Industry focus:

Consumer packaged goods and retail

The Allure and Challenges

of Chinas Changing
Consumer Market
Developing consumer archetype
strategies to win with one billion
urban Chinese consumers

Digital Lifestyle:

Yi Zhang
Online shopping
Greater choice
Better value

Contents
Executive Summary

03

Chinas changing consumer market

06

What you really need to know about the urban Chinese consumer

10

Meet your urban consumers

26

A winning consumer strategy in a changing digital market place

33

References 34

Digital Lifestyle:

Wei Feng
Online banking
Secure payments
24/7 Customer support

The Allure and Challenges of Chinas Changing Consumer Market2

Executive Summary
It is a country so vast and so complex that it can
never become hackneyed so little known that one
may with encouraging frequency enjoy the thrill of
the explorer by discovering some new fact. Carl
Crow, an American journalist and businessman, made
that observation in 1937 in 400 Million Customers,
a book of his insights about the Chinese people and
doing business in China. Today, more than 75 years
later, Mr. Crows words have never been more true.
With a consumer market now exceeding
one billion, China is often viewed as
a land of limitless opportunities. The
country has experienced multiple sea
changes that, collectively, have created
one of the most appealing business
destinations in the world. Decades of
economic growth and rising incomes,
the ubiquity of digital technology, and
the transformation of the hearts and
minds of Chinese consumers (evidenced
by the meteoric uptick in consumption)
all add to the countrys allure. It is
simply a market too attractive to ignore.
But, as many consumer packaged goods
companies and retailers are recognizing,
it is also one of the most challenging
markets in which to compete, much less
win. Thats due largely to the fact that
the ecosystem is evolving so quickly.
A range of factorsfrom demographic
changes and the breathtaking pace
of urbanization to fluctuating buyer
preferences and behaviorsmakes
consumers in China moving targets.

While it may be impossible to capture

a market of one billion, consumer
packaged goods companies and
retailers can make significant inroads
by narrowing their sights. The truth is
that Chinas consumer market today is
actually a collection of many different
consumer archetypes, groups of
consumers with different preferences
and behaviors. In fact, the consumer
landscape in China is so complex
that companies need differentiating
strategies and value propositions
that can be adapted to meet the
needs of each consumer archetype.
By customizing your approach and
targeting the unique preferences of
each consumer archetype, consumer
packaged goods companies and retailers
can create a formidable foundation for
growth and profitability.
To do this, first you need to know
your target consumers. Leveraging
data and consumer insights, you
can customize messages, offers and
experiences to attract new consumers,
and retain existing ones. By shaping
new business models, you can
enable more responsive operations.
To help consumer packaged goods
companies and retailers understand
the composition and complexity of the

consumer archetypes relevant in China,

Accenture surveyed 3,500 consumers
in 27 cities across China. Through
detailed analyses of the responses,
we have identified four learnings to
help inform consumer packaged goods
and retail consumer engagement and
growth strategies in China.

#1: A me culture
is prevailing
Urban Chinese consumers now
exhibit the consumption patterns of
a middle-class lifestyle. This means
they are spending money on things and
experiences that not long ago would
have been considered luxuries. It also
means spending more on goods that
are perceived to be of higher quality.
While three categories of products
and services (food and restaurants,
clothing and electronics) currently
top the consumption list, spending
is growing fast on leisure activities
such as travel and products related to
health. Importantly, these consumers
have become more aware of what their
purchasing power represents. They
increasingly set themselves apart and
assert their social status through what
they buy.

#2: It is difficult to drive

loyalty
Chinese consumers are extraordinarily
curious, with more than two-thirds
of survey respondents indicating their
willingness to try new products. Brand
switching is prevalent in all cities and
all age groups. Only 10 percent of
respondents are unwilling to try new
brands. Thats good news for consumer
packaged goods companies and retailers
that can leverage digital technologies
to offer entirely new products, services
and experiences to consumers. But it
spells trouble for companies that have
historically relied solely on their brand
or reputation to lure new shoppers.

#3: Life is digital

Digital channels are pervasive in China
and digital consumption continues to
grow in popularity. That means its no
longer sufficient to move consumers
through linear purchasing processes.
Creating smarter, seamless and secure
experiences at every point of interaction
is what defines expectations in the
digital world. Our findings suggest that
the surge of digital channels (and social
media, in particular) has done little to
eliminate the need for marketing basics
in China. Even in the digital space,
companies need to know their target
consumers and how to reach them
online and offline.

#4: Pragmatism still rules

Despite their growing focus on
purchases to represent their status
and online consumption, Chinas urban
consumers remain very pragmatic
shoppers, leveraging multiple channels
before they purchase, and expecting
an omni-channel experience. They
frequent traditional supermarkets
and department stores, as well as
e-commerce. Our findings confirm that
traditional retail and eShopping are not
mutually exclusive endeavors. Urban
consumers in China, as elsewhere,
use both channels and expect a
seamless and convenient experience.
Consumer packaged goods companies
and retailers that ignore one or the
other in their marketing and sales
efforts do so at their own peril.

Armed with these learnings, we

applied advanced mathematical
principles to identify eight consumer
archetypes, defined along multiple
dimensions and with unique consumer
profiles. Our goal was to show that
an analytics-powered segmentation
model can be used to continually
refine growth strategies and better
understand what it takes to target
and winwith consumers in China.
In a market as complex and fastmoving as China, a companys
success is dependent on the quality
and granularity of its consumer and
customer insights, as well as its ability
to act on those insights to drive
high performance. As this research
demonstrates, those that know your
consumers and customers best will have
a distinct advantage when it comes
to defining and succeeding with your
target consumer archetypes.

The Allure and Challenges of Chinas Changing Consumer Market4

Digital Lifestyle:

Fang Li
Online shopping
Greater choice
Better value

Chinas changing consumer market

New rules will dictate success in Chinas
consumer market. High performers
will be companies that not only
embrace new (even unconventional)
opportunities for growth, but also
engage with customers in new and
more dynamic ways.
The winners may have different business
strategies and operating models, but
they will have one important thing in
common - a clear understanding of
who target consumers are, what they
want and value, and how they make
purchasing decisions.
In many ways, China remains one of the
most attractive markets in the world:
an empowered consumer population
of more than one billion is simply too
large to ignore. This is especially true for
consumer packaged goods companies
and retailers, which operate in a sector

that is as open and competitive as

any developed market. China is an
increasingly appealing destination
for two main reasons. One, incomes
have risen (and will continue to rise)
at a steady pace. And, two, Chinese
consumers are clearly willing to spend
their money on all types of consumer
goodsfrom food and beverages to
consumer electronics and apparel.
Even the sales of luxury goods have
exploded in recent years (although
the growth of luxury good sales is
now tempered by greater government
scrutiny on displays of extravagance
and anti-corruption efforts). China is
on track to overtake the United States
as the worlds largest consumer market
in just four years (see Figure 1).

