The Chinese Consumer - China - April 2016

OVERVIEW
What you need to know
Covered in this Report
Demographic classification
Household income
EXECUTIVE SUMMARY
Overview of the Chinese economy and people in 2015
The economy
Figure 1: Annual GDP (RMB billion) and year-on-year growth rate, 2006-15
The people
Figure 2: Total China population and trends, by urban and rural, 2006-15
Consumer expenditure
Consumer spending in 2015
Figure 3: Consumer expenditure, by sector (RMB billion), 2015
Market dynamics: Mass markets vs niche markets
Figure 4: % change in total expenditure, by market sectors, 2014-15; % of surveyed consumers who claim to have spent more in 2015 as compared to 2014, by market sectors, January 2016
Forecast for the next five years
Figure 5: Best- and worst-case forecast total value sales, 2010-20
Consumer trends in lifestyle and spending habits
Consumers evolving into healthier lifestyles
Overall happiness is yet to be lifted
Majority of consumers have increased spending
Figure 6: Changes in spending, January 2016
Experiential discretionary spending drives overall expenditure
Figure 7: Most common ways used to reward oneself, January 2016
Online shopping booms
Figure 8: Changes in the amount spent in different shopping channels, January 2016
Figure 9: Shopping habits – Internet usage, January 2016
Overseas shopping rises as threat to domestic spending
What we think
CHINA TODAY – THE ECONOMY
Tertiary industry leads economic growth
Figure 10: Annual GDP (RMB billion) and year-on-year growth rate, 2006-15
Figure 11: GDP contributions by industrial sectors, 2011-15
Moving towards a technology-driven, environmentally-friendly economy
Figure 12: % increase in fixed asset investment, by industries, 2014-15
Figure 13: % increase in the output of selected industrial products, 2014-15
Domestic consumption drives economic growth
Online retailing acting as a main driver of domestic consumption
Figure 14: Retail sales of consumer goods (RMB billion), by online and offline channels, 2011-15
CHINA TODAY – THE PEOPLE
Urbanisation continues
Figure 15: Total China population and trends, by urban and rural, 2006-15
Increasing disposable income drives demand for higher living quality
Figure 16: Annual disposable income and trends, 2011-15
Figure 17: Kitchen and bathroom of a rural household, 2015
The internet brings urban life to rural consumers
Figure 18: Internet penetration, by urban and rural, 2011-15
Offsetting the aging problems
Figure 19: Age structure of the Chinese population, by gender, 2014
EXPENDITURE OVERVIEW
Sector breakout
Figure 20: Consumer expenditure, by sector (RMB Billion), 2015
Steadily slowing growth expected to continue
Figure 21: Best- and worst-case forecast total value sales, 2010-20
Winners in the next five years
Holidays
Leisure and entertainment
Trading-up in food and beverages
Figure 22: Fastest-growing market sectors, at current prices, by % growth, 2015-20 (est)
Slower growth sectors for the next five years
Alcoholic drinks
Foodservice
Home and household
Figure 23: Slower-growing market sectors, at current prices, by % growth, 2015-20 (est)
IN-HOME FOOD
What you need to know
What we think
Rising food prices drive steady year-on-year growth
Figure 24: Chinese in-home food expenditure, 2010-15
Opting for more convenient and healthier food drives further growth
Figure 25: Best- and worst-case forecast for in-home food, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Consumers spend more on food for healthier diets
Treat food reveals opportunity to trade up
Natural ingredients and healthy processing methods are key attributes of healthy food
FOODSERVICE (EATING OUT AND TAKEAWAYS)
What you need to know
What we think
Demand for experiential consumption can outweigh the impact of the economic slowdown
Figure 26: Chinese foodservice expenditure, 2010-15
Eagerness for healthier diets will drive future growth
Figure 27: Best- and worst-case forecast for foodservice market, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Dining out is the number one leisure activity
Consumers are willing to invest for healthier diets, while seasonal and organic ingredients remain influential
Expanding into more non-mainstream dining period and snacking varieties
NON-ALCOHOLIC DRINKS
What you need to know
What we think
Category structure changes towards healthier and category-blurring products
Figure 28: Chinese non-alcoholic drinks expenditure, 2010-15
Continuously increasing spending for healthy non- alcoholic drinks
Figure 29: Best- and worst-case forecast for non-alcoholic drinks, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Most consumers are keeping the same spending habit on non-alcoholic drinks
Figure 30: Changes in the amount spent in food and drink sectors, by demographics, January 2016
Flavoured water has an inherently unhealthy image but this could be reversed if flavours are sourced naturally
Looking for category-fused options
Interest in demographic-specific soft drink products
ALCOHOLIC DRINKS OUT OF HOME
What you need to know
What we think
Wine and beer growth help on-trade consumer expenditure
Figure 31: Consumer expenditure on alcoholic drinks out of home, 2010-15
Aspiration for high-quality products and sociable lifestyles will drive future growth
