McKinsey: Consumers now more discerning
Research shows that people in China are now more focused on spending on things to improve their well-being and family ties
Chinese consumers are seeking a more balanced life where health, family and experiences are the top priorities, according to McKinsey’s 2016 China Consumer Report.
The report revealed that Chinese consumers are now setting aside a larger portion of their income for lifestyle services and experiences — more than half of the interviewees plan to spend more on leisure and entertainment, as evidenced by a 50 percent surge in box-office receipts in the past year.
At the same time, an increasing number of consumers are striving to achieve more balanced lives by eating healthier food, practicing preventive healthcare and pursuing sporting activities.
The report, which surveyed 10,000 people aged 18 to 56 across 44 cities in China, also revealed that the days of broad-based market growth are coming to an end.
Although China is the world’s largest e-commerce market — generating revenues of about 4 trillion yuan ($620 billion) last year, nearly the same as Europe and the United States — physical the amount of revenue China's
generated in 2015
stores have nevertheless remained important to Chinese consumers.
Furthermore, consumer satisfaction with physical stores remains higher than online ones. However, the gap is narrowing, especially as satisfaction with hypermarkets declines, according to the report.
“Although online shopping is more convenient and accessible, it is still more reliable to purchase certain essentials like outerwear, food and large furniture in physical stores as we can then be sure of the quality of the product,” said Zhu Minzi, a housewife in Shanghai.
The report also showed that one trend that is helping maintain interest in physical stores is “retailtainment”. Twothirds of Chinese consumers say that shopping is the best way to spend time with their families, an increase of 21 percent from three years ago.
“Malls combine shopping, dining and entertainment options, and they offer the entire family a place to enjoy themselves,” said Gong Fang, partner in McKinsey’s Shanghai office.
The report added that consumers in China look to strengthen family ties through travel, with 74 percent of respondents saying that travel helps them to better connect with family members. About 45 percent of international trips were taken with family members in 2015, compared to 39 percent in 2012.
More than 70 million Chinese citizens traveled overseas in 2015, making 1.5 trips per person on average, and shopping has been founded to be an integral part of this experience.
“Having a happy family defines success for Chinese consumers, so the importance of the family has grown steadily over the last few years,” said Daniel Zipser, partner in McKinsey’s Shanghai Office and Leader of the Consumer & Retail Practice in Greater China.
In addition, the report found that Chinese consumers are also increasingly switching from spending on mass products to premium alternatives — 50 percent of respondents now seek the best and most expensive product available, a significant increase from previous years.
A rising proportion of Chinese consumers now focus on just a few brands while some have developed loyalties to a particular label. The number of consumers willing to switch to a brand outside their “short list” has also dropped sharply. For instance, in the apparel segment, the number of consumers willing to consider a brand they hadn’t before dropped from about 40 percent in 2012 to below 30 percent in 2015.
“Understanding and responding to changes in spending habits will be decisive in determining the companies that win or lose, whether international or domestic competitors,” said Gong.