Customer, community activism at work in ‘networked economy’

Source:Global Times Published: 2017/3/5 19:38:39

China’s changing consumers


Assessing China's rapidly changing consumers and how businesses are coping in the face of the increasing activism of communities and consumers were the central topics of a Global Times-organized roundtable on Wednesday. The event has brought together senior executives from a full range of businesses, including agriculture, food and beverage, manufacturing, energy, healthcare, entertainment, financial, banking and luxury goods. They made for a lively exchange of views on the trends shaping China's transformation to a consumption-based economy. North Head is strategic counselor of the roundtable.

Company executives and experts talk about China's changing consumers at a roundtable organized by the Global Times on Wednesday. Photo: GT



With the rise of the middle class and the millennial generation in China, domestic consumers are evolving and showing changing interests and concerns, executives and experts said on Wednesday at a roundtable discussion on China's changing consumers. The event was organized by the Global Times in Beijing.

There are some interesting factors to see the change in behavior among Chinese consumers, such as shifting geographies, interests and concerns such as for healthcare and pollution, and technology and its effects, such as brick-and-mortar stores moving online, or the "networked economy", Robert Kuhn, chairman of Kuhn foundation, said at the roundtable. 

One of the major changes in the country's demographics is the rise of the middle class and a burgeoning millennial generation. China's middle class families, or those with annual incomes from 80,000 yuan ($11,602.11) to 200,000 yuan, now represent 23 percent of the total population, said Zhang Yongjun, from the China Center for International Economics Exchange (CCIEE), a think tank.

The demographic is "forecasted to expand by 2 percent each year, with its proportion relative to China's total population soon to be nearly 40 percent."

The demographic shift and dramatic wealth creation have pushed the pace of change for the country's consumption to accelerate and created a new consumption structure, several company representatives said at the roundtable.

China's young people have been a powerhouse for luxury spending, not only in China but around the world, said Andrew Wu, the group president of LVMH who is in charge of the ­Chinese mainland, Taiwan, Hong Kong and Macao. Government is playing a lesser role in promoting consumption, while consumer behavior is now the driver.

Wu noted that the average age of Chinese high-end industry consumers is generally lower than their overseas counterparts, and "it is extraordinary to see the young generation's desire to upgrade their consumption."

Besides, "the middle class, especially people in their 30s to 50s, looks to experience different cultures and lifestyles," according to John Liu, managing director of portfolio company China Equity.

The country's increasing number of outbound travelers as well as soaring per capita overseas expenditures in recent years are evidence of the growing appetite for experiential and lifestyle products and services, he said. 

In 2016, Chinese people made 122 million overseas trips, up 4.3 percent year-on-year, according to the website of the China National Tourism Administration. Meanwhile, Chinese tourists spent 4,000 euros ($4,249.44) on average during their trips to Paris in 2016, up from an average of less than 1,000 euros in 2008, Liu said.

"Chinese students now account for 55 percent of the foreign students at universities in Switzerland who pursue bachelor or master degrees in majors related to services industries, such as hotel management," Liu said.

Changing values

Another difference is the changing perspective of China's younger generation. They not only care about the products, but have also started to look at their impact on environment, Boquet Ying Zhang, the vice president at energy firm Engie China.

Increasingly consumers and communities want more renewable and low-carbon forms of energy, and they also prefer more environmentally friendly vehicles, she said.

Such changing consumption expectations and growing young populations at home will initiate opportunities for emerging industries such as electric vehicles, experts said.

Other "new phenomena," such as the recent emergence of elderly care facilities, are shaping China's consumption model, Kuhn noted.

"China's aging population is expanding and so is the middle class demand for caring for their parents," the CCIEE's Zhang said, noting that this will be a huge market, as China currently lacks abundant professional nursing institutions for the aged.

Zhang also highlighted the government's priority to ensure that rural areas do not get locked out of the benefits of rising consumption and the provision of new products and services, particularly health and elderly care.

Tech triumphs

The evolving consumption patterns come as China's e-commerce and cross-border online shopping sectors like Alibaba are enjoying explosive growth, several company executives said. In 2016, China's e-commerce market maintained a robust growth and stood at 20 trillion yuan, according to domestic news portal sohu.com.

"Compared with their counterparts in Europe and Japan, China's young generations are adapting to new technologies so fast, much faster than even in Europe and North America," an entertainment industry CEO who preferred not to be identified, said at the roundtable.

As a result, the trend is changing the pattern of how new products are launched and distributed, he said.

"Traditionally new technologies were developed in the US and later rolled out in China. Given the size of China and the quicker uptake of its residents, we shall increasingly see [more] new products launched in China first, before the US and other developed markets, for many emerging technologies such as artificial intelligence and virtual reality," he noted.

Considering the trend, social media has become an increasingly important channel for businesses to communicate directly with Chinese consumers, company representatives said.

Consequences

But Jonathan Dong, a vice president of Nestle China, pointed out that there have been consequences of the networked economy. "We deal with consumers on a daily basis, and we find out that even though the millennial generation look at smartphones every day, their trust in the content they watch on social media is decreasing," Dong said at the roundtable.

He also compared China's public opinion environment to a typical Chinese restaurant - colorful, with a lot of choices, but noisy. "You must yell to be heard in the restaurant, which makes you very tired at the end of day," Dong noted. "And in a similar vein, consumers tend to get tired, and that's why they are losing trust in social media."

All these changes raise the question of market supervision, said John Russell, the managing director of consulting firm North Head.

"The government may be stepping back from directly driving consumption, but it is empowering the consumer to play a bigger role in market supervision," he said. 

Over recent years legislation related to consumer protections, food and product safety, advertising and environmental standards have expanded channels for consumer complaints and community engagement. 

  

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