Figure 32: Best- and worst-case forecast value sales of the alcoholic drinks out of home, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Majority spent about the same on on-trade alcoholic drinks compared with last year
Dining out and entertaining are key drivers for alcoholic drinks out-of-home consumption
Lack of category competitiveness according to consumer segmentation and targeting
ALCOHOLIC DRINKS IN HOME
What you need to know
What we think
E-commerce helps off-trade consumer expenditure
Figure 33: Consumer expenditure on alcoholic drinks in home, 2010-15
Aspiration for category premiumisation and shopping habits of convenience will drive future growth
Figure 34: Best- and worst-case forecast value sales of the alcoholic drinks in home, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Consumers have increased spending priority and switched shopping habits online
Price comparison and brand loyalty are key drivers for upgraded consumption and spending
BEAUTY AND PERSONAL CARE
What you need to know
What we think
The beauty sector is resistant to economic slowdown
Figure 35: Chinese beauty and personal care expenditure, 2010-15
Booming mobile shopping will support future growth
Figure 36: Best- and worst-case forecast for beauty and personal care, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Spending on beauty remains strong
Women love to reward themselves with beauty goodies
The contrast between the lowest income and highest income groups presents great opportunities for the beauty market
Take a holistic approach of beauty
OTC AND PHARMACEUTICALS
What you need to know
What we think
Widening access and big health awareness fuel growth
Figure 37: Chinese OTC pharmaceuticals expenditure, 2010-15
The aging population will continue to fuel future growth
Figure 38: Best- and worst-case forecast for OTC pharmaceuticals, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Spending on health stands strong
Healthcare services have great potential amongst women
Consumers show awareness of the importance of both mental health and body health
CLOTHING AND ACCESSORIES
What you need to know
What we think
Greater competition as consumers go casual
Figure 39: Chinese clothing & accessories expenditure, 2010-15
Aspiration for healthier and trendier lifestyles will drive future growth
Figure 40: Best- and worst-case forecast for clothing & accessories, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Consumers have spent more on clothing and accessories than any other segment
Clothing and accessories the leading self-reward purchase type
Menswear buying veering towards more stylish looks
HOUSEHOLD CARE
What you need to know
What we think
A steadily-growing market thanks to the increasing number of households
Figure 41: Chinese household care expenditure, 2010-15
Consumers’ evolving living standards will drive future growth
Figure 42: Best- and worst-case forecast for household expenditure, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Opportunity for imported and premium household care products
Females no longer the sole target of household care products
TECHNOLOGY AND COMMUNICATIONS
What you need to know
What we think
Steady growth within the technology and communications sector
Figure 43: Chinese technology and communication expenditure, 2010-15
Steady growth expected in the next five years
Figure 44: Best- and worst-case forecast for technology and communication expenditure, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Consumers are spending more on technology and communication
No significant difference across tier one, two and three cities
The premiumisation of technology products
The rise of domestic brands
LEISURE AND ENTERTAINMENT
What you need to know
What we think
Evolving spending priorities drove leisure spending in recent years
Figure 45: Chinese leisure and entertainment expenditure, 2010-15
Cultural sophistication will drive future growth
Figure 46: Best- and worst-case forecast for leisure and entertainment expenditure, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Consumers prioritising spending on leisure and entertainment
Increased frequency of taking part in out-of-home leisure and entertainment activities
Consumers would like to be connected rather than alone during leisure time
Leisure activities targeting families are popular
Consumers getting used to pay for virtual leisure products
HOME
What you need to know
What we think
E-commerce helps to trade up home expenditure
Figure 47: Chinese home expenditure, 2010-15
Aspiration for healthier and trendier lifestyles will drive future growth
Figure 48: Best- and worst-case forecast for home expenditure, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Consumers deprioritise trading up in household appliances
Increased varieties bought and upgraded consumption are key drivers for household appliance spending
Home furnishing rises to be amongst the most popular online shopping product categories
Affluent households are more likely to buy household appliances online
TRANSPORT
What you need to know
What we think
The growth of transport market slows down due to decreasing demand for new passenger cars
Figure 49: Chinese transport expenditure, 2010-15
