---
title: "Chinese Consumer Preferences Shift Rapidly Toward Mid-to-High-End Products"
description: "The moderate slowdown in China's overall retail sales growth masks multiple upheavals beneath the surface. Recent studies show changing tastes and shopping habits, with consumers curbing luxury purchases abroad, becoming more discerning at home, and prioritizing spending on health, family, and experiences. A survey by FT Confidential Research indicates that overall growth in discretionary spending likely continued to slow in March, following a 10.2% year-on-year increase in retail sales in the first two months of the year, down from 10.7% in 2015 and 12% in 2014."
author: "New Distribution"
publisher: "New Distribution"
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published: "2016-04-01"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/Qaz008BPdACCeqm9Rsw6eA"
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# Chinese Consumer Preferences Shift Rapidly Toward Mid-to-High-End Products

> The moderate slowdown in China's overall retail sales growth masks multiple upheavals beneath the surface. Recent studies show changing tastes and shopping habits, with consumers curbing luxury purchases abroad, becoming more discerning at home, and prioritizing spending on health, family, and experiences. A survey by FT Confidential Research indicates that overall growth in discretionary spending likely continued to slow in March, following a 10.2% year-on-year increase in retail sales in the first two months of the year, down from 10.7% in 2015 and 12% in 2014.

The moderate slowdown in China's overall retail sales growth masks multiple upheavals beneath the surface. Recent studies show changing tastes and shopping habits, with consumers curbing luxury purchases abroad, becoming more discerning at home, and prioritizing spending on health, family, and experiences.
A survey by FT Confidential Research, a unit of the Financial Times, indicates that overall growth in discretionary spending likely continued to slow in March. This follows a 10.2% year-on-year increase in retail sales in the first two months of the year, down from 10.7% for all of 2015 and 12% in 2014.
In terms of purchasing habits, a notable shift is occurring among big-spending Chinese outbound tourists. According to a survey of 1,318 outbound travelers by FT Confidential Research, they are less likely than before to buy expensive items such as designer handbags, jewelry, and luxury watches during trips abroad.
In contrast, spending on cosmetics, clothing, shoes, electronics, and souvenirs has held steady or even increased compared with the same survey in 2015. The World Travel & Tourism Council (WTTC), an industry body, estimated last week that Chinese tourists spent a total of $215 billion abroad in 2015, up 53% from $140 billion in 2014.
According to FT Confidential Research, the main reasons cited for reducing purchases of expensive luxury goods abroad are lower prices for similar items domestically and the increasing volume of cross-border online shopping.
Research firm Mintel estimates that cross-border online shopping grew at a compound annual rate of 63% between 2010 and 2015. Mintel forecasts that total cross-border online shopping will rise to $222 billion by 2020 (from $97.3 billion last year), accounting for 17% of China's expected $1.3 trillion in total online sales in 2020.
Reinforcing this "overseas shopping" trend is a clear tendency among Chinese consumers to upgrade to higher-end products. McKinsey, a research firm, found that **people show strong momentum to upgrade quality and brand in categories such as cosmetics, spirits, milk and dairy products, hair care, rice, fresh produce, and beer** (see chart).
A survey of 10,000 consumers in 44 cities conducted by McKinsey in late 2015 showed the flip side of this trend: Chinese consumers are increasingly shunning products perceived as less healthy or even potentially harmful. McKinsey found that compared with a similar survey in 2012, the popularity of carbonated drinks, chewing gum, ice cream, and Western fast food has declined (see chart).
The surge in sales of Momchilovtsi, a yogurt brand by Bright Dairy that uses lactic acid bacteria from a longevity village in Bulgaria, as well as the high prices of specialty teas and strong demand for Thai jasmine rice, all highlight this shift toward healthy eating.
However, the McKinsey survey also found that once Chinese consumers find brands they are satisfied with, they seem more likely to remain loyal to them. The number of consumers willing to switch to a brand outside their "consideration set" has declined. For example, in clothing, the share of consumers willing to consider brands outside their usual range has fallen from 40% in 2011 to just under 30% in 2015 (see chart).
More and more Chinese are seeking memorable experiences rather than products, with cinemas, dining, spas, and travel all seeing strong demand. Wang Yang, chief operating officer of Zanadu, an online travel agency specializing in outbound trips, told FT Confidential Research: "Our clients go to Italy to watch opera, to Northern Europe to see the Northern Lights, and dine at Michelin-starred restaurants in Paris."
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