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The previous issue of the Media Express（Winning in China 2024 Industry Response Interpretation） provided an interpretation of the industry response section in the report. An industry’s development strategy is influenced by macroeconomic and policy factors, and the reactions and measures of various industries will be transmitted to individuals, thereby changing consumer behavior and concepts. This issue of the Media Express will mainly focus on the consumer market section to provide an interpretation for everyone.
Macro
Consumption growth is steady, there is a significant rebound inresidents' travel, and policies continue to be implemented to expand domesticdemand
Retail sales grow steadily, with robust offline spending
Consumption has become the main driver of China's economy, contributing 83% to GDP growth in 2023, far exceeding investment (29%) and net exports (11%).
Boosting domestic demand and consumption has become a key strategy to maintain stable economic operations. Since last year, the government has implemented policies to stimulate consumption, designating 2024 as the "Year of Consumption Promotion." Initiatives like equipment upgrades and trade-ins for consumer goods are expected to create a market worth over a trillion yuan annually, fueling economic growth.
In 2023, China's real GDP grew by 5.2%, and the total retail sales of consumer goods increased by 7.2% year-on-year, nearly reaching the 2019 level of 8%, indicating steady consumption growth.
In Q1 2024, total retail sales rose 4.7% YoY, with catering income surging 10.8%, highlighting offline consumption strength. Sports, entertainment, tobacco, alcohol, and beverages saw notable growth, as did durable goods like communication equipment (up 13.2%). Yet, discretionary spending on jewelry, cosmetics, and apparel was more cautious, indicating a mixed consumer outlook.
Consumerconfidence needs boosting, and the savings rate remains high
In 2023, residents' disposable income rose 6.3%, matching the pace of the previous three years, while consumption expenditure jumped 9.2%, driven by offline activities. Despite this, consumer confidence remains low historically, with the March 2024 confidence index at 89.4.
High savings growth, totaling 56 trillion yuan from 2020 to 2023, surpasses 2023's total retail sales, reflecting a preference for saving overspending amidst uncertainty. The slight recent decline in savings growth indicates rising spending willingness, which is positive for economic stimulation. Implementing policies to raise income and stabilize employment, improving the consumption environment and fostering new consumption models, is expected to unlock further growth in the consumer market.
Domesticand international travel boost,improving convenience of population mobility
Domestic travel has surged since 2023, with a 19% rise to 470 million trips over 2019's Spring Festival. International travel is recovering and is set to reach pre-pandemic levels soon due to increased flights and visa-free policies.
Otherwise, China‘s new visa policy 2023, offering visa-free entry to several European countries like Germany， the Netherlands, Italy, and Spain， along with resumed international flights, is enhancing tourism and business investment through cultural and economic exchanges.
Consumers
Consumers adapt to uncertainty by lowering expectations, seeking newvalue, and creating new demands
Changingenvironments lead consumers to lower expectations and seek stability and newvalue
After a rebound in early 2023, the economy entered a period of slow growth, influenced by macroeconomic changes, slower income growth, and a real estate downturn, leading to consumer uncertainty. In 2024, despite slight improvements, risks remain, prompting consumers to lower expectations and seek stability.
Consumer attitudes are shifting towards enjoying the present and valuing happiness in spending. Data from GroupM's "Shan Hai Jin" indicates a significant increase in consumers who agree with living for the moment and prioritizing personal enjoyment, with a focus on spending on experiences like travel and entertainment.
Consumersdemand higher quality and prioritize practicality in their purchases
Information equality has expanded consumer choices and increased product knowledge, leading to higher demands for practicality, functionality, quality, emotional value, shopping experience, and aesthetics. Consumers are more discerning, valuing product quality over brand fame. People adapt to prolonged uncertainty and engage in "dignified saving": cutting back on ordinary consumables while investing more in learning, hobbies, and health for long-term benefits.
Breakthrough
Consumers increasingly valueemotional engagement, and brands can create new shopping experiences throughdiverse and innovative approaches
Under persistent external pressures, consumers prioritize emotional well-being and seek spiritual comfort to ease stress, elevating the importance of emotional value. Brands that foster emotional connections or offer stress-relief marketing activities are favored.
Cultural trends also shift towards traditional elements, with a resurgence of interest in metaphysical practices, creating niche communities around astrology and Eastern philosophies.
Brands like “Hope Water" enhance consumer experiences through diverse, scenario-based interactions and leverage trendy metaphysical topics to boost online presence and brand perception.
Rising awareness and purchasing power among young consumers globally, including in China, drive a growing interest in sustainable brands. This trend is evident in their willingness to pay more for eco-friendly products. Brands respond by adopting sustainable practices that align with consumer values, enhancing profitability and market competitiveness. Sustainable marketing is becoming more youthful and interactive, integrating lifestyle elements like travel and art to engage young consumers and strengthen brand loyalty.
Breakthrough
Focus on the structured shift inconsumer needs and make adaptive adjustments to existing products
Population shifts from first-tier cities to regional centers create multipolar growth, increasing consumer demand in second and third-tier cities. The narrowing income gap between urban and rural areas leads to similar consumption patterns. Businesses are capitalizing on the trend of upgrading their consumption in these markets, differentiating themselves with superior products and services. The internet also allows products from larger cities to reach consumers in smaller markets through proxy purchases.
Long-term demographic trends show declining fertility rates, expanding the single and childless population, and changing family structures, which drive new consumer needs. For instance, the pet and home entertainment sectors benefit from the need for companionship, and there's potential for home renovation due to small families' desire for comfort. Companies must adapt their product lines and marketing strategies to these shifts to capture new market opportunities and attract new consumer groups, ensuring a competitive edge.
Source:
GroupM Knowledge "Winning In China 2024"
Anna Zhang
GroupM Knowledge Analyst
Hot trends using sober analysis
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