Chinese enthusiasm for cars will drive future growth
Figure 50: Best- and worst-case forecast for transport, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Running errands for family and daily-commuting are the top two reasons for first car purchase
Safety is the top reason pushing consumers’ car replacement behaviour
People have high purchase intentions when it comes to new energy cars
HOLIDAYS
What you need to know
What we think
Great demanding on travelling still needs to be meet
Figure 51: Chinese holiday expenditure, 2010-15
Outbound travelling will drive future growth
Figure 52: Best- and worst-case forecast for holiday expenditure, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Holidays as a reward
Growing family travellers
Love for local cuisines continue
PERSONAL FINANCE AND HOUSING
What you need to know
What we think
Life insurance boosts growth
Figure 53: Chinese personal finance and housing expenditure, 2010-15
Mild growth for the coming years
Figure 54: Best- and worst-case forecast for personal finance and housing, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Insurance products are not only a protection but also a financial tool
Increased adoption of financial tools
Rising of financial products
MISCELLANEOUS
What you need to know
What we think
To-your-door consumer services booming
Figure 55: Chinese miscellaneous expenditure, 2010-15
Aspiration for healthier and trendier lifestyles will drive future growth
Figure 56: Best- and worst-case forecast for miscellaneous expenditure, at current prices, 2010-20
Winners for 2016
Losers for 2016
Key consumer findings
Smartphone-based consumer services apps market booming
Elderly care services likely to grow strongly in coming years
THE CONSUMER – WHAT YOU NEED TO KNOW
Consumers evolving into healthier lifestyles
Overall happiness is yet to rise
The majority are increasing their spending
Experiential discretionary spending drives overall expenditure
Online and overseas shopping are rising
CHANGES IN GENERAL LIFESTYLE
The majority spent more in 2015
Figure 57: Changes in spending, by age and income, January 2016
More items on the shopping list
Figure 58: Changes in spending, by demographics, January 2016
Moving towards healthier and more relaxing lifestyles
Figure 59: Changes in general lifestyles, by demographics, January 2016
Figure 60: Changes in leisure lifestyles, by demographics, January 2016
Overall happiness are yet to increase
Figure 61: Agreement with statement “I feel happier”, by demographics, January 2016
Figure 62: Changes in lifestyles, by agreement with statement “I feel happier”, January 2016
TRENDS IN SPENDING PRIORITIES
Most consumers increased spending on clothing, eating, leisure and technology products
Figure 63: Changes in the amount spent in different sectors, January 2016
Spending on holidays will continue to grow
Figure 64: % of consumers who have spent more on selected market sectors, by age and gender, January 2016
Beauty brands can focus on young females and social occasions
Figure 65: % of consumers who have spent more in selected sectors, by income, January 2016
WAYS OF REWARDING ONESELF
Clothing and accessories, food and domestic holidays are most common ways used for self-treating
Figure 66: Most common ways used to reward oneself, by gender, January 2016
High income consumers find greater indulgence in travelling
Figure 67: Selected ways used to reward oneself, by income, January 2016
CHANGES OF SPENDING IN DIFFERENT SHOPPING CHANNELS
Online shopping is the big winner
Figure 68: Changes in the amount spent in different shopping channels, January 2016
Convenience of access drives spending via online channels
Figure 69: Reason for increased spending in different shopping channels, January 2016
Shopping for premium products from overseas and department stores
Figure 70: Increased spending in different shopping channels due to upgrading, January 2016
Price increases are more of an issue in brick-and-mortar stores than virtual channels
Figure 71: Increased spending in different shopping channels due to price rose, January 2016
TRENDS IN SHOPPING HABITS
Increasing loyalty
Figure 72: Shopping habits – Loyalty towards retailers/brands, January 2016
Buy as you like
Figure 73: Shopping habits – Impulse purchase, January 2016
Better product quality will drive online retailers to grow further
Figure 74: Shopping habits – Internet usage, January 2016
MEET THE MINTROPOLITANS
More holidays and exercise to drive lifestyle evolution
Figure 75: Changes in general lifestyles, by target groups, January 2016
Overseas shopping will soon tap into the mass market
Figure 76: % of consumers who have spent more in different channels, by target groups, January 2016
Experiential expenditure to drive discretionary spending
Figure 77: Most common ways used to reward oneself, by gender, January 2016
The next big things
Figure 78: Shopping habits, by target groups. January 2016
APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
Mintropolitans
Why Mintropolitans?
Who are they?
Figure 79: Demographic profile of Mintropolitans vs Non-Mintropolitans, by gender, age and personal income
Figure 80: Demographic profile of Mintropolitans vs Non-Mintropolitans, by marital status, city tier and education level
Abbreviations