Compared to Tier 1 and 2 cities, lower tier cities suffered less from the outbreak of the COVID-19 pandemic in the first half of the year. However, they are also less sensitive to the economic recovery and confidence rebound in the second half of 2020. Currently, consumers tend to be cautious with spending, but are not downgrading. When choosing brands and products that suit themselves, they think more about the occasions where the products can be used, the significance of the products and how they can meet their emotional needs. Taking into account the costs of trial and error, they explore the fun brought by all kinds of consumption.

Through quantitative (based on the quantitative data from multiple Mintel Reports in 2019 and 2020) and qualitative research (based on in-depth interviews with 20 respondents from 10 Tier 3 or lower cities), this Report analyses the differences in consumer behaviour and attitudes in different city tiers. This Report examines changes in consumer confidence before and after COVID-19 and changes reflected in spending on credit, luxury spending, domestic product spending and leisure spending; it also explains to brands what strategies would effectively increase their competitiveness in lower tier cities using a series of cases.

• Consumer confidence change

• Acceptance of spending on credit

• Attitudes towards luxury spending

• Brand perceptions and selections

• Focuses in leisure spending

According to the National Bureau of Statistics, there were 672 cities in China at the end of 2018, among which 297 are of the prefecture level and 375 are of the county level. As Mintel clients have interest in multiple different aspects (region, city size), Mintel selects different cities for each round of surveys considering their geographical location and level of economic development (eg GDP, per capita income). Mintel classifies China's cities according to the following criteria:

• Tier 1 cities: large economic centres, ie Beijing, Shanghai, Guangzhou, Chengdu*

• Tier 2 cities: provincial capitals (eg Jinan), municipalities (直辖市) (eg Tianjin, Chongqing), and economically developed prefecture-level cities (eg Suzhou, Dalian)

• Tier 3 or lower cities: mostly prefecture-level cities (eg Weifang, Ganzhou, Pingxiang).

*Mintel chooses Chengdu to represent Tier 1 cities in the Midwest of China for the purpose of regional comparative analysis.

Through quantitative (based on the quantitative data owned by Mintel collected from 2018-20) and qualitative research (based on in-depth interviews with 20 respondents from 10 Tier 3 or lower cities), this Report compares and analyses consumer behaviour and attitudes in different city tiers. Meanwhile, the Report further explores effective strategies for companies to improve their competitiveness in lower tier cities by analysing cases.

Quantitative consumer research data was collected from various Mintel Reports over 2019-20. The consumer research exclusively commissioned for China Reports was conducted by a Chinese licensed market survey agent, KuRunData. The online consumer survey was sampled in 10 cities, each with a sample size of 300 people, for a total of 3,000 people.

To explore the “why” behind the quantitative data, Mintel conducted in-home or online interviews with 20 respondents from 10 lower tier cities listed below. Each in-home visit lasted for about two hours with a moderator doing in-depth interviews with respondents, to understand their lifestyles, purchase preferences and the factors that influence them.

Figure 2: Interviewed cities in the qualitative research

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Source: Mintel

In the qualitative research, Mintel selectively recruited affluent and educated respondents aged 25-39. In each city, Mintel recruited one male and one female respondent with a personal income of RMB6,000-10,000 if single, or a household income of RMB14,000-25,000 if married. These respondents are more sensitive to market trends and better able to express their opinions. This ensures the smooth running of the research and is critical to getting meaningful insights.