Chinese consumer confidence down 1 point in Q1
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E-mail China.org.cn, May 22, 2015
According to Nielsen, when Tier 4 consumers were asked where they spend their discretionary income, 65% said dining out, an increase of 3 percentage points compared to Q4 2014. Buying new clothes (65%, -7%) also surpassed putting money into savings (63%, -11%), followed by children's education (60%, +1%) and tour/holidays/vacation (55%, +2%).
"The increasing importance of these small cities is no doubt a positive sign for manufacturers and retailers looking to unleash even more consumption power from these Tier 4 cities in the future," Rust said. "With modern facilities and an emerging middle class, lower-tier cities are emerging quickly in today's China. However, a combination of modern and traditional approaches will be important to win consumers in these cities, as consumers still embrace many traditional aspects of life."
Increased Online Shopping Holiday Sales Lead to Offline Downtrend
Following a historic high of 118 points in Q4 of last year, Consumer Confidence in Tier 1 cities dropped five percentage points to 113 points this quarter. Meanwhile, the index of Tier 2 cities decreased by 4 index points to 108 in Q1.
"Instead of regarding it as adowntrend, we believe the changes inConsumer Confidence in upper tier cities are just normal fluctuations. While, despite these fluctuations, Tier 1 cities continue to drive Chinese Consumer Confidence momentum," said Rust.
According to Nielsen, the decline in Consumer Confidence within upper-tier cities is mainly a stabilization of the current trend. The increase in the last quarter of 2014 is primarily attributed to a massive increase of online sales during the Singles' Day online shopping holidayin late 2014.
"It doesn't mean online channels will be the main driver behind the retail growth in China in the future. Instead, our findings show that clicks won't be replacing bricks-and-mortar any time soon," said Rust.
Another recent global survey on e-commerce and retail indicates that although a majority of Chinese respondents say they already, or are willing to, order grocery products online for home delivery, two thirds still claim that going to a grocery store is an enjoyable experience. A similar percentage (69%) considers grocery shopping in a retail store as a fun day out for the family.
"Online channels bring convenience for consumers while offline channels provide unique shopping experiences. Consumers are no longer shopping entirely online or offline, ratherthey're taking a blended approach and using whatever channel best suits their needs. The most successful retailers and manufacturers will be at the intersection of the physical and virtual worlds, leveraging technology to satisfy shoppers however, wherever and whenever they want to shop," said Rust.
Emerging Trends: Travel Aspirations Mixed With a Focus on Family and Convenience
According to Nielsen, both the domestic travelling population (+13%) and overseas travelling population (+15%) realized double digit growth year-on-year. However there is still a gap between upper and lower tier city consumers. 62% respondents from Tier 1 cities and 59% from Tier 2 choose to travel during holidays, higher than that of Tier 3/4 cities (52% and 54% respectively).
Nielsen's data also shows that rising aspiration for travel among Chinese consumers brings new growth opportunities for single serving pack and on-the-go pack products. One example is the chocolate category, where single-serve-package chocolate grew by 9% in Feb and March 2015compared with the same period of 2014. This was in in contrast to the 1 percent decline for the overall chocolate category. Similarly, ready-to-drink beverage products (including products like Ready-to-Drink Tea, Juice, packaged water) also grew by 12% (vs. 10% for overall category) in February and March versus the same period last year.
In addition to Chinese consumers' increasing demand for travel, a focus on family and convenience can be found among Chinese consumers in their daily spending behaviors. Take the family cleanser pack (including laundry liquid, kitchen cleanser and bathroom cleanser) for instance; Tier 1 cities saw an impressive growth rate of 152% in Q1 this year, followed by 112% in Tier 3, 91% in Tier 2 and 83% in Tier 4 cities.
In addition to the previous findings,Nielsen's survey shows increased spending on home improvement and decoration (+1%) by Tier 1 consumersand on children's education (+5%) by Tier 2 consumers. "For both manufacturers and retailers, it's time to give special attention to these changingupper-tier consumers who are transitioning from self-recognition to family focus, from saving for the future to travelling to see the world," said Rust. "The key to winning over these changing consumers lies in identifying and riding the trends to best meet their evolving needs with the best products and services."
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