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Meet the new consumers

By Paul Cha  (China Daily)

15:21, August 20, 2012

Opportunities abound as the middle class comes of age

Over the past 10 years, China has undergone unprecedented economic growth. Never before has a country developed as rapidly as China, and that change has affected nearly every aspect of life in the country.

The middle class grew especially fast, increasing at an annual rate of 23 percent from about 23 million people in 2000 to 179 million in 2010. By 2030, Asia as a whole is forecast to have 3.3 billion people in the middle class, with nearly 1 billion in China.

This makes China a proving ground for global and local brands. Success stories of global brands adapting to the Chinese market, local brands rising to take the competitive edge or even some mid-tier brands successfully positioning themselves as premium are all around.

However, in the shadow of those successes are brands that fail due to the increasing competitiveness of the market. One of the key reasons for failure is that some brands simply do not understand what Chinese consumers really are and what they want, because the Chinese consumer has evolved.

Those living in the largest cities have become more sophisticated in their purchasing behavior, while a burgeoning middle class in the lower-tier cities are becoming "first-time" consumers, with incomes that enable them to make their lives more comfortable, buy homes and cars and discover new products. It is time to meet the new Chinese consumer.

One of their vital characteristics is the evolving social breakdown of China's population. Chinese consumers are highly segmented, across different income levels and even city tiers. Combined with China's economic resurgence and their increasing disposable income, these different classes of consumers are moving into higher income brackets and are looking to affirm their new social status.

With more disposable income, consumers have the ability to either expand their basket or trade up to higher-tier products. Taking fast-moving consumer goods as an example, the latest Nielsen study shows that 42 percent of total market growth comes from trading up. This is true even for second and third-tier cities, where 26 percent of consumers have traveled to nearby cities seeking a wider selection of premium goods as well as an enhanced high-end shopping experience.

The push for high-end products comes from consumers from different income segments, resulting in a range of definitions of what is premium. Higher-income consumers often seek similar high-end, high-price brands as shoppers in other countries. However, for the middle class, traditional luxury brands remain out of reach, so the need for premium yet accessible brands emerged.

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