Gone are the days when brands and manufacturers can simply create supply, then seek out demand to absorb it. Consumers worldwide are becoming more sophisticated in their purchasing decisions — especially so among Chinese consumers. Consumer behaviour in China has evolved drastically since the late 1970s after reforms and the opening-up policy were adopted.
The changes have been most obvious in the past 15 years. As China surpassed the US to become the world’s largest fashion market in 2019, it was also ranked as the world's largest online retail market for the eighth straight year in 2020. The online retail sales of physical goods in China reached 9.8 trillion RMB (about $1.52 trillion) in 2020. Official data from the Ministry of Commerce also showed more than 24 million live-streaming marketing activities took place in 2020. A Bain report also predicts China will become the world’s largest luxury market by 2025.
Consumption has become the primary driver of China’s economy. Consumers in China are showing much more sophisticated and varied demands, creating multiple unique retail experiences, products and consumption scenarios. We have deduced a list of 15 major consumption trends, which are often referred to as “economy” in China, including the likes of the night economy, pet economy, home economy, financial & investment economy, singles economy, she economy and the fitness economy among others.
Not all consumption trends can grow to become economies though. Only the ones that not only affect consumer behaviour, but also drive growth over the manufacturing and the investment of the industry can be considered as economies. Today, we will look at the five most prominent ones.
The night economy
The night economy refers to consumption that takes place between 6pm and 2am the next day.
Chinese people usually work long hours and return home late. Naturally, they also start having entertainment, shopping as well as social interactions later at night. The more people consuming late at night, the more the whole ecosystem is moving that direction to cater to the demand. We can see products that are created for late night consumption, such as “late-night rescue” eye creams or livestreaming sessions that go live at midnight on e-commerce platforms. In fact, merchants on e-commerce platforms also do 24-hour livestreaming to satisfy the needs of consumers.
The local government steps up too, to make sure there’s not only a digital economy at nighttime, but also many offline options. It has gradually been put on the agenda as part of China’s economic development. It extends consumption time, expands urban domestic demand, provides jobs, and enhances a city’s soft power. In the past two years, cities across the country such as Beijing, Shanghai, Guangzhou, Xi’an, and Nanjing have introduced policies to support the development of the night economy.
iiMedia reports China’s night economy market to be at 26.43 trillion RMB in 2019, and will reach 42.42 trillion RMB by 2022. The most active consumer group of the night economy is consumers from 20-40 years old, with 61% of them between 25-35 years old. As more and more youngsters enjoy the night scene, consumption of alcohol, apparel and cosmetics have also grown rapidly. With the post-90s group gradually becoming China’s main consumer group, liquor consumption is on overdrive. Last January to July, Tmall International’s sales of foreign liquor increased 220% year-on-year. Among these, hot-sellers saw sales increase as follows: Sake up 470%, liqueurs up 430%, Brandy up 220%, and Whiskey up 110%.
The night economy isn’t just about nightlife, discos and alcohol. It’s also about dining, shopping, entertainment. Take Guangzhou as an example, more than 110,000 catering businesses don’t close until some time between 6pm and 6am the next day. 16% of restaurants are still open by 1am and over 3,600 restaurants are open 24 hours a day.
The sleep economy
Not to be confused with the night economy, this refers to the demand economy created by those who experience difficulty in falling asleep or poor quality of sleep. As mentioned, Chinese consumers usually work overtime and have a high level of stress. The majority of their nighttime activities start close to late evening, so they also tend to stay up late. All of that helps to illustrate the fact why the quality of sleep has become such an important topic in China these days and over time has developed into a real sleep economy.
China’s sleep economy market is expected to exceed 1 trillion RMB by 2030. A report published by Chinese Sleep Research Society indicates that during the pandemic, Chinese nationals postponed their bedtime by 2-3 hours. The number of people who go to bed past midnight increased from 10% to 50% of the population. The general public also became more aware of sleep-related topics, with a 43% increase in search query on sleep-related topics.
During Double 11 in 2019, the sales of sleeping aid products skyrocketed and grew by 789.5%. Among consumers who purchased sleeping aid products, the number of post-00’s consumers increased by 434%. From 2016 to 2020, over 2,200 sleeping-related enterprises or corporations were established. Their product offerings mainly include traditional products such as bedding, mattresses, eye masks, melatonin, as well as new products such as sleep-enhancing smart devices or mobile apps. The market is still young and product development to cater this increasing demand is still at its infancy stage. A majority of products in the market still vary in quality and cannot fully satisfy the market needs.
The lazy economy
While the term lazy economy may sound a little negative, it really is not. The lazy economy refers to a new type of consumption demand that is time-saving, labour-saving and convenient, be it meal delivery services, errand running services, Daigou or actual products that simplifies your daily routine. To better put it in context, here are a few numbers of the lazy economy: The number of Chinese users on meal delivery platforms has surpassed 400 million. The market size of self-heating hotpots is over 6 billion RMB. China is responsible for close to 40% of the global instant noodles consumption - each person consumes 27 packets of instant noodles each year on average!
