Renowned companies have recently released their insights on the 2023 consumption trends, serving as valuable guides for businesses preparing strategies for 2024. This article provides a concise summary of Chinese consumption trends from different companies to help brands and retailers navigate China’s vast and lucrative market in 2024.
Consumer spending is still rising in China
NielsenIQ (NIQ) highlights a clear global economic rebound with obvious fluctuations and comprehensive recovery following China’s post-covid reopening. Noteworthy is the projection that Asia Pacific's consumer spending will surge by 4.0% year-over-year (YoY), surpassing the global average of 2.2%. Key players in this growth include China, India, and Japan, which have consistently led as the largest consumer markets since 2019. Looking ahead to 2024, significant upswings in real consumer spending are anticipated in Thailand (6.3%), Malaysia (6.1%), India, and Vietnam (both at 5.6%), marking them as pivotal countries with some of the world's most robust expected expansion rates.
China's economic landscape is gradually shifting towards greater reliance on consumption. Anticipated retail expansion, covering both goods and services, will increase by 5% this year, with similar expectations in the foreseeable future. This shift in dynamics indicates an additional 10 trillion yuan ($1.5 trillion US) in retail sales over the next five years. To put this growth into perspective, China is poised to emerge as the largest market globally.
Diverse consumer landscape in China
According to the "2020 China Consumer Market Development Report" from the Chinese Research Institute of the Ministry of Commerce, the population born in the 1990s and 2000s has reached 340 million, accounting for nearly a quarter of the total population. These two age groups have emerged as a formidable driving force behind consumption, exhibiting a distinct preference for online shopping. Growing up in a deeply digitized and globalized environment, they are heavily influenced by a myriad of information, prioritizing emotional well-being, aesthetics, intellectual enjoyment, and spiritual fulfilment more than their predecessors.
Beyond age categories, NIQ classifies the audience based on discretionary income into three groups: cutting-spending (5%), price-sensitive (43%), and quality-preferred (52%). The cutting-spending group focuses on necessities, seeking low-cost products, while the price-sensitive group compares prices across platforms, emphasizing cost efficiency. By contrast, the quality-preferred group prioritizes product quality and personal demands over prices. To effectively target these diverse audiences, companies are advised to strategically position their brands and products.
Consumer behaviour shift
After years of lockdown, economic uncertainty, and lifestyle changes, consumer behavior has undergone a significant shift.
(1) Increased Emphasis on Rational and Scientific Consumption
In response to global events, consumer caution has surged, with over 77% expressing heightened concerns about spending, as reported by NIQ. Remarkably, 39% of these individuals remain unaffected by the pandemic. A noteworthy trend is the shift towards smart spending rather than mere savings. iResearch reveals that 73.3% of consumers now carefully assess the necessity of a product, 62.1% consider its suitability, and 44.4% evaluate its potential financial burden. This signifies a move towards rational consumption, where individuals prioritize needs over trends.
For instance, the rise of "Value Hackers" indicates a growing group of consumers leveraging new financial and lifestyle strategies to maximize income and minimize costs. Additionally, the influence of "deinfluencers," social media figures advising followers on brands and products to avoid, reflects a conscious effort to reduce unnecessary expenditure. This transformation in consumer mindset reflects a broader shift towards mindful and intentional consumption, driven by a desire for financial prudence and value maximization.
(2) Shift in Factors Influencing Purchase Decisions
As consumers embrace a more rational approach, the factors influencing their purchasing decisions extend beyond mere price considerations. According to NIQ, there's a noticeable shift as consumers increasingly prioritize both price and quality. For instance, the price-sensitive group directs spending towards products that offer a compelling balance of value and the assurance of maintaining a comfortable quality of life.
Moreover, individuals are placing a heightened emphasis on the emotional value associated with products or brands, a sentiment influenced by the prolonged lockdown and mental health challenges. A significant 65.3% of consumers express a willingness to invest in small indulgences that bring them joy and happiness. Brands aiming to evoke emotional value are advised to focus on elements like healing power, storytelling, and brand images and values, as highlighted in insights from Digital 100.
