China’s emerging consumer class is more emotional than previous generations of shoppers and firms must shift their marketing strategies to keep pace with the nation’s new standard setters, consultants at McKinsey said in a new report on Tuesday.
More self-indulgent, individualistic and brand loyal than before, China’s mainstream consumer class will comprise 400 million people with incomes above 106,000 yuan ($16,800) by 2020, polarizing the market as they replace a more modestly monied urban population still focused on buying life’s basics.
That wealthier class of consumers, who are more emotionally driven and brand-conscious than their current mass market counterparts, will make up 51 percent of city-dwellers by 2020, up from 6 percent in 2010, McKinsey researchers predict.
“Marketers will have to move fast to cater to consumers with brands that ‘speak directly’ to their emotional wants,” said the report, which surveyed 10,000 people in 44 cities.
China’s current mass market consumers are defined as having annual household incomes of between 37,000 yuan and 106,000 yuan and make up more than four fifths of the population. But by 2010, they will occupy just 36 percent, McKinsey reckons.
That means the speed, scale and simplicity of products that have been crucial to success for consumer goods firms in China for the last 15-20 years will be supplanted by strategies built around emotions, niches and diverse brand portfolios.
McKinsey research suggests China’s new consumers are more than 50 percent more likely than their current mass market cousins to consider the emotional benefit of products they buy.
These consumers are also more likely to prefer certain brands, be younger than the overall population and live in the big cities dotting China’s east coast.
The report says younger consumers are more likely to emulate spending traits of consumers in developed countries – 41 percent of younger consumers in the new mainstream consumer class are more likely to say they “always pay premiums for the best products”, compared to 31 percent of older consumers.
Chinese consumers, famous for ferreting income into savings and shunning credit card debt, are beginning to pay more attention to foreign and luxury brands.
The share of urban households able to afford cars and little luxury items will rise six-fold by 2020 to about 57 percent of the total, the report said.
Higher income consumers also prefer foreign brands of food, drinks and personal care products in greater numbers.
“The good news for global companies is that the younger and more affluent consumers are, the more likely they are to favor foreign brands,” the report states.
The more affluent shoppers were also more likely to consider information gleaned from social media and the internet to help them make purchasing decisions.
Urban lifestyles and increasingly hectic schedules have taken their toll on Chinese consumers, McKinsey’s survey found. More than a third said they spent more on mobile phones, as well as pre-cooked meals and dining out, compared with a year ago.
Setting up domestic consumption as a driver of growth is a key tenet of the Chinese government’s current five-year plan, as the country looks to reduce its reliance on exports.
A report last year by the Boston Consulting Group predicted China would become the second-largest consumer market in the world, behind the United States, by 2015.
Source: Thomson Reuters