As China steps up to revitalise the economy, it has accelerated the domestic transformation of consumer behaviours. While Chinese consumers are exercising more rationale, seeking a balance between a trade-up and trade-down in their consumption journey, businesses are challenged to demonstrate a deeper understanding of consumer needs, not only in the material aspect but cultural and psychological perspectives too.
In this vein, this article will look at four major trends of the more cautious generation of Chinese consumers and explain how they can be converted into opportunities for brands.
Prioritising personal happiness
In the wake of the pandemic, Chinese consumers have been more active in self-exploration, seeking to understand themselves better, therefore, finding joy from within. This has resulted in “self-satisfaction” becoming one of the top consumer keywords in 2023, as found in the 2023 Chinese Consumer Insights White Paper released by iResearch in May.
A wide range of consumer interests go hand-in-hand with this as the demographics indulge in self-fulfilment. While more attention has been paid to consumers’ inner health, physically and mentally, they are also keen to find a sense of social belonging through communities. As a result, health preservation and interest-based community socials are key to drawing in consumer interest.
Gone are the days when consumers were passive listeners in the marketing scene. With Chinese people, in particular, the young cohorts, they are more involved in brands’ activities and engaged in the co-creation process thanks to the medium of social media. In fact, creating a sense of participation has become just as essential as ensuring high product quality for brands to gain consumer confidence and enrich the consumer experience.
A survey conducted in April by Morketing, a Chinese marketing research institute, found over 80% of 1,266 respondents agreed that entertaining interactions with brands would enhance their brand loyalty. Brands that can identify topics—be it an issue facing society, or a subculture that has sparked heated discussion—incorporating these into their activation and turning them into a personal conversation rather than purely a slogan, are more likely to build up a cemented relationship with their target audience, and ultimately benefit their conversion rates.
Chinese consumers now appear to be more empathetic and tend to associate their consumption decisions with social concerns, pushing social responsibility into playing a greater role in fostering brands’ relationships with them.
Environmental impacts of their consumption behaviours are at the forefront, as highlighted in Deloitte’s 2023 Chinese Consumer Insights Report where sustainability is one of the most considered factors in their decision making, ranked 3rd just behind options addressing how to achieve self-happiness.
While philanthropic endeavours, such as brand donations amid the hit of typhoon Doksuri, which affected hundreds of thousands in the surrounding area of the capital city of Beijing in July, has become common practice in winning over consumers. However, brands are also advised to be more sensitive when it comes to political subjects, considering the growing cultural confidence, and therefore, national identity amongst the Chinese population.
Endorsement of local identity
The past few years saw the rise of homegrown brands largely due to the Guochao (meaning "national wave" or "Chinese fashion") phenomenon that emerged in 2018, and local market players have enjoyed the advantages of this national sentiment, while their shrewd observations and cultural understanding coupled with the upgrade in product quality also allowed them to gain an extra edge over the competition.
However, the endorsement of local identity is not necessarily automatically in favour of domestic brands and the term now sees a broader connotation, which means global players have a better chance of impressing Chinese consumers with a fitting localisation strategy. In fact, the momentum of Chinese brands has been found to be slowing down as observed in the past six months, according to a McKinsey report published in early July.
Foreign brands are regaining Chinese consumers, particularly in the sportswear and beauty sectors. The results came after global brands such as Adidas and Nike were seen beefing up collaborations with local talents, leveraging not only their local influence but also their cultural knowledge, as well as L’Oréal who is deepening the group’s investment in building local research and development facilities, including cashing in on the Chinese fragrance dark horse Documents.
Speaking to Dao Insights, Daniel Ziper, Senior Partner at McKinsey & Company’s Shenzhen office who leads Asia Consumer & Retail Practice and authored the July report, said, “As China reopened, global executives flocked to China, resetting their China strategies…we’ve seen some positive gaining of market share by foreign companies in the first half of this year. But I wouldn’t say the momentum of domestic brands has been reverted. Instead the trend is flattening."