Digital Lifestyle:
Yi Zhang
Online shopping
Greater choice
Better value
Contents
Executive Summary
03
06
What you really need to know about the urban Chinese consumer
10
26
33
References 34
Digital Lifestyle:
Wei Feng
Online banking
Secure payments
24/7 Customer support
Executive Summary
It is a country so vast and so complex that it can
never become hackneyed so little known that one
may with encouraging frequency enjoy the thrill of
the explorer by discovering some new fact. Carl
Crow, an American journalist and businessman, made
that observation in 1937 in 400 Million Customers,
a book of his insights about the Chinese people and
doing business in China. Today, more than 75 years
later, Mr. Crows words have never been more true.
With a consumer market now exceeding
one billion, China is often viewed as
a land of limitless opportunities. The
country has experienced multiple sea
changes that, collectively, have created
one of the most appealing business
destinations in the world. Decades of
economic growth and rising incomes,
the ubiquity of digital technology, and
the transformation of the hearts and
minds of Chinese consumers (evidenced
by the meteoric uptick in consumption)
all add to the countrys allure. It is
simply a market too attractive to ignore.
But, as many consumer packaged goods
companies and retailers are recognizing,
it is also one of the most challenging
markets in which to compete, much less
win. Thats due largely to the fact that
the ecosystem is evolving so quickly.
A range of factorsfrom demographic
changes and the breathtaking pace
of urbanization to fluctuating buyer
preferences and behaviorsmakes
consumers in China moving targets.
#1: A me culture
is prevailing
Urban Chinese consumers now
exhibit the consumption patterns of
a middle-class lifestyle. This means
they are spending money on things and
experiences that not long ago would
have been considered luxuries. It also
means spending more on goods that
are perceived to be of higher quality.
While three categories of products
and services (food and restaurants,
clothing and electronics) currently
top the consumption list, spending
is growing fast on leisure activities
such as travel and products related to
health. Importantly, these consumers
have become more aware of what their
purchasing power represents. They
increasingly set themselves apart and
assert their social status through what
they buy.
Digital Lifestyle:
Fang Li
Online shopping
Greater choice
Better value
2012
$3.4
$4.4
2017
China
$4.2
United States
* Total sales from all retail outlets and B2C ecommerce, including warehouse clubs. The total market includes retailers operating in both modern and
traditional channels. It excludes wholesale operations and all non-retail business such as restaurants, financial services and travel services.
Source: EIU Retail Forecast; National Bureau of Statistics; Ministry of Commerce, 2012 China retail report.
Household incomes
continue to rise.
Although it is the second largest
economy in the world, Chinas GDP per
capita is less than the GDP per capita
of 81 other countries.3 However, many
Chinese cities are as rich as upper/
middle-income countries in terms of
GDP per capita. Recent research by
Accenture and the Chinese Academy
of Sciences revealed that 47 of 73
cities measured in the New Resource
Economy City Index have GDP per
capita of US$7,700. This is more than
the average GDP per capita of upper/
middle-income countries, which was
US$7,326. In 26 cities in China, GDP
per capita equals US$11,000.4
Urbanization is creating a
new consumer market.
As of the end of 2013, urban residents
accounted for 53.7 percent of the total
population in China. According to the
National New-style Urbanization Plan
(2014-2020) unveiled by the central
government, 60 percent of Chinas
population will live in urban areas by
2020, which means that nearly 100
million people will become urban
consumers in the next six years. By
2030, China will see more than 67
percent of its population living in cities,
making it a huge market comprising
one billion urban consumers.6
Trend Setting
Accenture research and experience
revealed two trends, which are
particularly relevant for consumer
packaged goods companies and
retailers to act on now as you look
to build or maintain your competitive
differentiation in China.
Digitization
Over the next five years, all companies
will become digital companies. In
tandem, all consumers will become
digital consumers. These bold
statements are based on two factors:
the explosion of data and the staggering
rise in the number of individuals and
organizations coming together in social
media networks.
Nowhere is the power and potential
of the digital revolution more evident
than in China. Consider the following
statistics. At the end of 2013:
618 million people in China were
Internet usersa figure that
represents just slightly more than 45
percent of Chinas population.18
More than 80 percent of Chinas
Internet users accessed the Internet
through mobile devices, an increase
of approximately 6 percent over the
previous year.19
The number of Chinese people who
shopped online topped 300 million,20
making China the largest retail
e-commerce marketplace by far.
