The Chinese Consumer - China - April 2018

The Chinese Consumer - China - April 2018

“Thanks to a more solid performance in China’s economy in 2017, consumer sentiment is starting to move away slightly from the prudence and caution seen in the same time last year. However, consumers are unlikely to change their habit of spending in a smart way. Value for money will continue to be a key consideration when people shop. This has less to do with low prices but is more about not leaving people with the feeling of being ripped off. Just as expensiveness and exclusivity no longer define aspirational brands, fancy but lazy marketing is no longer effective in winning customer favour compared to investing in better products and services.

Consumers are attaching more importance to personal satisfaction at work, and the need to protect their privacy. There is also a rise in national pride, reflected not only by a stronger confidence in and willingness to spend on Chinese brands, but also by calling out for bringing back traditional culture and heritage. These are providing new opportunities for brands to market themselves and engage today’s Chinese consumers.”

– Ruyi Xu, Director of Research


OVERVIEW
What you need to know
Covered in this report
Demographic classification
Figure 1: Definition of low/mid/high MHI groups, by city tier
EXECUTIVE SUMMARY
China today
Spending overview
Figure 2: Consumer expenditure by sector, 2017
Figure 3: CAGR in consumer expenditure, by sector, 2017-22
The consumer
Eating well becomes a spending priority again in tier one to three
Figure 4: Claimed change in consumer spending, by sector, January 2018
Family and health still the centre of people’s lives
Figure 5: Most important things in life, January 2018
More confidence in food safety and pollution, but not in work stress and privacy
Figure 6: Most concerned things, 2013 vs 2018
Being an aspirational brand is no longer about price and exclusivity
Figure 7: Attributes associated with an aspirational brand, January 2018
Short-term gimmicks cannot fulfil the long term job
Figure 8: Attitudes towards different marketing activities, January 2018
Middle class values but not middle class labels
Figure 9: General attitudes towards lifestyles and values, January 2018
What we think
CHINA TODAY
The Economy
2017’s good growth gives a stable outlook for 2018
Figure 10: China’s GDP and growth, 2013-17
CPI shows signs of climbing, but largely driven by Chinese New Year
Figure 11: Consumer Price Index, China January 2015-Febuary 2018
Home price increases eased in 2017
Figure 12: Average price of residential properties and growth rate, China, 2013-17
Employment stimulated by entrepreneurship and innovation
Figure 13: Unemployment rate, China 2013-17
The People
Nearly 1.4 billion population
Figure 14: China population, by urban and rural, 2013-22
2017: declined birth rate, second-birth exceeded first-birth for the first time
Figure 15: New births in China, by first birth and non-first birth, 2013-17
Figure 16: Young parents’ willingness to have a second child, 2016-18
An aging population brings challenges and possibilities
Figure 17: China population structure, by age 2013-22
Over 600 million post-70s, post-80s and post-90s in total
Figure 18: China population of post-1950s to post-2000s in 2017
Income growth drives spending confidence
Figure 19: Annual per capita disposable income and growth, China 2013-17
Expenditure Overview
Total consumer expenditure grew by 11.6% in 2017
Figure 20: Total consumer expenditure in China, 2012-17
Figure 21: Claimed change in consumer spending, averaged across sectors, 2017-18
The big stories have not changed much in 2017
Figure 22: Consumer expenditure by sector, 2017
Eating well becomes more important in tier one to three cities
Figure 23: Claimed change in consumer spending, by sector, January 2018
The five-year outlook
Figure 24: Total consumer expenditure in China, 2012-22
Winners in the next five years: going out and about
Figure 25: CAGR in consumer expenditure, by sector, 2017-22
In-home Food
What we think
A better treat to the stomach and palate
Figure 26: Consumer expenditure in in-home food, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 27: Best- and worst-case forecast for consumer expenditure in in-home food, at current prices, 2012-22
Key consumer findings
A significant increase of people spending more in the past year
Figure 28: Claimed spending changes in in-home food, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Food Service (Eating Out and Takeaway)
What we think
Busier and fun-seeking lifestyle drive expenditure on foodservice
Figure 29: Consumer expenditure in foodservice, 2012-17
Who’s winning?
Specialty restaurants with a focused menu
Light meals and salads
Who’s struggling?
Coffee houses
The five-year outlook
Figure 30: Best- and worst-case forecast for consumer expenditure in foodservice, at current prices, 2012-22
Key consumer findings
People are spending more on eating out, especially young consumers
Figure 31: Claimed spending changes in eating out, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Restaurant as ‘the third place’
Consumers are getting explorative with cuisine types
Organic claim resonates with consumers best
Non-alcoholic Drinks
What we think
Desire for natural hydration and light indulgence drives upgrading
Figure 32: Consumer expenditure in non-alcoholic drinks, 2012-17
Who’s wining?
Who’s struggling?