The impact of personal consumption

on Chinas economy, and the consumer
packaged goods and retail industries is
significant. Despite a cooling economy
in recent years, Chinas retail industry
has been posting double-digit sales
growth since 2000.
Although its private consumption
accounts for only about 8 percent
of all consumption in the world,
Chinas contribution to the growth of
consumption in 2011-2013 was more
than that of any other country.1 And
while official data indicates that private
consumptions share of GDP in China is
significantly lower than richer countries
(decreasing from 46 percent in 2000
to 34 percent in 2013), some research
has suggested that Chinas household
consumption is actually underestimated
by 10 percent.2

Figure 1. China is an attractive retail market

Total Retail Sales (US$ trillion)*
$2.3

2012

$3.4

$4.4

2017

China

$4.2
United States

* Total sales from all retail outlets and B2C ecommerce, including warehouse clubs. The total market includes retailers operating in both modern and
traditional channels. It excludes wholesale operations and all non-retail business such as restaurants, financial services and travel services.
Source: EIU Retail Forecast; National Bureau of Statistics; Ministry of Commerce, 2012 China retail report.

The Allure and Challenges of Chinas Changing Consumer Market6

Ironically, profiting from Chinas

growing consumer market is getting
harder for both domestic and foreign
firms. With all this pent up demand
now being expressed, how is it that
operating income margins for retailers
are shrinking? The drop in profit margin
from an average of 2.67 percent in 2011
to 2.49 percent in 2012 suggests that
brand erosion, industry fragmentation,
rising costs, and intense competition
from domestic and foreign companies
have all taken their toll.
The decline in profitability also points
to just how difficult it is for businesses
to maintain your growth momentum
in Chinas rapidly changing social
ecosystem. A range of factors
from demographic changes and the
inconsistency of income levels across
China to fluctuating buyer preferences
and behaviorsmake consumer behavior
and spending in China a moving target.

Household incomes
continue to rise.
Although it is the second largest
economy in the world, Chinas GDP per
capita is less than the GDP per capita
of 81 other countries.3 However, many
Chinese cities are as rich as upper/
middle-income countries in terms of
GDP per capita. Recent research by
Accenture and the Chinese Academy
of Sciences revealed that 47 of 73
cities measured in the New Resource
Economy City Index have GDP per
capita of US$7,700. This is more than
the average GDP per capita of upper/
middle-income countries, which was
US$7,326. In 26 cities in China, GDP
per capita equals US$11,000.4

The consumer population is

agingfast.
Currently, people aged 65 and over make
up 9 percent of the total population.
This group will account for 25 percent of
the population by 2050.5 As the number
of senior citizens rises, the number
of working-age people is falling. A
consequence of Chinas lower mortality
rates and its one-child policy enacted
in the 1980s is that, beginning in 2013,
the workforce in China has started
to shrink. The trend will continue.

Urbanization is creating a
new consumer market.
As of the end of 2013, urban residents
accounted for 53.7 percent of the total
population in China. According to the
National New-style Urbanization Plan
(2014-2020) unveiled by the central
government, 60 percent of Chinas
population will live in urban areas by
2020, which means that nearly 100
million people will become urban
consumers in the next six years. By
2030, China will see more than 67
percent of its population living in cities,
making it a huge market comprising
one billion urban consumers.6

Digital is reshaping the

consumer experience.
Throughout 2013, Chinas total value
of online shopping sales reached 1.8
trillion, accounting for 7.8 percent of
the retail sales of consumer goods
and ranking China first among all
online shopping markets worldwide.7
Calculated against an annual growth
rate of 10 percent, the total value
of Chinas online shopping market

will grow to $650 billion by 2017, far

outrunning that of the US online market
of $370 billion.8 Accentures research
confirms the important role of digital
technologies in China. Three-quarters
of urban consumers we surveyed have
smart phones and 60 percent have
tablets. It is very likely that in the next
few years, nearly all urban consumers
in China will have smart mobile devices
that connect them online, anytime and
anywhere. The prevalence of a digital
lifestyle makes it easier than ever for
urban consumers to know a product,
share comments, or pursue personalized
products through online shopping.
It is clear that Chinas consumer
market today is actually a collection
of unique consumer groups, with
different preferences and behaviors. It
is imperative for consumer packaged
goods companies and retailers to
have a differentiating strategy and a
value proposition that can be adapted
to attract and meet the needs of a
constantly evolving set of consumers
and customers. Equally important,
the winners in China will not be the
companies chasing consumer and
economic trends. The winners will be
shaping them. Along the way, they will
redefine the market and drive demand
for new types of business and new
methods of interaction. In short, they
will likely pursue opportunities for
growth outside their traditional business
models, and often outside their industry.

Trend Setting
Accenture research and experience
revealed two trends, which are
particularly relevant for consumer
packaged goods companies and
retailers to act on now as you look
to build or maintain your competitive
differentiation in China.

Digitization
Over the next five years, all companies
will become digital companies. In
tandem, all consumers will become
digital consumers. These bold
statements are based on two factors:
the explosion of data and the staggering
rise in the number of individuals and
organizations coming together in social
media networks.
Nowhere is the power and potential
of the digital revolution more evident
than in China. Consider the following
statistics. At the end of 2013:
618 million people in China were
Internet usersa figure that
represents just slightly more than 45
percent of Chinas population.18
More than 80 percent of Chinas
Internet users accessed the Internet
through mobile devices, an increase
of approximately 6 percent over the
previous year.19
The number of Chinese people who
shopped online topped 300 million,20
making China the largest retail
e-commerce marketplace by far.
The value of products purchased via
mobile shopping exceeded 167 billion
(US$27 billion), a 165 percent increase
over 2012.21
Some 600 million of Chinas 1.3
billion population are active in social
media.22

Industry Convergence
With consumers growing digital
footprints, companies have access
to more data about them than ever
before. Buried in the data, you will find
insights about new types of products
and services consumers want and the
purchasing experiences they demand.
Often, what consumers want extends
far beyond traditional offerings.
Accentures recent survey has revealed
that, for about 60 percent of business
leaders, unconventional growth means
using digital advances to expand their
business models to different industries.23
Consider the case of Alibaba, a privately
owned group of e-commerce businesses
in China. Leveraging its analyticsdriven consumer insights, the company
realized that most merchants trading
on its platforms were small- and
medium-sized businesses that found it
difficult to access traditional lenders.
In 2012, the company started offering
merchants small loans, using data
on their activities to help them make
financial decisions. By the end of 2013,
its loan book reached US$2 billion,
up from US$600 million in 2012.24

Our research supports this viewpoint;

87 percent of executives based in
China expected to pursue crossindustry growth. Once again, consumer
packaged goods companies and
retailers are well placed to be the
trendsetters when it comes to reshaping
their industry dynamics and giving
consumers better experiences and
more offerings than they expected.

