Long press the QR code or click "Read Original" to register. 30+ industry experts, 100+ B2B platform founders, 800+ manufacturer friends, gather in Fuzhou to discuss the Internet transformation of the FMCG industry. Author: Yan Xuan / President of Nielsen Greater China Reprinted from: CEIBS Business Review During the Spring Festival of the Year of the Monkey, one of the most reported news events was Chinese "international shoppers" queuing up to buy popular products in brand stores and duty-free shops in Japan, Italy, Germany, Spain, and other places. Reports of Chinese tourists "buying up" around the world have become commonplace. According to Ministry of Commerce data, in 2015, Chinese overseas consumption reached 1.5 trillion yuan, with at least 700-800 billion yuan spent on shopping. A closer look reveals that in the past two years, the targets of Chinese overseas shopping have changed significantly, shifting from mainly purchasing high-end luxury goods to buying high-quality, cost-effective daily consumer goods. These changes in purchasing behavior reflect the changing preferences of Chinese consumers and indicate that Chinese residents' consumption has entered a new stage of quality consumption. Compared to the other two drivers of investment and imports/exports, consumption has performed remarkably well in recent years. With investment and export growth significantly declining, consumption has fully played its role as a "stabilizer" and "ballast stone" for economic growth. In recent years, with the acceleration of China's urbanization, the income levels and consumption capacity of Chinese consumers have grown significantly, not only increasing residents' disposable income but also accelerating the maturity of Chinese consumers and their increasing demand for high-quality products. Nielsen's 2015 Consumer Confidence Index annual review found that compared to 2014, consumers' spending intention index rose two percentage points to 48% last year, the highest in four years. This figure indicates that despite China's economic slowdown in 2015, with GDP growth of only 6.9%, consumers' desire to spend is not affected and continues to rise. By the end of 2014, China's per capita GDP had reached $7,800, and consumers' demand for high-quality goods is increasing. Residents' consumption has evolved from simple quantitative growth to parallel quantitative growth and quality improvement. Of course, with the acceleration of urbanization and the significant growth in income and consumption capacity, the scale of the quality-conscious population will continue to expand. Nielsen's survey data at the end of 2015 showed that nearly half (47%) of respondents said they would spend more on products related to improving quality of life and health. We have reason to believe that in the next 5-10 years, China will undergo a new wave of quality consumption transformation. The pursuit of a high-quality lifestyle will become the "new normal," which will drive growth in the consumer goods market, and the trend of consumption upgrading is bound to continue. How to define quality consumption? The fundamental difference between quality consumption and "diaosi economy" (plebeian economy) and "symbolic consumption" lies in the change in consumption behavior. In the past, consumers spent more to meet their actual needs, so they tended to buy cost-effective or promotional products, that is, spending the least money to buy a product that meets their needs. With the improvement of consumption capacity, some consumers have moved to the extreme of "symbolic consumption," that is, "only buying expensive, not right," believing that buying expensive products is a display of status. Quality consumption is an attitude between the two. Chinese consumers' shopping needs have evolved from functional needs to personal emotional needs, from meeting basic life needs to expressing personal taste. In simple terms, quality consumers' demand for products is not only at the practical level, nor do they blindly chase famous brands. More and more consumers, especially the younger generation, pay more attention to personalization and diversification. The products they buy not only meet their actual needs but also reflect their personality and values. Therefore, their demand for products has gradually shifted from material needs to the pursuit of both material and spiritual satisfaction, which is essentially different from purely functional consumption and symbolic consumption that promotes big brands. So, who are the consumers pursuing quality, and what are their characteristics? Nielsen's "2015 Shopping Trends Report" shows that quality-conscious consumers have a certain income base and good economic conditions, allowing them to consume calmly; in addition, they are usually younger and more educated, and mostly from small families in wealthier areas or young singles. At the same time, there is a particularly health-conscious consumer group whose lifestyle attitudes and main shopping demands are similar to the quality group. In terms of gender ratio, women account for 63% of quality consumers, while women account for 79% of all shoppers. This shows that compared to other groups, there are more men among quality consumers. From an age perspective, "health-oriented" consumers are younger, want a healthy lifestyle, and pay great attention to food safety, so they are more willing to choose mid-to-high-end products for health and safety reasons. In terms of product selection, this group is relatively price-insensitive, highly brand-conscious, and values the self-identity that products bring. For them, the high-quality consumption process is a means of self-expression, reflecting identity and social status. They are also a group of "picky" consumers who pursue a more comfortable and convenient shopping environment and are willing to shop in convenient, time-saving settings. They pay less attention to conventional discounts but may participate in promotions such as "member points." Quality consumers also have different shopping experience expectations from other consumer groups. They prefer more professional services and more personalized