The five-year outlook
Figure 33: Best- and worst-case forecast for consumer expenditure in non-alcoholic drinks, at current prices, 2012-22
Key consumer findings
More consumers tend to maintain current spending level
Figure 34: Claimed spending changes in non-alcoholic drinks, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Alcoholic Drinks – In Home and Out of Home
What we think
Trading up from quantity to quality
Figure 35: Consumer expenditure in alcoholic drinks (out of home), 2012-17
Figure 36: Consumer expenditure in alcoholic drinks (in home), 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 37: Best- and worst-case forecast for consumer expenditure in alcoholic drinks (out of home), at current prices, 2012-22
Figure 38: Best- and worst-case forecast for consumer expenditure in alcoholic drinks (in home), at current prices, 2012-22
Key consumer findings
Signs that consumers starting to find the right balance
Figure 39: Claimed spending changes in alcoholic drinks, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Beauty and Personal Care
What we think
Continuous steady growth driven by elaborative care
Figure 40: Consumer expenditure in beauty and personal care, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 41: Best- and worst-case forecast for consumer expenditure in beauty and personal care, at current prices, 2012-22
Key consumer findings
Demands energise more spending
Figure 42: Claimed spending changes in beauty products and toiletries, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
OTC and Pharmaceuticals
What we think
Convenience and standardization maintain steady growth
Figure 43: Consumer expenditure in OTC and pharmaceuticals, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 44: Best- and worst-case forecast for consumer expenditure in OTC and pharmaceuticals, at current prices, 2012-22
Key consumer findings
Fear of illness drives consumers to spend money beforehand for prevention
Figure 45: Claimed spending changes in healthcare and pharmaceutical products, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Clothing and Accessories
What we think
The fashion industry shifts from imitation to innovation
Figure 46: Consumer expenditure in clothing and accessories, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 47: Best- and worst-case forecast for consumer expenditure in clothing and accessories, at current prices, 2012-22
Key consumer findings
Increasing enthusiasm for fashion consumption
Figure 48: Claimed spending changes in clothing and accessories, 2016-18
Who are spending more?
Figure 49: Claimed spending changes in clothing and accessories, by gender, 2017-18
Analyst’s pick of 2017 insights
Technology and Communication
What we think
Spending on smartphones and mobile internet contribute to steady growth
Figure 50: Consumer expenditure in technology and communication, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 51: Best- and worst-case forecast for consumer expenditure in technology and communication, at current prices, 2012-22
Key consumer findings
Intention on spending maintains
Figure 52: Claimed spending changes in technology and communications, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Household Care
What we think
Household care saw a slight pick-up in growth
Figure 53: Consumer expenditure in household care, 2012-17
Who’s winning?
Facial tissue replaced toilet paper as the biggest segment of household paper
Household care brands take on a lifestyle-oriented image
Who’s struggling?
Fabric softeners failed to become a laundry room essential
The five-year outlook
Figure 54: Best- and worst-case forecast for consumer expenditure in household care, at current prices, 2012-22
Key consumer findings
Household care being an unwavering category
Figure 55: Claimed spending changes in household care, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Practical and function-driven Chinese household care shoppers
Positive attitudes towards housework
Anti-bacterial sought after across different household care categories
Home
What we think
Sluggish housing market dragged down growth in 2017
Figure 56: Consumer expenditure in home, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 57: Best- and worst-case forecast for consumer expenditure in home, at current prices, 2012-22
Key consumer findings
Not a high priority sector but will keep current growth momentum
Figure 58: Claimed spending changes in-home, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Transportation
What we think
Transport is still one of the fastest growing sectors
Figure 59: Consumer expenditure in transport, 2012-17
On the edge of revolution
Who’s winning?
Who’s struggling?
Figure 60: Best- and worst-case forecast for transport expenditure, at current prices, 2012-22
Key consumer findings
41% of surveyed consumers plan to spend more
Figure 61: Claimed spending changes in transport, 2018
Driven by young people living in tier two and three cities
Analyst’s pick of 2017 insights
Leisure and Entertainment
What we think
Growth driven by rising pressure at work and serious pursuit of fun
Figure 62: Consumer expenditure in leisure and entertainment, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 63: Best- and worst-case forecast for consumer expenditure in leisure and entertainment, at current prices, 2012-22
Key consumer findings
Leisure spending intentions get stronger