Are you a trend setter?

To what extent do you believe
your business can provide
consumer experiences versus
products and services?
How do you maintain active
relationships with businesses
outside your immediate value
chain?
How are you deploying digital
technology to proactively disrupt
your industry?

Alibaba and numerous other Chinese

companies have taken advantage
of the reams of digital data now at
their disposal to create new business
models and revenue streams. Chinese
consumers, even more so than their
counterparts in the developed world,
are very fast movers when it comes
to adopting digital technologies.
These factors, plus fewer regulations
to muddy the competitive landscape,
make cross-industry expansion
a particularly relevant option for
companies operating in China.

Each of these figures, on its own,

suggests that companies looking to
conduct business in China must build
their digital capabilities. Collectively,
they present an absolute imperative.

The Allure and Challenges of Chinas Changing Consumer Market8

What you really need to know about

the changing Chinese consumer
To drive growth and profitability in
China, consumer packaged goods
companies and retailers must know
their target consumersand use that
knowledge to deliver truly outstanding
experiences at every touch-point. With
such insights, these companies can
create more responsive operations and
more easily shape new business models.
However, in a consumer market as
complex and fluid as Chinas, it is
exceedingly difficult to generate
meaningful insights that hold relevance
over time. As with everything in China,
the consumer market is continually
being shaped by economic conditions,
demographics and technological
advances. Together, these forces are
having a profound effect not only on
consumers preferences and behaviors,
but also on the tactics consumer
packaged goods companies and retailers
implement to drive demand and brand
loyalty. Also, urban consumers in China,
as elsewhere, are multi-dimensional.
They are affected by trends in different
ways. And their brand preferences and
shopping behaviors are fluid and often
dependent on product categories or
specific circumstances in which they
find themselves.

Traditional segmentations based solely

on factors such as age, location or
income, offer momentary snapshots
of ones consumer base. But they do
not provide insights that can help
companies prioritize their marketing
investments for the medium- and longterm. Rather, one must take a number of
variables into consideration, including
Chinas demographic shifts, the impact
of urbanization, the countrys adoption
of digital technologies and continuing
economic growth. Recognizing that
these factors continually shape the
consumer landscape, Accenture
launched its China Consumer Study
in 2013. Through detailed analyses of
responses to our comprehensive survey
of mainstream Chinese consumers,
we produced insights that we believe
accurately reflect the complexities of
the Chinese market.

Digital Lifestyle:

Ying Wang
Online banking
24/7 Customer support
Cloud

The Allure and Challenges of Chinas Changing Consumer Market10

About the research: The unique focus of

Accentures China Consumer Study
Any effort to unearth consumer insights
must reflect the reality that China is a
bifurcated society, with a significant gap
between urban and rural consumers.
Overall, rural household consumption is
only about one-third of urban household
consumption. And while the government
launched a series of social and economic
initiatives aimed at increasing the
incomes for both rural and urban
individuals by 7 percent by 2015, the gap
between urban and rural households is
not expected to narrow.
For the purposes of our study, we focused
exclusively on the urban consumer. This
is because Chinas urban areas already
comprise 70 percent of Chinas consumer
market. In total, we surveyed 3,500
consumers in cities in eastern, southern,
western, northern, northeast and central
China. We focused specifically on
consumers in 27 Tier 1, Tier 2, Tier 3 and
Tier 4 cities, with populations ranging
from one million to more than 20 million
(see Figure 2).

Survey respondents were aged 18

to 55, with household income levels
below 600,000 (US$97,500) and
above the income level attained by
the top 70 percent of residents in a
given city, or approximately 45,000
(US$7,400). It is important to note
that the household income data in
this study, which was drawn from the
surveyed cities Statistics Yearbook,
may have been underestimated. It is
widely accepted that Chinas household
income figures are often believed to be
under-reported. According to research
by Xiaolu Wang of Chinese Academy of
Social Sciences, Chinas household grey
income - income that goes unreported
to authorities - in 2011 accounted for
12.2 percent of GDP.9 Wangs research
also revealed that the under-reported
household income could be as high
as 76.8 percent of what is officially
reported.10 The under-reported income is
concentrated mainly in high- and middleincome households.

Beyond the urban focus, our research

differs from other China consumer
studies in two fundamental ways.
Our profiling takes geographic and
demographic diversity into account and
is based not on singular factors such as
age or location, but on individual needs,
attitudes and behaviors. Additionally,
the study has specifically targeted
consumers of mainstream (i.e., nonluxury) consumer packaged goods
companies and retailers.
Generally speaking, our survey results
reveal four learnings that can be used
to shape the growth strategies of
consumer packaged goods companies
and retailers looking to expand and
grow in urban China. These learnings
are broad, yet durable. We believe they
can be applied to better address the
needs of customers, regardless of the
consumer segment they find themselves
in at any given time.

