China’s
Consumer
Markets
The Pyramid of China’s Urban Consumer
Market
Changes in Consumer Market
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Rapid economic growth of 9% per year
↑Income/disposable income
 ↑Purchasing Power (From 1997 to2003, per capita
disposable income of urban Chinese increased 64.2%)
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↑Population  Larger market
↓Collectivism  ↑Self-satisfaction
↑Education  ↑Consumption
Change in consumer preference
Change in life style and consumption pattern
Where are the opportunities
in China’s consumer market?
Consumer Spending
Savings and Housing
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Per capita household savings is increased, it rose
123.9% from 4.6 trillion RMB to 10.4 trillion RMB
To maintain a stable living standard when they are
old
Spending on healthcare and for big ticket items such
as housing
Under the rule of WTO, foreign banks has the
opportunity to take the Chinese deposit starting in
2007
These foreign financial institutions will fully
participate in the Chinese financial system
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The government encourages home
ownership
Smaller initial payments for obtaining a home
mortgage is required
Mortgage interest payments is tax deductible
Save less, buy more
Automobiles
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Large reduction in import tariffs on
automobiles following China’s entry into the
WTO.
1998
2003
%change
stock of passenger
cars (per 1000
people)
2.3
5.4
135
new passenger car
registration ('000)
508
2083
310
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Under the WTO, the automotive financing will
be further opened to foreign participation
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Increase the competition for domestic financing
institutions
Reduce down-payment requirements
Expand the market
Apparel and Fashion
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In 2003 Chinese spent roughly US$56 billion
on clothing
Many global brands are undertaking a multichannel approach to the Chinese market
(licensed , franchising )
E.g Gap (US), H&M (Sweden), and Zara
(Spain)
Apparel and Fashion
Tourism and entertainment
Foreign brand
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Highly brand-conscious
Quality is perceived as highly important
Preferences for domestics goods has
dropped from 78% to 67%
Preferences for foreign goods has increased
from 19% to 22%
Foreign brand
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Small stores:purchasing apparel such as
footwear, jewelry, or cosmetics
E.g Louis Vuitton, Bally, Gucci and
Ferragamo.
Large stores : electronics, furniture, and other
home related goods
E.g Carrefour, Metro, Wal-Mart, Auchan, Ikea,
and B&Q
Attitudes to luxury brands
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The majority of them regard owners of
luxury brands as being successful and
having good taste
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Over half of them said they longed to buy
luxury goods, even if they could not
afford them at present
Attitudes to luxury brands
Attitudes to luxury brands
2. How do Chinese consumers
differ in their lifestyles and
consumption patterns?
Lifestyles of Chinese consumers
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Demand for trendy and innovative
products
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Demand for quality of life
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curious to fashion and fresh products
enjoy good quality and luxury goods
Less inclined to save and a strong
propensity to spend
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confidence in their long-term earning potential,
higher qualifications, growing purchasing power
Lifestyles of Chinese consumers
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Like to show off individuality
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Spending according to own interests
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build up own image by different brand name goods
freedom and independence to spend
Buying products through the internet
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convenient and popular channel
Consumption Patterns (Products)
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The need of durables are mostly satisfied in urban
cities
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Desire for life enjoying goods
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Color television, washing machine and refrigerator
Traveling (48%↑), houses (38.5%↑), mobile phones
(35.9%↑), luxury goods (20%↑), automobiles (15%↑),
cosmetics (8%) and laptop computers
Emphasize fashion over function
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MP3 players → iPod
TV games → PS2
Consumption Patterns
(Distribution Channels)
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Department stores became less popular
New purchasing channel:
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Internet
Convenience stores
Hypermarkets, shopping centers and warehousestyle supermarkets
Different approaches of Segmentation
1st Geographic
Coastal (urban &richer) vs. interior region (rural
&poorer)
e.g. Shanghai—1st in「China Development Index」 ,
highest GDP per capita in 2006
Gansu—the lowest level in 「 China Development
Index 」, poorest in China
→ urban vs. rural: 3 times higher in consumption
expenditure
- sub-segments emerge
e.g. Xi’an, Wuhan, Nanjing
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Different approaches of Segmentation
2nd Demographic
: size, density, age, gender, race, occupation, education
etc
China:
- changing age and sexual structure of Chinese
population
e.g. elderly ↑, 7.7% of the people reached 65 in 2005 &
around 12% in 2010
-↑educational level -- > 50% post 80s have secondary
level
-↑female labours -- > Women purchasing power
Different approaches of Segmentation
3th Income
- Working poor—paid more on daily necessities
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like food, domestic brands
Salary class—idealistic, willing to pay for brands
Little rich—brand conscious
Rich (yuppies)—prefer foreign goods &brands
Different approaches of Segmentation
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4rd Behavioral
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Life philosophies: market rejecter, conservative,
pioneer
lifestyle activities: entertainment—reading,
travelling, movie, dinning out etc
Media usage: newspaper, radio, TV, magazine,
internet, mobile phone etc
Consumption attitude: consumption pattern
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China’s Vast Consumers
1st Post 80s Generation
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Generation Y aged 18-24
Love entertainment more than household items
eg. DVD players 7%(1997)52%(2004)
Mobile phones 10%(1999)48%(2004)
eg. Nokia > Motorola
due to emphasis on fashion
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Have more access to media
eg. TV, magazines, the Internet
Use computer > Watch TV
China’s Vast Consumers
2nd Affluent Group
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Coastal Urban regions
High desire for buying with high purchasing power
Love high technological products, especially mobile
phones, pc etc.
Willing to pay higher price for higher quality
Emphasis on Brand name products
China’s Vast Consumers
3rd Women aged 19-30 (in big cities)
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Buy products on image
Care about themselves and love beautifying
themselves
High aspiration and are interested in ownership and
leisure
Do not care about price even if they have low
income
Favor foreign-invested department stores
3/ How to target the different
segments of the market, i.e. the
implications of the marketing
strategies?
Marketing strategies
1st Undifferentiated marketing
 Base on largest numbers of buyer
 Ignore market segment differences
 Target the whole market with one offer
2nd Differentiated marketing
 Target several market segments and design
separate offers for each
 e.g. Gap (clothing)
 3 different retail stores format
 Gap, Gap Banana Republic, Old Navy
Marketing strategies
3rd Concentrated / Niche Marketing
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Focus on a large share of one or a few segments or niches
Used by companies with limited resources – capture more
market share
e.g. Tetra ( fish supplier 80% of the world’s tropical fish food)
4th Micro marketing
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1/ local marketing e.g. CitiBank different services in different
branches
2/ individual e.g. Dell
Focus on product tailoring
Satisfy the needs and wants of specific individual and local
customer group
Marketing strategies
For Generation Y
 Use Concentrated Marketing
 Online > TV advertising
 Product design & packaging
 Suitable celebrities e.g.
蔡依琳
李宇春
F4
周杰倫
Marketing strategies
For Women (aged 19-30 in big cities)
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Use Concentrated Marketing
E.g. Cosmetics & skin cares
Foreign brands
e.g. Max Factors, Shiseido
Fashion – International Brand Name
Marketing strategies
For Affluent Group
 Use Individual Marketing
 High class brand name
 Provide direct experiences
 E.g. Rolls Royce
- Personal selling
satisfy specific needs of
customers
Conclusion
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Nowadays, the disposable income
lifestyle and consumption pattern changed
purchasing power
Business opportunity
If we want to start a business in China
Concentrated on specific segments
We need to realize what China’s Vast
Consumer specific needs and wants