Product creators are thinking how to make sure the products are convenient and “lazy” to use. Both online and offline sellers are also often putting “ease” first. Young generations are paying more for optional lifestyle products than necessities on e-commerce platforms. Some of the top-trending products on the platform include one-swipe eyeshadow applicators, self-heating hot pots, lazy horizontal glasses that allow users to read or watch television while lying down, and even smart home appliances, such as automated cooking machines and robotic vacuum cleaners. Consumers aspire for a higher quality of life, but also do not want to do much work to achieve that. In addition to self-heating hotpots, semi-prepared meal packages have been very popular as well. Just over this past CNY, the online sales of semi-prepared meal packages in cities such as Beijing, Shanghai, Guangzhou and Shenzhen grew over 300%. The GMV of ready-to-cook meals priced below 60 RMB grew over 2.6 times.
The main drivers behind this economy are predominantly consumers between age 18 to 30. This consumer group makes up close to 70% of the total consumers of the lazy economy and has a roughly 1:1 gender ratio. Some experts in the industry expect the consumer group of aged 30 or above is soon emerging and would further contribute to the growth of the lazy economy.
The Guochao economy
Guochao literally translates as “national trendy”. Guochao does not simply mean adding Chinese elements to sneakers or doing trendy collaborations with local brands. But rather, there is an ever increasing appreciation and recognition of Chinese culture among Chinese consumers. They also show a higher preference for local brands after the pandemic. Survey data shows that 62.0% and 55.2% of survey respondents prefer purchasing Guochao products from e-commerce platforms and brand official websites respectively.
The highly social nature of e-commerce platforms as well as livestreaming features have advanced the promotion of Guochao trends. For instance, Alibaba has announced a series of initiatives to support Chinese brands since 2018. The “New National Products” initiative in 2019 was launched to promote the digitalization of over 1,000 Chinese business communities and to facilitate over 200 traditional Chinese brands to reach an annual GMV of 100 million RMB. Last April, Alibaba also launched another initiative to help with the local brand and product development. With the project in place, they are aiming to give more exposure for Chinese brands and get at least 3 more Chinese brands in each Tmall consumer’s shopping cart.
The fan economy
Last but not least, the fan economy. This term refers to the consumption driven by fans and followers of celebrities and influencers. The market size of the fan economy in 2019 was over 3.5 trillion RMB and is expected to surpass 6 trillion RMB by 2023. In the past, those who have an influence over their followers were typically movie stars or singers. As the digital economy develops, an abundance of KOLs, influencers, livestreaming anchors from multiple sectors and platforms have already risen to exert influence over their followers. Studies show that fans and followers are becoming younger. Only 26.78% of post-90’s report to be followers of celebrities or influencers, while the numbers are much higher among younger generations - 50.82% among post-95’s and over 70% among post-00’s. The kinds of influencers different age groups are after also slightly differ. Post-00’s mainly follow idol band groups while older generations tend to follow internet celebrities (also known as Wanghong) and livestreaming anchors.
Celebrity endorsement remains to be a major strategy for brand marketing and sales promotion. While this is no foreign concept in the West, the scale of celebrity endorsement in China is significantly different from the West. These fans have proven to be a very strong supporting force of the market and will buy everything or almost everything their favourite artists or bands endorse. They would simply buy to support their idols and even purchase these products as gifts to friends and family. This super loyal fandom will truly drive the consumption forward.
Celebrity-endorsed FMCGs tend to drive the most consumption as the unit price for such products is smaller, making it easier for young fans and followers to support the products endorsed by their favourite stars. In 2020, celebrities drove the most consumption on instant coffee, personal hygiene products, fashion accessories, skincare, cosmetics and sports accessories. The star effect is not only present among lower-priced items. For instance, a number of automobile brands such as BMW, Audi, Mazda, Lexus, Volkswagen and Hyundai have recruited post-95’s celebrities as their brand ambassadors to appeal to a younger audience as well.
Chinese consumer behaviour is constantly being shaped and modified by geographical, generational and psychological complexities as well as the surge of different new trends and technology. Trends are constantly evolving. The above-mentioned 5 group economies are only a part of the much more complicated and vibrant market that China is. These economies are not any short lived consumer trends, but they stimulate manufacturers or businesses and even the whole ecosystem to make adjustments to fit the new reality.
To succeed in a market like China, you need to stay on top of these changes, remain flexible but patient and commit an adequate budget for strategy, research, promotion and sales activations.
It takes a village to succeed in China. This means a mix of your own team, strategy consultants, marketing agencies, tech giant and platform collaborations as well as ecommerce trade partners. It also takes focus, investment and time. But the prize is worth it.
This article was contributed by Ashley Galina Dudarenok, founder of ChoZan & Alarice, China marketing expert, best selling author & professional speaker. Download the latest China e-commerce and digital marketing report for Q1 2021 here.