Sue Feng, [email protected], 010-5912-9195
China – Beijing -- Chinese consumer confidence ended 2014 with an index score of 107—a decline of four index points from the previous quarter, which comes after four consecutive quarters at 111, according to a new study by Nielsen, a leading global provider of information and insights into what consumers watch and buy. While confidence fell slightly in China in the fourth quarter from the previous quarter, year-over-year, the index still maintained at 110, the same level with 2013 and 13 percentage points higher than the global average.
Worldwide, Global consumer confidence ended 2014 with an index score of 96—a decline of two index points from the previous quarter. China still ranks the 6th with Hong Kong among the 60 countries and regions measured in Nielsen’s global Consumer Confidence Index tracking. Consumer confidence declined one point in Asia-Pacific (106) in the fourth quarter. Among the world’s biggest economies, consumer confidence decreased two points in the U.S. (106), and four points in Japan (73). Conversely, confidence rose one point each in Germany (98) and in the U.K. (94).
“Despite the 4-point drop, the Chinese consumer remains optimistic about their job prospects, personal finances and their desire to spend in the coming year relative to their global peers for most of the markets. Meanwhile, our survey results also show that the consumer confidence in higher tier cities, where income growth and buying power are comparatively stronger, shows a healthy boost ,” said Yan Xuan, President of Nielsen China.
The Nielsen consumer confidence index measures perceptions of local job prospects, personal finances and immediate spending intentions. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively.
A HEALTHY BOOST AMONG HIGH-TIER CONSUMERS
Looking within the country, among Tier 1 consumers, who are usually regarded as well-educated and financially-powerful consumers, job prospect expectations rose 3 percentage points to 65%, the state of personal finance increased three percentage points to 77% in Tier 1 cities, and immediate spending intentions jumped four percentage points to 65% among Tier 1 consumers in the 12-month period.
“It’s worth noticing that all three key indicators of Nielsen’s consumer confidence index (namely job prospect expectations, state of personal finance and immediate spending intention for the next 12 months) reached record high levels in Q4, 2014 for Tier 1 consumers,” said Kiki Fan, Managing Director of Nielsen China. “The high consumer confidence scores for these three key indicators can be attributed to several factors: Expectations for a stable economy and well-controlled CPI, aspiration for a high-quality life, and an established habit of online shopping.”
According to consumer confidence report, 66% of Tier 1 consumers increased their household spending in 2014 compared with 2013, while 28% claimed they remained the same level of spending with 2013. When compared with the previous year, vacation/travel (48%), food and beverage (44%) and out-of-home dining (41%) tops their spending list, in particular, those who spend on vacation/travel increased 8 percentage points compared with 2013.
Meanwhile, the trend towards online shopping is strongest for Tier 1 consumers as well. Nielsen’s report shows that nine out of ten Tier 1 consumers (91%) shopped online in 2014, a 12-percetnage-point increase compared with 2013. Tier 1 consumers also spend more than half (53%) of all their time on all kinds of media browsing and shopping online.
“Thanks to the concentration of shopping holidays such as Singles’ Day, Christmas and New Year in the fourth quarter, both online and offline, consumer purchase intention registered stronger readings, especially in higher tier cities, It proved again that online shopping festivals created new vitality in the retail market, not only for online merchants, but for offline channels as well,” Fan added.
YEAR-OVER-YEAR PERFORMANCE REMAINS STEADY
Despite the 4-percentage-point drop in China’s overall consumer confidence, which is mainly due to the temporary decreases in job prospect expectations and state of personal finance in Lower Tier cities, Chinese consumer confidence remains steady and has kept growing in small increments form since 2009, when the CCI was only at 97 points.
When looking at the year-over-year key indicator performance metrics, Chinese consumers’ perceptions about spending intentions and job prospects increased one percentage point to 44% and 74% respectively in 2014 compared to 2013. Meanwhile, Chinese consumers’ perception about personal finance remained unchanged at 69%.
By region, the Central-Western region, however, still lagged behind the other three regions at 104 points, reporting the highest growth of 4 percentage points in 2014 compared with 2013, followed by the Southern (112) and Northern regions (112), where consumer confidence has increased 2 percentage points year-on-year. The Eastern Region, where consumer confidence has always been highest in 2013 at 115 points, slid down to 112 points as well in 2014.
“There was a small step back in the fourth quarter, but this will NOT have a big impact on the Chinese consumer market, where a transit from meeting a basic demand to satisfying aspirations for a better life is happening every day across the country,” said Fan.
