisearch partnered to conduct a study on the interplay between demographic, social and technological trends that are influencing consumption. The scenario depicted shows a two-speed consumer economy that has upper-class, younger and e-commerce development on one side; poorer, older and traditional retail on the other. Average wages are growing fast, at a pace of 11% YoY since 2010 and is not deemed to stabilize soon as the economy shifts from being low-wage manufacturing based to better-paying service and high-tech industries. The overall picture is promising though: even after a brief slowdown, the final effect will be a positive expansion particularly in the sectors of luxury, wine, automobiles and overseas travel. Our analysis of new consumption trends in China this year distinguished three parts. This is the first one and focuses on a changing consumer base – more educated, affluent, urban, younger and increasingly more female.
- The rise of the Upper-Middle Class. Until recently Chinese economy benefitted from the ascent for millions of people from poverty to emerging-middle class. Now growth is led by the upper-middle class and affluent households, so much so that they are expected to account for 30% of total consumption by 2020. To win strategically their loyalty, companies need to venture beyond the biggest cities. Indeed, the fastest growth will take place in small cities, namely tier 4 or below. Three great forces that are changing the chinese market.
- 2. A new generation of consumers. Tomorrow the main consumers will belong to the “young generation”, that is how Chinese identify youngsters born from the late ’80s on. They already are lavisher spenders than their parents, feel like they need more things, are more brand conscious and informed. To attract them it is key building a strong presence on the most important communication channels.
- 3. The emerging of a “she economy”. Women living in cities are more educated than ever before and often more than their male counterparts. They are also increasingly important for the economy as their labor participation augments and their purchasing power. They are the driving force of China’s cross-border online shopping market and consume in general much more than men. Companies should approach them in a smart way: not only by displaying women-oriented products, but also deep comprehension and appreciation of who they are. 2016 Consumer Trends in China.