Since opening up to foreign trade and investment and implementing free-market reforms in 1979, China has become one of the world’s fastest-growing economies.
Many of its people have risen out of poverty as a result and Oxford Economics predicts that by 2040 China will contribute 44% of global consumer spending – more than three times the expected contribution of the U.S. With its huge population and more internet users than other countries, it’s no surprise that it is a huge consumer market.
One of the most significant changes in the Chinese consumer economy has been the growth of e-commerce. Average consumers are spending more online and are likely to continue to do so. In 2010 online transactions made up an insignificant amount of total private consumption but since then, they have exploded.
The share of sales on ecommerce marketplaces, like Tmall, has risen sharply as more and more consumers shop online for premium-priced, distinctive products. Tmall activation of a brand is made simple for companies who leverage the insights and experience of the right Tmall partner. WPIC technology and marketing agency has experience in launching companies successfully on China’s leading cross-border ecommerce portal.
An emerging middle class
A significant factor affecting the consumer market in China is demographic trends. Over the past few decades, there has been the growth of an emerging middle class. The number of upper-middle-class and affluent households has more than doubled and consumption is growing significantly in these households.
What these consumers have in common is that they like to shop online. Luxury brands are sought after when purchasing jewelry, cosmetics, apparel or footwear. Chinese consumers are price-sensitive, of course, yet they are also concerned about other attributes of a product or service and will often pay a premium price. As homeownership in China has grown significantly, there is a strong demand for home-related products.
Young consumers who spend more
Young consumers are experiencing the most income growth and are the most important target for global companies interested in China. Consumers of 35 and younger are often college graduates who have traveled to other countries and have more sophisticated tastes than their parents.
They spend more freely, are brand conscious and use social media to express their product preferences and write reviews. Clothing and digital goods are popular purchases and they seek out luxury goods that reflect their personal style, often being highly influenced by European fashion brands.
A shift in spending patterns
Increasing household incomes and better living standards have resulted in more spending on discretionary goods and services than on basic necessities. With a drop in spending on basics like food comes increased spending on healthcare, recreation, transportation, education and communications. There is a big demand for household appliances, cars, and luxury goods.
The rapidly aging population and an increasing number of chronic diseases have put some strain on the healthcare system, and wealthier consumers are purchasing private sector alternatives. Chinese consumers are also rapidly embracing new technologies.
Favorable government regulations
The industrial model has dominated the Chinese economy for a decade and political leadership has set itself the aim of rebalancing the economic mix and boosting the consumption share of the economy because a reliance on exports has left China exposed.
The government has poured money into developing infrastructure and establishing e-commerce zones in cities where foreign companies can store their goods for quick shipping. Investors can earn good returns and China doesn’t collect sales tax on cross-border e-commerce. The development of modern store formats, channels and distribution networks is expanding the availability and improving the quality of products for all consumers in China.