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Value-for-money a key new consumer trend
By Cao Qian |
July 8, 2010, Thursday
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Print Edition
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WHILE Chinese consumers are becoming more sophisticated in making retail purchase decisions with value-for-money the key consideration, international brands should have large-scale presence in top cities in order to maximize the marketing impact and returns from low-tier cities, according to a new report by Deloitte.
Value-for-money is consistently the top decision factor for consumers in the first- and second-tier cities and it is now increasingly driving purchases in third-tier cities, the report found. However quality still remains the top decision criteria for consumers in third- and fourth-tier cities.
"Chinese consumers are still less sophisticated than their Western counterparts, but over time the importance of value-for-money may be expected to rise in all tiers of cities," said Alan MacCharles, partner, M&A Transaction Services, Deloitte China.
"Consumers are getting more sophisticated in thinking about whether what they buy is really worth the money."
To enter the China market, the report suggests that premium brands can enjoy a definite "halo effect" by penetrating into the first-tier cities. Consumers in the lower-tier cities appear to have a high preference for brands "seen in big cities" and it is also easier for a recognized brand to gain access to department stores, a conventional channel for apparel.
The report also found that Chinese consumers are willing to experiment, with approximately 70 percent of respondents across all cities interested in trying new premium brands. As to retail promotion, consumers in first-tier cities usually consider word-of-mouth and well-positioned media and advertising campaigns as critical drivers for them to try new brands.
Interestingly, brand image has a stronger influence on men than women. Male consumers in China were found to be using brand as a short-cut for evaluating quality while women are moving past brand in their buying habits.
Despite the growing importance of sustainability, the report indicated that Chinese consumers are unwilling to pay premium for abstract concepts, such as "low carbon." A majority of consumers recognized the concept of "low carbon," but did not consider this a motivation to buy goods marketed in this way. Only 10 percent of consumers would accept low carbon as a value proposition and were willing to pay a 10 to 20 percent premium over goods not making this claim.
"As with almost everything in China, the purchasing power and sophistication of Chinese consumers are developing at an exceptionally fast pace fuelled by economic growth," concluded MacCharles.
"We advise retailers to carefully analyze their target markets before entering China and, just as critically important, keep their fingers on the pulse of Chinese consumers by continuously and actively monitoring their brand positioning."
Value-for-money is consistently the top decision factor for consumers in the first- and second-tier cities and it is now increasingly driving purchases in third-tier cities, the report found. However quality still remains the top decision criteria for consumers in third- and fourth-tier cities.
"Chinese consumers are still less sophisticated than their Western counterparts, but over time the importance of value-for-money may be expected to rise in all tiers of cities," said Alan MacCharles, partner, M&A Transaction Services, Deloitte China.
"Consumers are getting more sophisticated in thinking about whether what they buy is really worth the money."
To enter the China market, the report suggests that premium brands can enjoy a definite "halo effect" by penetrating into the first-tier cities. Consumers in the lower-tier cities appear to have a high preference for brands "seen in big cities" and it is also easier for a recognized brand to gain access to department stores, a conventional channel for apparel.
The report also found that Chinese consumers are willing to experiment, with approximately 70 percent of respondents across all cities interested in trying new premium brands. As to retail promotion, consumers in first-tier cities usually consider word-of-mouth and well-positioned media and advertising campaigns as critical drivers for them to try new brands.
Interestingly, brand image has a stronger influence on men than women. Male consumers in China were found to be using brand as a short-cut for evaluating quality while women are moving past brand in their buying habits.
Despite the growing importance of sustainability, the report indicated that Chinese consumers are unwilling to pay premium for abstract concepts, such as "low carbon." A majority of consumers recognized the concept of "low carbon," but did not consider this a motivation to buy goods marketed in this way. Only 10 percent of consumers would accept low carbon as a value proposition and were willing to pay a 10 to 20 percent premium over goods not making this claim.
"As with almost everything in China, the purchasing power and sophistication of Chinese consumers are developing at an exceptionally fast pace fuelled by economic growth," concluded MacCharles.
"We advise retailers to carefully analyze their target markets before entering China and, just as critically important, keep their fingers on the pulse of Chinese consumers by continuously and actively monitoring their brand positioning."
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