61% of Chinese Consumers Choose Premium products because of Superior Quality

CPG, FMCG & Retail | 04-01-2019

According to Nielsen's latest premium products survey, the top five premium products that Chinese consumers are most willing to buy are personal electronics (56%), apparel (48%), cosmetics (46%), cars (43%) and jewelry (42%). Based on this result, we can see that with the rapid growth of disposable personal income, the rise of the middle class, more and more Chinese consumers with more wealth and personal taste have emerged rapidly in China. They prefer superior quality, premium products, and are increasingly willing to spend money on premium products.

What does “premium products” mean? According to Nielsen's definition, when a product’s price exceeds 20% of the average price of the category, it is a “premium product”.

"Based on the continued and rapid growth of premium products in China, we can see that Chinese consumers are increasingly looking for innovative and high quality products, and they are willing to pay for an upgraded lifestyle. We have been seeing the premiumization trend develop in recent years, so this is not necessarily new, however the evolving sophistication of consumers is something that continues to surprise us. Consumers are looking for niche premium products that align with their personal taste, they want products that deliver an experience, and they demand strong value for the price they are paying," said Andy Zhao, president of Nielsen China.

Overseas e-commerce is becoming an important channel for Chinese consumers to buy premium products

Chinese global shopping is no longer limited to overseas travel, online overseas retailers have become an important channel for Chinese consumers to buy premium products. Following the improvement of China’s e-commerce environment, industry capital investment and rising consumer demand, various online and overseas e-commerce platforms are stepping into a new development stage. According to Nielsen research, 49% of Chinese consumers purchase premium products online from overseas retailers, which is much higher than the global average rate (24%).

At the same time, based on the background of consumption upgrade, and the accelerating integration of online and offline, new retail channels continue to grow in popularity. Many cross-border e-commerce platforms are now opening offline stores and creating new e-commerce consumer experiences through online and offline integration. Nielsen data shows that 26% of Chinese consumers choose to buy premium products from offline stores opened by overseas e-tailers, which is much higher than the global average rate (15%).

Undoubtedly, the rapid development of overseas e-commerce has brought tremendous pressure on local retailers both online and offline. Nielsen report also shows that 63% of consumers will buy premium products from offline stores, while 57% of consumers buy premium products from online retailer.

“Despite the rise of overseas e-commerce, consumers will continue to buy locally because of faster logistics as well as after-sales service, which is one weak point for overseas e-tailers,” Andy Zhao added.

Superior Quality, natural/ organic ingredients, superior function and performance are the most important reasons for consumers to purchase premium products

With the change in consumption habits, prices are no longer the primary factor of the consumers consider when purchasing premium products. According to Nielsen’s survey, 61% of Chinese consumers decide to purchase premium products because of the superior quality of the products, which is much higher than the global average rate (49%). This is followed by organic/natural ingredients (56%) and superior quality (54%). Similarly, consumers also are willing to pay more for exclusive series products (47%), sustainable products (49%) and socially responsible products (37%).

In addition to being able to get a better experience in product functionality, Chinese consumers are more concerned about whether these premium products can give them a good experience and make them feel more confident. When asked about the motivation to purchase premium products, 63% of consumers around the world said that buying quality products can more or less make them feel happy, but this proportion is as high as 67% in China, ranking second in the world, next to India's 72%. Among global consumers, 63% believe that buying premium products can increase their self-confidence, while China's proportion is once again at a high level, reaching 62%, second only to India's 72%.

Interestingly, Nielsen’s research found that some Chinese consumers will also consider whether the product will help to demonstrate their high social status and good taste to others. However, quality products can not only express the purchaser's sophistication and taste, but also give the user a sense of accomplishment. Most Chinese consumers who were interviewed said they bought quality products because the products made them feel successful (61%) or made others think are successful (59%), which is much higher than the respondents of developed countries.

“Superior quality and performance are now key decision factors. However, social status and a desire to show one’s personal taste or career success are still important considerations for today’s increasingly sophisticated Chinese consumers," Andy Zhao said.

Recommendations by friends or family play an important role in influencing consumers in their trial of new premium products.

The survey further highlights that 68% Chinese consumer show that recommendations by friends or family play the most important role in their trial of new premium products. Likewise, many consumers (40%) rely on television advertising, online advertising (39%), in-store advertising (26%) and emotional factors (26%).

“In this survey, we were very surprised to find that the recommendation by friends or family when consumers go shopping became much more important than other factors, such as advertising,” Andy Zhao said, “In this highly competitive retail industry, all company should pay attention to this point, provide better services, improve consumer’s shopping experience, and create more content for the products which make products more humanize and form a good reputation among consumers."

Tagged:  CONSUMER  |  CHINA

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