Chinese Consumer Behavior: 7 Key Features For Brands To Know
Chinese consumer behavior has seen tremendous changes over the last few decades due to massive structural changes in Chinese society and the economy as a whole. The extraordinary GDP growth rate of the Chinese economy over the past 30 years surpasses that of any other country in the world and brings with it a huge increase in its middle-class.
By 2022, research from Zhaopin Limited, a leading job platform in China, suggests that more than 75% of China’s urban consumers will earn between 60,000 – 229,000 renminbi a year. Given that average monthly wages for white-collar workers in 2018 were only RMB 7,665 this would represent a significant increase.
While not middle class by UK/US standards, when compared to the cost of living in China, these middle-class consumers are able to accumulate a surplus of disposable income. In the coming decade, household consumption will grow by an average of 6% annually to reach RMB 56 trillion!
To truly understand the Chinese consumer, one must look at their behavior. Chinese consumer behavior varies across different age groups. This article will identify and explain the differences between these generations.
While not one of our typical marketing articles, it’s important to fully understand the landscape in China before launching any marketing efforts. Building a strong understanding of your target Chinese consumer’s behavior is the first step in successful brand expansion.
A Look at Chinese Consumer Behavior From A Generational Perspective
The Lost Generation – Consumers Born Before 1960
Those born before the 60s had a tough and difficult life, they had to deal with famine and constant political unrest. Leading up to 1960s, it is estimated that up to 47 million died due to such harsh living conditions.
This generation grew up during one of China’s most difficult periods called the Cultural Revolution. Social Services essentially came to a complete halt with no public transport, schooling, or other basic services. This generation has come to be called “The Lost Generation”, as without access to formal education many were unprepared to participate in modern society.
Consumers in this era can be divided into two categories: frugal-retired and wealthy-retired, with the former being uneducated and price-sensitive with the latter being educated and placing importance on quality over cost.
Gen X – Post-Cultural Revolution Consumers . 1965 – 1980
These consumers grew up at the start of the reform era which has strongly affected their consumer behavior. Since they grew up in a time of political upheaval and constant change they became accustomed to saving a large portion of their income in case of emergency.
They fluctuate between traditional and modern trends. Those with a higher wage in this bracket are willing to pay for premium products and have a larger amount of disposable income to spend on frivolous things such as travel and entertainment. However, they are still accustomed to saving their money.
The wealth generated by this generation is often spent by the younger generations, and while they might be more frugal than their lavish millennial children, Gen-Xers have a high degree of purchasing power and are typically savvy consumers unfazed by the latest trends.
Millennials (1985 – 1994) – The Biggest Driver in Chinese Consumption
Consumers in the first generation of the one-child policy are referred to as Millennials or The Twenties. This group has often been called “little emperors” or “little empresses” as since they were born under the one-child policy, they were heavily spoiled by their families. This has led to a sense of entitlement among this generation with these consumers demanding high-quality goods and services.
The spending habits of Chinese millennials is almost the complete opposite of their parents; they are less likely to save and spend most of their money on various products and services. Chinese millennials are more willing to spend on experiences and luxury goods than other generations (aside from Gen-Z). They are also the first digitally savvy generation meaning they are more likely to participate on social media platforms and purchase goods through e-commerce.
This group was also the first to begin heavily using credit cards to fund their purchases. However, as this group starts to settle down and establish families it is estimated that they will become more conservative in their spending.
Gen-Z (Those Born Between 1995 – 2002)
Those under the age of 20 are the most westernized and susceptible to new and imported products. This group is the most likely to spend money out of all of the generations, becoming the least likely to save. Many in this generation have also used credit cards as a way to fund their purchasing.
Gen Z is the most technologically savvy, and the quickest to adopt the latest trends. Their purchasing behavior is very impulsive and driven largely by social media, with over 70% of young adults in China between the ages of 18-22 willing to purchase products through social media according to an Accenture survey.
Gen-Z’ers place a high value on individualism and use social media to follow the latest global trends. They often spend their parent’s money and are a huge factor in influencing their parents purchasing habits too. A Survey from OC&C Strategy Consultants found that “Chinese Generation Z accounts for 15 percent of their household’s spending in the survey compared with 4 percent in the U.S. and the U.K.” This is considered by many to be the most lucrative generation to focus on for many businesses.
7 Key Features of Chinese Consumer Behavior
Chinese Consumer Behavior #1 – Instant Gratification
A Key characteristic of a Chinese consumer is the need for instant gratification. Chinese consumers want to experience pleasure without delay. When they see a product – they want it immediately. Only 22% of the Chinese New Generation said that they’re satisfied with next-day delivery. With over ¼ stating they want delivery within two hours or half a day!
