New econ­omy: young adults in small cities

Shanghai Daily - - BUSINESS - CON­SUMER (Xin­hua)

THE sky­scrapers and neon lights of Guangzhou and He­fei failed to lure Zhang Shaoyang, a 24-year-old teacher in Hu­oshan County in the city of Lu’an, east­ern China’s An­hui Prov­ince.

Af­ter grad­u­at­ing from the Guangzhou Academy of Fine Arts, Zhang worked in He­fei shortly be­fore she re­turned to her home­town, where she earns a salary of 3,200 yuan (US$$460) a month.

Although the pay is mod­est, Zhang tries her best to make life com­fort­able. Like many young adults in her town, Zhang buys top skin-care brands on­line, dines out with friends oc­ca­sion­ally, and spends on her hob­bies such as trav­el­ing and pho­tog­ra­phy.

“I’m quite sat­is­fied with the life­style I have in a smaller town,” she said.

Zhang is one of the mil­lions of young adults liv­ing in China’s pre­fec­ture and county-level ur­ban ar­eas that are play­ing an in­creas­ingly im­por­tant role in the coun­try’s chang­ing con­sumer mar­ket.

Aged around 18 to 30, In­ter­net-savvy, of­ten with a col­lege de­gree and a de­cent job that pays a sta­ble salary, th­ese young adults in China’s lower-tier but fast-de­vel­op­ing cities and towns are be­com­ing the new face of Chi­nese con­sumers, driv­ing eco­nomic growth and of­fer­ing abun­dant op­por­tu­ni­ties for com­pa­nies to cap­ture.

“While in­vestors per­ceive larger cities as of­fer­ing the most im­por­tant con­sumer base, we be­lieve that lower-tier cities will be big­ger, wealth­ier and more eager to spend, and could con­trib­ute two-thirds of in­cre­men­tal growth in na­tional pri­vate con­sump­tion to­ward 2030,” said Robin Xing, Morgan Stan­ley’s chief China econ­o­mist, in a re­search re­port.

Richer and care-free

What un­der­lies the chang­ing con­sumer dy­nam­ics is the grow­ing con­sump­tion power of small-town dwellers.

Ac­cord­ing to the Morgan Stan­ley re­port, per capita, dis­pos­able in­come for fam­i­lies in China’s smaller cities was 55 per­cent lower than those in top-tier cities a decade ago, while the dif­fer­ence de­creased to 45 per­cent as of 2017 and will likely come down fur­ther to 36 per­cent by 2030.

For many young adults like Zhang, liv­ing in a small town means they do not need to worry about the sky­rock­et­ing real es­tate prices in mega-cities such as Bei­jing and Shang­hai, and they will have more leisure time to spend money.

“I don’t need to spend much on my apart­ment or com­mute. If I were to live in big­ger cities such as Guangzhou or He­fei, I would def­i­nitely be un­der much more pres­sure,” she said.

While deeper pock­ets cre­ate de­mand, the rise of e-com­merce as a ma­jor way of shop­ping pro­vides young peo­ple in small cities with a wide range of sup­pli­ers.

Chen Qian, a 23-year-old com­mu­nity worker in the city of Bengbu in An­hui Prov­ince, buys al­most ev­ery­thing on­line.

“All I need is Taobao. Then I am all good,” Chen said, re­fer­ring to the on­line shop­ping plat­form un­der In­ter­net gi­ant Alibaba.

Ac­cord­ing to a re­port con­ducted jointly by Bos­ton Con­sult­ing Group and AliRe­search, the re­search arm of Alibaba, by 2020, e-com­merce will be­come a far more im­por­tant re­tail chan­nel, driv­ing 42 per­cent of to­tal con­sump­tion growth.

While small-town con­sumers are be­com­ing in­creas­ingly af­flu­ent, they do not al­ways aim for the fan­ci­est prod­ucts.

Oppo and Vivo, two Chi­nese smart­phone brands fo­cus­ing on the mid-range con­sumer seg­ment, took up about 18 and 15 per­cent of China’s mar­ket share in 2017, while iPhone, rep­re­sent­ing the pre­mium seg­ment, took up about 9 per­cent of the Chi­nese mar­ket.

The rise of do­mes­tic brands could be at­trib­uted to small-town con­sumers, who were the ma­jor tar­gets of Vivo and Oppo.

For many in­ter­na­tional brands, first­tier cities such as Bei­jing and Shang­hai may be their ma­jor tar­gets, but the mar­kets in small cities are just too big to ig­nore.

Com­pa­nies will have to ven­ture far be­yond China’s big­gest met­ro­pol­i­tan ar­eas to win the loy­alty of up­per-mid­dle-class and af­flu­ent house­holds, said the re­port by BCG and AliRe­search.

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