China ’ s Consumer Markets

1. China’s Consumer Markets

2. The Pyramid of China’s Urban Consumer Market

3. Rapid economic growth of 9% per year ↑Income/disposable income ↑Purchasing Power (From 1997 to2003, per capita disposable income of urban Chineseincreased 64.2%) ↑Population  Larger market ↓Collectivism  ↑Self-satisfaction ↑Education  ↑Consumption Change in consumer preference Change in life style and consumption pattern Changes in Consumer Market

4. Where are the opportunities in China’s consumer market?

5. Consumer Spending

6. Per capita household savings is increased, it rose 123.9% from 4.6 trillion RMB to 10.4 trillion RMB To maintain a stable living standard when they are old Spending on healthcare and for big ticket items such as housing Under the rule of WTO, foreign banks has the opportunity to take the Chinese deposit starting in 2007 These foreign financial institutions will fully participate in the Chinese financial system Savings and Housing

7. The government encourages home ownership • Smaller initial payments for obtaining a home mortgage is required • Mortgage interest payments is tax deductible • Save less, buy more

8. Automobiles • Large reduction in importtariffs on automobiles following China’s entry into the WTO.

9. Under the WTO, the automotive financing will be further opened to foreign participation • Increase the competition for domestic financing institutions • Reduce down-payment requirements • Expand the market

10. Apparel and Fashion • In 2003 Chinese spent roughly US$56 billion on clothing • Many global brands are undertaking a multi-channel approach to the Chinese market (licensed , franchising ) • E.g Gap (US), H&M (Sweden), and Zara (Spain)

11. Apparel and Fashion

12. Tourism and entertainment

13. Foreign brand • Highly brand-conscious • Quality is perceived as highly important • Preferences for domestics goods has dropped from 78% to 67% • Preferences for foreign goods has increased from 19% to 22%

14. Foreign brand • Small stores:purchasing apparel such as footwear, jewelry, or cosmetics • E.g Louis Vuitton, Bally, Gucci and Ferragamo. • Large stores : electronics, furniture, and otherhome related goods • E.g Carrefour, Metro, Wal-Mart, Auchan, Ikea, and B&Q

15. Attitudes to luxury brands • The majority of them regard owners of luxury brands as being successful and having good taste • Over half of them said they longed to buy luxury goods, even if they could not afford them at present

16. Attitudes to luxury brands

17. Attitudes to luxury brands

18. 2. How do Chinese consumers differ in their lifestyles and consumption patterns?

19. Lifestyles of Chinese consumers • Demand for trendy and innovative products • curious to fashion and fresh products • Demand for quality of life • enjoy good quality and luxury goods • Less inclined to save and a strong propensity to spend • confidence in their long-term earning potential, higher qualifications, growing purchasing power

20. Lifestyles of Chinese consumers • Like to show off individuality • build up own image by different brand name goods • Spending according to own interests • freedom and independence to spend • Buying products through the internet • convenient and popular channel

21. Consumption Patterns (Products) • The need of durables are mostly satisfied in urban cities • Color television, washing machine and refrigerator • Desire for life enjoying goods • Traveling (48%↑), houses (38.5%↑), mobile phones (35.9%↑), luxury goods (20%↑), automobiles (15%↑), cosmetics (8%) and laptop computers • Emphasize fashion over function • MP3 players → iPod • TV games → PS2

22. Consumption Patterns(Distribution Channels) • Department stores became less popular • New purchasing channel: • Internet • Convenience stores • Hypermarkets, shopping centers and warehouse-style supermarkets

23. Different approaches of Segmentation 1stGeographic • Coastal (urban &richer) vs. interior region (rural &poorer) e.g. Shanghai—1st in「China Development Index」 , highest GDP per capita in 2006 Gansu—the lowest level in 「 China Development Index 」, poorest in China → urban vs. rural: 3 times higher in consumption expenditure • sub-segments emerge e.g. Xi’an, Wuhan, Nanjing

24. Different approaches of Segmentation 2ndDemographic : size, density, age, gender, race, occupation, education etc China: • changing age and sexual structure of Chinese population e.g. elderly ↑, 7.7% of the people reached 65 in 2005 & around 12% in 2010 -↑educational level -- > 50% post 80s have secondary level -↑female labours -- > Women purchasing power

25. Different approaches of Segmentation 3thIncome - Working poor—paid more on daily necessities like food, domestic brands • Salary class—idealistic, willing to pay for brands • Little rich—brand conscious • Rich (yuppies)—prefer foreign goods &brands

26. Different approaches of Segmentation • 4rdBehavioral • Life philosophies: market rejecter, conservative, pioneer • lifestyle activities: entertainment—reading, travelling, movie, dinning out etc • Media usage: newspaper, radio, TV, magazine, internet, mobile phone etc • Consumption attitude: consumption pattern

27. China’s Vast Consumers 1st Post 80s Generation • Generation Y aged 18-24 • Love entertainment more than household items • eg. DVD players 7%(1997)52%(2004) Mobile phones 10%(1999)48%(2004) eg. Nokia > Motorola due to emphasis on fashion • Have more access to media eg. TV, magazines, the Internet • Use computer > Watch TV

28. China’s Vast Consumers 2nd Affluent Group • Coastal Urban regions • High desire for buying with high purchasing power • Love high technological products, especially mobile phones, pc etc. • Willing to pay higher price for higher quality • Emphasis on Brand name products

29. China’s Vast Consumers 3rd Women aged 19-30 (in big cities) • Buy products on image • Care about themselves and love beautifying themselves • High aspiration and are interested in ownership and leisure • Do not care about price even if they have low income • Favor foreign-invested department stores

30. 3/ How to target the different segments of the market, i.e. the implications of the marketing strategies?

31. Marketing strategies 1st Undifferentiated marketing • Base on largest numbers of buyer • Ignore market segment differences • Target the whole market with one offer 2nd Differentiated marketing • Target several market segments and design separate offers for each • e.g. Gap (clothing) • 3 different retail stores format • Gap, Gap Banana Republic, Old Navy

32. Marketing strategies 3rd Concentrated / Niche Marketing • Focus on a large share of one or a few segments or niches • Used by companies with limited resources – capture more market share • e.g. Tetra ( fish supplier 80% of the world’s tropical fish food) 4thMicro marketing • 1/ local marketing e.g. CitiBank different services in different branches • 2/ individual e.g. Dell • Focus on product tailoring • Satisfy the needs and wants of specific individual and local customer group

33. Marketing strategies For Generation Y • Use Concentrated Marketing • Online > TV advertising • Product design & packaging • Suitable celebrities e.g. 蔡依琳 李宇春 F4 周杰倫

34. Marketing strategies For Women (aged 19-30 in big cities) • Use Concentrated Marketing • E.g. Cosmetics & skin cares • Foreign brands • e.g. Max Factors, Shiseido • Fashion – International Brand Name

35. Marketing strategies For Affluent Group • Use Individual Marketing • High class brand name • Provide direct experiences • E.g. Rolls Royce • Personal selling satisfy specific needs of customers

36. Conclusion • Nowadays, the disposable income lifestyle and consumption pattern changed purchasing power Business opportunity • If we want to start a business in China Concentrated on specific segments • We need to realize what China’s Vast Consumer specific needs and wants