Chinese consumers are increasingly opting for quality goods at higher prices and adopting online shopping and social media to gather product information – two key trends driving company strategy in China, according to a report jointly released by The American Chamber of Commerce in Shanghai (AmCham Shanghai) and Booz & Company.
The 2013 China Consumer Market Strategies, the third annual report based on a survey of nearly 90 Chinese and multinational companies (MNCs), measured how companies rank 7 major trends by importance and the approaches they take to respond to them.
This year’s survey also included a section aimed at evaluating companies’ digital capabilities.
With the rise of e-commerce and social media, the second most important trend identified in the report is that both multinational and Chinese companies recognize the importance of developing digital marketing and sales channels. However, majority of companies declared that they are not yet adequately prepared to convert growing online interactions to a sales advantage.
The report, however, noted that leaders in this area demonstrate an ability to make strategic use of data derived from online viewing and purchasing habits, and to align digital activities with their corporate strategies and across organizational functions.
"The report highlights that the use of mobile devices, online shopping and social media is a disruptive business trend. Companies must develop targeted strategies and China-specific capabilities that enable them to respond and beat out competition," said Robert Theleen, Chair of AmCham Shanghai.
The report noted that for the second year, both MNCs (69 percent) and Chinese companies (55 percent) chose "value as a differentiator" as the most important consumer trend in China today. In Tier-1 and Tier-2 cities, an increasing number of consumers are seeking greater reliability, consistency and integrity in the products they purchase. This represents a significant evolution from what has been a price-driven market.
"As China’s consumer market matures, Chinese consumers in developed cities and regions continue to trade up in their purchasing choices. This presents companies with opportunities to build products and brands that could deliver great value. However, to capitalize on this trend, companies will need to strengthen their capabilities in innovation and branding," said Adam Xu, Director for and Consumer & Retail Practice at Booz & Company.
Majority of MNCs and Chinese companies (70%) expect this trend to increase brand loyalty among consumers focused on value and 85 percent expect to see an increase in consumers’ willingness to pay higher prices for quality products and services.
The rise of e-commerce and increasing integration of social media into the day-to-day lives of consumers was ranked as the second key trend by Chinese companies (58 percent) and MNCs (55 percent).
"Although consumer companies in China have high levels of confidence due to their long experience in the market and success relative to their peers, they still face several challenges adapting to the rising digitization trend. In contrast to findings from our global digital study, the key challenges for companies in the China market are measurement of success, organizational alignment and adapting global capabilities for China," Xu added.
Companies admit that they have yet to make operational improvements keyed to the Internet and take actions to integrate the digital dimension into their branding and product development.