Latest China Consumer Report Highlights Opportunities for the West
By Stephen Knowles, MD at Industrial Design Consultancy (IDC) UK
With China's rapid development and changing attitudes, Chinese consumers are now spending more on services than products, but the good news for Western manufacturers is that the focus is on premium, high quality products. According to McKinsey’s latest China Consumer Report, which interviewed 10,000 consumers across 44 cities, 50% of Chinese consumers are now seeking the most expensive products and Western brands are leading the way.
With design studios in both the UK and China, IDC has been in a unique position to observe the changes that have taken place within China over the last five years and the McKinsey report confirms much of what we have been observing. Consumers are used to owning a wide range of products but most will, at some point, have experienced disappointment by low quality, low price generic products from domestic Chinese manufacturers. In response to this, Chinese people are rightly demanding that products live up to their promises. They are looking for the best quality products and no longer want inferior, cheap products that copy expensive Western brands. They want quality and are prepared to pay for it.
Increasingly Chinese retailers and distributors are searching to find new Western products to bring into China to capture a share of this market. Export requests such as: ‘Baby pushchair products sought by Hubei-based company’, ‘Pharmacy company seeks medical devices & diagnostic reagents’, ‘Alcoholic beverages requested to sell in Free Trade Zone’, give a snapshot of the scale and breadth of products affected.
At the same time leading Chinese manufacturers have understood this changing consumer attitude and are coming to us for product design and innovation as they look to develop high quality products that compete with the best products globally. There is also a focus on the longer term and developing products that can bring sustainable profits. While local companies may lack the history and perceived quality of their western counterpart, they do have the advantage of being closer to their customers.
Clearly, there is great opportunity for Western manufacturers, with Western brands in a leading position with consumers for their creativity, quality and for meeting stringent international standards. The biggest challenge facing Western companies is understanding Chinese markets, culture and customs which are so different to the West, and adapting or developing products to meet the local market needs. The IDC China research team (Western and Chinese) have been carrying out research with users for a broad range of products, from OTC medicines, to domestic appliances, from security equipment to medical devices. In fact as I write this, I'm working in China visiting hospitals across the region to assess concepts with doctors and nurses on behalf of a UK client. Our research projects and insights have been fascinating and have led to innovations and the development of products for Chinese and Western clients.
Our experience has also shown that companies can find it tough developing products that balance cost, innovation and quality with an image-conscious population. But the opportunity for developing products for a population of 1.4 billion people is immense, especially as McKinsey’s report confirms consumers are happy to keep on spending, with rising salaries and low unemployment.
Whether it's medical devices, domestic appliances or fast moving consumer goods, the trend in China is the same, users are demanding more and more from their products - they want high-quality products and they trust Western companies to deliver this but at the same time they have specific needs which brands need to address if they are to win their custom and ultimately their loyalty.
Key findings of McKinsey’s 2016 China Consumer Report:
- The majority of Chinese consumers prioritise happiness over wealth but feel a growing need to save money.
- Chinese consumers are positive about their future income.
- There is a growing desire to buy premium quality products.
- Online shoppers are much more likely to visit a physical store before buying than shoppers in a physical store are to visit an online store before purchasing.