Consumption Trends China 2011 Mandy Wu & Theresa Loo

8 Consumption Trends for 2011

Low-Carbon Consumption

Frugal Consumption

Social Herding

Online Consumption

Cluster-Oriented Consumption

Renting Instead of Owning

Mass Luxury

Consumption of Virtual Products

T1: Low-Carbon Consumption

Low-Carbon Consumption?

Low-carbon means the low (or lower) emission of green house gases (mainly carbon dioxide). �

Low-carbon consumption has become another way of referring to an environmentally friendly way of living. It does not just mean emitting less carbon dioxide, it means placing an emphasis on saving natural resources and protecting the environment. �

1. Personal Carbon Footprint Calculator

 There is a tribe of low-carbon people on the internet, who are actively advocating carbon neutrality. They see it as their daily duty to use their personal carbon footprint calculators to check progress on their “low carbon mission”.

 The concept of the Annual Rings ofGarment was put forward by Li Ning Co. Ltd. and the Jane Goodall Institute China. Drawing on the idea of tree ring growth, they suggested using a carbon emission index to assess the service life of each garment and the total discharge of carbon during its life-span.

2. Clothes Too Have Ages: The Annual Rings of Garments

3. A New Criterion for Car Selection: Environmental Profile

 Environmentally friendly but not down-market, the luxury brands have been vying with each other to bring out low emission models. The sales data from January to June 2010 show the beginning of a great surge in lower-emission luxury cars, and people no longer take pride in buying high-powered vehicles.

Source of data: Data Source Center of China Automotive Technology & Research Center (ADC), 2010

 In a survey 94% of consumers said they would buy energy-saving electrical appliances, and in the chart on the right, with nearly 60% expecting to do so within one year, shows that this trend is imminent.  Water-saving toilets and supermarkets that sell only energy-saving products are becoming more generally accepted.

ZOL Data Center

4. Energy-saving and Environmentally Friendly Houseware

T2: Frugal Consumption

Although the global financial crisis has not affected Chinese consumers in a big way, they have still come to realize they cannot be as extravagant as before. As a response to the economic downturn and as the inevitable consequence of excessive consumption in some areas, a frugal attitude to consumption is being rediscovered by more and more people. The virtue of frugality advocated by our ancestors is back. This “new frugality” sweeping over us does not mean you cannot spend money, it means spending wisely where expenditure is needed. Being shrewd with money is a thing to be proud of in our age.

1. New Lace on an Old Gown

 Changing one’s life for the better does not necessarily require great expense, and the inventiveness of consumers is a constant source of wonder. At roadside tailors and dressmakers there is a rash of new signs saying “old garments remade, maintained or repaired”. Clearly consumers are ever more willing to use all kinds of clever ideas in their search for a frugal way of life.

Before After

2. Internet Account Keepers

 Websites specializing in accounting services are mushrooming, and some have hundreds of thousands of users.

Internet account keepers are netizens who keep e-accounts on the net and are diligent about updating them every day.

3. Pin Ke (The Sharers)

Car-pool, flat-pool, meal-pool, card-pool, trip-pool - everything can be shared in the consumer world.

 From the earlier “no frills marriage” to the current “wedding cooperative”, frugality is clearly no longer just a necessary response to economic crisis. Rather, getting good enough while paying less is the modern idea of spending.

4. Kou Kou Zu (The Stingy) Goes Coupon-Hunting

 There is a group of people who are thrifty but do not give up their comforts. They are called the kou kou zu, that is, the stingy.

 The ubiquitous VELO coupon machines and coupon download websites like Dianping and Koubei are their favorite haunts.

5.The Article Number Copiers and the Triers-On

 Go to the specialist shop, copy down the serial numbers, and then do an internet search, and you will get what you want at a much better price. Economic pressures have boosted the number of article number copiers. There are also the triers-on, who go to stores and try everything on and then buy on the net.

T3: Social Herding

We hear a lot about the growing individuality of the Chinese, but their long immersion in Confucian ideology has left collective thinking deeply ingrained in them. On top of that, the Chinese have an attitude to “group” which says that you can’t go wrong if everyone joins in. At the end of the day real fashion leaders are a tiny minority; as long as we are not left behind, we don’t feel inferior to others, and that for the majority of Chinese is the criterion of success.

1.Group Purchase

 In just 6 months from January 2010 the number of group purchase websites in China reached a thousand. The number of people involved has already topped 1 million.

Source of data: LETYO Group Purchasing, 2010

The Largest Group Purchase in History: Smart

 On September 6, 2010 there was a Smart group purchase on Taobao. Two hundred Smarts were sold in just three and half hours. This has been called the largest group purchase in history.