Figure 2. Accenture surveyed 3,500 consumers in 27 cities across China in 2013

Beijing

Dingzhou
Taiyuan

Jilin
Shenyang

Baoji

Liaoyang

Linghai

Shijiazhuang
Weifang
Xuzhou

Luoyang
Dujiangyan
Chengdu

Kunming

Ningbo

Shanghai

Macheng
Yueyang

Nanchang

Nanning

Wuhan
Fuzhou
Yingde

Guangzhou
Shenzhen
Foshan

11

Tier 1 cities
Tier 2 cities
Tier 3 cities
Tier 4 cities

#1

A me culture is prevailing
With rising levels of income, more and
more urban Chinese consumers have
embraced the consumption patterns
that a middle-class lifestyle affords. This
includes spending money on things and
experiences that not long ago would
have been considered luxuries. It also
means spending more on goods that
are perceived to be of higher quality.
This is clearly reflected in a number
of consumer segments identified in
Accentures research.
According to our survey results, urban
consumers spend the lions share of their
money on three categories of goods and
services: food and restaurants, clothing
and electronics (see Figure 3). Spending
on leisure activities is growing among
consumer groups at all income levels
from aspirational wage earners (typically
in lower income brackets) to exclusive
service buyers (among the wealthiest of
those consumers interviewed). Leisure
purchases will continue to grow in
importance, with travel and tourismrelated activities expected to become
a particularly important spending
category. In 2012, Chinese consumers
spent RMB 2.3 trillion (US$360 billion)
on traveling within China, 17.6 percent
more than the previous year11, and more
than US$100 billion on international
travel, up from just $73 billion in 2011.
This makes them the largest source of
tourism cash in the world.12

Figure 3. What do (will) urban consumers buy?

Top 3 Spending Categories
% of respondents

Top Category for Increased Spending

% of respondents

Food and Beverages/Dining Out

Travel and Tourism

45%

72%
Apparel

Food and Beverages/Dining out

31%

42%
Consumer Electronics

Consumer Electronics
26%

36%

Health and Medical

Travel and Tourism

24%

34%
Home Appliances

Home Appliances
23%

33%
Personal Care

Apparel
21%

28%
Home Care

Personal Care
20%

25%
Health and Medical

Home Care
19%

21%
Books and Videos

Books and Videos

7%

9%

Q: Which of the following are your top three expenses over the last year? Which of the following
category are you most likely to increase expenditure in over the next year (allowing for inflation)?
Source: Accenture China Consumer Survey

Products related to personal health also

hold appeal across income levels. They
already make up an important purchase
category for older consumers and
will take a much larger share of these
consumers wallets in the years ahead.
This is because China is an aging nation,
and is poised to be one of the largest
silver economies in the world.

The Allure and Challenges of Chinas Changing Consumer Market12

These consumers in urban China have

not just grown wealthier; they have also
become more cognizant of what their
purchasing power represents. Through
shopping, they are increasingly looking
to set themselves apart and assert
their individualism or social status.
This was clearly evident among young
professionals in Tier 3 cities and, to
a lesser degree, other segments. This
trend shows no sign of slowing. In fact,
as geographic and socio-economic
differences continue to erode, what
consumers buy will increasingly become
a tangible symbol of their success and
an expression of who they are.
As illustrated in Figure 4, 62 percent of
urban consumers do not want to buy
products that most other people buy.
This attitude is most prevalent among
younger consumers. Older consumers,
by contrast, are more likely to spend on
purchases that represent their social
class. Among all urban consumers
surveyed, 45 percent hold this view.

Figure 4. Spending among urban consumers makes a statement

Urban consumers are willing
to spend on products that
reflect ones identity

The young are drawn towards individualism

while the older generation remain attached
to social status
Age

21%
Individualism
17%

62%

18-25 17% 18%

65%

26-35 20%

64%

15%

36-45 23%

18%

59%

46-55 23%

18%

59%

Age
18-25 46%
40%

Social Status

45%

26-35 40%

14%
17%

40%
43%

36-45 37%

13%

50%

46-55 36%

15%

49%

15%

Are you prepared

to reach the me
consumer?
How are you capturing
consumer data and
insights today?
If traditional geographic and
socio-economic boundaries
are disappearing, does
your current consumer
segmentation still work?
How does this impact your
category management
(product mix, price band,
promotion tactics, shopping
environment) to retain and
grow your customer base?

13

Agree
Neutral
Disagree
Q: To what extent do you agree with the following statement? I am not willing to purchase the same
items that are bought by most other people. It is worthwhile to spend more on products that better
represents ones social status.
Source: Accenture China Consumer Survey

The transition to a middle-class lifestyle

is prevailing in cities of all tiers. The
categories of future spending among
this new breed of me consumers are
remarkably consistent (see Figure 5).
So is their willingness to pay more for
better products. Approximately 90
percent of respondents in each city tier
express a willingness to pay at least a 5
percent premium for high-end products.
Nearly 60 percent are willing to pay at
least 10 percent more.
Thanks to multi-year economic growth,
state-of-the-art infrastructure,
advanced communications technologies
and the prevalence of mass media, the
differences in urban Chinese consumers
needs, preferences and behaviors across
city tiers are narrowing. This means
consumer packaged goods companies
and retailers will soon need to develop
different approaches to segmentation to
gain an even deeper and more nuanced
understanding of consumers.

Figure 5. How spending will increase

Top Category for Increased Spending By City Tiers
Travel and Tourism

37%

47%
47%
45%

Food and Beverages/Dining Out

28%

32%
31%
31%

Consumer Electronics

22%

26%
25%

30%

Health and Medical

23%
24%
24%
24%

Home Appliances
21%
22%

25%
25%

Apparel
17%

20%

23%
23%

Personal Care

17%

21%
20%
21%

Home Care
16%
18%
19%

25%

Books and Videos

4%
Tier 1

8%
8%
7%

Tier 2

Tier 3

Tier 4

Q: Which of the following category are you most likely to spend more on in the next year
(allowing for inflation)?
Source: Accenture China Consumer Survey

The Allure and Challenges of Chinas Changing Consumer Market14

#2

It is difficult to drive loyalty

In Accentures 2011 Global Consumer
Figure 6. The lure of new brands and products
Pulse Research,13 we observed that
69 percent of urban consumers are willing to try new products
Chinese consumers are extraordinarily
curious. That finding was confirmed in our
most recent research. More than twothirds of survey respondents expressed
11%
their willingness to try new products.
According to our study, the curious
characteristic of brand switching was
found equally in all city sizes and all age
20%
groups. Only 10 percent of respondents
claimed to be unwilling to try new
brands or products (see Figure 6).
This bodes well for consumer packaged
goods companies and retailers that
are able to take advantage of industry
convergence to offer entirely new
products, services and experiences
to consumers. It also presents
opportunities for companies looking
to accelerate the pace of your go-tomarket strategies with new products.

Are you prepared

to reach the
curious consumer?
How important is branding
in your product category?
How do you make sure you
have the right brand value
proposition?
- Are you fully aware of
your brand values and
positioning?
- How much of your brand
value proposition is tied to
consumer and customer
values?
- Are you fulfilling consumer
and customer needs?
Which brand elements can
you tweak to build brand
loyalty?

