Chinese Consumer Market Maturing with an Increasing Focus on Product Quality, Combined with an Exponential Growth of Consumer Choice

SHANGHAI, June 13, 2012 /PRNewswire-Asia/ -- The Chinese consumer market­place is quickly growing more segmented and mature, with an increasing number of consumers in top tier cities demanding higher quality products—and willing to pay a premium for them.  While at the same time, in smaller but rapidly expanding cities and rural areas where price still rules, the choice of available prod­ucts has dramatically increased.

In stark contrast to last year's results, both Chinese and multinational companies (MNCs) view the opportunities, challenges and trends in the China consumer marketplace similarly leading to heightened competition for the same market segments.  

These top trends, revealed in 2012 China Consumer Market Strategies, a report released today by The American Chamber of Commerce in Shanghai and Booz & Company, are driving an increasingly complex consumer market that is becoming more competitive for both Chinese and multinational companies. 

"This year's report highlights an increasingly mature and competitive consumer market in China, one which U.S. companies are fully committed to," said Brenda Foster, president, AmCham Shanghai. 

The second annual report, based on a survey of more than 150 Chinese and multinational companies, focused on nine disruptive consumer trends identified by AmCham Shang­hai and Booz & Company.  Companies were asked to rank the trends, how prepared they felt they were to respond to them and then to rate their top challenges to respond to the trends.

THE TOP TREND: VALUE AS A DIFFERENTIATOR

Both Chinese companies and MNCs chose value as a differentiator as the most important consumer trend in Chi­na today.  In Tier-1 and Tier-2 cities (including Shanghai, Beijing and Guangzhou), an increasing number of consum­ers are seeking greater value, qual­ity and integrity in the products they purchase. This represents a significant evolution from what has been a price-driven market.

A significant majority of MNCs and Chinese companies (83%) expect this trend to increase brand loyalty among consumers focused on value and 87% expect to see an increase in consumers' willingness to pay more for quality products and services. 

Joni Bessler, director, Booz & Company, said, "This is a positive trend for the overall market and one that respondents believe MNCs are best positioned to respond to."  Continued Bessler, "At least for now, the gap between MNCs and Chinese companies in responding to value consumers appears to be in branding capabilities. Chinese companies admit that they have not gone far enough to promote their brands."

INCREASING CHOICE THE DRIVING FACTOR IN MARKETS IN TIER 3, TIER 4 AND BEYOND

In smaller but rapidly expanding Tier 3 and Tier 4 cities (such as Ningbo, Wuxi and Dongguan) the survey indicates price remains the key driver in purchase decisions, but the choice of available prod­ucts has dramatically increased. Price points and purchasing channels are also in flux as companies battle to win over these more fickle consumers, hoping to align their products and services with customer tastes.

"In contrast to the top trend, Value, companies told us the increase in choice has reduced consumer loyalty to specific brands and consumers in this segment expect to pay less for products or services of similar quality," said Adam Xu, principal, Booz & Company. 

A CONVERGENCE IN APPROACH

"This year's survey found that in their strategic approach to the market, as well as in their responses to the challenges they face in product development, marketing and sales—do­mestic and international companies have converged," said  Brenda Foster, "This, in turn, has made an already competitive Chinese consumer market much more competitive." 

The report highlights a jump in the number of MNCs focused on e-commerce in China.  Twelve months ago, many more Chinese companies than MNCs placed a premium on the rise of e-commerce (developing e-commerce and other Internet-based sales channels) to tap into the Chinese market.  

"An increas­ing number of MNCs told us that they plan to implement e-commerce as a sales channel to reach Chinese consumers and to incorporate social media into their branding strategies - a clear indi­cation that MNCs are trying to find the best way to monetize the large population of Chinese Internet users," said Vineet  Arora, Executive Partner at Havas Digital.

Both this year and last, MNCs noted that human resources issues—finding, develop­ing and retaining talent—were among the top two challenges they faced. Chinese companies, however, were far less worried about these issues in 2011. This year, by contrast, views have converged—as many as 62 percent of Chinese companies and 51 percent of MNCs rate talent is­sues among their top two challenges.

LOOKING AHEAD

2012 China Consumer Market Strategies details an increasingly competitive market as both Chinese companies and MNCs view the market and its challenges similar­ly - and they are targeting the same potential cus­tomers.

To succeed in the Chinese consumer market today, the report outlines four priorities for companies: 

• Clearly articulate the role that each of the four core capabilities— product innovation, marketing and branding, sales and distribution and people—will play in the organization's operating and business model.
• Develop detailed strategies within each of these four capabilities and un­derstand, against the company's strat­egy, where it is important to be truly great versus acceptable.
• Ensure that these capabilities and underlying strategies are mutually re­inforcing and coherent.
• Be nimble and adaptive, and use the company's capabilities to shift strategies as the market transforms.

About the 2012 China Consumer Market Strategies

The 2012 "Trends in China's Consumer Market" survey was conducted by The American Chamber of Commerce in Shanghai (AmCham Shanghai) in cooperation with Booz & Company, a global management-consulting firm that works with many of the world's top businesses, governments and other institutions. A total of 152 companies with extensive sales operations in China were surveyed in April and May, 2012. The companies were presented with nine trends impacting the Chinese consumer and in a series of questions were asked to rank them by a) their overall importance; b) how these nine trends will impact the market in the coming years; and c) how businesses are responding to these trends.  The survey was conducted through online questionnaires and follow-up interviews.  This is the second annual report and survey conducted by AmCham Shanghai and Booz & Company.

About AmCham Shanghai

The American Chamber of Commerce in Shanghai, known as the "Voice of American Business" in China, is the largest and fastest growing American Chamber in the Asia-Pacific region.  Founded in 1915, AmCham Shanghai was the third American Chamber established outside the United States.  As a non-profit, non-partisan business organization, AmCham Shanghai is committed to the principles of free trade, open markets, private enterprise and the unrestricted flow of information.

Visit www.amcham-shanghai.org for more information about AmCham Shanghai.

Follow us: Sina Weibo, LinkedIn, Twitter & RSS Feed

About Booz & Company                                    

Booz & Company is a leading global management consulting firm, helping the world's top businesses, governments, and organizations. Our founder, Edwin Booz, defined the profession when he established the first management consulting firm in 1914.

Today, with more than 3,000 people in 60 offices around the world, we bring foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. We work closely with our clients to create and deliver essential advantage. The independent White Space report ranked Booz & Company #1 among consulting firms for "the best thought leadership" in 2011.  

For our management magazine strategy+business, visit strategy-business.com.  

Visit booz.com to learn more about Booz & Company.

SOURCE The American Chamber of Commerce in Shanghai