# 39; Chinese History, Culture & Innovation # 39;
Older consumers can assess the price on quality, but the younger generations are increasingly willing to pay a premium for high-end products by Yujun Qiu Since China began its reform and opening policy 1978 its economy has developed rapidly, and most major retailers and international manufacturers have entered the Chinese market, some foreign companies are reluctant to enter the market, however, because they do not understand Chinese consumers and their habits purchase Despite the rapid economic growth of the country, China's regions have developed at different rates, and consumer trends vary considerably across different groups and regions Understand the preferences and attitudes of consumer groups is the key to successfully growing a retail business in China.
Over the past three decades, Chinese consumers buying habits have changed dramatically as revenue increased and new products and concepts have entered the Chinese market consumption habits continue to evolve today and review consumers generations can reveal some shopping Planet Retail trends found that the older generation usually maintains the habits of traditional spending oscillate middle-aged Chinese tradition and new trends, and the younger generation is becoming more westernized and conscious the quality.
In general, Chinese consumers develop shopping habits in their youth and keep those habits in adulthood While increased wealth can change certain preferences, such as beverage and snack food preferences, most habits Chinese consumers are identified by their objective living conditions and limited income The current population of Chinese consumers can be divided into several groups with distinctive characteristics.
Born before 1960, most of these Chinese consumers have grown up in difficult political and economic times, has not received systematic education, and worked in state enterprises The difficult environment in early life made these frugal people and sensitive to changes in prices of consumer goods.
This group experienced similar difficulties to frugal retirees consumers, but the retired wealthy individuals mainly worked in public enterprises and government funded that provided higher wages and better pensions Although many of these consumers are frugal they are less sensitive to price and quality often worth more than the cost.
Over the next 5-10 years, the spending habits of Chinese consumers who are over 50 will change slightly These consumers will increase spending on food as the government increases pensions based on inflation Although they consume health products and entertainment, their children will probably buy these products for them.
These consumers, who grew up during the Cultural Revolution 1966-1976 and early stage of the reform period, swinging between tradition and new trends They work in various companies owned by the state, private and low-income and foreign capital win these consumers usually save much of their income to take care of their children and parents.
These consumers share the same origin as the forties frugal, but they work for the government or large public companies and have slightly higher incomes Although they are raising children and caring for their parents, they are willing to pay bonuses for quality products the next decade, consumers in their forties will have responsibilities and spending less childcare These consumers increase spending and entertainment, grocery, travel, and high quality and health products .
Many consumers in this group are well educated and have grown up in a more open environment than their parents compared to older generations, the Chinese in their thirties save less, spend more on entertainment, and often shop online They continue also the value and quality rather than low prices These people become the largest consumers in the next decade, the purchase of their parents, children and themselves.
Consumers of the first generation of the child policy have buying habits in front of their parents These consumers save and barely spend most of their income on entertainment, advanced electronics, and other products in fashion often they shop online and are looking for products that help distinguish their personalities they can also be impulse buyers as consumers in their early twenties and start new families, their purchasing habits can become a bit more conservative, but they will continue to promote high quality and practical products and spend more on groceries than previous generations.
The new generation of consumers under 20 is the most westernized and open to new products these consumers continue individualism and often use the Internet to track global trends Although most of this group do not earn income, they influence significantly decisions parents on food, clothing, electronics and other social media purchasing is an effective marketing tool to reach this consumer group see the CBR, January-March 2011, social media in China the same but different.
Former migrant workers are generally 25-45 years rural residents who moved to the cities for jobs in the 1990s from They can be even more frugal than older consumers, purchasing the necessities and save money to send money to their families in rural areas many migrant workers should see a strong increase in revenues and move their families to the cities in the future, they will greatly increase spending on groceries once they receive household registration in the city, or hukou, status and fully integrate in the levels of consumption of migrant workers to urban life is unlikely to match that of their urban counterparts, however.
There are more than 1 million Chinese with assets of more than 1 5 million, and the number is increasing rapidly wealthy consumers generally 20-60 years old are quite concentrated in large urban areas, with Beijing, Guangdong and Shanghai housing close half of that group these individuals are successful entrepreneurs, executives and business owners they pursuing the best products available, especially imports, and are perfect candidates for the commercialization of new products premium supermarkets already established in China to provide high quality products to affluent consumers see Choosing the right retail format.