15

69%

Similar trend is observed across city tiers and age segments

City Tier
Tier 1

11%

21%

69%

Tier 2

11%

21%

68%

Tier 3

11%

18%

71%

Tier 4

11%

24%

66%

18-25

9%

21%

70%

26-35

10%

22%

68%

36-45

12%

19%

69%

46-55

12%

19%

69%

Age

Not willing to try new brands/products

Neutral
Willing to try new brands/products
Q: How willing are you to try out new or innovative products in the market?
Source: Accenture China Consumer Survey

The financial impact of brand switching

is significant. According to Accentures
2013 Global Consumer Pulse Research,
it is estimated that revenue loss due
to brand switching in China in 2013
neared US$1.2 trillion. That makes it
the second-largest switching economy
in the world, accounting for 23
percent of Chinese consumers annual
disposable income. According to our
survey, about 40 percent of consumers
reported they switched retailers in
the past year. And approximately
60 percent of those consumers
switched because of a negative
customer experience (see Figure 7).

Figure 7. Switching due to poor service by industry

% of respondents who switched in the sector
Retailers
41%
Banks
29%
Hotels
25%
Internet Service Providers
23%
Wireless/Cell Phone Companies
21%
Property and Casualty Insurance
21%
Airlines
18%
Cable/Satellite Television Service Providers
12%
Home Telephone Service Providers
11%
Utility Companies
10%
Other
1%
Q: In the past year, which of the following types of service providers, if any, have you switched away from
because of poor customer service or support?
Source: Accenture 2013 Global Consumer Pulse Research

The Allure and Challenges of Chinas Changing Consumer Market16

What about brand appeal? Shouldnt

that temper the brand switching of
curious consumers? Our survey revealed
that urban Chinese consumers are
highly brand conscious when choosing
what and where to buy. Brand-based
purchases correlate with age and
location. The larger the city (where
international brands have more
presence) and the younger the consumer
(who are more aware of brands), the
higher the influence a brand has on
purchasing decisions (see Figure 8).
Interestingly, while urban Chinese
consumers are extremely brand
conscious, the brands of consumer
packaged goods companies and retailers
no longer hold the appeal they once did.
Thanks to the much greater availability
and range of brands, urban Chinese
consumers are constantly evaluating
new products. Some experts have gone
so far as to say that brand loyalty is a
thing of the past.14

Figure 8. Brand matters

82% of urban consumers are brand conscious during grocery shopping

18%

82%

Brand consciousness is more pronounced among developed cities and the young
City Tier
Tier 1

12%

88%

Tier 2

18%

82%

Tier 3

19%

81%

Tier 4

28%

72%

Age
18-25

14%

86%

26-35

15%

85%

36-45

18%

82%

46-55

24%

76%

Value-driven

Brand-driven

Q: When you purchase food products or daily necessities, which of the following best describes you?
Stick to one brand, choose between multiple brands, go for the best deal
Source: Accenture China Consumer Survey

17

This spells big trouble for consumer

packaged goods companies and retailers
that have historically relied on their
brand reputation to lure new shoppers.
Only half of our survey respondents
were committed to a specific brand.
The other half routinely chose among
multiple brands. Older respondents
(aged 36 to 55) and residents of Tier 4
cities demonstrated the lowest levels of
brand loyalty (see Figure 9).
The Internet and social media have
played a large role in the weakening of
brands around the world. Consumers
now have fast and easy access to
product information and consumer
reviews, which hold more sway than
logos or advertisements.

Figure 9. Brand loyalty is not particularly strong

Among brand conscious urban consumers, there is an equal split between
loyalists and switchers

50%

50%

Loyalists
Switchers

Similar trend is observed in Tier 1/2/3 cities and across age segments
City Tier
Tier 1

52%

48%

Tier 2

51%

49%

Tier 3

53%

47%

Tier 4

42%

58%

18-25

51%

49%

26-35

52%

48%

36-45

49%

51%

46-55

49%

51%

Age

Stick to one brand

Choose between multiple brands

Q: When you purchase food products or daily necessities, which of the following best
describes you? Stick to one brand, choose between multiple brands, go for the best deal
Source: Accenture China Consumer Survey

The Allure and Challenges of Chinas Changing Consumer Market18

#3

Life is digital
Whereas insights into the me and
curious consumers can be used to
better understand what urban Chinese
people buy and the thinking behind their
purchasing decisions, our analysis also
sheds light on how urban consumers
engage with consumer packaged
goods companies and retailers. Not
surprisingly, digitization has taken
hold in a pivotal way. Digital channels
are pervasive and digital consumption
continues to grow in popularity.
What does the emergence of digital as a
way of life mean for consumer packaged
goods companies and retailers? It means
that growth is no longer simply a matter
of moving consumers and customers
through linear purchasing processes.
Creating smarter, seamless and secure
experiences at every point of interaction
is what defines expectations in the
digital world. Experiences today must be
non-stop, customized and cross-channel
(see Figure 10).

Are you prepared

to reach the digital
consumer?
What is your new marketing
plan around digital
consumer touch-points
instead of traditional
Above the Line (ATL)
and Below the Line (BTL)
promotional activities?
What are the new
digital channels that are
increasingly relevant for
target consumers?
What consumer insights
you gain from social
listening can improve your
R&D, service, marketing
and sales, etc.?

19

Figure 10. New dynamics of todays consumers and customers

The Traditional Funnel
Discover
Consider
Evaluate
Purchase
Use

The Accenture Nonstop-Customer Experience Model

Purchase

Discover

Promise

Evaluate

Delivery

Consider

Open content/channels

Use

Brand-controlled content/channels

Source: Digital Customer: Its time to play to win and stop playing not
to lose. Accenture 2013 Global Consumer Pulse Research.

Our research showed that 86 percent

of urban Chinese consumers are
Internet users. One segment of
consumerswhich we refer to as
Internet civiliansconducts nearly
all of its transactions online. Only two
of the eight segments we identified
have little digital exposure. Of Chinas
digitally connected urbanites, 73
percent go online and nearly 50 percent
visit social media sites every day. And
25 percent of respondents expressed
their preference of watching television
programs on their computers, tablets
or mobile phones. This has significant
implications for advertising and brand
building. Consider this: urban consumers
spend, on average, 9.4 hours per week
watching TV. Yet, they spend more than
28 hours per week consuming content
via their PCs, tablets or smartphones
(12.6, 8.3 and 7.2 hours, respectively).
In this fragmented environment, it is
quite difficult to maintain a consumers
attention through a single channel.
In the future, as screens and content
multiply, brands and content will
become even more diluted.

