According to a recent McKinsey’s survey about Chinese consumers, Chinese have taken to consumerism with ease, embracing thousands of new products, services, and brands. Three findings stood out.
Even in the face of rising inflation, Chinese consumers are more confident this year than in 2010 about their financial prospects.
the survey shows that the number of respondents who choose to spend more—buying in greater quantities, more frequently, or more expensive items in a given category—is holding firm. Whereas last year’s survey showed that consumers offset higher spending in some categories by spending less in others, this year there appears to be much less rebalancing.
Among urban consumers, the number of first-time buyers—a group that has been a major driver of category growth in China—is declining. as so many products are now both available and within the financial reach of large numbers of consumers. Big variations in the importance of first-time buyers have opened up, depending on the category and geographic region. At the geographic level, the penetration of certain goods may be high in China’s more economically developed regions, but plenty of consumer-conversion opportunities remain in less developed ones, which the government has targeted for higher economic growth
Finally, although brand awareness is rising, we see little sign that brand loyalty is following suit. In fact, more and more consumers choose among a growing number of favorite brands. The survey shows the extent to which consumers value brands more than price or channel, largely because they believe that branded products are safer, of higher quality, and more reliable than nonbranded ones. But faith in brands still does not translate into brand loyalty. In fact, both the number of consumers who always choose from among a relatively small set of brands—whom we refer to as “repertoire loyalists”—and the number of brands in their repertoire continue to rise. The average Chinese consumer now chooses among three to five brands in any given category, compared with two to three brands two years ago. In some categories, such as apparel, where luxury brands have grown hugely popular, the contrast is sharper still.
To succeed in this environment, executives will need to understand where the growth prospects lie, both at the category level and in different geographic regions. Only then will companies be able to prioritize resources and tailor strategies appropriately, to strike a balance between building mass appeal and meeting the needs of specific consumer groups, to focus on perceived value rather than absolute price, to modernize marketing tools for the Internet age, and to embrace rapidly growing online sales channels quickly. Companies must have both the flexibility to adapt and the skills to innovate to keep in step with the Chinese market’s exciting development.