Figure 64: Claimed spending changes in leisure and entertainment, 2016-18
Who are spending more?
Analyst’s pick of 2017 insights
Holidays
What we think
Strong growth maintains
Figure 65: Consumer expenditure in holidays, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 66: Best- and worst-case forecast for consumer expenditure in holidays, at current prices, 2012-22
Key consumer findings
Maintain a high level of willingness of spending
Figure 67: Claimed spending changes in holidays, 2016-18
Who is spending more?
Analyst’s pick of 2017 insights
Personal Finance and Housing
What we think
A slight decrease in growth rate
Figure 68: Consumer expenditure in personal finance and housing, 2012-17
A long term expanding market
Who’s winning?
Who’s struggling?
Figure 69: Best- and worst-case forecast for personal finance and housing expenditure, at current prices, 2012-22
Key consumer findings
Analyst’s pick of 2017 insights
Miscellaneous
What we think
High growth driven by education and medical services
Figure 70: Consumer expenditure in miscellaneous, 2012-17
Who’s winning?
Who’s struggling?
The five-year outlook
Figure 71: Best- and worst-case forecast for consumer expenditure in miscellaneous, at current prices, 2012-22
Analyst’s pick of 2017 insights
THE CONSUMER
What You Need to Know
Family and health remain life priorities
Luxury and exclusivity are no longer definitions of as aspirational brand
Smart services and customised solutions are best at winning consumer hearts
The Western-originated Middle class label does not work in China
Priorities in Life
Family and health are still by far the most important
Figure 72: Most important things in life, January 2018
The growing importance of personal feelings: making money but also doing a job one enjoys
Figure 73: % of mentions what’s most important, money and career-related, 2013 vs 2018
Figure 74: Selected mentions of most important things in life, by generation, January 2018
Concerns in Life
Health threats remain the biggest worries…
…but there is more confidence in dealing with food safety and pollution
Figure 75: Most concerning things, 2013 vs 2018
Concern over privacy doubled in five years’ time
One in ten feel disheartened by the loss of Chinese culture
Figure 76: Most concerned things, January 2018
Figure 77: Pechoin’s cushion BB cream in collaboration with the Palace Museum, China, 2017
What Makes a Brand Aspirational
Being luxurious and difficult to buy are the least important
Figure 78: Attributes associated with an aspirational brand, January 2018
Value for money is important, but not enough
Staying true to the brand is the best strategy
Big differences by age generations
Figure 79: Selected attributes associated with an aspirational brand, by age generation, January 2018
Attitudes towards Marketing Activities
Short-term buzz generators cannot do the long term job
Smart services and customised solutions are most wanted
Though not new, lifestyle-positioning is still winning favour
Figure 80: Attitudes towards different marketing activities, January 2018
Post-80s and post-90s defy some assumptions
Figure 81: Attitudes towards selected marketing activities, % mention on have favourable attitudes towards the brand, by age generation, January 2018
Men and women attracted by different types of spokespersons
Figure 82: Attitudes towards selected marketing activities, % mention on have favourable attitudes towards the brand, by age and gender, January 2018
Lifestyles and Values
Two thirds of consumers say they are happy with life now
Figure 83: General attitudes towards lifestyles and values, January 2018
Figure 84: Selected most concerned things, by consumer segment, January 2018
Middle class label does not help brands connect with their audience
Figure 85: General attitudes towards lifestyles and values, % of any agree, by consumer segment, January 2018
Post-80s want to show off their lifestyle the most
Figure 86: General attitudes towards lifestyles and values, % of any agree, by age generation, January 2018
Meet the Mintropolitans
Who are they now?
Figure 87: Definitions of Mintropolitans by Mintel, 2015-18
Figure 88: Incidence of Mintropolitans by city, January 2018
Where do they spend more?
Figure 89: Gap in sectors that have spent more in the last 12 months between MinTs and Non-MinTs (as benchmark), January 2018
Priorities and concerns
Figure 90: Gap in life priorities and most concerned things between MinTs and Non-MinTs (as benchmark), January 2018
What’s aspirational and how to connect them?
About half of MinTs want to let others know about their lifestyle
Figure 91: Gap in attributes that make a brand aspirational between MinTs and Non-MinTs (as benchmark), January 2018
Figure 92: Agreement on ‘I like letting others know what brands I am using’, by consumer classification, January 2018
Less showy MinTs are more resentful towards impetuous marketing activities
Figure 93: Attitudes towards selected marketing activities, by consumer segment, January 2018
APPENDIX
Consumer Expenditure Forecast
Figure 94: Consumer expenditure by sector, 2017-22
Methodology and Abbreviations
Methodology
Fan chart forecast
Abbreviations
RESEARCH METHODOLOGY
China Research Methodology
Confidence levels
Sample sizes by city
Sampling methodology and sampling structure
Our research partner - KuRunData
KuRunData's sampling and quality control
Further Analysis
Appendix
Statistical Forecasting

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