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In China, Premium Sells: From Toothpaste to Cars to Banking
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In China, Premium Sells: From Toothpaste to Cars to Banking

Chinese consumers have developed a taste for the good life

They are spending more on goods and services they perceive as higher quality or higher status, on everything from toothpaste to cars to banking, Nielsen research shows. Consumers are using their growing buying power to trade up to premium products – and this trend is a key driver of sales growth in China.

“In FMCG (fast-moving consumer goods) categories, the trading up trend started with small items like a yogurt drink, as consumers were willing to pay more for something beyond the ordinary,” said Lynn Xu, vice president, Nielsen BASES, Nielsen Greater China. “Today, the trading up trend is so prevalent for FMCG products that it can be seen in nearly every category, from infant baby formula to liquid milk, from a bottle of skin moisturizer to a tube of toothpaste.”

One reason: A fourfold increase in average household income in just over a decade.

Between 2000 and 2012, disposable annual income in China jumped from an average of 6,280 RMB ($1,022 USD) to 24,564 RMB ($3,999 USD), according to the Chinese government. And in just the past three years, total assets in Chinese banks have grown 146 percent.

“With more cash in their pockets, Chinese consumers have developed a more sophisticated taste for life,” said Xu. “Consumers’ increased awareness of product quality and safety is the primary trigger behind the premium trend. The strong premium momentum in infant milk formula, especially following the 2008 melamine scandal, is a good example.”

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China’s booming growth is also obvious on the country’s roads and highways. In just five years, sales of luxury cars have tripled. And Nielsen research shows the luxury car and luxury SUV sectors have grown at a faster rate than the total market: 32 percent for cars and a staggering 70 percent for SUVs.

“We could say that China has become a regional hub of premium car brands, as several of the most well-known premium brands have secured a significant market share in China,” said Ganesh Relekar, senior director of Auto Consumer Research, Nielsen Greater China. “Luxury auto companies from around the world are working to expand their footprints in China.”

With a growing number of millionaires and billionaires, China also has attracted the attention of the financial world. Eighteen banks have launched elite services to cater to the needs of wealthy Chinese.

But premium products aren’t just for the wealthy. In fact, average-income consumers show interest in a wider variety of premium products than wealthy consumers do, Nielsen research shows.

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“Today, Chinese consumers’ needs are evolving from functional to emotional, from basic needs to self-realization,” said Xu. “Beyond basic needs, Chinese consumers are looking for a better and healthier life where they can enjoy advanced technology, a product that might showcase who they are, and an opportunity to indulge as a self-reward for their hard work. In this regard, products with natural/green ingredients, or special features are likely to win more Chinese consumers on their path toward premiumization.”

What are the best ways to sell a premium product in China?

  • Stretch your brand, instead of launching a new brand, to leverage existing credibility in the market.
  • Go green and natural, with natural ingredients.
  • Offer a unique benefit or a specific function – such as VIP perks with a premium service credit card, for instance.
  • Offer a competitive advantage, communicating specifically why your product is better than your competitors’. And back it up with superior performance.
  • Stand out with high-quality packaging.

For more insights into the Chinese consumer, click here.