The value of products purchased via
mobile shopping exceeded 167 billion
(US$27 billion), a 165 percent increase
over 2012.21
Some 600 million of Chinas 1.3
billion population are active in social
media.22
Industry Convergence
With consumers growing digital
footprints, companies have access
to more data about them than ever
before. Buried in the data, you will find
insights about new types of products
and services consumers want and the
purchasing experiences they demand.
Often, what consumers want extends
far beyond traditional offerings.
Accentures recent survey has revealed
that, for about 60 percent of business
leaders, unconventional growth means
using digital advances to expand their
business models to different industries.23
Consider the case of Alibaba, a privately
owned group of e-commerce businesses
in China. Leveraging its analyticsdriven consumer insights, the company
realized that most merchants trading
on its platforms were small- and
medium-sized businesses that found it
difficult to access traditional lenders.
In 2012, the company started offering
merchants small loans, using data
on their activities to help them make
financial decisions. By the end of 2013,
its loan book reached US$2 billion,
up from US$600 million in 2012.24
Digital Lifestyle:
Ying Wang
Online banking
24/7 Customer support
Cloud
Beijing
Dingzhou
Taiyuan
Jilin
Shenyang
Baoji
Liaoyang
Linghai
Shijiazhuang
Weifang
Xuzhou
Luoyang
Dujiangyan
Chengdu
Kunming
Ningbo
Shanghai
Macheng
Yueyang
Nanchang
Nanning
Wuhan
Fuzhou
Yingde
Guangzhou
Shenzhen
Foshan
11
Tier 1 cities
Tier 2 cities
Tier 3 cities
Tier 4 cities
#1
A me culture is prevailing
With rising levels of income, more and
more urban Chinese consumers have
embraced the consumption patterns
that a middle-class lifestyle affords. This
includes spending money on things and
experiences that not long ago would
have been considered luxuries. It also
means spending more on goods that
are perceived to be of higher quality.
This is clearly reflected in a number
of consumer segments identified in
Accentures research.
According to our survey results, urban
consumers spend the lions share of their
money on three categories of goods and
services: food and restaurants, clothing
and electronics (see Figure 3). Spending
on leisure activities is growing among
consumer groups at all income levels
from aspirational wage earners (typically
in lower income brackets) to exclusive
service buyers (among the wealthiest of
those consumers interviewed). Leisure
purchases will continue to grow in
importance, with travel and tourismrelated activities expected to become
a particularly important spending
category. In 2012, Chinese consumers
spent RMB 2.3 trillion (US$360 billion)
on traveling within China, 17.6 percent
more than the previous year11, and more
than US$100 billion on international
travel, up from just $73 billion in 2011.
This makes them the largest source of
tourism cash in the world.12
72%
Apparel
42%
Consumer Electronics
Consumer Electronics
26%
36%
24%
34%
Home Appliances
Home Appliances
23%
33%
Personal Care
Apparel
21%
28%
Home Care
Personal Care
20%
25%
Health and Medical
Home Care
19%
21%
Books and Videos
9%
Q: Which of the following are your top three expenses over the last year? Which of the following
category are you most likely to increase expenditure in over the next year (allowing for inflation)?
Source: Accenture China Consumer Survey
21%
Individualism
17%
62%
65%
26-35 20%
64%
15%
36-45 23%
18%
59%
46-55 23%
18%
59%
Age
18-25 46%
40%
Social Status
45%
26-35 40%
14%
17%
40%
43%
36-45 37%
13%
50%
46-55 36%
15%
49%
15%
13
Agree
Neutral
Disagree
Q: To what extent do you agree with the following statement? I am not willing to purchase the same
items that are bought by most other people. It is worthwhile to spend more on products that better
represents ones social status.
