a booming market · giant internet market china’s massive online community—nearly 772mm million...

A Booming Market

• China’s GDP will overtake the U.S. level in 2029

https://www.bloomberg.com/graphics/2016-us-vs-china-economy/ Sources: World Bank for urbanization data for 1960 and after; U.S. Census Bureau for urbanization data before 1960; IMF for remaining data (via Bloomberg).

Upcoming Superpower

https://www.bloomberg.com/graphics/2016-us-vs-china-economy/

Growing Middle Class

According to McKinsey, in 2012 54 percent of China's urban households were considered "mass middle" class, meaning they earned between US$9,000 and US$16,000 per year. But by 2022, thanks to a growing number of higher-paying high-tech and service industry jobs, 54 percent will be classified as "upper middle" class - meaning they earn between US$16,000 and US$34,000 a year.

http://www.businessinsider.com/chinas-middle-class-is-exploding-2016-8

Growing Consumption• Chinese consumption (the amount of stuff people buy) is experiencing a 9%

growth year over year. Overall, the consumer economy is forecasted to grow to US$6.5 trillion by 2020, according to the Boston Consulting Group. It would be like adding a new consumer market of the same size of Germany in five years.

• MGI forecasted that China’s working-age consumers (15–59 year-olds) as one of three groups* that will drive roughly half the increase in global consumption between now and 2030.

http://www.businessinsider.com/chinas-middle-class-is-exploding-2016-8

Economist Intelligent Unit, BCG Research

https://www.mckinsey.com/featured-insights/china/the-ceo-guide-to-chinas-future

*The other two are retirees in the developed world, and 15–59 year-olds in North America.

A Market of Complexity

Regional Gaps• For Beijing and Shanghai, the richest regions in China, the real per capita

household disposable income was around 48,000 CNY, or about four times the level of the lowest income regions.

*Disposable income is a person’s total income less taxes.

Urban vs. Rural• Rapid urbanization and rising inequality are two main characteristics of

China’s development. By the end of 2016, 57% of China’s 1.38 billion population lives in the urban areas, a significant increase since 2000 (36%). However, behind the fast urbanization speed rate is the unbalanced development between urban and rural. In 2016, per capita disposable income of urban households in China was $33,616 CNY, which was 2.7 times of the household income from rural areas.

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Rich v.s. Poor

• According to Goldman Sachs’s research, there are 1.4 million Chinese overpassed annual income $500,000 per person. These wealthiest citizens in China already make up a large part of the global demand for high-end goods. While there are half of the Chinese workers (387 million) are making less than $2,000 a year, and are still struggling to afford basic living essentials such as food and housing.

http://www.goldmansachs.com/our-thinking/macroeconomic-insights/growth-of-china/chinese-consumer/index.html

Modern Consumers

Increasing IndividualismChinese consumers are, on the whole, more individualistic, more willing to pay for nonnecessities and discretionary items, more brand loyal, and more willing to trade up to more expensive purchases.

In a 2016 McKinsey research, travel and leisure products observed significant growing favor among the Chinese consumers compared to five years ago, while healthcare products also trended slightly up.

While their consumption choices have become more individualistic, though, it is important to note that family values continue to be at the top of their priorities

https://www.mckinsey.com/industries/retail/our-insights/chinese-consumers-revisiting-our-predictions


hallmark pragmatism enduresInterestingly, Chinese consumers across all age groups have, in some ways, become even more pragmatic. They’re now even more likely to compare prices across multiple stores, to be more price aware, and to stock up on promotions. That said, they’re now willing to buy more often on impulse



More Brand LoyaltyChinese consumers are now significantly less likely to buy a brand that is not already among their favorites. A McKinsey research effort encompassing 10,000 in-person interviews with people aged 18–56 across 44 cities found that 50 percent now seek the best and most expensive offering.

https://www.mckinsey.com/industries/retail/our-insights/chinese-consumers-revisiting-our-predictionshttps://www.mckinsey.com/featured-insights/china/the-ceo-guide-to-chinas-future

https://www.mckinsey.com/industries/retail/our-insights/here-comes-the-modern-chinese-consumer


E Commerce

Giant Internet Market

China’s massive online community—nearly 772MM million Internet users (as of December 2017). The number of mobile phone users in China has reached an impressive 753 million, larger than the total population of Europe (741 million).

China’s e-commerce market continues to see high double-digit growth year on year. McKinsey estimated that by 2020, online consumer-electronics purchases would jump to 40 percent of overall sales, from about 10 percent in 2011.

https://www.mckinsey.com/industries/retail/our-insights/chinese-consumers-revisiting-our-predictionshttps://www.mckinsey.com/featured-insights/china/the-ceo-guide-to-chinas-future

E Commerce Growth

Nielsen’s 2017 e-commerce tracking data within 34 fast-moving consumer goods categories shows that online sales grew 27% versus the year before, whereas offline sales increased only 6% over the same period.

Meanwhile, the ratio of enterprises with e-commerce services increased significantly. According to Nielsen’s CCI report, up to Dec 2016, the ratio of enterprises launching online sales reached higher than 45%.

https://www.weforum.org/agenda/2018/01/china-ecommerce-what-we-can-learn/

E Commerce Success

This success is being driven by mobile consumer behavior, innovative social commerce models, trusted digital payment systems & innovation in ‘new retail’ through O2O (the increasingly seamless fusion between online & offline experience).

https://www.marketingtochina.com/guide-understanding-e-commerce-market-china/

E-commerce shopping festivalsThe Double 11 event on 11 November 2017 – also known as Singles’ Day, when single people in China celebrate, and which has become a popular shopping holiday – was a clear example of how China’s consumption-led economy is evolving digitally. Online marketplace Alibaba saw sales growth of 39% in comparison with the event in 2016, suggesting that Chinese consumers are confident in their spending and that consumption will continue to rise.


From online platform to media platform

• Features of social media, where people primarily come to interact with one another, make it an ideal place to share and comment on products. As the number of mobile users rises, the importance of social media has increased.

• The high concentration of mobile commerce has accelerated the transition of the e-tail advertising ecosystem from open to closed loop. Thus social media has become a crucial tool for marketing, especially when communicating and engaging with potential consumers.


Digital paymentAlipay and Wechat pay are the most popular online payments in China, and they are already an integral part of e-commerce platforms such as Alibaba and JD.com.


New retail: online and offline are merging rather than competing

• Since the term “new retail” was coined by Jack Ma in 2016, it has been a hot topic for manufacturers and retailers alike. This concept emphasizes the integration of online and offline retail elements, including products, services, logistics, big data, marketing, management and so on.

• Currently in China, online players are taking the initiative to drive this integration. As the largest e-commerce platform in China, Alibaba recently invested $2.9 billion in China’s biggest offline retail group, Sun Art.

• The Online to Offline (O2O) business model is transforming the retail industry, and bringing both challenges and opportunities to the market.


THE ‘SILVER ECONOMY’

• E-commerce In China is no longer just for young, tech Savy millennials as the older generation are catered for with rising of the “silver economy.” The number of people over 60 years old is expected to exceed a whopping 255 million by 2020 (data from statistica).

https://www.marketingtochina.com/guide-understanding-e-commerce-market-china/

a booming market · giant internet market china’s massive online community—nearly 772mm million...

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