In looking at consumer confidence trends in China during the recent second quarter, a subtle shift is becoming apparent: willingness to spend among rural consumers is bolstering the country’s overall confidence. In fact, willingness to spend among these consumers hit 47% in the second quarter, up 10 percentage points from past quarters. The uptick resulted in a two-point rise in consumer confidence among rural-dwelling consumers.
The shift in the rural portions of the country stands in notable contrast to confidence in Tier 1 cities, which dropped one index point since the first quarter. Comparatively, the consumer confidence index levels for Tier 2, 3 and 4 cities remained steady during the recent quarter. Combined, the overall confidence level and willingness to spend in the country’s rural areas stand out as strengths to support future consumption growth in China.
Notably, when consumers were asked why they believe now is the time to buy what they need, 25% of rural consumers cited “convenience of shopping” as the strongest factor for their behavior. Rural consumers also stressed that online shopping channels are dramatically making shopping more convenient. Shopping online also helps rural consumers purchase items they don’t have access to otherwise.
With the help of agreements between manufacturers and local governments, e-retailers have penetrated almost 20% of China’s rural population. While this level of online shopping availability lags the national average of 42%, rural consumers say they are spending more online than the national average. Rural online spending growth stood at 64% in the second quarter, markedly higher than the national average of 53%.
And when it comes to areas of opportunity, maternal and baby care products, personal cosmetics, tourism and virtual service products have higher penetration rates among rural consumers than Tier 1 consumers. Nielsen research suggests that the strength of these categories stems from a high degree of product assortment and availability that is now available online.
In looking at fast-moving consumer goods purchasing trends across China, consumers in the east are making the transition from brick-and-mortar stores to online sites quickest. The percentage of people who say they are buying online instead of offline stood at 35%, and 25% of people in the east say they purchased items more than two times a month. Both metrics highlight how consumers in the east are driving consumption—and they’re using digital channels to do it.
So what are eastern consumers buying? Nielsen research shows an emphasis on day-to-day items, quality-of-life improvements and personal indulgences. Eastern consumers were also more willing to spend more on dining out (59%), clothing and apparel (53%), and home appliances (50%).
While the east is doing its part in helping China’s shift to a consumption-based economy, its consumer spending is more rooted in satisfying personal desires/needs—a wave of consumption that, in correspondence with the onslaught of convenient, pervasive e-retailer influence, could propel China into an abundance of potential consumer growth.
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The Nielsen Global Survey, which includes the Global Consumer Confidence Index, was established in 2005. This Nielsen Global Survey of Consumer Confidence and Spending Intentions was conducted May 11-29, 2014 and polled more than 30,000 online consumers in 60 countries throughout Asia-Pacific, Europe, Latin America, the Middle East/Africa and North America. The sample has quotas based on age and sex for each country based on its Internet users and is weighted to be representative of Internet consumers. It has a margin of error of ±0.6%. This Nielsen survey is based only on the behavior of respondents with online access. Internet penetration rates vary by country.
Nielsen uses a minimum reporting standard of 60% Internet penetration or an online population of 10 million for survey inclusion. The China Consumer Confidence Index is compiled from a separate mixed methodology survey (online, phone and face-to-face) among 3,500 respondents in China. The mixed methodology facilitates the insights from Tier 1 and rural cities.