Instant gratification has become a key component in Chinese consumer behavior due to the rise of social media – as it has led to a rise in impulse buying. Chinese consumers don’t even need to leave WeChat to buy products as pop up boxes appear with a one-step buying option for various products (these can range from high-end beauty products to designer handbags!). Platforms like XiaoHongShu and Weibo have added features specifically catering to this unique demand.
The need for instant gratification is only going to increase with social media platforms ramping up their omnichannel operations to cater to their tech-savvy consumers. WeChat mini-programs have also helped facilitate this need for instant gratification, with users being able to access a fully fleshed out e-commerce experience without leaving WeChat!
Chinese consumer behavior #2 – Omnichannel Shoppers
Chinese consumers get bored very easily and are constantly looking for new and interesting ways to interact with brands. Experiential marketing has become popular to cater to this need – through the use of omnichannel platforms, games, and contests. These marketing techniques enable the customer to stay interested in the brand and links with their need for instant gratification and constant social media validation.
95% of Chinese shoppers identify as omnichannel shoppers. This behavior has seen brands such as Sephora integrate various platforms and marketing strategies to engage with their customer base on a variety of different channels including T-Mall, JD.com, WeChat, and its own website Sephora.cn.
Sephora became the first comprehensive beauty retailer to offer a fully social shopping experience. They launched a WeChat Mini Program and designed an in-store program for its Shanghai Concept store that allows shoppers to discover their own individual and unique beauty using augmented reality and digital interfaces. This has served to create an O20 experience for Sephora’s customers allowing them to book makeover appointments, share reviews, and more!
Chinese people find shopping fun, and see it as a chance to bring the whole family together and experience new and exciting ways to shop. This helps foster positive interactions with a brand. This has led to an increase in omnichannel and O2O (Online 2 Offline) Shopping experiences.
A good example of an O2O shopping strategy can be seen with Lancôme’s Chinese New Year gift machines. In order to receive the free gift, the customer needed to scan the QR Code on the machine and follow Lancôme’s official WeChat, after which they would receive a code used to redeem a CNY-themed gift box containing various product samples. The machines attracted long lines of Gen-Z shoppers for the free gift and WeChat-ready photos.
Chinese consumer behavior #3 – The Powerful Woman
There are more than 140 self-made women billionaires in China today, making up more than 75% of all self-made women billionaires worldwide! It’s not just these women having an impact on Chinese consumer behavior though. “Women are often the dominant players in household consumption. They have become the main force to lead the future consumer market.” Said Andy Zhao, president of Nielsen China.
Women have a strong impact on household purchasing decisions in China, with many having complete control over the household’s finances. Although Chinese women have maintained this role for a number of decades, Chinese women are becoming more and more independent representing an opportunity for brands across China.
While Chinese women are proud of what they have accomplished and want to let it show – be it through buying expensive cars or luxury handbags. A key example of a women’s spending power can be seen with Porsche: a brand that advertises to and associates itself with rich men but, in 2015 saw almost 40% of their China sales coming from women.
For Chinese women, their choice of spending for the coming year can be broken down into four key areas according to Nielsen China:
- Vacation/hiking 54%
- Children’s education 46%
- Recreational activities such as the cinema etc. 44%
- Self-improvement 29%
Further, Nielsen’s data found that next year’s preferences for women showed a strong desire to upgrade their quality of life through better food, clothing, housing, and transportation.
Showing off their wealth and improving themselves is the key behavioral attributes of middle-class women in China. They do not want to be ignored, nor do they want to feel patronized by marketing campaigns. (A good example of this can be seen here) Chinese women have begun to place value on autonomy, ego and confidence – brands should focus their marketing on these labels in order to successfully captivate them.
Chinese Consumer Behavior #4 – Riding Solo
There has been a cultural shift in terms of dating in China. Marriage is being delayed with being single becoming the norm as young Chinese people set their expectations for dating higher and higher. They are becoming more liberated and breaking away from traditional dating habits. By 2021, it is estimated that there will be over 90 million single Chinese people.
This shift has created a ripple effect on the types of services and products young Chinese people are purchasing. Ctrip, one of China’s largest online travel agencies, observed a positive shift in single travelers going abroad. In 2018 China overtook Russia as the emerging country with the highest proportion of respondents planning to travel abroad.
This has led to many brands launching campaigns specifically designed to target single Chinese consumers. The popular hot pot restaurant chain, Haidilao, has begun providing Teddy bears for customers eating alone. This not only helps the restaurant better appeal to single diners but was also great for creating some buzz on Chinese social media.
