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Nielsen: Chinese Consumer Confidence Holds Steady In Q3 2013

Contact:
Sue Feng, sue.feng@nielsen.com, 010-5912-9195

Willingness to spend highest over the past three years driven by tier 4 consumers
Health top concern among city consumers

Beijing – Embargoed until Nov. 19, 2013, 12:01 AM ET – Consumer confidence index in China remained stabilized at 110 in Q3 2013, an increase of four points from the same period last year (Q3 2012), according to consumer confidence findings from Nielsen, a leading global provider of information and insights into what consumers watch and buy.

In other key developed economies, Nielsen information shows that the United States saw consumer confidence increase seven index points to 98 from the same period 12 months ago, its highest score in six years (Q3 2007) and nearing pre-recession levels. While consumers in India and Brazil remain some of the most confident in the world, confidence in these key growth economies continues to show modest downward movement over the last few quarters. India delivered a score of 112 for its third consecutive quarter of declines, and confidence in Brazil declined one index point to 109. Russia held steady from Q2 2013 with index scores of 80.

Perception on purchase intention in Q3 highest in three years

“Amid the rebound of Chinese GDP growth rate to 7.8 percent in Q3 from 7.5 percent in Q2, Chinese consumers’ perception about personal finance and job prospects all remained stabilized, while the perception about spending intention increased another two percentage points to 43 percent, the highest since Q2 of 2010, which again built up a good foundation for China to transform its economic growth pattern from investment-driven to consumption-driven,” said Patrick Dodd, managing director of Nielsen China.

“The increases in Chinese consumers’ willingness to spend were mostly shown in lower-tier cities and rural areas, which was in line with the government’s efforts in increasing household income, offering affordable housing and healthcare and granting people’s access to compulsory education in these city tiers,” said Dodd. “With the urbanization set as one of the strategic objectives of China’s economic rebalancing, we are confident that the momentum will continue in the years ahead.”

The Nielsen Global Survey of Consumer Confidence and Spending Intentions, established in 2005, measures consumer confidence, major concerns, and spending intentions among more than 29,000 respondents with Internet access in 60 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. The Nielsen China Consumer Confidence Report is the biggest of its kind and is compiled from a mixed methodology survey among 3,500 respondents in China, covering from tier 1 to rural consumers in China.

Nielsen’s survey shows that in the third quarter of 2013, consumers in East China reported the highest confidence index in China of 116 points (+1), followed by the South region at 111 (-1), the North region at 109 (-3) and the West region at 99 (+1).

Tier 4 cities most promising in boosting Chinese consumption

The quarterly confidence in Tier 2 cities increased from 104 to 105, declined one point in Tier 3 cities to 105, and declined three points in Tier 1 cities to 111. Quarterly confidence in Tier 4 cities continues to show a growing momentum in Q3, which increased two index points to 109, seven index points up compared with Q1.

In specific, respondents from Tier 4 cities reported increased optimism for personal finance from 66 to 68 percent, and for purchase intention, three percentage points up to 48, following a big jump of seven percentage points from Q1 to Q2.

“The tier 4 cities, many of which are located at the border of rural and urban China, are always regarded as the regional center for rural consumers to shop around, or to have a try-out of city life, making them as a bridge to connect urban consumption with rural consumption,” said Dodd. “The expansion by both multi-national and local Chinese companies and retailers into lower-tier cities will further unlock the consumers’ purchase power in these emerging markets.”

According to Nielsen’s information, the retail sales for FMCG (a total of 59 categories measured by Nielsen in modern trade channels) in Tier 4 cities account for 44 percent of the total across the country in Q3, a 9 percentage-points growth compared with the same period of last year. Meantime, consumers from these cities generate 52 percent of China’s total online shopping.

