China’s consumption market in solid expansion with emerging trends
Even as the COVID-19 pandemic wreaks havoc across the globe, China’s consumption market, the second largest in the world by 2020, continued its vibrant expansion this year with more new trends.
Official data shows that China’s total retail sales of consumer goods rose 13.7 percent year on year to 39.96 trillion yuan (about 6.25 trillion U.S. dollars) in the first 11 months of 2021. The country is expected to be the world’s largest goods consumption market during the 14th Five-Year Plan period (2021-2025).
On the solid path to top the world, the Chinese consumption market is witnessing new opportunities created by emerging trends related to product upgrade, new selling channels and the detailed division of consumer groups.
Life service consumption
The significant raising of Chinese consumers’ living standards has been accompanied by the emergence of development-oriented consumption in place of the necessity-based pattern. As a result, life services have quickly made their way into people’s shopping bags.
During this year’s Singles’ Day shopping spree, the consumption of vaccine and oral health services increased by 20 times and 12 times, respectively, data from e-commerce giant JD.com shows. New services such as pet health management and home organizing were also welcomed by consumers.
From tourism to professional training, from handicrafts and baking classes to car maintenance, China’s service consumption continues to expand its territory both online and offline.
Service consumption accounts for over 45 percent of China’s consumption, said Chi Fulin, head of the Hainan-based China Institute for Reform and Development, expecting the country to become the world’s largest new market for service consumption.
China’s online retail sales market had been the world’s largest for eight consecutive years by 2020. As the contactless economy boomed due to the COVID-19 pandemic, the country’s advantage in e-commerce was further consolidated, with online services such as remote education and healthcare easier to access and new channels of selling becoming more significant.
As a typical example of innovation in sales, livestreaming e-commerce, which enables sellers to showcase their goods more authentically and thoroughly, had attracted 617 million users by May 2021.
The size of the market is expected to near 2 trillion yuan this year, according to a report from a Ministry of Commerce research institute. It is expected to top 4.9 trillion yuan by 2023, data from Market research company iResearch shows.
In the traditional market of goods sales, enterprises are racing to win customers with products of higher quality, at a lower cost and with more added value, with “guochao,” or domestic brands and products, as a good example.
The zeal of Chinese consumers has been extended from products by time-honored brands to domestic brands in various fields, including mobile phones, automobiles and cosmetics, supported by technological innovations and a mounting sense of identity with the Chinese culture.
Industry data shows that the popularity of “guochao” surged 528 percent in the past decade, while the consumption of domestic goods soared 32.6 percent year on year in the first four months of 2021. During this year’s Singles’ Day shopping carnival, the sales of Chinese brands accounted for 70 percent of the total.
While it continues to expand, the Chinese consumer market is now more accurately divided, based on the diversified demand of various consumer groups, creating new opportunities in niche markets.
For example, in the first-tier cities, the “smart buyers” group mainly consists of middle-aged women seeking cost-effective deals, while people in the “frugal youth” group tend to cut out all unnecessary expenses.
Wealthy families in small cities and towns focus on high-end products, while the “delicate moms” pay more for entertainment, healthy diets, cosmetics and garments.
“Driven by new consumer groups who pursue fashion, health, leisure and quality, a more personalized, diversified and multi-layered consumption market is forming at a faster pace,” said Chen Wenling, chief economist with the China Center for International Economic Exchanges, noting that the growth of the groups will contribute to promoting new consumption forms and reshaping consumption values.
Generation Z, a typical consumer group consisting of youngsters born in the 1995-2009 period, has drawn special attention, growing into a major category of buyers in the country.
A report from the consulting firm Ernst & Young shows that this group views products in more dimensions and pays more attention to diversified and individualized experiences.
With a distinct personality and strong demand for a happy life, Z-ers are willing to pay for their interests, prefer things with a better appearance and cultural value, and welcome services that help them save time and labor. Their demand has boosted a number of new sub-sectors, such as health food, game and video services, intelligent home appliances and internet celebrity brands.
A report released by the consulting firm McKinsey & Company has underlined the power of elderly consumption, anticipating that the number of over-60s in China will increase by 45 percent, accounting for around one-quarter of the country’s population by 2030, with the consumption of this group increasing by about 150 percent.
The pandemic changed the lifestyles of seniors, causing many to be stranded at home and active on the internet.
Data from JD.com shows that online shopping by elderly internet users increased by 4.8 times year-on-year in the first three quarters of 2021, with more and more elderly people purchasing electronic products, daily necessities, and travel and health services like physical checks online.
In China, a minimum of two-thirds of seniors are expected to be online by 2030, according to McKinsey. As the country strives to address the “digital divide” among the elderly, the “silver-hair” market is expecting a rosy future.
McKinsey’s senior partner Daniel Zipser, believes Chinese consumers are at the forefront in terms of the acceptance of new technology and demographic and consumption behavior changes, commenting that “these changes are likely to reshape the global consumption market.”