The single Chinese consumer is actively seeking the opportunity to explore and gain experiences alone. They are consciously looking for ways to better themselves and their lives. For example, F45, a leading fitness center states that nearly 40% of its members are single!
Chinese Consumer Behavior #5 – Phone Obsessed
There is no denying that the internet and mobile apps have changed the face of Chinese shopping. The extent to which consumers rely on their phones is unparalleled to any other country in the world.
The number of people accessing the Internet via mobile devices (phones, pads, etc.) in China reached 817 million according to SCMP’s China Internet Report. This method of consuming the internet has altered Chinese consumer behavior to favor convenience and efficiency.
However, this has also led to two separate phenomena that have had a strong impact on Chinese consumer behavior: scams and immediate reviews:
The Chinese government estimated that nearly one-third of people who regularly shop online have been duped by scam sites. These scams have led to a more nervous shopper – one who needs more assurances and direction during the shopping process. This is uncommon in the West – where consumers, for the majority, accept websites at face value due to a higher degree of trust in consumer protection agencies.
Comparatively, the Chinese consumer is far more demanding, requesting more information about products and the company than shoppers anywhere else in the world. They prefer a tailored system that answers any questions they might have throughout the process. This can be seen on nearly all of China’s e-commerce platforms, with product description pages featuring pictures from every angle, FAQs, and incredibly long descriptions (some product descriptions can easily exceed 5000 words!).
With daily phone usage at such a staggeringly high rate, a culture of immediate internet reviews has been fostered. Apps such as Xiaohongshu have over 3 billion posts a day reviewing beauty products, clothes, restaurants, and services! This culture can make or break a brand, nobody is safe from potential backlash! The flip side, however, is the chance to go viral with minimal marketing input.
Mintel research found that a third of Chinese consumers value brands’ responses to their comments, criticism, and questions on social media. Chinese consumers want to feel valued and heard. This represents a significant opportunity for brands to improve their consumer perception with little investment. This can be evidenced by the fact 75% of Chinese netizens post online feedback on their purchases – 55% more than the US.
The Growing Impact of Lower Tier Cities
While being phone obsessed may ring true in tier one cities, lower tiers still have some catching up to do! This has been steadily changing with more and more companies targeting these more rural areas, including Pinduoduo and JD.com. It’s predicted that these areas will become new drivers of growth in the Chinese economy. We predicted that these cities will become a major target for brands in 2019 (See our other predictions for 2019 here: Top 10 China Digital Marketing Trends (2019))
Chinese Consumer Behavior #6 – Face
Face is perhaps one of the most important aspects of Chinese consumer behavior. The term face is often equated to ego, with a bit more nuanced as it is derived from traditional Chinese culture. All Chinese have a deep inherited relationship with the concept of ‘saving face’ or ‘mianzi’. An old Chinese proverb sums up its importance:
“Men can’t live without face, trees can’t live without bark.”
人要脸树要皮 – rén yào lǐan, shù yào pí
Chinese face is a way of receiving immediate recognition from others to maintain and/or enhance one’s status in society. It is associated with: dignity, honor, and pride with many Chinese willing to pay more for goods and services in order to save face. What must be noted is that its less about one’s own personal pride or ego and more about how you are viewed by others.
A study conducted by Warveni Jap found that Chinese people purchased and used global brands to save face and maintain sound relationships within their social circles. The research found that the culture of face strongly influenced their consumption values and behaviour towards global brands. Global, imported brands, in their mind, attract more direct and immediate positive attention – thus enabling them to gain more face.
Chinese consumers pay a lot of attention to a product’s packaging. Oftentimes, Chinese customers that cannot afford a higher-quality gift will purchase the product with the nicest packaging. Chinese consumers will most likely always favor an item with better packaging, even if the product is of lower quality, showing the importance of considering face when selling in China.
Chinese Consumer Behavior #7 – Tradition
Culture and tradition are not static, but rather evolutionary. As Gen-Z obtains more access to a disposable income, they may become even more aware of western brands.
This new Chinese consumer, however, still has a sense of national pride and it would be a mistake for any brand to think they are neglecting previous traditions and cultures. Brands who simply ignore this loyalty to their country will see themselves become unpopular, or simply mocked on Chinese social media (see our article here on mistakes made by western companies!)
Incorporating Chinese tradition is important, but it’s even more important to do it in the right way. You can see below some screenshots of Dolce & Gabbana’s advertising campaign last year that targeted China, which is a textbook example of what NOT to do when marketing in China.
The Chinese consumer is a complex hybrid of various behaviors. However, by researching this, you will be putting your company and brand in the best possible position to succeed.
Chinese consumer behaviour is one which, once understood, can offer great rewards. Still unsure of something? Get in touch and we’ll guide you through!