Premium items fuel customer spending

THE public’s growing desire for premium items pushed up consumer goods spending by 5.2 percent last year.

The average selling price rose by 4.6 percent as consumers spent more on items such as high-quality homes and personal-care products, according to the latest China Shopper Report from Bain & Company and Kantar Worldpanel.

The report, which covers 106 consumer goods categories purchased for home consumption in China, also suggests that the growth of online penetration may be reaching a limit.

The overall growth of consumer goods spending through online digital channels slowed slightly to 30.6 percent last year from an average annual increase of 35.1 percent between 2014 and 2018.

However, lower-tier cities are expected to grow for at least three or four more years.

The trend to trade up is particularly evident in personal-care categories such as skin care, where luxury products grew at 13.7 percent in value, compared with average products growing at 7.7 percent.

Food and beverage expenditure was less marked with spending on packaged foods growing by 4.7 percent in 2018, thanks to solid volume growth. Beverage spending growth stalled at 1.5 percent, the result of a volume decline despite higher prices.

“While penetration and purchase frequency may be reaching their limits in some categories, there appears to be ample room for average selling prices to rise,” said Bruno Lannes, partner in Bain’s China Consumer Products Practice and co-author of the report.