18 Jan 2013
China’s baby boom dividends (Executive Summary)
In the last five years, some 16 million babies were born each year in the Chinese mainland. In other words, there are now about 170 million children aged six and under in the mainland, of which 70 million are living in urban areas. According to National Bureau of Statistics figures, on average, children's consumption accounts for 30% of urban household expenditure. Other than big-item expenses such as child care and education, the proportion of parents' spending on what babies and small children eat, wear, use and play every day is also very substantial. In June 2012 HKTDC Research commissioned a survey of 2,443 middle-class consumers in mainland cities. The findings reveal that they spend over Rmb1,600 a month on food, clothing, toys, sanitary care products, daily-use articles and furniture for their babies and small children.
However, on account of frequent negative reports about the safety of baby and children's products in the mainland in recent years, 89% of the respondents to the HKTDC survey admit they are increasingly concerned with the safety and quality of baby and children's products, especially those with children aged three or under. Moreover, as the first generation of people born under the one-child policy become parents themselves and they are more willing to pay more for products of better quality for their little ones, it is believed that baby and children's products will become an important growth area of the mainland consumer market.
Wary or doubtful of the safety and quality of mainland-manufactured baby and children's products, 77% of the respondents indicate their willingness to pay more for products with safety certification. On the other hand, due to increased environmental awareness on the part of mainland consumers, 87% of the respondents say they would buy organic or eco-friendly products for their children as far as possible to minimise the impact of chemicals on their children's body.
The kinds of goods most often bought by the respondents in the past 12 months are food (93.2%), clothing (91.0%), toys (81.7%), sanitary care products (78.6%), daily-use articles (75.2%), and furniture (25.2%). Parents have to buy food regularly because it is a consumable item. Their frequency of buying clothing, shoes and socks is also high because children are growing.
Supermarkets/hypermarkets are the principal marketing channels for the sale of baby and children's products. The reason is that these stores offer extensive range and wide choice of merchandise, and that consumers can also purchase other household items available there. What merits attention is that nearly half of the respondents say they have bought baby and children's products online during the past 12 months. If differentiation is made according to the child's age, more respondents whose kids are aged one or under shop online than respondents whose kids are in other age groups. Since online shopping transcends time and geographical constraints, it is believed that a considerable number of parents do their online shopping during lunch break at work or after their children have gone to bed.
Mainland parents' overall trust of the domestic baby and children's goods industry is only average and many of them are willing to pay higher prices for superior quality and safer products for their children. The survey finds that more than 60% of the respondents have preference for products of Hong Kong and foreign brands. The main reason is that the respondents (68%) are convinced that baby and children's products of Hong Kong and foreign brands offer wider and better varieties, features and styles. As many as 65% of them are wary of the quality of mainland brands/products and prefer buying Hong Kong and foreign brands/products. For respondents with children aged one or under, in particular, the proportion of those who favour Hong Kong and foreign brands/products is even higher at 71%.
Compared to products made in the mainland by domestic manufacturers, the respondents are willing to pay up to 16.2% in price premium for comparable products made by foreign firms overseas. For comparable products made in Hong Kong by Hong Kong companies, they are willing to pay a price premium of 13.5%. Nevertheless, the price premiums for products of foreign and Hong Kong companies manufactured in the mainland are only 10.8% and 10.3% respectively. Respondents from different cities are willing to pay quite different price premiums, but such price premiums do not vary significantly with the age of their children.
The respondents' overall perception and evaluation of Hong Kong's baby and children's products are positive. In the survey, 58.9% of the respondents say that Hong Kong products are superior in quality. Among them respondents from Shanghai (80.0%) and Wuhan (76.0%) agree with this most. Though under general circumstances prices of Hong Kong products/brands are higher than those of mainland ones, 39.7% of the respondents agree that Hong Kong products are value-for-money, particularly for respondents in Guangzhou (70.9%) and Wuhan (58.9%).
Although mainland consumers have confidence in the baby and children's products of Hong Kong companies on the whole, it is not at all easy for Hong Kong companies to distinguish themselves from among all the competitors because the mainland baby product market is teeming with brands and products. In addition to product design and quality, they should try to build up a professional image for their brands/products. Third-party or international certification can give consumers greater confidence.
In order to successfully open up new markets, Hong Kong companies should also carry out sales promotions to attract buyers. Overall, the three promotion channels most effective in drawing the attention of the respondents are: TV/radio commercials (60%), exhibitions of baby products (38%) and newspaper/magazine ads (36%). For Hong Kong companies which have just started venturing into the mainland market, participating in exhibitions is undoubtedly less costly than investing in TV commercials and newspaper/magazine ads and is more effective in focusing resources to cities with more business opportunities.