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Price matters, but consumers now seek quality and premium

Remarkably, given the slowdown of China’s economy and the extreme ups and downs of its stock market, Chinese consumers continue to spend, almost as if these market changes are part of normal life. BrandZTM research about the attitudes and behaviors of individual Chinese investors, conducted autumn 2015, found that people remain optimistic and plan little change in their spending across most categories. 

if required to cut back, people would start with luxury and entertainment. Necessities, like food, would experience limited spending reductions. Investors are also reluctant to cut back on their telecommunication expenses, perhaps a necessity, and the cost of education for themselves and their children. Spending cutbacks are more moderate among higher income people.

These spending considerations rest on other significant and long-term shifts in consumer purchasing patterns. Chinese consumers are shopping less frequently, but spending more on each trip. A study of 26 categories by Kantar Worldpanel found a “new normal”, where the growth rate of Fast Moving Consumer Goods (FMCG) purchasing is flattening, but consumers are willing to pay more for certain products. 



Partially in reaction to the food scandals that shocked China several years ago, consumers are willing to pay a premium for safety assurance in certain categories, particularly those related to health and personal care. In less sensitive categories, consumers shop for sales. Consumers will pay a premium for bottled water, for example, but expect to buy carbonated soft drinks on promotion.

Consumers are becoming smarter. In categories where they do not perceive a useful di erence between brands, they shop for price. The ability to command a premium is not about category alone, however. Category influences – but does not exclusively determine – a product’s destiny. Brand plays an important role, too. Brands that score highest in Di erent, the BrandZTM measurement of how a brand is unique or trendsetting, can command price premiums that are 58 percent greater than the brands that score lowest in Di erent, according to BrandZTM research. 





Implications for Brands

Chinese consumers are changing in their attitude and behavior. In attitude, they remain optimistic, despite economic and stock market challenges, and they intend to keep spending. At the same time, they are becoming more sophisticated as consumers, which is reflected in their purchasing behavior and shifting spending priorities

The rate of spending on FMCG products is slowing. Consumers seek to buy commodity products on promotion but are willing to pay a premium for other items, usually related to personal care and health. And they devote a larger portion of income to non- essentials like travel, entertainment, and other experiences.

A brand, in just about any category, can command premium prices with product innovations that can satisfy this need for a special experience. In addition, Chinese consumers are diverse. The more a uent consumers are willing to pay a premium for some products that many consumers might expect to buy on promotion. And the premium prices of Chinese brands are still less than the luxury prices of many multinationals.