As incomes rise and the younger generation becomes the main body of consumers, the Chinese gradually spend to buy only necessities to major comfortable, high quality lifestyles Planet Retail expects the following categories of consumer products to rapidly develop in the next 5-10 years.
The younger generation of parents is more willing than older generations to pay for toys New parents tend to buy Western brands for their children because they perceive these toys to be safer than the Chinese.
The younger generation spends a lot less cooking time than their parents and up to cooked restaurants and dishes, such as meals, microwave and instant noodles Many Chinese do not consider the food appetizing western comfort, but it is generally easier to prepare than Chinese dishes Many local companies are looking how to make Chinese food more convenient.
Many Chinese consumers own animals for most cats and dogs, but few spend money on pet products, such as food and toys, they make up these items at home The new generation, however, is richer and less time to do-it-yourself products such as this generation ages, the consumption of animal products will increase.
The consumption of personal care products in China is still low, but this market has great growth potential, for example, most Chinese men do not wear cologne and shampoo buy Chinese without conditioner With rising incomes, more Chinese consumers can not afford personal care products essential especially cosmetics and personal care products for men.
Wine and whiskey broke the traditional alcohol preference in China, as the younger generation seeks alternatives to traditional high spirits, such as baijiu see opportunities in the market consumers alcoholic beverages of China rich often display their status drinking high-end wine while low-income consumers drink the local beer Although traditional alcoholic beverages still dominate the Chinese market in most major cities, and their young consumers rich contribute to a rapid increase in sales of wine and whiskey.
The younger generation will more than their parents on snacks for themselves and their traditional children Chinese snacks such as roasted sunflower seeds and sweet dried potatoes, are usually made by small local factories but recent food crises and product safety have led some Chinese consumers see food products manufactured by factories like the market or impure hazardous Western snacks such as chocolate products and chips, broaden young consumers fancy these snacks more than the traditional Chinese view chocolate fortunes.
Although food and health products, Chinese consumers in general are still expensive pay more attention than ever to their older health and low-income Chinese consumers are turning to natural solutions and herbal medicine Chinese herbal while younger and more affluent consumers often turn to Western products, which are usually pre-established.
Older generations have brought their babies with self-supplied products such as cotton diapers and baby food home, but the younger generations rely on disposable diapers and baby food canned new parents and grandparents hoping to buy the best products for their children, especially taking into account recent food safety concerns, for example, after the incident of melamine contaminated milk Sanlu Group in 2008, most of the parents surveyed said they are more local confidence infant and buy imported brands brands if they can pay also many new parents will turn to Western products baby because the variety of Chinese baby traditional products is limited many young parents buy already of baby products online US and European producers ens.
personal car ownership in China is still low, but rising rapidly Many Chinese consumers can not afford expensive cars, but they spend money on products such as cushions, gadgets and tinted films on windows to improve their appearance cars also short car trips are gaining popularity as many Chinese drive out of town on weekends for picnics, hiking and other recreational activities accordingly, the consumer products, such as silverware and dishes for single use will also increase.
Over the next 5-10 years, China's elderly population will reach 250 million, almost the entire population of the United States see the CBR, April-June 2011, perhaps China's aging rising China Although these revenues older consumers will not increase significantly, their children take care of them and to buy food and care of health products to the elderly.
Due to the strong consumer demand for low prices, many retailers stock products cheap China and have little space for the mid-range or high-end items Although retailers have tried to bridge the gap with private labels, few have done successfully consumers are concerned about the safety of cheap goods and are willing to pay more for safe food, but many buyers think private labels and other products midrange, they tried not worth the premium price, according to a 2009 China Chain store and Franchise Association survey retailers must use effective marketing, price accuracy and consistent quality to build trust between consumers and sell products more price higher.
Foreign companies must understand certain factors in successfully selling to Chinese consumers.
