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Nielsen China Forum Succeeding in China’s FMCG Marketplace
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Nielsen China Forum Succeeding in China’s FMCG Marketplace

64% of Chinese consumers consider online opinions important when buying consumer electronics and 48% look to web advice for purchasing cars.

Recent global and national economic trends have upended the fast moving consumer goods (FMCG) market in China. The long-term economic growth of the Chinese economy has produced consumers with higher levels of disposable income, driving FMCG manufacturers to increase supply. Now that the recent global economic uncertainty has slowly started to fade, Chinese consumers are again feeling cautiously confident and they are spending money. Yet, having recently lived through economic turmoil, Chinese consumers are more demanding than ever.

To succeed in this market, FMCG companies must prove they can be both demand- and innovation-driven. Marketers must confront sophisticated Chinese consumers with innovative and unique product offerings.

The Power of Innovation

Not long ago, marketers operated in an environment with little competitive supply and unlimited consumer demand. This imbalance favored FMCG producers, who were able to leverage the lack of consumer choices into profitable operations on limited costs. The tables have since turned. Product offerings have multiplied, new companies have expanded, and widespread distribution has improved—all dramatically increasing supply. Demand, on the other hand, has contracted, and FMCG marketers are in a fierce competition. To distinguish themselves in the oversupplied market and win customers, companies must develop innovative products that stand out from the crowd and attract the new sophisticated Chinese consumer.

The Fixed vs. the Flexible Marketplace

Today’s Chinese consumer is far more agile and flexible than in previous times. Chinese consumers are quickly moving much of their shopping from in-store purchases to the online arena. E-commerce is thriving; China online sales are estimated to reach 400 billion RMB by the end of 2010 with exponential growth forecasted beyond.

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Consumer’s online experience with packaged goods begins before the actual point of purchase. Increasingly, consumers are conducting their own online research when considering important purchases. They are consulting online consumer review sites and leveraging online social networks for opinions on brands, products, and value. According to a Nielsen global study, fully 64% of Chinese consumers consider online opinions important when buying consumer electronics and 48% look to web advice for purchasing cars.

Developed Cities to Emerging Markets

China’s recent economic development has been both swift and gradual. While the vast economic growth is unmistakable, the regional manner in which it was administered and facilitated by the state has produced tiered cities and towns in different stages of market development. As a result, lower tier markets still hold huge potential for manufacturers and retailers in the FMCG sector. In these areas, economic liberalization happened later than in the Tier 1 cities like Shanghai, Beijing, and Guanzhou, and they represent a huge opportunity as emerging markets.

To capitalize on this opportunity, both multinational and local marketers need to understand the intricacies of these lower tier markets. To leverage the emerging markets in China’s lower tier regions, FMCG marketers will need to think about these populations differently than in the past and balance their resources accordingly.

Ready, Willing and Demanding

Chinese consumers today are conscious, demanding, and in power. They have money to spend and are willing to try new products using new channels. FMCG marketers willing to invest in product innovation, understand the new marketplace, build a strong brand and leverage China’s emerging markets will be well positioned to succeed in this new demand-driven economy.