dgroup • Understanding shopping behavior of Chinese consumers to envision our digital future

Recent news from China center around its decreasing growth rate and the stock market crash. With the additional onward trend of increasing incomes, companies have started shifting their production sites and investments to other countries. However, the technology-savvy and fast-growing Chinese middle class is very affine to digital shopping. This creates great opportunities for multi-channel retailers and European brands offering high quality products.

Income in China is rising by 6,8% (compared to 1,3% world average) leading to an ever-growing number of people converting to the middle class. Back in 2000 the middle class segment held only 4% of urban households. By 2022, however, this number will have risen to about 75% which corresponds to 630 million people or put differently: Twice as many people as the total U.S. population! By then, they will consume USD 3,4 trillion, which are 25% of China’s GDP.

Whereas low-income Chinese shoppers remain to be very price sensitive, the new Chinese middle class sets different priorities: The quality of a product becomes a decision driver and as many “fake” products are still offered both offline and online there is strong trust in well-known brands. This middle class is also quite global in their outlook, favoring imported products, especially those from France or Germany.

Chinese Customer Journey — the impact of digital

What differentiates the Chinese middle class from those in Western countries is their strong affinity for everything digital. During projects in China and our INSIDE CHINA SUMMIT we learned that Chinese consumers are very curious to try out new technologies, platforms and brands — in contrast to their rather loyal counterparts in the West. Virtually everyone is active in social media and comment online on their shopping experience twice as much as the global average. The largest social media platform in China is WeChat, with more than 650 million monthly active users and over 90% of people in tier one cities using it. Notice though, that WeChat is more than WhatsApp: It not only comprises a chat and telephone function but serves as an e-commerce platform with an integrated payment function through WeChat wallet and as a social network with private as well as corporate accounts. The creation of such all-in-one messaging platforms with their great convenience for users is claimed to be one of the next big things in digital for the Western markets.

Another trait of WeChat, while well-known, should be perceived consciously: WeChat is an App, not a platform developed for the computer screen. And there is a powerful reason for that: Smartphone penetration in China is very high with over 50% in 2015. Not to mention that many users have never owned a desktop computer. This explains why there are barely any discussions in modern Chinese companies on whether to go “mobile first” but instead “mobile only” is the relevant strategic question. Another development that pushes mobile is the very advanced mobile payment market. Next to the above-mentioned WeChat wallet, Alipay, the solution from the e-commerce giant Alibaba, is implemented widely leading to 55% of Chinese internet users realized mobile payments (compared to the US with only 19%).

What makes life easier for companies offering products or services to Chinese consumers is that the level of sensitivity towards data is rather low. Almost two thirds are willing to share their data for a free app which is true for only 30% in the US. What challenges firms on the other hand, is the low loyalty level in digital: if a customer experience is not perfect the service will be dismissed quickly (switching economy). There is a very simple explanation why Chinese aim for effective solutions: The long period of one-child policy along with the non-existent pension scheme. One worker has to feed all other generations within the family and just does not have the time to waste it with non-optimal solutions.

In hand with innovative technologies the demanding Chinese consumers pushed the transformation of complete ecosystems and value chains in firstly the media and technology and then the retail industry and other ones by becoming part of the respective ecosystem.

Why is understanding the Chinese consumers interesting for any business?

So what do all Chinese consumer statistics tell us that differ so much from Western consumer behavior and what can we learn from them?

If you as a European brand or retailer want to enter the Chinese market, it is crucial to understand the behavior and expectations of the Chinese consumers in order to adapt your product or service. Summing up, these are:

• Mobile first or even mobile only
• Best price and promotions for lower classes; quality and safety products for middle class
• Dismissing of solutions that do not offer perfect customer experience
• Curiosity to try out new things with openness towards data transparency
• Preference for integrated, user-centered platform solution
• Trust in imported, European products
• Often have to feed several generations so they need practical solutions saving them time

If you do not plan to enter the Chinese market, you should still be aware of the developments in the Chinese digital market: Start-up’s are boosted intensely, e-commerce is booming (you all know the incredible revenues Alibaba makes) but most importantly: Chinese consumers who are pushing companies to create optimal and integrated customer experiences (and of course those companies developing the solutions) show us how the digital landscape in the Western world could look like in the near future.

Carolin Knothe is Analyst at dgroup who knows the Chinese market and culture well from studies and projects in Southern China. Her expertise lies in digital marketing strategy and implementation as well as business model transformation.

Originally published at www.d-group.com.