2. Parents Won’t Let Their Kid Lose At The Starting Line

 66% of mothers believe that their kids cannot lose at the starting line. And 43% of mothers believe that the starting line is at the pre-natal stage. When most mothers are with these mentalities, the social herding effect makes the crowd gets bigger. The mentality is that if all the other kids are doing that then my kid cannot miss out.

3. The Spectacular Success of the Shanghai World Expo

 The number of Expo visitors in one day topped 1 million on October 16, 2010, and the total number of visitors reached the target of 70 million.

 ”Since everyone else was going, I decided to go along too“ , this kind of social herding is one of the factor.

T4: Online Consumption

Bad weather, no parking space, no shopping-buddy etc. are not going to disrupt the mood for shopping anymore. For the new generation of Chinese consumers, the mouse is their shopping tool. Big discounts, wide selection of products, trusted WOM and avoiding the embarrassment of face-to-face bargain are all reasons to join the online shopping crowd. The continuous increase of online shopping is likely to exceed 32% penetration amongst internet users in 2011. For many Chinese, especially those in low tier cities and the rural areas, the saying “there will only be things that you cannot think of, there will not be things that you cannot get hold of” used to be an exaggeration. Now it is coming true.

Source: iResearch 2010

1. Consumers of 3rd & 4th Tier Cities Are More Enthusiastic About E-shopping

 In a MEC proprietary research on consumers of low tier markets, it was found that the percentage of consumers who e-shopped were higher in 3rd and 4th tier cities than the provincial capitals (2nd tier cities) in 12 out of 14 provinces surveyed. Data from Synovate’s Media Atlas corroborated the findings.

Source：MEC proprietary research on Consumers of Low Tier Markets 2009

2. Online Shopping Goes Luxury

 Online shopping for luxuries is likely to grow, and many luxury brands have launched their own E-shops. Websites specializing in the sale of all kinds of luxury goods have also appeared in response to demand.

3. Online Shopping Goes Routine

“I even buy salt and soy sauce on the Internet.”

 There has clearly been a change in consumers’ attitude to online shopping. They are not just after unusual items, they are also after convenience. With the increase of Zhais (people who prefer hanging around the house to going out), this will come ever more to the fore.

4. A Real Shop Is Not A Prerequisite  VANCL, a wholly web-based fashion brand, has won the recognition of many Chinese consumers. The turnover in 2009 topped 600 million RMB, and it is expected to reach 10 billion RMB in 3 to 5 years. Consumers no longer need the guarantee of a physical presence, and their distrust of online shopping is on the wane.

5. The Bargain-Snappers

 Because the competition for bargains is so intense a sub-group has come into being ‒ the SecKillers (one second hit-squads). They focus on doing one thing: buying “expensive” goods for only 1 yuan.

 Online shopping is clearly not just a way of getting good prices. It’s also a fun activity.

They sit in front of their computers every day watching for news of limited-offer deals. At the first hint of something, they react with lightning speed, snapping up bargains like crazy. These are the bargain-snappers.

T5: Cluster-Oriented Consumption

The popularity of the Internet in China has made Chinese consumers ever more eager for autonomy and individuality, but the age-old Doctrine of Golden Mean in Chinese culture makes them reluctant to adopt too high a profile. The saying “the nail that sticks out gets hammered” is still valid for a lot of Chinese. Therefore the current way of pursuing individuality is through “cluster-oriented consumption”. It is an intermediate stage between mass culture and individuality. People have their individuality and refuse to go with the tide, yet at the same time they seek out others with the same outlook, and gain a sense of belonging. A country’s path to individuality often goes through this stage, and that is where China is now.

1. Vertical Portals

 Vertical websites are more and more popular with consumers in China. These sites gather groups with common interests or characteristics and provide them with a forum for communication and sharing, helping people to find like minds. Examples are Douban, Baby Tree (maternal and babies) and World Executive Forum (business).

2. Chinese Brands Are Back  It is not Adidas and Nike, nor Lancome and L’Oreal. So what are the in crowd buying? The answer is: domestic brands.

 Since cluster-oriented consumers, in their tireless pursuit of individuality, tend to believe that ‘popular’ means ‘ordinary’, their fashion sense is bound to run against the popular tide. That is how they identify their own kind and advertise their group membership.

3. Niche Traveling  More and more niche holidays have been developed. For example, do-it-yourself trips are organized independently on the Internet: like-minded people are invited to join in and form a travel group, and when enough people have signed up, off they go. There are also religious tours.

 Such holidays have attracted the participation of many kinds of small groups. Travelers have taken like-minded people with them on their holidays, and got to know others through these niche trips.

