China Consumer Trend Index Stood at 112 Points in Q3 of 2018

FMCG and Retail | 11-30-2018

China’s Consumer Trend Index reached 112 points in the third quarter this year, down 1 point from the last quarter, according to Nielsen's latest study. 

Data from the National Bureau of Statistics showed, the country's GDP growth increased by 6.5 percent in Jul-Sep period, 0.2 percentage point lower than the previous quarter. GDP remained stable, but the growth rate slowed a bit. It indicated that as China's economic structure continues to optimize, new economic drivers continue to grow, becoming an important force for economic operations to maintain at a reasonable range.

Andy Zhao, president of Nielsen China, said: "Thanks to a slew of stable policies, employment, finance, investment, foreign investment, foreign trade and expectations all have shown a stable and good trend. It has laid a solid foundation for China’s economy."

Nielsen’s Consumer Trend Index measures perceptions of local job prospects, personal finance and willingness to spend. Consumer Trend levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively.

PERSONAL FINANCE REMAINED STABLE, CONSUMER TREND INDEX IN RURAL AREA SURGED

The Nielsen report showed the three components consisting Consumer Trend Index were in a stable state. Personal finance stood at 68 points, the same as the previous quarter. Job prospects and the willingness to spend were 73 points and 59 points, respectively.

In terms of different city tiers, Consumer Trend Index in rural areas climbed from 114 points in the second quarter to 115 points in the third quarter – a slight increase. Specifically, the willingness to spend increased from 58 points to 60 points, which became the leading factor of growth. Personal finance grew from 63 points to 64 points, and job prospects surged from 82 points to 83 points – both of which witnessed a slight increase.

"As China will put forward tax cuts and other fees reduction, tax policy has become more reasonable and benefited Chinese people. The disposable income of residents has increased significantly, which effectively boosts consumption and plays a positive role in driving economic growth," Andy said.

Since 2015, China’s Consumer Trend Index has surpassed the global average. According to Nielsen data, China's Consumer Trend Index reached 107 points in 2015, which was 10 points higher than the global average of 97. In the first half of 2018, the index in China amounted to 114 points, far higher than the global average of 105. The willingness to spend has become an important factor in the steady growth of China's Consumer Trend Index. The Nielsen report showed China's household spending has grown steadily. Households with the rising expenditures accounted for 45 percent among all in the third quarter of 2018, compared with 39 percent of the same period last year. 52 percent of family generated the same expenditure as that of a year ago, while only 3 percent spent less than last year.

“New retail has been integrated with advanced technologies like big data, artificial intelligence, modern communications. It has become a driving force of China’s business transformation. At the same time, as the globalization advances, China has made ceaseless efforts in further opening-up and boosting global trade, which injected strong momentum into the economic development," Andy added.

MAINSTREAM ATTITUDES ON CONSUMING: PAYING FOR INTEREST, RATIONAL CONSUMPTION, COST-EFFECTIVE

Paying for interest, rational consumption, cost-effective became mainstream attitudes. Nielsen study showed in the next year, 48 percent of consumers have a tendency to buy cost-effective products, 39 percent prefer to purchase products that are suitable for themselves, which indicates that “fit matters more than brand.” 36 percent of consumers were willing to pay premium for their interest and emotion, and 24 percent would compare prices through different channels.

Interest drives consumption. Consumers are willing to pay premium for their interest. 36 percent of consumers are willing to pay premium for interest. For example, the middle class spends 600 yuan per year on watching cinema, and female in middle class spends 40,000 yuan per year traveling abroad.

Though consumers are willing to pay premium for interest, they become rational. When making purchase decisions, consumers could consider more about product quality, rather than relying solely on brands. New brands gradually gain market due to the increasingly segmented market.

Nielsen data founded that the value share of mid-small brands increased by 0.5 percent, and brands owned by retailers rose by 0.1 percent. At the same time, in terms of offline channels, the value share of top ten FMCG multinationals shrank from 17.8 percent to 17 percent. On the contrary, the value share of local medium- and small- size firms increased from 25 percent to 21.3 percent.

Homegrown medium and small firms took advantage of flexible decision process and management of channels in lower-tier markets, accelerated the pace of making breakthrough innovations, and boasted a network of dealers in different regions. Thus, they continued to gain market. Meanwhile, those imported brands met consumers’ diversifying demands through selling products with exotic features in online channel.

In addition, cost performance was another factor that consumers paid attention to. The trend didn’t represent consumption downgrading, but indicated that consumers looked for a cheaper way for buying quality goods and they differed in product categories. Nielsen’s data showed, between November 2017 and October 2018, consumers preferred to purchase super premium advanced personal care products. The growth rate of such super premium products reached 28 points, and value share 52 percent – both were way higher than products in other price tiers. As for daily necessities, consumers were more likely to buy quality goods in cheap price. The value market of these products amounted to 46.8 percent, higher than those in other price tiers.

At the same time, consumers also chose to reduce the total expense through membership or group purchasing. Nielsen found that 31 percent of consumers hold a membership for the reason to gain a cheaper price, while 65 percent did group purchasing to achieve the goal of saving money.

Andy said: “The consumption upgrading means not only enhance the product quality but also upgrade consumption concept. Amid a frenzy of consumption upgrading, consumers have been more mentally mature, more practical and rational, and no longer willing to spend for the consideration of face or buy famous brands. A new type of consuming culture is forming.”

PROSPEROUS SOCIAL CONNECTION, THE INTEGRATION OF ONLINE AND OFFLINE SOCIAL EXPERIENCE BECAME NEW MARKETING TREND

The e-commerce sector has been continuously innovating its models. Social e-commerce, a concept recognized by consumers, witnessed rapid growth. According to Nielsen’s data, social e-commerce saw an explosive growth, an increase of 439.2 percent year-on-year. The expansion was higher than second-handed e-commerce (46.4 percent), cross-border e-commerce (38.5 percent) and comprehensive e-commerce (21.9 percent). So far, social e-commerce can be categorized into two models: social relation and interest circle. Consumers in the first- and second- tier cities preferred interest-oriented e-commerce, while those in the third- and forth- tier cities preferred buying what friends and family recommended.

City tiers differed in social shopping demand. Nielsen report indicated that consumers in first-tier cities paid more attention on product quality, looked for personalized products and special offers. Consumers in the second-tier cities focused on cheap products, and those in the third- and forth-tier cities cared more about authentic picture and quality services. It can be concluded that social platform would integrate online and offline development to enhance consumers’ experience.

Andy said: “Amid the great upsurge in social marketing, brands need to lay more emphasis on combining the online and offline social experience, in order to meet consumers’ personalized need and scenarized social experience. Meanwhile, as the market continue to be segmented, brands need to pay attention to consumers’ personalized demand, boost their satisfaction and lay a foundation for the brands’ future development.” 

Tagged:  CONSUMER

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