With escalating income and education level, Chinese mainland middle-class consumers are more concerned with product and service quality than prices, according to a survey conducted by the Hong Kong Trade Development Council (HKTDC).
The survey, interviewed 1,600 middle-class consumers in eight Chinese cities, found that 76 percent indicated they give first priority to quality when making purchase, as compared to only 24 percent stated price as the first priority. 60 percent of the consumers also indicated they prefer products and services that are more specialized, despite a higher price, as compared to 40 percent prefer to buy products that satisfy basic needs.
With a minimum personal monthly income between CNY4,000 (USD653.6) and CNY6,700 (USD1094.91), these middle-class consumer respondents came from eight different cities in the country. These cities included Beijing, Shanghai, Guangzhou, Chengdu, Wuhan, Shenyang, Nanjing and Changzhou. The study also included 10 consumer focus group discussions held in five tier-2 cities (Chengdu, Wuhan, Shenyang, Nanjing and Changzhou).
Brands that reflect status and tastes
To ensure quality products, more mainland consumers are also turning towards branded products, as 59% stated well-known brands mean higher quality. On top of product quality, purchasing branded products also represent the consumers’ social status. Participants from the focus group stated they have switched to buy branded products in the past couple years, as that help to identify themselves as middle-class. 56% of the survey respondents stated using branded products can help to enhance self-image.
The awareness of self-image is also driving these consumers to make purchase decisions based on the reflection of personal style and taste. 60% of the respondents agreed that their purchases aim to allow “people to see me as a person of good taste.”
These brands are preferred to be foreign brands (58 percent) or joint-venture brands (60 percent) even they are produced locally. Despite demand for branded products, the study indicated middle-class consumers are turning away from high profile brand towards those that highlight personal style. More than half (51 percent) of the respondent indicated they do not like logo designs that are too prominent as it is boastful.
“My watch and jewelry come in with the xx brand, and not many people know about it,” said one of the participants at the focus group stated. “I do not boast about it, but if you know about this brand, you will see that I understand everything about brands.”
Tier-two cities consumers shop online more often
Apart from product quality, after-sales service is also valued among the middle-class consumers. 68% agreed that product knowledge of the sales staff as an important factor in their buying decision. Such requirement of sales service also applies to online shopping.
As a common practice to purchase via online store, 83% of the respondent indicated they have shopped online and 27 percent stated they make online purchase about once a month. The frequency to shop online also appears to be higher among the tier-two cities. 18 percent of the respondents in Changzhou indicated they shop online four times a week, but only 3 percent and 4 percent of the consumers from Guangzhou and Shanghai respectively, indicated the same frequency.
E-commerce platform: services over price
When choosing e-commerce platforms, price is also less a driving factor. 68 percent of the respondents indicated they choose online platforms with better after-sales assurance, as compared to 32 percent that stated they buy from those that offer cheaper price. These services, include delivery reliability and exchange policies, are highly valued particularly among respondents from Guangzhou (82 percent) and Shenyang (79 percent).
Influence from the Internet goes beyond the purchase activity. The study indicated middle-class consumers are also turning towards social media platform for purchase decision. More than half (63 percent) of the respondent stated they believe in products recommended by people they follow on Weibo and WeChat. 58 percent of them also indicate they would use different social media platform to share their positive and negative shopping and consumption experience.
For this reason, HKTDC suggested Hong Kong companies not to overlook the online sales channel, “however, they should choose online shops with better reputation and after-sales services in accordance with the class of product in question.”
Opportunities for Hong Kong’s fashion brand
HKTDC also noted considerable business opportunities are expected to Hong Kong fashion brand, as 84 percent of the middle-class consumer considered Hong Kong as the hub of the world’s latest fashion trends.
“To target mainland middle-class market, it is important for Hong Kong companies to build a clear brand image, as well as to have a good grasp of their desire to express their personality and pursue of finer tastes,” said Billy Wong, HKTDC senior economist. “They should emphasis the style characteristics of their brands and convey to these consumer the image and concepts behind the brand.”
Taking Stock is Retail in Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.