China’s New Conscious Consumer - Part 1
When I first started our Singing Grass Viral Learning series in February 2020 (Covid-19 Has Reshaped The Educational Landscape of China), it was becoming evident that Covid-19 was pushing China’s already tech-savvy population even further online, not only for shopping but also for entertainment and learning. In the absence of direct contact, travel and ease of communication, this Viral Learning series serves an insight into what's happening in China today.
Now, as we look forward, what key consumer trends are emerging in Chinese society in 2021?
Introduction
China’s rapid recovery from the pandemic is astounding, and - with poor levels of growth elsewhere - companies around the world are looking at the Chinese market as a strategic growth opportunity.
The Financial Times recently listed 2020's top 100 companies, explaining why and how they prospered during the pandemic. China outperformed the rest of the world with 36 companies shortlisted. Although technology companies dominate China’s list, there are plenty of other sectors ranging from automotive to healthcare and food and beverage. This diversity is a reflection of the unparalleled rebound in consumer confidence in China.
A closer look showed spending to be heavily influenced by a new characteristic, one I’ve called "conscious consumerism".
These ‘conscious consumers’ have a vastly different view of material goods and shopping due to their everyday, personal experiences. Persistent air pollution and multiple high-profile food scandals have shaken the confidence of consumers in China, and those concerns have been accelerated by the pandemic. Conscious consumers are anxious about product safety, reliability and quality. They seek out sustainable solutions to the challenges of their immediate environment, whether the quality of the air they breathe or the safety of the products they are using. In other words, they focus on issues that directly impact on their lives, compared with ‘conscious consumers’ in the West.
Conscious Consumption
The pandemic was a huge shock in China. Arguably, China has taken it more seriously than any country in the West, with draconian measures to control its spread. These measures have reinforced huge anxieties amongst consumers, in particular, concerns about product safety, as illustrated by the latest McKinsey Chinese consumer survey.
These anxieties are real, but they are not always a barrier to product adoption. Instead, when embraced, conscious consumers can become staunch supporters of businesses. The same McKinsey study found that 82 percent of Chinese consumers said that they recently started using a new brand because of the innovative or compassionate way the brand responded to the Covid-19 crisis.
There are big opportunities for international brands that strike the right balance in messaging. Those that offer premium quality products and - at the same time reassure consumers who may have health and safety concerns - can reap the benefits.
The most buzzworthy example of “the conscious consumer” right now is the upsurge in interest in Electric Cars in China (See our Case Study for China's New Conscious Consumer). Sales growth during the pandemic clearly shows how consumers have been persuaded: a winning combination of luxury and innovative vehicles that are perceived to be safe, and competitive price offers due to the government subsidies and incentives to improve air quality, have created the confidence to purchase.
Conscious Choice
Consumer spending in China has largely recovered from the effects of Covid-19. Consumers have a strong desire to shop, but they are still extremely price sensitive. They want deals and discounts. The number of price promotions increased substantially in the second half of 2020 as companies fought for customers, both to get people back to the stores and to drive online sales. Ultimately, it led to record breaking sales on Singles' Day in November, the world's largest online shopping festival.
Several Chinese companies noted by the Financial Times, such as Pinduoduo, Meituan, and Xiaomi - brands known for their value-for-money proposition - demonstrated this dramatic uplift in sales, doubling or even tripling their previous performance in 2020.
Don’t know them? Here is a brief introduction:
Pinduoduo, the largest interactive e-commerce platform in China, offers everything at a bargain price through its group purchase model. Who can beat an online version of PRIMARK or POUNDLAND where China’s particular type of social commerce can bring down the price of products - just sharing a link on your social media can provide discounts for you and your friends. Pinduoduo's interactive model attracted hundreds of millions of Chinese shoppers who turned to their smartphones rather than malls while looking for ultra-cheap goods.
Meituan, China’s everything-app offers goods and services at a bargain price - from hotel booking offers, to brand shopping discounts and restaurant offers, as well as takeaway food. It integrates customer reviews on restaurants and hotels, an equivalent of 'Four Square/TripAdvisor' functions, with discounts and special offers. The app was hit hard by lockdown in China, but bounced back in the second half of 2020 once the economic recovery was underway. Their success signals just how much consumers wanted to get back to normal everyday life, which is supported by research from McKinsey that reported 80% of Chinese consumers returning to out of home business by the end of 2020. Now boasting 477 million annual users, Meituan doesn't just help consumers organise their daily lives, but offers the best possible prices in doing so.
Xiaomi was originally known for its low-cost smartphone device. Since then, Xiaomi has expanded its product portfolio to everything from smart household electronics to AI speakers, rice cookers and electric scooters. According to the Financial Times, "it has now risen above Apple to take third place in global smartphone market share. Its stock was added to Hong Kong’s Hang Seng index in the summer and it crossed the $100bn market cap mark in December 2020."
As Chinese consumer markets continue to grow, I expect to see factors such as availability, convenience and deal promotion, as well as perceptions of product safety, to play a bigger part in China’s current retail environment.
China's economy expanded by 2.2% in 2020 - making it the only major world economy to grow in what was a pandemic-ravaged year. For those deciding where to go next in their business’s journey - China is still a great growth opportunity, if you understand China’s 'new conscious consumers'.
If you would like to know more, please get in touch with us at info@singinggrass.com.
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Singing Grass is a business consultancy advising on access and development strategies for the Chinese market. We develop bespoke programs for clients in the cultural and lifestyle sectors to connect them to new markets and maximize their potential in China.
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