Some habits can change wine offers the best example of the evolution of Chinese consumer habits minds once dominated the Chinese market in alcohol, but wine consumption has skyrocketed in the last decade Many consumers Chinese now prefer wine because it is less powerful than the mind, less bitter beer and promoted as a healthy drink in hand, some companies have had to adapt their products to better meet Chinese tastes for example, McDonald's Corp. is trying to promote its beef burgers when it entered China in 1990. After realizing that chicken and pork are more popular in China, the company adapted to consumers immutable habits and started a chicken burger menu.
Small cuts are better than nothing, many Chinese consumers, especially older consumers wishing to save as much as possible retailers, particularly hypermarkets, often cut prices of basic goods and articles sensitive to price, such as eggs, pork, local seasonal ingredients and specialty retailers limit the amount of these products can buy consumers at a time to encourage consumers to visit stores more frequently these types of promotions were effective that many Chinese consumers are willing to wait half an hour to record on a particular point.
product safety errors can be devastating food problems and product presentations in the media security can strongly influence Chinese consumers, for example, the media in March revealed that clenbuterol, a drug that accelerates the growth was found in the Shuanghui pork group, a local leader pork months manufacturer, retail sales fell Shuanghui 45 percent, and many consumers surveyed do not buy its products.
imports the Chinese face attach great importance facing a quality associated with dignity, honor and pride and pay more to save face, for example, when buying gifts for important friends and family during the Chinese new Year, consumers usually buy gifts that are of the appropriate value for the receiver and pay particular attention to consumer product packaging that can not afford a better gift will buy the product with finest packaging in their price range in addition, consumers pay more for gifts with fancy packaging, even if the product is of equal quality at a cheaper item.
Chinese consumers generally favor foreign brands security incidents products and supervision of lax government afraid of Chinese consumers away from some domestic consumers often pay a premium for foreign brands to ensure quality, especially for important elements such as infant formula to increase their loss leaders, many Chinese companies registering an office in the US or Europe and brand their products as abroad This has made it harder to discern from domestic consumers foreign brands, and they thus rotate and famous brands instead of foreign companies must devote resources to ensure Chinese consumers know their true origin of products.
The price is a sensitive issue price foreign brand in China can be difficult on the one hand, Chinese buyers believe the higher the price, the better quality or more status If a foreign brand is less than the price of a local, the customers can suspect that he has the other defects, the premium Chinese consumers are willing to pay varies by product category and by consumer groups such as Planet Retail believes that young buyers are willing to pay double for preparations for foreign brand infant or five to seven times more for foreign mineral water bottle, but older consumers are not the most modern retailers in China are implementing a policy of high-low prices to create an image of low prices, hypermarkets and supermarkets prices of frequently purchased goods down to match and compete with rivals while charging a bonus on purchases pulse and other products insensitive to price.
Understanding Government Foreign players found the legislative system and complex policy of China difficult to navigate, especially if they do not have a local partner to achieve the goals of development of the central government, local governments can provide incentives for attract more foreign investment in their region local regulators can deduct taxes, coordination with developers to reduce or eliminate the rent, fees discount offers utilities, accelerate the approval process, or help companies find local suppliers and secured loans in exchange for these measures, local authorities sometimes require foreign retailers to open more stores or establish regional headquarters in the region in general, these negotiations may be more difficult in large cities, where the local government has a greater choice of foreign direct investment options.
The location is key face a unique group of consumers, foreign companies need to focus on locating operations localization is not just about opening an office and use the Chinese package, but it also includes marketing, maintaining patience, and invest in research and development Although the PRC government further requires that foreign retailers to form joint ventures with local companies, many foreign retailers still favor in partnership with local businesses, which have more local knowledge.
Chinese consumers show different business models depending on their wealth, age and location Although many Chinese consumers are demanding cheaper products, a small but significant proportion is willing to pay a premium for higher quality The biggest change behavior of Chinese consumers comes from the younger generation's increasing wealth and lifestyle increasingly westernized over time, the demand for better quality products, especially among the younger generation, will accelerate and present of enormous opportunities for foreign brands.
Before China opened its market to foreign investment, availability of raw materials was limited Great shops, distribution outlets owned and wet markets dominated the retail market International retailers were allowed to enter the market in 1992, but only if they had a controlling interest in a joint venture with a local company Today, China has a wide range of retail formats, hypermarkets and shopping centers on wet markets and online stores Choose format can be critical to business success.