experiences while shopping. In addition, because quality consumers are usually younger, they are good at collecting product information and can effectively use various emerging technologies and methods, such as reading online product reviews and social network discussions, to quickly understand product quality and make smarter shopping decisions. By 2020, China's urbanization rate will rise from the current 55% to 60%. At that time, there will be over 800 million urban residents. By 2022, 75% of urban families will become middle class. As these people become urban residents, employment opportunities and income increase significantly, and they will become the new main force of consumption. At the same time, their lifestyles will shift towards higher quality, further promoting the rise of the middle class and the increase in consumption demand. However, besides young people and urban residents as the main force of quality consumption, there are two high-potential groups worth noting. By age, they are the middle-aged and elderly group over 50, and the social backbone aged 35-45, namely the post-70s generation. The over-50 group is just retired or nearing retirement, with more savings, and their lifestyle begins to shift from busy work to enjoying retirement. Surveys show that the proportion of people over 50 who think quality is more important than price is higher than the average of the overall consumer group. As China gradually enters an aging society, the growth of the elderly group with more consumption capacity will bring development potential for products tailored to the "silver-haired" group, such as health products. As for the post-70s, although their education and growth environment are not as good as the post-85s and post-90s, among them are entrepreneurs who benefited from national reform policies and started from scratch, as well as those who became middle and senior managers in enterprises and institutions through their own efforts. The improvement in social status gives them higher income, leading to a desire to improve their quality of life. Currently, most of them still focus on their children, but it is believed that over time, in 5-10 years, the post-70s are expected to become an important group in the quality consumption population. Consumers' pursuit of quality will undoubtedly boost consumption upgrading. Surveys show that in most consumer goods categories, consumption upgrading is an obvious trend. Take personal care products as an example. In 2015, product structure upgrading contributed over 80% to the national sales growth of the entire category. For lower-tier cities in the urbanization process, product structure upgrading also contributed over 50% to sales growth. In 2015, the sales growth rate of personal care products in China far exceeded the sales volume growth rate, at 7% and 1% respectively. Similarly, in the skincare market, high-end products such as moisturizers and sunscreens are becoming the main drivers of sales. Although sales volume grew less than 3% compared to the same period last year, total sales increased significantly by 13%. Nielsen predicts that in 2016, as consumers continue to demand high-end, high-quality products, the sales growth rate of personal care products will again exceed the sales volume growth rate. When Chinese consumers buy food and beverages for their families, they also pursue more high-end and high-quality products than before—health and safety have become the primary considerations, leading to increasing demand for healthy functional drinks and natural foods in 2015. Nielsen research found that in 2015, China's beverage market showed stable slight growth, with an increase of nearly 1% compared to 2014. However, consumers' requirements for beverages are getting higher, providing development opportunities for innovative manufacturers of functional drinks. Juice, as a healthy and natural choice, also has similar appeal. 2015 data shows that compared to the same period last year, functional drinks grew by 7.6% and juice by 4.7%, indicating that under the background of consumption upgrading, products focusing on health and nature are very suitable for current consumer demand. In the dairy category, products that can endorse health concepts, such as organic milk, imported milk, and fresh yogurt, have always shown good growth. High-end and health-oriented products have greater growth potential. In the maternal and infant products market, consumers pay much more attention to safety and quality than price, resulting in continuous category upgrading in the industry over the past few years. Not only that, many consumers actively seek channels such as overseas shopping and purchasing agents to obtain high-quality foreign products. More than one-third of Chinese respondents said that when choosing a certain baby food, rich nutrition (36%) and safe raw materials and processing methods (43%) are very important considerations, ranking second and third in importance. A trustworthy brand ranked first with 45% of the votes. According to Nielsen monitoring data, China's infant and toddler FMCG industry maintained high double-digit growth (18%) in the past year, with sales approaching 103 billion yuan. Baby food and care products both showed double-digit growth of 15% and 23% respectively, far exceeding the overall FMCG sales growth rate. After the full implementation of the two-child policy, China will usher in another baby boom. As new parents are dominated by the post-85s and post-90s generation, their high spending willingness and quality upgrading needs will usher in a golden period for the infant and toddler consumer market. Among the FMCG products monitored by Nielsen, most mature categories have experienced consumption upgrading, and this trend has continued to ferment in recent years. In 2016, China's FMCG market sales growth will be slightly faster than in 2015, and the trend of consumption upgrading will continue. In addition to FMCG, the durable goods industry in China also shows a trend of quality consumption. Taking electronic products as an example, in 2015, consumption of transportation and communication products grew by