Category Overview: Analysis of 24 categories details
dynamism of Chinese market
Changing consumer attitudes and priorities drive value changes
The addition of consumer finance, entertainment, lifestyle platform, and transport brings the number of categories in the China BrandZ™ Top 100 to 24, more than ever before, in an effort to more fully document the increasing sophistication of Chinese consumers, the dynamics shaping the Chinese market, and the trends that may ultimately influence markets beyond China.
Led by entertainment, with year-on-year growth of 186 percent, 13 categories increased in value. Education and retail continued to increase in value, with rises of 57 percent and 55 percent. Eight categories declined. The valuation of the home appliance category doubled, primarily because Haier is now valued as an ecosystem of interrelated businesses.
To varying degrees, several factors influenced these value changes, including: Chinese cultural priorities; changing consumer expectations, including the technology-enabled desire for maximum convenience; and an economic climate in which shoppers became more rational, slowing spending when possible but also paying premium prices when merited.
The cultural priorities are best illustrated by the entertainment and education categories, opposite pursuits in many ways, in which Chinese young people, especially, spend much time. Two brands, iQiyi and Youku, previously listed in the technology category were assigned to entertainment, along with newcomer Bilibili.
These brands demonstrate both the importance of entertainment in China and the ability of entertainment brands to improve the quality of their content and effectively monetize it.
The value growth of the education category follows two years of sharp growth, making education the category that has most consistently increased in value. Education in China is a cultural ideal, a government priority, and a parental preoccupation to prepare children to compete successfully and enjoy a better life than earlier generations.
The desire for maximum convenience, a function of the online-offline transformation of retail, has stretched across many categories and reshaped consumer expectations. The four categories added to the ranking this year especially reflect this change. For example, the lifestyle platforms—Meituan, Ele.me, and Dianping—enable people, especially in large cities, to conduct the business of daily life using just a few apps to order and pay for almost any product or service.
New Retail epitomizes this trend. The retail category continued to increase in value, 55 percent, over a 47 percent rise a year ago. As the category leaders Alibaba and JD continued to add to their data and logistical advantages, they also encountered more competition, from brands like Pinduoduo, which emphasizes price discounts, often earned through group purchasing.
Technology, of course, enabled this O2O convenience revolution and the technology category increased 22 percent after consecutive annual increases of 19 and 16 percent. All but two of 11 technology brands rose in value. (Four technology brands joined the ranking for the first time based on the revised eligibility criteria.) Technology led the ranking both in number of brands and in contribution to total value, 26 percent.
The strong value rise occurred despite economic and geopolitical pressures felt by many of China’s technology brands. Chinese government regulations impacted the gaming business of internet platforms, like Tencent, and US government security concerns slowed expansion of some technology brands, like Huawei. In addition, brands faced competition from startups.
Many categories contended with the evolving spending habits of China’s more sophisticated consumers who engaged with what Kantar Worldpanel calls stratified spending, trading down when appropriate and trading up when a premium price seems justified. In the alcohol category, most brands of baijiu, the traditional Chinese white alcohol, both maintained their premium offerings and marketed to a wider group of customers. Beer brands introduced more premium offerings.
Although the home appliance category was affected by government regulations aimed at reducing housing overcapacity, customers who purchased home appliances often upgraded to built-in models with connectivity engineered for the Internet of Things. In food and dairy, prices languished for certain basic items, but consumers were willing to pay more for other basics, like instant noodles, when brands added new tastes or packaging to signal a premium difference worth paying for.
Brands that declined in value lost momentum for a variety of reasons, including economic uncertainty, which slowed car sales. But even in the car category the premium end of the market retained strength. The following articles describe in detail how cultural priorities, consumer expectations, the economy, and other factors impacted the 24 categories of products and services analyzed in this report.