Changing spending trends in the Chinese New Year
As we enter the “golden week” of the Chinese New Year we can see how China is changing – especially in terms of consumer spending habits. For several years, the Chinese government has been attempting to stimulate consumer spending and this is definitely happening.
But it isn’t so much government policy that is stimulating consumer spending but rather social trends which the Boston Consulting Group and Ali Research describe as three great forces of change. First, there are more upper middle-income households earning over US$24,000 (Bt750,000) a year; second, younger consumers are becoming more dominant in the market; and third, we are seeing a phenomenal rise in e-commerce, especially mobile e-commerce.
All these factors work together to stimulate a sharp rise in demand for premium goods and services, such as healthy foods and travel, and this will open up many new opportunities for those targeting the Chinese market.
One indication of the trend is the rise of the use of virtual red packets known as “hongbao”, digital versions of the traditional red envelopes filled with cash and given as gifts. Last year the number of red packets sent via WeChat rose to 46 billion, a huge increase compared to 8 billion in 2016. The use of digital hongbao has been a great success for WeChat as sending them requires people to register their bank accounts with the application, thus opening the door to other kinds of online spending.
During the 2017 Chinese New Year holiday some retailers launched special promotions whereby potential shoppers approaching their stores were sent virtual hongbao. When they opened the hongbao, they would receive coupons and small amounts of cash. And to open them they needed to go into the store and scan the store logo with their Alipay app.
We are certain to see similar innovations this year as the growing spending power of young people drives consumer-spending patterns. In addition to being digital natives they are much more likely to spend than their frugal elders. Indeed, they like to spend even more than their peers in countries such as the US, Europe and Japan, and they have quite sophisticated tastes and a love for travel.
Naturally, e-commerce will continue to grow at a phenomenal rate. By 2020 – now only two years away – e-commerce in China is expected to account for around a quarter of all private consumption and most of this spending will take place through mobile devices. This is turn will further drive demand for more upmarket products and services as consumers can more easily find more distinctive premium-priced products online.
Thai businesses, including tourist operators, should take note as these trends are very promising for those with an eye to an opportunity.
