China’s retail environment has undergone sweeping changes in the last few years, both because more and more stores and brands like Home Depot (HD) and Toys ‘R’ Us are entering China’s retail environment, and because consumers’ needs and desires are maturing. The purpose of this brief is to discuss several of the factors that are impacting China’s developing retail market including, service needs, store layout, and consumer profiles. Consumer Profiles
One of the biggest causes for change in China’s retail environment is the emergence of a new consumer class, the Chinese version of the baby boomer. Chinese born after 1978 have very different shopping and spending patterns than their parents and grandparents, who felt the effects of the Cultural Revolution first hand. In contrast, the baby boomers have grown up in a period of economic prosperity that has caused them to be much more optimistic about their futures and this impacts the way in which they shop.
This younger demographic is much more brand savvy and active in researching products than older generations. Internet discussions on blog and BBS forums on portals like Sohue (SOHU) and Sina (SINA) plays a large part in their brand awareness and their ability to discuss products. Indeed, Chinese youth are the most prolific internet users in the world averaging 17.9 hours a week surfing the web. There are approximately 162 million internet users in China with growth rates at approximately 20% a year.
Chinese youth spend far more time on the internet than their counterparts in other countries and much of this time is spent on internet bulletin boards and blogs discussing products, brands, marketing, and what they want out of the shopping experience.
Now that Chinese consumers are more aware of brands like Tiffany’s (TIF) or Coach (COH) and are more consumer oriented, they are becoming increasingly picky