Source: Accenture China Consumer Survey
37%
47%
47%
45%
28%
32%
31%
31%
Consumer Electronics
22%
26%
25%
30%
Home Appliances
21%
22%
25%
25%
Apparel
17%
20%
23%
23%
Personal Care
17%
21%
20%
21%
Home Care
16%
18%
19%
25%
4%
Tier 1
8%
8%
7%
Tier 2
Tier 3
Tier 4
Q: Which of the following category are you most likely to spend more on in the next year
(allowing for inflation)?
Source: Accenture China Consumer Survey
#2
15
69%
11%
21%
69%
Tier 2
11%
21%
68%
Tier 3
11%
18%
71%
Tier 4
11%
24%
66%
18-25
9%
21%
70%
26-35
10%
22%
68%
36-45
12%
19%
69%
46-55
12%
19%
69%
Age
18%
82%
Brand consciousness is more pronounced among developed cities and the young
City Tier
Tier 1
12%
88%
Tier 2
18%
82%
Tier 3
19%
81%
Tier 4
28%
72%
Age
18-25
14%
86%
26-35
15%
85%
36-45
18%
82%
46-55
24%
76%
Value-driven
Brand-driven
Q: When you purchase food products or daily necessities, which of the following best describes you?
Stick to one brand, choose between multiple brands, go for the best deal
Source: Accenture China Consumer Survey
17
50%
50%
Loyalists
Switchers
Similar trend is observed in Tier 1/2/3 cities and across age segments
City Tier
Tier 1
52%
48%
Tier 2
51%
49%
Tier 3
53%
47%
Tier 4
42%
58%
18-25
51%
49%
26-35
52%
48%
36-45
49%
51%
46-55
49%
51%
Age
Q: When you purchase food products or daily necessities, which of the following best
describes you? Stick to one brand, choose between multiple brands, go for the best deal
Source: Accenture China Consumer Survey
#3
Life is digital
Whereas insights into the me and
curious consumers can be used to
better understand what urban Chinese
people buy and the thinking behind their
purchasing decisions, our analysis also
sheds light on how urban consumers
engage with consumer packaged
goods companies and retailers. Not
surprisingly, digitization has taken
hold in a pivotal way. Digital channels
are pervasive and digital consumption
continues to grow in popularity.
What does the emergence of digital as a
way of life mean for consumer packaged
goods companies and retailers? It means
that growth is no longer simply a matter
of moving consumers and customers
through linear purchasing processes.
Creating smarter, seamless and secure
experiences at every point of interaction
is what defines expectations in the
digital world. Experiences today must be
non-stop, customized and cross-channel
(see Figure 10).
19
Purchase
Discover
Promise
Evaluate
Delivery
Consider
Open content/channels
Use
Brand-controlled content/channels
Source: Digital Customer: Its time to play to win and stop playing not
to lose. Accenture 2013 Global Consumer Pulse Research.
Figure 11. Internet advertising and social media are more influential for younger
consumers in Tier 1 cities
Internet Advertising
Social media
Tier 1
38%
Tier 2
31%
Tier 2
Tier 3
31%
Tier 3
Tier 4
28%
Tier 4
Tomorrows mainstream
41%
38%
26-35
46-55
27%
21%
22%
Tomorrows mainstream
18-25
36-45
29%
Tier 1
31%
22%
40%
18-25
29%
26-35
36-45
46-55
18%
17%
Q: Which are the top three sources of information (by order) that influence your choice of food and
beverages and personal care products?
Source: Accenture China Consumer Survey
21
Figure 13. TV remains a mainstream channel for food and beverages and
personal care products
TV Advertising
61%
66%
57%
Instore Displays
34%
40%
Salesperson Recommendation
38%
44%
Internet Advertising
29%
33%
Personal Care
Q: Which are the top three sources of information (by order) that influence your choice of
food and beverages and personal care products?
Source: Accenture China Consumer Survey
#4
23
Figure 14. Traditional shopping destinations trump online shops for now
Tier 1
80%
Tier 2
Tier 3
79%
Tier 4
70%
38%
26-35
37%
36-45
32%
46-55
25%
Q: Have you ever made purchases online? How often do you make purchases online? Which of the
following would you prefer to purchase online? Which of the following categories of products would
you prefer to purchase offline over online?
