The Chinese consumer in 2020

According to McKinsey & Company, some of the key trends in Chinese spending patterns will be:

_ Higher discretionary spending

_ Aspirational trading-up

_ An emerging seniors market

 

After carrying out a survey which drew samples from about three-quarters of China’s GDP and almost half its population, McKinsey found that China is following a similar pattern to Japan in the 1950s and South Korea and Taiwan in the 1980s. Namely, it is experiencing rising incomes and urban living, better education, postponed life stages and greater mobility. 

So what will China look like in 2020?

Higher discretionary spending: Chinese consumers will be much richer – the per-household disposable income of urban consumers will double between 2010 and 2020, to about $8000, close to South Korea’s current level.

Many more of these people will be “mainstream” consumers: relatively well-to-do households with annual disposable income of between $16,000 and $34,000. This group will increase from 14 million households to 167 million, or from 6 percent to 51 percent of the urban population.

Aspirational trading-up: Like consumers everywhere, Chinese are aspirational and want to move up, and their improving social standing is reflected in changing patterns of consumption. 

Producers that cater to the top end of the market will benefit the most from this trading up – e.g. premium skin-care products and luxury cars. Brands focused on mass-market consumers might need to be repositioned to suit these rising aspirations, while newer, younger brands may be able to leapfrog established competitors by offering premium products and crafting a premium brand image.

Emerging seniors market: The aging of China means that in 2020 there will be 125 million more citizens aged over 65 than there are today. Elderly Chinese today tend to save more and spend less on discretionary items. By 2020 this may change as their economic confidence will have risen. In any case, companies that are preparing to supply the goods and services that will be required by an aging population will be well placed for the future. 

China’s vast size and geographical diversity means companies that succeed in this market, tend to treat it almost as a collection of separate countries. McKinsey advises that those trying to sell their products widely in China should have several regional bases and ensure they give them sufficient autonomy to make important strategic decisions, as China’s consumers will be widely varied across regions.

Thai companies are already heavily involved in China. But regardless of how successful they may have been, the dynamic Chinese consumer market means they can never relax or stop thinking ahead.

 

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