Figure 11. Internet advertising and social media are more influential for younger
consumers in Tier 1 cities
Internet Advertising

Social media

Tier 1

38%

Tier 2

31%

Tier 2

Tier 3

31%

Tier 3

Tier 4

28%

Tier 4

Tomorrows mainstream
41%
38%

26-35

46-55

27%
21%
22%

Tomorrows mainstream

18-25

36-45

29%

Tier 1

31%
22%

40%

18-25
29%

26-35
36-45
46-55

18%
17%

Q: Which are the top three sources of information (by order) that influence your choice of food and
beverages and personal care products?
Source: Accenture China Consumer Survey

Digital media is particularly relevant to

younger consumers in Tier 1 and Tier
2 cities (see Figure 11). As the 18- to
35-year olds age, their affinity for digital
media will certainly continue and also
be embraced by the generations that
follow them. This suggests that Internet
advertising will become a mainstream
approach to connecting with urban
consumers in the years ahead.

The Allure and Challenges of Chinas Changing Consumer Market20

Social media deserves special

consideration. Urban consumers in
China use social media for a variety
of purposes (see Figure 12). Most
use social media to stay connected
and communicate information.
But a sizeable number also turn to
social media sites to source product
information. Given that 73 percent of
respondents often recommend products
theyve purchased to their friends,
one can assume that many of these
recommendationsand critiquesoccur
in the social media space.
Given the prevalence of social media
activity among consumers in China,
its understandable that businesses
are upping their investments in digital
marketing. In fact, a quarter of all
advertisers budgets were dedicated to
digital channels in 2013an increase
of 38 percent from just a year prior.15
For many, the growing emphasis on
digital marketing is based on the belief
that Chinas explosive growth in online
and mobile channels, coupled with
consumers skyrocketing use of digital
technologies, can transcend many of the
old barriers to market entry.

21

Figure 12. Urban consumers are actively consuming and contributing

information on social media
Communicate and share
79%
Source information
53%
Express own opinion
43%
Comment or forward others opinion
28%
Q: To what extent do you agree with the following statement? I often recommend products purchased to
my friends. How often do you visit social media networks, such as microblogs, renren, qzone, blogs, tieba,
or forums?
Source: Accenture China Consumer Survey

This belief may be somewhat misguided.

While the importance of digital channels
cannot be disputed, their usefulness
as a marketing mechanism has been
somewhat overhyped, at least in the
consumer packaged goods and retail
sector. Our survey confirms this by
showing that television advertising of
consumer products is still the main
channel of influence for the vast
majority of urban Chinese consumers.
Only about 25 to 30 percent of
consumers consider social media and
online advertising to be their main
channel of influence when it comes to
purchasing food, beverages or personal
care items. Even traditional marketing
approaches such as in-store information
and sales staff interactions trump online
advertising and social media (see Figure
13). Price-sensitive families, thrifty
householders and conservative middleincome shopperswhich, collectively,
make up about 40 percent of the urban
consumer baseare all united by the
lack of digital influence in their lives.
There is also the issue of diversity in
the digital world. The online community
in China is enormousand no more
homogenous than the population at
large. Digital consumers have varying
preferences, attitudes and behaviors.
Additionally, some digital consumers are
more digital than others. It is unlikely
that a single digital campaign would
target these groups equally effectively.
Our findings and observations suggest
that, to date, the surge of digital and
social media in China has done little to
eliminate the need for marketing basics.
Even in the digital space, consumer
packaged goods companies and
retailers still need to know their target
consumers and how to reach them
online and offline.

Figure 13. TV remains a mainstream channel for food and beverages and
personal care products
TV Advertising
61%

66%

Family and Friends Recommendation

46%

57%

Instore Displays
34%

40%

Salesperson Recommendation
38%

44%

Internet Advertising
29%

33%

Social Networks, Blogs, Forums

25%
23%
Outdoor Advertising
20%
17%
Print Advertising
18%
17%
Food and Beverages

Personal Care

Q: Which are the top three sources of information (by order) that influence your choice of
food and beverages and personal care products?
Source: Accenture China Consumer Survey

The Allure and Challenges of Chinas Changing Consumer Market22

#4

Pragmatism still rules

Despite all indications that online
channels are gaining ground, Chinas
urban consumers are still, at their core,
pragmatic shoppers. This means they
frequent both brick-and-mortar and
online shops to make their purchases,
and increasingly expect a seamless
experience when navigating these
two worlds.
The growth in online shopping is
phenomenal. Nearly 70 percent of
consumers we surveyed had online
shopping experiences. In its 12th FiveYear Program, the central government
estimated that online shopping volume
will be 8 percent of total retailing
volume. In fact, online shopping
is growing much faster than the
governments forecast and faster than
offline shopping, as well. In 2013, Chinas
online shopping was RMB1.85 trillion
(US$303 billion), which was about 7.8
percent of the total retailing volume,
an increase of 1.6 percent from 2012.16
According to the Ministry of Commerce,
online shopping sales grew by 31.9
percent in 2013, over 22 percent faster
than department stores, supermarkets
and boutique shops, respectively.17
However, traditional supermarkets and
department stores still reign supreme
(see Figure 14). Citing convenience,
comfort and a wide selection, 84
percent and 62 percent of respondents
rank supermarkets and department
stores, respectively, as their primary
shopping destinations. This finding held
across all city tiers and across all age
groups. Among all survey respondents,
Internet shopping is a distant thirdplace contenderand did not even
register as a top-three shopping
destination for urban consumers in
Tier 4 cities, in the countrys northern
region, or in the 36 to 55 age range. It
is among younger shoppers in Chinas
largest cities that Internet shopping
really shows its power and potential.