Source: Accenture China Consumer Survey
Figure 16. Urban consumers are cautious when it comes to shopping online
Inferior Product Quality
82%
Unable to Try Products
40%
Fake Products
38%
Internet Scams
34%
Poor Online Customer Service
34%
Inflexible/Late Delivery
23%
Inconvenient Payment Methods
17%
Higher Prices
15%
Time Consuming
9%
Poor Online User Interface
2%
Q: What are the three most important problems you are concerned with in shopping online
(by order)? To what extent do you agree with the following statement? I often go to
physical stores to see and try products before buying them online.
Source: Accenture China Consumer Survey
25
Figure 17. Eight consumer archetypes relevant to the urban China market
Wealthy class (Not Included)
Income
600K+
Fashion-forward
consumers - 5%
Exclusive service
buyers - 6%
Yuppies - 10%
The bourgeois group of consumers
seek self-esteem in their pursuit of
quality and personalized services
that represent social status.
Demanding, high-income,
urban-dwelling white-collar
workers; seek service excellence,
personalized experience,
performance and efficiency.
Internet
civilians - 23%
A young, motivated group with general spending
power, enthusiastic for digital technology, typically
associated with the Internet.
72K+
Aspirational
wage earners - 15%
Thrifty
householders - 18%
Price-sensitive
families - 16%
Conservative
middle-income
shoppers - 8%
< 45K
18-25
26-35
36-45
46-55
Age
*Note: Annual household income in RMB. Analysis excludes consumers with annual
household income of less than RMB45K (30%) and more than RMB600K (2%).
Source: Accenture China Consumer Survey
27
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Price-sensitive families
Also known as wise shoppers, this
archetype is very rational when it comes
to making consumer product purchases.
Like the aspirational wage earners, this
group is predominantly middle-aged
and female, has low spending power,
and values promotional discounts and
incentives. The lions share of their
spending on consumer products is
directed to personal care and household
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Internet civilians
The largest of any of our identified
archetypes, this group comprises
younger, ambitious, middle-income
wage earnersprimarily men from Tier
3 cities. These consumers are more
emotional about their purchases and
are willing to spend more than, say,
members of the price-sensitive family
segment, for whom spending is more
restrained. The Internet civilians do
not buy out of necessity; rather, they
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Thrifty householders
Like Internet civilians, thrifty
householders tend to have medium-level
incomes and live in Tier 3 cities. That
is where the similarity between these
two groups ends. Thrifty householders
are middle-aged and quite conservative
in their purchasing practices. They
prefer to pay cash, and spend their
money on practical things such as
home appliances and health care. When
they buy things, price and quality are
often the determining factors. They
29
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Fashion-forward consumers
These young professionals are clearly
part of the digital generationa fact
borne out of their strong propensity
to purchase digital and electronic
products. Mostly male, these individuals
tend to live in Tier 1 cities. They are far
trendier than any other archetype and
seek out high-quality goods that can
help them assert their individualism.
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
Consumer Preferences
Price
Brand Conscious
Convenience
Price
Sensitive
Features
Quality
Personalization
Impulsive
Service
Class
Trading Up
Appearance
31
Case study
Blurring borders:
A banks venture into e-commerce
In response to its customers continuing
transition to online consumption, a large
Chinese bank moved into the e-commerce
territory by launching a B2C eBusiness
platform, offering financial and nonfinancial products. By applying Accentures
analytics-powered, cross-industry
segmentation model, the bank was able to
precisely target retail consumers with the
greatest need for online financial products
(see Figure 26). In addition, the bank was
able to improve its understanding of the
financial and non-financial needs of target
customer groups.
Fashion-forward consumers
Yuppies
Internet civilians
40
Aspirational
wage earners
35
30
Average
Price-sensitive families
Thrifty householders
25
20
15
15
20
25
Current penetration of consumer credit products (%)
30
35
40
45
33
References
1 Doing it their way, The Economist,
January 25, 2014.
Contact Us
About Accenture
Disclaimer
Till Dudler
Managing Director, Global Strategy
Consumer Goods and Services
till.dudler@accenture.com
Rajat Agarwal
Managing Director, Consumer Goods and
Services, Asia Pacific
rajat.agarwal@accenture.com
Woolf Huang
Managing Director, Consumer Goods and
Services, Greater China
woolf.w.huang@accenture.com
14-1995 / 11-8616