1 Aug 2013
Survey on China’s middle-class consumers (Executive Summary)
With its high spending power and penchant for consumption, the mainland middle class is the main target of Hong Kong manufacturers and traders eyeing the mainland market. HKTDC Research has carried out several studies on mainland middle-class consumers in the past for the purpose of tracking and understanding their spending patterns to provide points of reference for Hong Kong companies wishing to develop the mainland market. Besides trying to find out the general characteristics of middle-class consumption behaviour, the present survey also explores the impact and the direction of social changes in recent years, including consumer demand for quality improvement, urbanisation and improved transportation, and rapid growth of online shopping, on middle-class consumption and way of life.
The present survey was conducted between December 2012 and January 2013 in eight mainland cities, namely Beijing, Shanghai, Guangzhou, Chengdu, Wuhan, Shenyang, Nanjing and Changzhou, where 1,600 consumers were interviewed by questionnaire and 10 consumer focus groups were held. The major findings are summarised as follows:
The middle class is still as enthusiastic about international brand name products as ever. 81% of respondents have bought international brands in the past year, while 37% have bought luxury products costing more than their monthly personal income. Among the different types of international brand name products purchased in the past year, garments rank first based on mention rates (74%), followed by footwear (57%), electronic products (41%), and handbags/wallets/luggage (40%).
There is an obvious increase in the frequency of buying organic products. In this connection, the proportion of respondents aged 36-45 buying organic products is comparatively higher, and so is the case with married people, while 76% of the respondents agree that "I am willing to pay more for green products".
With the increase in private car ownership and the further development of inter-city transport, the middle class has formed the habit of travelling regularly. During the past year, 39% of the respondents had self-drive travel and 35% have travelled to other cities for holiday by high-speed rail. The frequency is on the rise.
Among the middle class, there is noticeable growth in gatherings with relatives/friends and family activities. In the survey, 74% of the respondents agree that "I now spend more of my free time with family/friends". In addition to entertaining at home and dining out, there are many more weekend excursions to the countryside. In terms of the frequency of consumption of services, "gatherings with friends" and "trying out new restaurants" are trending up.
Consumers are seeking more after branded products, and more people think that "branded products have better quality assurance". People's disdain for fakes is also growing. Among the respondents, 52% agree that "I prefer using well-known branded products even though they are more expensive"; while 54% agree that "I prefer using less well-known branded products to using counterfeited goods".
Among branded products, middle-class consumers have a penchant for imported brands and joint-venture brands. 52% of the respondents agree that "I prefer imported products to domestic products even though the price is higher" while 60% agree that "I prefer joint-venture products to domestic products even though both are produced on the mainland".
Middle-class consumers exhibit a greater desire to try out trendy and novel items and products and are more willing to share experiences with others. 68% of the respondents agree that “I hope to try out or own trendy/novel items and products”; and 73% agree that “I like sharing and discussing with friends the latest fads and my experience of them.”
At the present stage, a significant proportion of the middle-class consumers (57%) still tend to use more "generally recognised famous brands" although some are beginning to turn to niche brands to show their character and inner qualities. The so-called low-key luxury spending is possibly in the making.
The mainland middle class is paying more and more attention to quality (both for products and services) and consumers are increasingly sophisticated. Apart from turning to more expensive international brands, they are also showing more concern for "authenticity", "quality of after-sale service" and factors such as the environment of shopping or service venue. 76% of the respondents agree that "I give first priority to quality"; 60% agree that "I like using products and services which are more specialised, even though it means that I have to pay more"; 68% agree that "professional knowledge of sales staff about the product/service is very important to me in making the buying decision"; and 71% agree that "I pay more attention to a restaurant's comfortable environment than before".
With the completion of high-speed railways and more subway lines in cities, and the increase in car ownership, travelling has become ever more convenient. Over the past year, 80% of the respondents said they have "made excursions to neighbouring cities" while 72% said they sometimes "dine in a suburb restaurant".
37% of the respondents agree that "as transportation becomes more convenient, I go spending money in new commercial districts outside the city centre more now" although the majority of middle-class consumers (67%) still mainly shop at traditional commercial districts. A larger percentage of the younger respondents spend in new commercial districts outside the city centre. The main reason they gave for preferring to visit the new commercial districts is that these places have a better shopping environment and offer a wider range of leisure and entertainment facilities.
In spite of good inter-city transport, only 22% of the respondents said they "shopped specifically in neighbouring cities". Most people only shop in other cities on the way. 67% of the respondents agree that "there is no need for me to go to the key cities for shopping because the city I live in has a good business environment and a rich variety of brands and styles", which shows that the retailing environment and level of some of the second- and third-tier cities are improving.
Although TV is the channel through which most respondents obtain information, "sharing among relatives/friends/colleagues" is the most effective. This makes word-of-mouth an important marketing strategy. Online advertising is the second most effective information channel.
83% of the respondents had experience with online shopping. Among them, 27% said they do it once a month. The mainland middle class is attaching more and more importance to quality, including their choice of online shopping platforms. 68% of the respondents agree that "for similar products, I tend to choose the shopping platforms with better after-sale assurance". Price is not their only consideration.
Social networks have a definite influence on consumption. 58% of the respondents agree that "I would make use of instant-messaging software or social networks to share my good or not-so-good experience in consumption" while 63% agree that "I believe in products recommended by people I follow on Weibo and WeChat and am interested in giving them a try".
Mainland middle-class consumers generally have positive perceptions of Hong Kong, including its reputation as a fashion capital and strict government oversight. 84% of the respondents agree that "Hong Kong is the place of origin of fashion trends and the trendsetter"; while 50% of the respondents say that "my outfits/lifestyle/pastimes are influenced by Hong Kong trends".
The mainland middle class has a penchant for imported brands and joint-venture brands and is showing a stronger disdain for fakes, which is a favourable factor for Hong Kong companies trying to build up their own brand name or introduce suitable foreign brands into the market. They should pay attention to the following points as these should be of help to them in market expansion and sales promotion.
Knowing that middle-class consumers like to express their personality and taste, efforts should be made to underscore the unique characteristics of individual brands to help them understand the stories and concepts behind these brands that are new to them.
Since middle-class consumers enjoy spending their leisure hours with family and friends, there should be ample market opportunities for recreation and specialty food restaurants that are suitable for such gatherings.
While being ready to pay a higher price, the middle-class consumers are also looking for products and services which are more specialised. Thus sales staff should demonstrate their enthusiasm through their professional knowledge of the products or services they sell rather than just persuading customers to buy their products or services.
Although most of the higher-end international brands still operate in traditional commercial districts in city centres, some of the medium-high-end and trendy products as well as products targeting young consumers, such as fast fashion brands, are beginning to open stores in shopping plazas in the new commercial districts. The development of these new commercial districts and urban transportation has a definite influence on the site selection of retail outlets.
Where cost-effectiveness and efficiency are concerned, efforts should be made to make good use of information sharing with relatives/friends/ colleagues to create so-called "inner-circle marketing". How to create word-of-mouth publicity (including making good use of network resources) is quite an important strategy of sales promotion.
Hong Kong companies should make good use of Hong Kong's leading edge in terms of fashion, level of design and higher standard of quality/service management to build up their brand image in the hearts of mainland consumers.