T6: Renting Instead Of Owning

It is characteristic of most Chinese to seek security, and so in the past they did not like to take out loans or borrow. This is one of the reasons why thousands upon thousands of Chinese have struggled so desperately to buy a house. But in these years of quick replacements and soaring prices, renting instead of owning has become an option. Getting a sort of sense of ownership at a relatively low price is becoming more acceptable to the modern consumer.

1. The Hires There Is Nothing That Can’t Be Hired

 The Hirers, a growing group, are the harbingers of a future mode of consumption. For all kinds of reasons people no longer strive for full ownership. Rather, hiring is often the most suitable mode of consumption for a life full of changes. Young people prefer it for its freedom and convenience.

2. More and More People Rent Their Accommodation

 As indicated in a survey of real estate in 2010, an average of 40% of the interviewees are now renting (yellow bars on graph on the left).

Source of data: Real Estate Market Survey in 2010, by Beijing Ruizhi Sun Information Consulting Co., Ltd.(transliteration)

3. Renting Luxuries  “I don’t have to have it for ever, but I do have to have it for a while.” This has become a slogan for many people who rent luxuries. If a luxury is too expensive to buy but you want to look great on an important occasion, the luxury rental store is there to help you out. Just pay a daily rental of a few hundred yuan and leave a deposit, and you can walk away with whatever you want.

T7: Mass Luxury

Luxury goods are no longer the exclusive preserve of the royal and noble. On the streets of China today you will see a lot of people carrying luxury brand products like LV or Gucci, and for people carrying a LV handbag to squeeze onto public transportation is no longer a cause for surprise. Luxury goods are increasingly accepted and preferred, and popularized.

1. Consumption of Entry-Level Products

 Each social stratum, after achieving a certain quality of life, wants to move on quickly to the enjoyment of a more luxurious and fashionable life-style. The vast majority of consumers do not need to buy luxury cars or villas to achieve this, but are happy with luxuries more easily accessible. These are initially the entry-level products and accessories of the big brands, such as silk scarves, perfume and glasses.

Source of data: China Marketing and Media Study (CMMS) of Sinomonitor (CMMS2007A-2009A), with 70,000 samples in 30 cities.

 Nowadays at every scenic spot there seems to be an SLR in every hand.

 These people aren’t necessarily photography enthusiasts, but they enjoy the sense of owning an SLR. If they use it to snap themselves, what’s the surprise?

The Mass Consumer: If no big ones, easily accessible ones are also satisfying

I’ll buy expensive perfume and cosmetics Quality of counterfeit articles are likely to quality of the real ones

2. Luxury for the Grass Roots

 Fast fashion brands like H&M and ZARA are popular with Chinese consumers. In particular, products produced in cooperation with famous designers will have them queuing round the block.

3.Crossovers  There have been cases of cooperation between big brands and more ordinary brands, such as Ferrari with Acer, and Armani with Samsung.

 In this way, consumers who cannot afford to buy Ferrari can buy Acer Ferrari. This kind of cooperation advances the popularization of luxury and satisfies people’s taste for luxury goods.

T8: Consumption of Virtual Products

It is usually held that the Chinese have a bias towards the real and concrete, believing that you can only rely on things you can hold in the hand. Bulky things were all the rage because they stood for stability. But all kinds of recent indicators are telling us that it is no longer only physical products that attract consumers. Consumption of virtual products has won people’s confidence and is starting to grow.

1. Cloud Computing Leads to New Ways of Consumption

 The concept of cloud computing is also affecting virtual consumption trends. It’s making software CDs and computer hardware less important. Just log on to your cloud access point, and even if you have poor equipment you will be able to enjoy computer games which need HD graphics to run. People linked to the cloud in future will see their hardware as just a shell, giving access to a virtual world where everything is possible.

2. Virtual Currency, Virtual Image  The expenditure of Chinese consumers on virtual consumption in 2009 topped US$5 billion, more than 6 times what Americans spent on such things. China is now the world’s largest virtual consumer. The market includes Q coins, online game cards, and recharge and upgrade on all kind of forums and websites.

3. Virtual Courses  With the spread of the internet and the quickening pace of life, people nowadays prefer to receive information when and where they want it. For this reason online virtual courses are a growing trend. Dr. Enio Ohmaye, the Chief Technical and Teaching Experience Officer of English First, says this: “It is inevitable that traditional classroom-based study will be replaced by study based on web terminals.”

Summary: Consumption Trends for 2011

Low-Carbon Consumption

Frugal Consumption

Social Herding

Online Consumption

Cluster-Oriented Consumption

Renting Instead of Owning

Mass Luxury

Consumption of Virtual Products