Chinese consumers are looking for a taste of the good life, and not just those who are wealthy. Sales of premium tier products, as goods that cost at least 20% more than the average price for the category, are growing at a rapid pace, according to Nielsen.
According to recent Nielsen Retail Sales data, which captures sales and price data from major retail chains, factors on both the supply and demand side are driving the growth of the premium segment in China.
56% of Chinese say they buy premium products in order to feel successful or show their success to others. 48% of consumers say they’re willing to pay a premium for electronics, followed by clothing (38%) and cosmetics (38%).
Many consumers have greater buying power than ever before; consumer purchasing power is growing from 7% to 9% per year in China.
“With increasing affluence, consumers are craving products that offer an enhanced, premium experience,” said Vishal Bali, managing director of Nielsen China. “Beyond basic-needs and benefits, Chinese consumers are making purchase decisions based on how products make them feel.”
A Nielsen study shows that 65% of online respondents in China will try a new and innovative premium product based on the recommendations of friends and family. Additionally, 60% of respondents say they are very willing to pay for premium products that have high quality and safety standards.
Among all product categories, consumers are most willing to pay a premium for electronics according to Nielsen’s study. Globally 42% of consumers say they are willing to pay a premium price for electronics, and in China that number is even higher at 48%. Considering the dramatic change that modern technology has brought to consumers’ everyday lives, it should come as no surprise that people are willing to pay more for this now essential category.
Apart from electronics, clothing and cosmetics also have strong upgrade potential. In China, 38% of respondents say they are willing to pay for a premium offering in these two categories. Globally however, 39% expressed their willingness to buy premium clothing, and only 33% say they would buy a premium offering in cosmetics. This suggests that cosmetics are an especially relevant trend in China, with significant opportunity left in the category for innovation and new offerings.
In addition, diary products (37%), cars (32%), oral care (31%) and meat and seafood (30%) are also key categories where a high percentage of Chinese consumers say they are willing to pay a premium.
Status is also a more important purchase consideration in China when compared to the rest of the world. Roughly half of respondents in China (54%) say they buy premium products because these items show other people that they have good taste. But premium products don’t just communicate sophistication; they’re also an important indicator of accomplishment. Most Chinese respondents say that they buy premium products because these products make them feel successful (56%) or show other people they’re successful (also 56%), with these percentages significantly higher than those in other developed markets.
“Today, emotional motivation is a key factor for Chinese consumers, and we see premium products driving this trend. Consumers want unique experiences that they can share with their friends, they want products that express their individual taste while also projecting a positive image of success and status. Brands that pay close attention to China’s increasingly sophisticated consumers have an enormous opportunity for growth in front of them,” said Bali.