Hypermarkets generate a stable cash flow for retailers and are popular among Chinese consumers, who like to spend time shopping with their families on weekends hypermarkets including a mall with specialty shops and restaurants are especially popular a result, many operators in the channel tend to build large shopping complex with hypermarket as their anchors and invite clothing retailers, restaurants and entertainment operators to create a small shopping center.
Hypermarkets will continue to succeed in China Although Chinese incomes may increase significantly, consumers still opt to buy groceries in supermarkets because of low prices and the shopping experience one-stop continuous urbanization, hypermarkets find new opportunities in the emerging small cities, a growing number of big box chains may emerge.
ordinary supermarkets are quite profitable in China because they face fierce competition from hypermarkets and wet markets Chinese cities are saturated richer with supermarkets, but consumers in smaller cities are often too poor to support a string of profitable supermarkets .
As the number of wealthy consumers is increasing in cities of first and second rank, a demand for better quality lifestyles emerged these rich consumers favor imported products, which are associated with high social status and a lifestyle more quiet Although most Chinese buyers perceive hypermarkets as the place to find bargains, high-end supermarkets, which offer more imported and high quality products are growing in large cities are likely premium supermarkets open near the top-end office buildings and shopping centers in central locations and affluent residential areas Many local retailers such as Beijing Hualian Department store Co Ltd and China Resources Enterprise, Ltd. have already started testing this format sale to detail.
Some big cities like Beijing; Guangzhou, Guangdong; and Shanghai stores are saturated with Planet Retail provides consumers fast-growing second-tier cities will also accept the convenience of low prices soon.
Most chains of local convenience stores operate as small supermarkets with less inventory management units, higher prices, and no modern convenience fresh products are likely to develop in the second-tier cities, but they face a high rents and competition from stores mom and pop local take time before a convenience store chain can grow to scale, build an efficient supply chain and become profitable.
Foreign companies seeking to exploit the convenience of expanding market, for example, FamilyMart Co Ltd of Japan announced its intention to move from Shanghai to other cities of first and second rank, such as Chengdu, Sichuan and Hangzhou, Zhejiang this year objectives of retailers to operate 8,000 stores in China in February 2021, from 600 stores currently.
Hypermarkets and department stores operators have taken advantage of the popularity of their brand to develop shopping centers outright, leasing the remaining space to complementary retailers local and international retailers have announced plans to open more shopping centers first, second and third tier cities such as AEON Co Ltd of Japan has announced plans to run 10-15 malls in China by 2015. the retailer also plans to open points in small towns where there more space in the streets located in the center in general, more shopping centers are likely to open in the suburbs of large cities.
Convenience stores, located in populated areas, are like small supermarkets They sell more groceries as convenience stores, but pay more than hypermarkets typical neighborhood stores include Walmart Stores Inc. Smart Choice plc and Tesco Express Texco these stores have moderate sales but still operate at a loss because of their small scale operations and supply chains ineffective as incomes rise, however, more Chinese buyers should buy products in neighborhood stores for practical reasons hypermarket discount stores.
This format should theoretically be popular with Chinese consumers, but private labels have yet to gain consumer acceptance a prerequisite for the growth of discount stores of this retail channel are not likely to grow in China short term.
About 8 percent of China's population currently online stores and e-commerce market would have totaled $ 263 billion 40 billion in 2009 see the CBR, January-March 2011, Understanding and Tapping into China's Digital Generations stores' online shop are still developing, but, most of their sales come from consumer to consumer platforms such as Taobao online grocery stores face many obstacles, such as poor distribution networks, competition hypermarkets and supermarkets, shopping impersonal experience, poor design of the online store, higher prices and limited options products.
Despite these difficulties, the grocery business online in China can succeed, especially as the population becomes wealthier younger urbanites are willing to pay a fee for delivery because they have less time to store grocery retailers must be willing to make an initial investment to improve the appearance and the range of their products online, to advance their supply chain and shorten delivery times to meet the needs of consumers.
Author Qiu Yujun email protected is a retail analyst at Planet Retail is based in Qingdao, Shandong author.
Understanding Chinese consumers China Business Review, understanding Chinese consumers.
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