After 6 years of explosive growth, China’s e-commerce is slowing down with saturation seemingly the main culprit: from an impressive growth rate of 74% in 2011, it has fallen to an expected 19% in 2017. However, consumption itself is the opposite of sluggish. In fact, by 2021 China is expected to add another consumer market the size of Germany’s.
Although the main factors driving China’s online market, such as the rising middle class and demographic changes, have been constant, a recent report published by McKinsey (in Chinese) reveals that there are new shifts in the market that companies need to be aware of. Here are the five trends that explain the evolution of China’s digital consumers.
1. Omnichannel shopping becomes mainstream
People want to try out gadgets before they commit. This is why for consumer electronics selling products through both online and offline channels is especially beneficial. When consumers do online research and then visit the brand store or showroom, the probability of buying the product rises up to 80%.
Consumers also have more demands when it comes to services such as delivery and online customer service. More advanced omnichannel experiences such as VR and online customization of products have also drawn demand from consumers.
2. Buying anytime and anywhere with context-triggered shopping
Whether they are hanging out with friends or swiping through WeChat, consumers want goods to be available for purchase at any time, any place and by any means. Immediate availability means that many consumers will not have time to change their minds. Delivery is also a crucial part of making the sale – for many sellers, tomorrow is just not good enough
3. Keeping touch with consumers through social media
Sales through social platforms are expected to be the next big growth area. Among digital consumers, 85% regularly interact through social media, but for now, they only spend 10% of their shopping time on social platforms. Chinese consumers value recommendations from friends and family, which means B2C brands can use social platforms to spread positive shopping experiences.
4. Personalized goods and services are on the rise
Consumers are craving more customized products and services for themselves and their families, such as specific designs, short-term rentals, and trials. This gives brands opportunities to test more innovative models which can help them gain an edge among competitors.
5. Big data will lead to a better understanding of consumers
Nobody likes spam, and according to social media users, most of them are receiving just that. Seeking advice in offline environments such as stores has also been lacking a personal touch. This is why retailers should focus on gathering data that can be used to understand the consumers and offer them exactly what they need.
The McKinsey analysis also noted that companies in China are now abandoning classical online sales models and looking at new trends and channels that will enable them to stay on top of their game.
But identifying trends may not be enough to drive growth. Companies need to zoom in on specific consumer segments to fully exploit new trends, according to a report on Chinese digital consumers by Boston Consulting Group (BCG) in cooperation with Alibaba.
In the past, retailers mostly targeted their consumers according to demographic factors like age, gender, and income. Today, companies need to understand how trends affect shopping habits turning their shoppers into more heterogeneous groups. The BCG report has identified five profiles that explain how macro trends play out on a microeconomic level.
1. The Savvy Shopper
Chinese consumers are more brand-aware than in other parts of the world and thanks to the web they are able to “shop the world.” When it comes to demographics, savvy shoppers can belong to any gender and age. They are growing more independent in the products they buy. A good example is Chinese men living in first-tier cities who have been spending more time on grooming and searching for the best products to keep themselves look good.
2. The Single Person
Marriage trends in China are catching up with the West, meaning there are more singles than ever. This means that many consumers now have a different lifestyle; they live, dine, travel, and pursue activities by themselves. It also means that products designed for singles, such as furniture, smaller appliances, and food packages are rising.
3. The Eco-conscious Consumer
Sustainability and environmentally-friendly products have also seen a rise in popularity. According to Alibaba, 66 million customers bought five or more eco products in 2015, compared to only 4 million in 2011.
4. The Passionate Trend Seeker
In the past, many Chinese consumers were focused more on professional advancement, and they had simple hobbies that did not require high levels of spending. However, this is changing. Exotic travel destinations, extreme sports, pursuing hobbies and other experiences which enrich lives are gaining traction in China.
5. The Connected Consumer
Chinese consumers are digitally connected in a remarkable degree; they often buy products online for the sake of convenience instead of price. This also means that they are open to new technologies, including smart devices and appliances.