Chinese consumer behavior and targeting in 2024

In the past three decades, Chinese consumer behavior have changed dramatically as incomes have risen and new products and concepts have entered the China market.  Consumer behavior continue to evolve today.

Planet Retail has found that the older generation generally maintains “traditional” spending habits, middle-aged Chinese move between tradition and new trends, and the younger generation is becoming more Westernized and quality conscious.

In order to determine who exactly shall you target, you would need to have a clear picture of each of the consumer layer excising in China.

The basics of Chinese Target Audiences and Chinese consumer behavior:

Before you start deciding where to invest your money and time, we suggest you take a deeper look at the audiences that you would want to attract and match those with the marketplaces. These would include General TA attributes and a deeper consumer shopping behaviors.

In general Target Audience Attributes include:

Geographical and demographical criteria: such as gender, age, province or city, occupation.

Phyco-emotional criteria: such as pain points, aims, wishes, problems and hesitations. What does your targeted consumer feel when it comes to your product or service? How does your product resolve the pain point of the audience? Does your audience look for the solution of their problem?

General Behavioral criteria: such as the factors of decision making, general behavior and purchasing habits. Would the person compare every product on the market or buy the one that speaks to him in the moment? Does he or she enjoy online shopping?

Knowledge of these criteria would allow you to target the best audience suited for your offer.

Chinese consumers’ behavior attributes

Generally, Chinese consumers develop shopping behaviour in their youth and keep these habits through adulthood. According to the China Business Review Magazine, the current Chinese consumer population can be separated into 9 groups.

Frugal retired

Born before 1960, most of these Chinese consumers grew up in tough political and economic times, did not receive systematic education, and worked at state-owned enterprises. The difficult environment during their early lives made these individuals frugal and sensitive toward changes in consumer goods prices.

Wealthy retired

This group experienced difficulties similar to the frugal retired consumers, but wealthy retired individuals primarily worked in government and government-funded enterprises that provided higher wages and better retirement benefits. Though many of these consumers are frugal, they are less price-sensitive and often value quality more than cost.

Frugal forties

These consumers, who grew up during the Cultural Revolution (1966-76) and early stage of the reform era, swing between tradition and new trends.

They work in various companies—state-owned, private, and foreign-invested—and earn modest incomes. These consumers generally save a large proportion of their earnings to take care of their children and parents. 

Wealthy forties

These consumers share the same background as the frugal forties, but they work for the government or large state-owned enterprises and have slightly higher incomes. Though they must also raise children and look after their parents, they are willing to pay premiums for quality products. In the next decade, consumers in their forties will have fewer childcare responsibilities and expenses. These consumers will thus increase spending on entertainment, groceries, travel, and high-quality and healthcare products.

Thirties

Many consumers in this group are well-educated and grew up in a more open environment than their parents. Compared with older generations, Chinese in their thirties save less, spend more on entertainment, and often shop online. They also pursue value and quality rather than low prices. These individuals will become the most important consumers in the next decade, buying for their parents, children, and themselves.

Twenties

Consumers in the first generation of the one-child policy have opposite shopping habits from their parents. These consumers barely save and spend most of their income on entertainment, advanced electronics, and other trendy products. They often shop online and look for products that help distinguish their personalities.

They can also be impulse buyers. As consumers in their twenties age and start new families, their shopping habits may become slightly more conservative, though they will still favor high-quality and convenient products and spend more on groceries than previous generations.

New generation

The new generation of consumers (under the age of 20) is the most Westernized and open to new products. These consumers pursue individualism and often use the Internet to follow global trends. Though most in this group do not yet earn an income, they significantly influence their parents’ decisions on food, clothing, electronics, and other purchases. Social media is an effective marketing tool to reach this group of consumers (see the CBR, January-March 2011, Social Media in China: The Same, but Different).

Migrant workers

Migrant workers generally aged from 25 to 45 years old, are rural residents who moved to the cities for jobs starting in the 1990s.

They can be even more frugal than elderly consumers, buying only the necessities and saving money to send to their families in rural areas. Many migrant workers are expected to see a big increase in incomes and move their families to the cities in the future.

They will significantly increase spending on groceries once they receive city household registration, or hukou status and fully integrate into city life. Migrant workers’ consumption levels are unlikely to match that of their urban peers, however.

The rich

There are more than 1 million Chinese with assets over $1.5 million, and the number is increasing rapidly. Rich consumers, of any age, are fairly concentrated in large urban areas, with Beijing, Guangdong, and Shanghai housing about half of this group. These individuals are successful entrepreneurs, top managers, and business owners. They pursue the best products available, particularly imports, and are the perfect candidates for marketing new products. Premium supermarkets have already emerged in China to provide high-quality products to wealthy consumers.

This classification is not the only one available, but it does illustrate some of the most important factors in decision making of the consumers in China.

Driving Consumption habits in China

Foreign companies must understand certain factors to successfully sell to Chinese consumers.

1.Some consumer habits can change

Coffee provides the best example of changing Chinese consumer habits.

Affected by the COVID-19 pandemic and turmoil in capital markets, the freshly brewed coffee chain market in China has, over the past 15 months, experienced rapid expansion, a slow down, and a rapid pick up.

According to Deloitte’s recent report, 1st- and 2nd-tier cities have a coffee penetration rate of 67% which is equivalent to their tea penetration rate.

Of habitual coffee drinkers, more than 50% are constantly increasing their coffee consumption, thereby developing a coffee drinking habit.

Driven by 1st-tier cities, coffee marketing education will extend to other cities, and coffee will change from a “trendy drink” to a “daily drink”.

The reasons why Chinese consumers’ consume freshly brewed coffee have changed from drinking coffee to socialize to functional demand, wherein drinkers become dependent on coffee physically or psychologically. Consumers in 1st-tier cities drink coffee to refresh themselves as they face greater stress at work, making physiological needs the major reason for coffee consumption.

2.Small discounts are better than none

Many Chinese consumers, wish to save as much as possible.

Brands limit the amount of discounted products consumers may buy at a time to encourage shoppers to visit the stores more frequently.

These types of promotions have proven effective as many Chinese consumers are willing to invest time to save on a particular item.

3.“Face” matters

Chinese people greatly value “face”—a quality associated with dignity, honor, and pride—and will pay more to “save face”.

For example, when purchasing gifts for important friends and family during Chinese New Year, consumers generally buy gifts that are of the appropriate value for the receiver and pay particular attention to product packaging.

Consumers that cannot afford a higher-quality gift will buy the product with the nicest packaging within their price range. In addition, consumers will pay more for gifts with fancier packaging, even if the product is of equal quality to a less expensive item.

4.Chinese consumers generally favor foreign brands

Product safety incidents have scared Chinese consumers away from certain domestic products. Consumers will often pay a premium for foreign brands to ensure quality, particularly for important items such as infant formula.

To increase their products’ appeal, many Chinese companies register an office in the United States or Europe and brand their products as “foreign.” This has made it increasingly difficult for consumers to discern domestic from foreign brands, and they thus turn to famous and leading brands instead.

Foreign companies should devote resources to ensure Chinese consumers know their products’ true origin.

5.Pricing is a sensitive issue

Pricing a foreign brand in China can be tricky.

On one hand, Chinese shoppers believe the higher the price, the better the quality or the higher the status. If a foreign brand is priced lower than a local one, shoppers may suspect that it has defects.

On the other hand, the premium Chinese consumers are willing to pay varies by product category and by consumer groups.

For example, Planet Retail finds that young shoppers are willing to pay double for foreign-branded infant formula or five to seven times more for foreign bottled mineral water. But older consumers are not.