Besides saving money (63%), which is always where Chinese consumers’ extra spending money goes, in 2014, China saw more consumers, compared with the previous year, spending their spare cash on discretionary items such as dining out (36%, +8%), clothing and shoes (45%, +6%),personal digital products (27%, +6%), children’s education (37%, +5%), personal car’s maintenance (22%, +4%) and holiday and vacations (21%, +4%).
“In 2014, we see a stronger awareness for health and wellness, and higher discretionary spending intention towards items aimed at a better life, which are all positive signs for us to further dive into the un-met demands in these areas and activate more consumption in the future,” Fan concludes.
AN OVERVIEW OF CHINESE RETAIL MARKET IN 2014
According to Nielsen’s retail tracking data, Chinese retail offline market for Fast Moving Consumer Goods (FMCG) categories grew year-on-year at a single digit 5.5% in 2014 in offline channels.
“Compared with the year-on-year double digit growth of FMCG categories at 15% back in 2012, this year’s single-digit growth of 5.5% is a drop-off. However, it doesn’t mean Chinese consumers stopped spending; Instead, it means that given more choices and more channels to buy what they want, consumers kept spending more year on year,” said Fan. “The competition to win today’s Chinese consumer is only getting fiercer, between online and offline, locals and multinationals, for a wide range of existing and emerging consumer segments.”
According to Nielsen, China witnessed a rapid e-commerce growth in 2014 in China’s retail market. Among the 55 FMCG categories measured by Nielsen, in particular, 13 key categories with higher online sales penetration, the online sales against its total sales value importance rose from 16% in 2013 to 19% in 2014, growing 37% in terms of absolute sales online. It brought the total growth of these categories from 7% offline only to 12% as a combined growth of online and offline. At the same time, mobile commerce also show very strong uptrend, with a 48% of Chinese consumers once shopped via their mobile devices in 2014, while in the US, only 33%.
However, with the strong growth in e-Commerce and Mobile Commerce, offline retailers are fighting back to defend their territory. “Amid the moving-online strategies among many Chinese manufacturers and even retailers, in 2014, offline retailers were also trying different strategies to compete, by providing better shopping experience & services, further specialized store segmentations, and integrate online with offline, in order to better reach today’s consumers,” said Kiki.
According to Nielsen’s research, in 2014, the market that is tailored for aging consumers enjoyed a double digit growth in 2014.
“China’s aging population is a segment that will grow bigger in the future and bring huge opportunities for the Chinese consumer market,” said Fan. “No matter in size or in consumption capacity, today’s aging population has become more financially powerful over the past decade given the overall wealth accumulation in China,” said Fan.
However, Nielsen’s global survey report on aging in 2014 shows that many needs of the elders have yet been well met.
“As retailers and manufacturers clamor to create a point of differentiation for their products and services, they only need to listen to the loud call for help coming from aging consumers,” said Fan.
“Meanwhile, as the Internet continues to permeate the everyday lives of connected Chinese consumers everywhere, savvy marketers need to ensure they are connecting with the aging demographic, not only with today’s elderly, but the future elderly who grew in the Internet Age.”
Another highlight for China’s FMCG retail market in 2014 is the rise of local brands, who have been, over the past couple of years, quickly catching up with their multinational counterparts for a bigger share of the market.
For the top 30 key FMCG categories measured by Nielsen, Chinese local manufacturers take up nearly 70% of the market. Even in categories where multinationals traditionally win such as personal care, the gap between local and multinational is further narrowing down (48% vs. 52%).
“The Chinese market is showing an unique development pattern, and multinationals are facing a different market landscape in China than five years ago; They need to adapt to the changing consumer’s taste to keep competitive,” said Fan.
“Besides smartly inheriting the Chinese heritage in their products based on a better understanding of Chinese consumers, there are many things we can learn from local players. It can be their very fast response towards a new need or a hot social event, their robust deep distribution network, and their constant innovation to expand their product portfolio to meet a diverse of emerging needs,” said Fan.
Based on Nielsen’s forecast, China’s retail market for FMCG market is likely to maintain a single digit year on year growth of 5.5% in 2015. In the face of the low-growth momentum of the Chinese retail market, Fan pointed out that fight for consumer’s share of mind and wallet is only going to get tougher this year.
ABOUT THE GLOBAL SURVEY
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 Nov. 10-28, 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 among 3,500 respondents in China.
The sub-Saharan African countries in this study are compiled from a separate mobile methodology survey among 1,600 respondents in Ghana, Kenya and Nigeria. These three countries were added to Nielsen’s measurement of consumer confidence in the first quarter of 2014 using a mobile survey methodology, which differs from the online methodology used to report consumer confidence and spending intentions for the other 60 countries outlined in this report. As such, the three sub-Saharan African markets are not included in the global or Middle East/Africa averages discussed throughout this report.
Nielsen 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.