(3) People expect a balance between AI and humans
AI is reshaping global consumption patterns and lifestyles, a trend not confined to China alone. According to Boston Consulting Group (BCG), generative AI (GenAI) offers personalized VIC (Very Important Customer)treatments that now reach over 90% of aspirational luxury consumers, effectively overcoming the historical trade-off between reach and richness. Furthermore, AI's potential extends to marketing and product design within the luxury sector.
Despite the transformative impact of AI on consumption and lifestyles, there is a growing consensus that a balance between technology and human interaction is essential. Mintel's findings reveal that over 48% of German consumers anticipate a positive impact on productivity through technology, while 47% of their British counterparts express concerns about increased communication with AI, particularly in customer service and emergency responses, at the expense of human interaction.
However, some consumers may be tired of advanced technology and they may feel nostalgic. In response, brands are urged not only to invest in AI but also to guide consumers towards more holistic experiences. This involves emphasizing elements beyond efficiency, such as happiness, face-to-face connection, and empathy, to foster and maintain strong customer relationships.
(4) Consumers increasingly prioritize green and sustainable products
After the pandemic and amid increased global warming, consumers’ awareness of green products and sustainable development has increased. According to Digital 100, 33% more consumers pay more attention to protecting the environment. Additionally, iResearch reports that 42.3% of consumers now possess a strong environmental protection awareness, influencing their purchasing decisions towards consistently usable products. Furthermore, a significant 79% of customers express a willingness to embrace second-hand commodities, with digital products, household appliances, and books and audio ranking as the top three categories acceptable for such purchases.
Other valuable insights
(1) Euromonitor: Single-person households will continue to grow.
The increase in single-person households has typically been attributed to delayed marriage, postponed childbirth, ageing, and higher divorce rates. However, amid economic uncertainty, concerns about living expenses, personal finance, health, and well-being have become additional factors contributing to the hesitation of many individuals in committing to stable relationships, cohabitation, and parenthood.
In response to this trend, businesses across various sectors need to adjust their products and services to accommodate the needs of smaller and single-person households, particularly in advanced economies where the prevalence of single-person households surpasses the global average.
(2) BCG: Gen X and Gen Y will be the twin engines of consumption.
In recent years, there has been a widespread fascination with youth in the Chinese consumer market. Numerous brands have eagerly targeted Gen Z, carefully studying their needs, preferences, and behavior to seize opportunities for future brand growth. However, considering the population size and per-capita category consumption, Gen X and Gen Y are expected to remain the primary drivers of consumption for a considerable period of time. Despite being less interested than Gen Z in experimenting with new things, Gen X and Gen Y exhibit a robust willingness to consume and upgrade their product quality across various categories. They are more open to paying a premium for an enhanced quality of life.
(3) iResearch: The product evaluation path has been extended.
Before purchasing a product, Chinese consumers use diverse channels to gather information to enrich decision-making materials and enhance decision efficiency. In addition to checking product reviews and details on e-commerce platforms, such as Tmall, JD.com, and Pinduoduo, 38.7% of consumers also explore product-related content on social media and video platforms like Douyin (Chinese TikTok) and Little Red Book. Among them, nearly 95% of consumers visit multiple platforms to gather information about the product. Therefore, developing marketing strategies across different platforms would be necessary. For example, brands collaborate with influencers called key opinion leaders (KOLs) for ‘seeded’ campaigns to increase conversion rates by planting brand content across various digital platforms.
(4) McKinsey: Livestreaming will continue to thrive in Chinese e-commerce.
Livestreaming increased 20% during Double Eleven, while traditional e-commerce slightly declined. Livestreaming accounted for 20% of the total sales, driven by major platforms' substantial investments in traffic support and product subsidies. Notably, over 60% of top Tmall and Taobao livestreaming channels with significant gross merchandise value (GMV) are now operated by brands, showcasing the increasing adoption of livestreaming as a powerful shopping channel. Future trends include a focus on content over discounts and an exploration of ways to integrate physical retail infrastructure into livestreaming experiences.