23

Figure 14. Traditional shopping destinations trump online shops for now

Majority of urban consumers shop in supermarkets and department stores due to

convenience, comfort and wide product range
Supermarket
84%
Department Store
62%
Internet Shopping
40%
Convenience Store
35%
Traditional Market/Wholesale
29%
Branded Boutiques
22%
Fashion Shop/Street
14%
Others
8%
TV/Phone Shopping
4%
Q: Please specify the three key channels where you spend the most of your daily expenses?
Source: Accenture China Consumer Survey

Does this insight suggest that consumer

packaged goods companies and retailers
should invest more in traditional
marketing programs? Not really. Despite
the general preference for brick-andmortar shopping experiences, more than
one-third of urban consumers in China
regularly shop online. Nearly 80 percent
of Internet shoppers buy online at least
once a month. More than a third do so
weekly. Apparel, payments (for things
like mobile phone charges or concert
tickets), and travel are the three hottest
Internet product categories. Again, the
younger the consumer and the larger
the city, the more frequently they carry
out online purchasing (see Figure 15).

Figure 15. Who shops online and how often?

Online shopping is prevalent in all city tiers.
Young consumers are more frequent online shoppers.
Shop online at least once a month
83%

Tier 1

80%

Tier 2
Tier 3

79%

Tier 4

70%

Shop online at least once a week

18-25

38%

26-35

37%

36-45

32%

46-55

Are you prepared to

reach the pragmatic
eShopper?

25%

Q: Have you ever made purchases online? How often do you make purchases online? Which of the
following would you prefer to purchase online? Which of the following categories of products would
you prefer to purchase offline over online?
Source: Accenture China Consumer Survey

Do you have an omnichannel/online-offline

strategy to tap into
overall growth and
build differentiation?
How will you leverage
digital to create new
consumer in-store shopping
experiencesto be more
inclusive, interactive
and integrated?
How ready is your back
office to build a highly
integrated organization
with seamless operations
to support an omnichannel strategy?
The Allure and Challenges of Chinas Changing Consumer Market24

Our findings confirm that traditional

retail and eShopping are not mutually
exclusive endeavors. Urban consumers
in China, as elsewhere, are using both
channels to create a seamless and more
reassuring experience. For example, 75
percent of urban consumers compare
prices online and offline before
purchasing big-ticket items. And more
than half venture to physical stores to
assess products in person before buying
them online. There are a number of
reasons urban Chinese consumers are
wary of purchasing products directly
online without examining the quality
or other pricing options. Concerns over
product quality top the list by a large
margin (see Figure 16).
Our survey results further prove that
the fine line between online and offline
worlds are blurring. Urban consumers
see value in both worlds and regularly
step from one to the other. Consumer
packaged goods companies and
retailers that ignore one or the other
in their marketing efforts do so at their
own peril. It is now imperative that
companies employ an integrated, omnichannel approach to provide urban
consumers the seamless experience they
expect and demand.

Figure 16. Urban consumers are cautious when it comes to shopping online
Inferior Product Quality
82%
Unable to Try Products
40%
Fake Products
38%
Internet Scams
34%
Poor Online Customer Service
34%
Inflexible/Late Delivery
23%
Inconvenient Payment Methods
17%
Higher Prices
15%
Time Consuming
9%
Poor Online User Interface
2%
Q: What are the three most important problems you are concerned with in shopping online
(by order)? To what extent do you agree with the following statement? I often go to
physical stores to see and try products before buying them online.
Source: Accenture China Consumer Survey

25

Meet your urban consumers

The insights gleaned from Accentures
research and outlined above can help
consumer packaged goods companies
and retailers begin to craft strategies
for growing their businesses in urban
China. They provide a broad overview
of shoppers changing preferences,
attitudes and behaviors, and can form
the basis of a consumer experiencedriven blueprint. But to create long-term
differentiation in the market and highly
targeted offerings, consumer packaged
goods companies and retailers should
dig even deeper into the attributes of
the consumers they are trying to reach.

We applied an advanced analyticspowered segmentation model to

generate more granular insights
of consumer patterns from the
perspective of the consumer packaged
goods and retail industries. This
enables companies to zero in on
high-value consumer archetypes or
channels. Further, by examining each
archetypes consumption patterns
from the perspective of the financial
service, communications and hi-tech
industries, our analysis also sheds light
on emerging preferences or crosssector purchasing patterns. Above all, it
distinguishes one set of consumers from
others in a way that allows consumer
packaged goods companies and retailers
to make targeted strategic investments.

A detailed analysis of our survey results

reveal eight consumer archetypes for
consumer packaged goods companies
and retailers to consider targeting in
urban China.
At the lower income ranges, two
consumer archetypesaspirational
wage earners and price-sensitive
familiesdominate (see Figures 18 and
19). Together, these groups make up
about 30 percent of the urban Chinese
consumer market.

Figure 17. Eight consumer archetypes relevant to the urban China market
Wealthy class (Not Included)

Income
600K+

Fashion-forward
consumers - 5%

The digital generation, focused

on fashion trends and high
140K+ quality, are keen on the Internet
and digital technology.

Exclusive service
buyers - 6%

Yuppies - 10%
The bourgeois group of consumers
seek self-esteem in their pursuit of
quality and personalized services
that represent social status.

Demanding, high-income,
urban-dwelling white-collar
workers; seek service excellence,
personalized experience,
performance and efficiency.

Internet
civilians - 23%
A young, motivated group with general spending
power, enthusiastic for digital technology, typically
associated with the Internet.

72K+

Aspirational
wage earners - 15%

Thrifty
householders - 18%

Price-sensitive
families - 16%

Wage earners who lack strong spending power but

45K+ pursue convenience and enjoyment, are progressive
and open-minded in their consumption.

Cost-conscious men and women seeking

affordability for their families.

Conservative
middle-income
shoppers - 8%

Well-off group with

satisfactory living standards
and conservative in their
pursuit of comfort and
decent quality.
The middle-aged,
home-focused group,
cautious and conservative
in their pursuit of
practical and economical
goods and services.
Focused on children's
expenditure and lifestyle,
save up to support
children's expenditure.

Low Income (Not Included)

< 45K
18-25

26-35

36-45

46-55

Age

*Note: Annual household income in RMB. Analysis excludes consumers with annual
household income of less than RMB45K (30%) and more than RMB600K (2%).
Source: Accenture China Consumer Survey

The Allure and Challenges of Chinas Changing Consumer Market26

Accentures Segmentation Model and

why it matters
Traditional consumer segmentation
models are rarely based on more than
two distinct buyer characteristics. Levels
of income and consumption are two of
the most commonly utilized dimensions.
One of the greatest advantages of such
a simplistic segmentation model is that
it establishes clear boundaries among
the resulting segments. However, a
two-dimensional analysis provides
scant insight into the value potential
of each group or how companies
should target their marketing and
sales investments for maximum
impact. Additionally, defining income
and consumption levels is a highly
subjective exercise. The lack of rigor
applied to segmenting consumers means
that the nuances of the consumers
expectations, desires and experiences
cannot be taken into consideration.
Accentures approach to segmentation
is markedly different. Based on the data
collected through the research, we
applied analytics to create distinct buyer
profiles based on multiple dimensions
that go far beyond income levels and
spending patterns. Specifically, we
examined survey respondents attitudes
towards shopping, their consumption
needs, their buying power (versus their
buying intent), and the factors that
come into play when they make their
purchasing decisions. With this model,
an almost limitless number of attributes
can be assessed and quantified.

