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Management reports, briefs and video-clips issued by Samsung Economic Research Institute

Seven Growing Consumption Trends in China

Seven Growing Consumption Trends in China

HONG Sun-Young

Dec. 4, 2007


Welcome to our Video Program. I’m Sun-Young Hong from the Marketing Strategy Department.

After nearly two decades of being the “factory” of the world, China is now on track to be one of the world’s main consumer markets. Competition is already heating up as foreign companies expand the scope of their business into services like finance and retail, while local companies redouble their efforts to develop into viable brands in their own right. Today, we’ll take an in-depth look at seven trends that are setting the pace for Chinese consumers.

First, Chinese consumption is increasingly characterized by “present-oriented consumption.” Amid growing confidence about their financial future, Chinese consumers, especially young people, are showing an increased tendency to enjoy the fruits of their labor now.

Mobile IT products like cell phones and MP3 players are increasingly regarded as “must haves,” and demand for luxury items is also picking up. The “buy now, pay later” mentality is seen in the growing use of credit cards and loans to buy homes and household electronics.

Second, the consumption of “good-enough” products is growing at a healthy pace. Consumers in this segment stress value. They offer upgraded features at reasonable prices. Chinese domestic makers of LCD TVs made modest changes and captured 62% of TV sales in 2005.

Under these circumstances, foreign brands are starting to jump on this bandwagon, diversifying from high end products to a more diverse range of areas.

Third, “travel consumption” is picking up. Along with an overall increase in income levels and a five-day work week, an increasing number of people are traveling.

Many Chinese now travel to accumulate knowledge and experience, not simply to relax, while travel for investment or shopping is also increasing. For example, a variety of Hong Kong tour packages are vehicles to learn about real estate management or stock trading, or explore the architecture and art of Hong Kong.

Fourth, “green consumption” that focuses on health and environmental-friendly products is emerging as concerns rise over the safety of Chinese products. The size of the green food market, a market for certified environmentally-friendly products, has been growing at a robust rate of 24.6% since 2000. Foreign health-related products such as organic foods have become especially popular among high income earners.

Fifth, new households are emerging along with China’s rapid urbanization and industrialization. They include single professionals in cities who delay or avoid marriage; childless, double-income couples; and elderly who pursue a young lifestyle. A wide variety of products and services are targeting these households, including apartments with many conveniences and 24-hour laundries.

The sixth trend is the emergence of “Cyber Chinese.” An increasing number of Chinese regard the Internet as an essential part of their life. Internet shopping is also enjoying robust growth thanks to the resolution of problems from settlement methods and product delivery. The size of the Chinese Internet shopping market shot up to 31.2 billion yuan in 2006, up 61.7% from a year earlier.

Last, a “new traditionalism” is sweeping across China as people start regaining interest in their traditional history and culture. Traditional ideology and philosophies like Confucianism and the traditional Hundred Schools of Thought are drawing attention again. In furniture, architecture, design, and food, Chinoiserie, a term that denotes a kind of faux Chinese style is increasingly prevalent. The Shanghai Tang line of Chinese style apparel and Nokia’s mobile phones with traditional Chinese motifs are attempts to capitalize on this trend.

Thus far, we have examined seven new trends in the Chinese consumer market. In contrast to the past, China now serves as an opportunity for market expansion and as a test bed for global marketing.

With a population of 1.3 billion people, China is the world’s largest potential market for a wide range of global brands. As the Chinese market undergoes rapid changes and as various values and lifestyles begin to co-exist, businesses need to move away from uniform mass marketing and focus on more specific segments.

Thank you for watching. I am Sun-Young Hong.

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