over 13%. According to Nielsen's smart device share monitoring platform data, China's smartphone market is shifting from an incremental era to a replacement era, meaning consumers are no longer buying smartphones for the first time but upgrading their existing smartphones for a better user experience. Last year, the overall share of mid-to-high-end smartphones (models priced above 2,000 yuan) increased from 36.9% to 45.7%, a growth of nearly 9%; while the share of models priced below 1,000 yuan declined most significantly, by over 6%. It is expected that the share of mid-to-high-end smartphones will further increase in 2016. The automotive industry also shows a trend of consumption upgrading. According to data from the China Passenger Car Association, the average selling price of passenger cars overall rose from 142,000 yuan in 2011 to 151,000 yuan last year. In different price ranges, the sales proportion of models priced at 100,000 yuan and below fell from 39% five years ago to 32% in 2015, while the proportion between 100,000 and 200,000 yuan increased from 42% to 49%. At the same time, consumers are becoming more personalized in their car model choices, with a growing sense of self-identity. They not only value the relevance of the product to their personal image but also have an increasingly prominent tendency for conspicuous consumption, hoping to showcase their achievements and taste through a new car. According to Nielsen survey data, 30% of Chinese consumers believe that "high-end" is the main factor driving their choice of new products. With the upgrading of new cars and the continuous improvement of purchasing power, consumption upgrading is driving the growing demand for high-end products. It is not difficult to see that in the Chinese market, both FMCG and durable goods industries are undergoing dramatic consumption transformation. Undoubtedly, pursuing a quality life and improving product quality play a crucial role in boosting consumption, and it also makes today's consumers more rational and mature, and manufacturers more focused on product quality. In terms of product quality control, manufacturers and consumers will pay more attention to origin (such as Australian imported milk powder), raw materials (such as Colombian coffee beans in ready-to-drink coffee), etc. Consumers are more rational in their judgments, no longer blindly pursuing high prices, but choosing products that are more suitable for themselves. Although high-end is a major trend, mid-to-high-priced products with better "cost performance," such as Japanese and Korean skincare products more suitable for Chinese people and formula milk powder more suitable for Chinese infants, are also gradually gaining popularity. At the same time, due to the significant increase in spiritual demands for purchased products, the connotation and sentiment of products have also become a major selling point to showcase consumers' quality of life. Chinese flavor, city memory, and domestic products have also become footholds for promoting differentiated quality. The growth in demand for high-quality products has led to explosive growth in cross-border e-commerce. Nielsen found that in 2015, over 60% of online shoppers had overseas shopping experience, compared to only 32% in 2014. Taking snacks as an example, only 80% of products are sold both online and offline, and over 20% of online sales are new products, a large part of which are overseas products. From January to November 2015, Chinese consumers purchased 14.5 billion yuan worth of "foreign goods" globally through cross-border e-commerce B2C models alone. China is moving from "selling globally" to "buying globally." Consumers have more and more overseas shopping channels, from self-purchase abroad, to purchasing on behalf of relatives and friends, professional purchasing agents, overseas shopping, and then cross-border e-commerce. Young people with high income and high education constitute the main force of cross-border online shopping, mainly young men aged 26-35 and women aged 26-40. Compared to domestic online shopping, those who prefer cross-border online shopping are more likely to work in wholly-owned, joint venture, or foreign-funded enterprises, have generally higher education levels, and most have a monthly household income exceeding 11,000 yuan. Compared to traditional online shopping, cross-border online shopping shows the characteristics of "slightly lower frequency" but "higher average order value." Thirty percent of cross-border online shoppers made purchases 3-5 times in the past year, with a frequency of 76% of domestic online shopping. However, cross-border online shopping reached 176% of the average order value of domestic online shopping. About a quarter of respondents spent 1,000-3,000 yuan per cross-border online shopping transaction, and 11% spent over 5,000 yuan per transaction. It is worth noting that shoppers in second-tier cities have little difference in shopping frequency and spending compared to first-tier city shoppers. Nearly 90% (88%) of second-tier city consumers said they would definitely or possibly try cross-border online shopping. At the same time, second-tier cities have fewer offline channels for purchasing overseas goods than first-tier cities, so consumers are more likely to choose cross-border online shopping to meet their demand for overseas products. Therefore, second-tier cities have a large consumption space for cross-border online shopping and huge potential. The overseas categories consumers plan to buy in 2016 mainly include clothing/accessories/shoes/hats/bags (44%), cosmetics/personal care products (40%), maternal and infant products (26%), and home appliances/mobile phones/IT digital products (22%). The surge in Chinese consumers' demand for high-quality overseas products has also attracted multinational manufacturers to open flagship stores on Chinese online platforms. We expect that by 2018, the annual consumption of overseas shoppers will reach 1 trillion yuan. -END- The best domestic learning platform for FMCG distributors Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation | [Long press QR code to follow]