Changing Consumer Market: The CPG Industry In China
The Consumer Packaged Goods (CPG) Industry worldwide has been suffering a huge change with the advance of technology and the dramatic shift in consumer preferences. The CPG industry in China, home for more than 1.37 billion consumers, becomes even more complex. In order to succeed in this environment companies need to understand really well who their new consumers are, what they are looking for and how to exceed their expectations.
The rapid industrialization in China created common features, such as: rising incomes, urban living, better education, postponed life stages, and greater mobility. With all this development, the Chinese are certainly getting richer and having more disposable income to go shopping. A Mckinsey study showed that the share of Chinese households in each income level will shift dramatically by 2020, where the population with income above $16,000 represented 1% in 2000, just 8% in 2010 and will represent 57% by 2020. This means that the Chinese are spending more money on things that were considered luxuries not a long time ago and also demanding for products with better quality.
The consumers in China are considered extremely curious, a fact that increases their willingness to try new products. However, this characteristic leads consumers to be less loyal to specific brands and companies. The Chinese want to experience new things and are constantly searching for a better deal to satisfy their expectation.
The one child policy helped the Chinese economy in many different ways and one of them was supporting the women independency. Chinese women was free from caring for a large family and started to aim high. These women, aspiring to get top jobs, are important consumers for the CPG industry. In January 2016 this policy shifted to a two-child policy applied to all married couples, but the expectation is that the Chinese women will keep this goal of independency.
The pragmatism is still really vivid in each Chinese. In general, they are not very impulsive consumers, as they prefer to search in different channels before they purchase. Urban Chinese consumers want to have a convenient experience associated with their shopping habits.
The Impact of Technology
Chinese consumers are now digitally empowered and consequently more demanding. Comparisons among products regarding price, quality or consumers feedback can be done quickly online. A recent research showed that 8 out of 10 consumers now interact with brands or products online before arriving at a store.
In 2013 China was already ranked first among all online shopping markets worldwide, because its online market represented 7.8% of the whole retail market of consumer goods. By 2017 studies predict that China’s online shopping market will grow to $650 billion, what is much higher than the $370 billion projected for the US online market.
Consumers in China are heavy users of social media. Even though the most popular worldwide social media platforms are prohibited in China, this country has its own platforms and networks, such as Tencent Weibo, which has more than half a billion accounts. Chinese also use these platforms to source product information. So it is clear that the TV advertisements are becoming less important and the investments on digital marketing are skyrocketing.
The digital era has also impacted significantly the CPG companies regarding knowing their consumers better. The internet allowed the companies to have access to huge and detailed databases about their consumers’ preferences and trends, especially through the social media platforms. However, the amount of information is so big and move so fast that the companies need to have specialized team in big data analytics to interpret all the information and transform it in smart strategies.
So the changes in this industry has been significant in order to follow the changes in the consumer’s’ preference. Investments in technologies and in analytics capabilities are essential to be innovative, consumer-driven and succeed in this environment.
- The purchase power of the Chinese is continually increasing.
- Chinese consumers are becoming less loyal
- Women have an increasing importance in this CPG industry
- The availability of online information helps the Chinese to find better deals
- E-commerce and social media are bringing new opportunities and challenges for this industry
MBA Candidate 2016