Meet China’s young consumers
China is rapidly transforming from a “world factory” to a “consumption powerhouse” as it shifts from export/investment-led expansion to consumer-drive growth. This policy paradigm shift comes as China’s top leaders acknowledge that continued reliance on state and corporate investments and exports is no longer conducive to stable growth.The shift is well under way. Domestic consumption has grown at an annual rate of about 15 percent in the past five years. As a result, consumption’s contribution to growth reached 51.8 percent last year, up from 43.1 percent in 2010. This trend should continue as the government promotes further urbanization.
The vanguard of the consumption wave is four young generations - post-1980s (balinghou), post-1990s (jiulinghou), second generation of the rich (fuerdai) and young rural-to-urban migrants (new generation nongmingong). With rising income, purchasing power and greater propensity to consume, they are the current and future agents of China’s efforts to reconfigure its economic model.
The balinghou were born in the first decade of China’s reform when the country began opening up. Now in their 30s, they are the main drivers of consumption. Born under the one-child policy, they are the center of their families and the major consumption decision makers. Consumption by this generation is expanding more than 20 percent annually, leading the change in the growth of consumption.
The jiulinghou were born in the 1990s. Currently in their 20s, they grew up in a period of double-digit economic growth rates and mounting prosperity. Highly attuned to luxury goods and foreign brands, they are the trendsetters. The jiulinghou are early adopters who practice experimental consumption and are the present and future drivers of consumption in China.
The fuerdai and the “new generation nongmingong” were born after 1980, but their backgrounds are far different. The fuerdai have inherited their parents’ wealth and currently account for 10 percent of the upper class. They use brands to express their unique personalities and prefer new or niche brands. Since the fuerdai are much richer than the balinghou, they tend to purchase luxury products like high-end cars and expensive watches as well as travel abroad.
In sharp contrast, the new generation nongmingong have humble rural backgrounds. In their 20s and 30s, these rural-to-urban migrant workers come from low-income households. Among the 220 million nongmingong, about 100 million are part of the new generation nongmingong. The environment and period in which they grew up make them completely different in values and lifestyle from first generation nongmingong. The new generation experienced high economic growth and social change. They have a strong sense of individualism and aspire to certain standards of living. Unlike the previous generation, they hope to be a part of the urban population.
The new generation nongmingong will soon become a consumer force that can no longer be ignored. Currently, their purchases are primarily in low-priced segments, but in the near future, they will likely move up the value chain. While their hard work led China to achieve economic prosperity, their consumption in the future will have a formidable role in converting China’s economic growth model.
Companies trying to tap into the Chinese domestic market will need to understand the sentiment, emotion and characteristics of young consumers. Continuous monitoring is necessary to identify consumption patterns and values on which to base Chinese strategies.
For companies that have not yet established brand loyalty in China, it is important to first make a good impression with young consumers. To be successful, companies need a must-have iconic product that boasts global-level design, quality and personality to tap into young consumers’ insatiable appetite for new brands and products.
Furthermore, businesses need to understand that these four generations prioritize individuality. Therefore, marketing strategies need to consider their desire to differentiate themselves and express unique individual values.
Since the new young generations are active Internet users, expanding marketing on blogs and social networking sites, including QQ, China’s key online chat site, is also crucial. Various approaches based on their income levels also are needed.
by Yoo Jin-seok
with the Korea JoongAng Daily
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