Though the consumer confidence in Tier 1 cities dropped three percentage points from 114 to 111, over the past two years, the Tier 1 consumers still reported an increase of 10 percentage points since Q4 of 2011. “Tier 1 consumers, together with consumers from Tier 2 cities, are still China’s mainstream consumers thanks to their higher household income and more diverse needs for consumption in a wide range of areas. Meanwhile, Tier 1 and Tier 2 consumers’ strong desire in trying better products and new trends so as to satisfy their aspirations for a high quality life is the most important driver to push further ahead China’s overall trading-up trend in consumer market,” said Dodd.

Health as top concern for city consumers; concerns on rising food price dropped

According to Nielsen’s survey, Income (43%) and health (26%) remained the top national concerns for Chinese consumers. While income (71%) continued to be the top concern for rural consumers, health mattered most to city consumers by winning at least 23 percent of respondents’ votes from all tiers. Compared with Q2, health attracted more attention by winning the favour of 26 percent (+3) and 27 percent (+3) of respondents from Tier 1 and Tier 4 cities respectively.

Nielsen’s information also indicates that more than half of the Tier 1 Chinese respondents put a healthy diet ahead of enjoying meals. “Those products that contain certain ingredients helpful for a body’s health gained much higher growth than ordinary products,” said Dodd.

According to Nielsen’s information, Asian traditional drink that features natural ingredient has become the 3rd fastest-growing category in FMCG market monitored by Nielsen, only following functional drink and facial mask that ranks No.1 and 2 respectively.

Nielsen’s research on Tier 1 cities also showed that both the low-fat milk and skim milk enjoyed a fast growth over the past year.

Increasing food prices, formerly ranked among the top three concerns for Chinese consumers, dropped to the fifth (12%), following children’s education and welfare (18%), personal career (13%), and equally weighted by consumers together with job security.

Winning over China’s E-commerce market

According to Nielsen’s information, the sales growth for FMCG categories showed a downward trend to 7 percent in Q3 compared with Q2, with a year-on-year retail sales growth of 8 percent.

But meanwhile, the overall retail sales across China had remained a healthy double-digit growth of 12.9 percent in the first three quarters, according to the latest statistics by the National Bureau of Statistics.

“Compared with offline, the retail sales via the emerging online channels has been growing so rapidly in China over the past few years, with its contribution to the total retail sales increased more than nine times from the 0.6 percent in 2007 to the current 5.6 percent in 2012,”said Lynn Xu, vice president of Nielsen Greater China. “The challenge for online commerce outlets is to define just who their customers are, what they buy online and how they make their purchase decisions.”

According to Nielsen’s research, apparel & accessories and cases and bags enjoy the highest penetration of around 88 percent of Chinese online shoppers, followed by products of daily use or household products, which attract more than 73 percent of online shoppers to buy.

Though only around 30 percent of Chinese consumers surveyed by Nielsen claimed they once bought mom-and-baby products online, the sales value for this category in the virtual market ranked the third among the 8 categories measured by Nielsen, only following digital products/electronic home appliances/mobile phones and apparel & accessories/cases/shoes. “Flexible shopping and delivery/pick-up options are proving popular and attractive for more and more online shoppers, particularly when combined with smart promotions across online and offline platforms,” said Xu.

Thanks to a 66% penetration of smart phones among Chinese consumers today, e-commerce evolves a step further to mobile commerce. “Engaging with different mobile users, whether young or old, rural or urban residents and well connecting with them with the right business and media strategy is critical in winning this quickly-expanding momentum,” Xu added.

About the Nielsen Global Survey
The Nielsen Global Survey of Consumer Confidence and Spending Intentions was conducted between August 14 and September 6, 2013, 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 their Internet users, is weighted to be representative of Internet consumers, and has a maximum margin of error of ±0.6%. This Nielsen survey is based on the behavior of respondents with online access only. Internet penetration rates vary by country. Nielsen uses a minimum reporting standard of 60-percent Internet penetration or 10M online population for survey inclusion. The China Consumer Confidence Index is compiled from a separate mixed methodology survey among 3,500 respondents in China. The Nielsen Global Survey, which includes the Global Consumer Confidence Index, was established in 2005.

About Nielsen
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA, and Diemen, the Netherlands. For more information, visit www.nielsen.com.

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