27

Clearly, such a highly nuanced profile

is quite helpful to consumer packaged
goods companies and retailers (and
companies from other industries) looking
to build their brands, set prices, launch
new cross-industry offerings, or establish
a stronger digital presence. That said, we
also realize thatdespite their granularity
of detailthese segments (or archetypes)
should rarely be considered in isolation.
This is the true power of an advanced
analytics-based approach that can
examine an infinite number of attributes:
the ability for companies to generate
even more complex and meaningful
insights that enable you to meet the
needs of target consumers, regardless of
the segment they find themselves in at
any given time.
So why does the analytics-powered
segmentation matter? Without
segmentation models, some
companies might approach members
of the Internet civilians and thrifty
householders segments similarly
simply because both groups are
middle-income wage earners. Deeper
analysis quickly reveals that income is
where the similarity starts and ends.
Consumers in the thrifty archetype are
older, more price-sensitive and more
rational in their decision-making. When
they buy something, it is because they
need itnot because it promotes their
individualism. They have low intentions
to buy, and equally low buying power.
In making their online purchasing
decisions, their top consideration
is value. Things like quality, service
and speed of delivery are much less
important to them.

In short, the attitudes, preferences

and behaviors of these two archetypes
call for completely different marketing
approaches. That realization would have
never come to light without advanced
analytics and segmentation. Marketing
investments would have been wasted or,
at a minimum, not been able to produce
the desired results.

Figure 18. Aspirational wage earners

Buying Considerations

Consumer Preferences
Price

Brand Conscious

Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Aspirational wage earners

This archetype is typically represented
by middle-aged women in Tier 3 cities.
While they lack significant spending
power, they will pay for products that
give them enjoyment or make their lives
easier. Like other archetypes, they are
highly influenced by social networks
and online advertising. And the largest

amount of their spending is directed

toward apparel and household items,
which they buy in large measure via
online channels. However, unlike other
archetypes, they are less likely to follow
trends or place much emphasis on the
latest product features. They purchase
what they need and, as far as they are

able, what they want. Point-redemption

schemes appeal to this archetype,
as do low delivery costs. The buying
considerations and preferences of this
archetype are illustrated in Figure 18.

Figure 19. Price-sensitive families

Buying Considerations

Consumer Preferences
Price

Brand Conscious
Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Price-sensitive families
Also known as wise shoppers, this
archetype is very rational when it comes
to making consumer product purchases.
Like the aspirational wage earners, this
group is predominantly middle-aged
and female, has low spending power,
and values promotional discounts and
incentives. The lions share of their
spending on consumer products is
directed to personal care and household

items. They spend little of their

disposable income on impulse buys or
items or experiences they might simply
want to have. These wise shoppers are
experienced in online shopping. But
they ultimately base their purchasing
decision on where they can get the
best price advantages. The buying
considerations and preferences of this
archetype are illustrated in Figure 19.

Among middle-income urban Chinese

consumers, another two archetypes
emerged. Internet civilians and thrifty
householders make up about 40 percent
of the urban Chinese consumer market.

The Allure and Challenges of Chinas Changing Consumer Market28

Figure 20. Internet civilians

Buying Considerations

Consumer Preferences
Price

Brand Conscious
Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Internet civilians
The largest of any of our identified
archetypes, this group comprises
younger, ambitious, middle-income
wage earnersprimarily men from Tier
3 cities. These consumers are more
emotional about their purchases and
are willing to spend more than, say,
members of the price-sensitive family
segment, for whom spending is more
restrained. The Internet civilians do
not buy out of necessity; rather, they

are motivated by the opportunity to

enjoy leisure and, to a slightly lesser
extent, trendy pursuits. They are heavily
influenced by social networking and
allocate a significant part of their
spending to online purchases across
a wide range of areas. Interestingly,
they prefer physical channels when it
comes to purchasing books or electronic
products. They can be impulsive
shoppers, and they react positively

to shopping experiences that deliver

personalized service and convenience.
Importantly, their buying intent is very
high. But, at this point in their lives,
their buying power is relatively low. In
other words, they are dreamers, with
wallets not yet large enough to meet
their purchasing aspirations. The buying
considerations and preferences of this
archetype are illustrated in Figure 20.

Figure 21. Thrifty householders

Buying Considerations

Consumer Preferences
Price

Brand Conscious

Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Thrifty householders
Like Internet civilians, thrifty
householders tend to have medium-level
incomes and live in Tier 3 cities. That
is where the similarity between these
two groups ends. Thrifty householders
are middle-aged and quite conservative
in their purchasing practices. They
prefer to pay cash, and spend their
money on practical things such as
home appliances and health care. When
they buy things, price and quality are
often the determining factors. They

29

care little about an items appearance

or what it might say about the owners
social status. This segment generally
has no online shopping experience and
is, therefore, not influenced by social
networking or online advertising. Instore promotions and attentive sales
people make the difference. The buying
considerations and preferences of this
archetype are illustrated in Figure 21.

Accentures segmentation model

revealed four distinct archetypes
among higher-income urban
consumers. Fashion-forward
consumers, yuppies, exclusive service
buyers and conservative middleincome shoppers, combined, make up
approximately 30 percent of the urban
Chinese consumer market. Members
of these archetypes have the highest
buying power in urban China.

Figure 22. Fashion-forward consumers

Buying Considerations

Consumer Preferences
Price

Brand Conscious
Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Fashion-forward consumers
These young professionals are clearly
part of the digital generationa fact
borne out of their strong propensity
to purchase digital and electronic
products. Mostly male, these individuals
tend to live in Tier 1 cities. They are far
trendier than any other archetype and
seek out high-quality goods that can
help them assert their individualism.

Not surprisingly, the appearance and

features of an item hold great sway, and
price is a less important consideration.
These Internet-savvy consumers use
multiple devices to navigate their
online shopping experiences. They are
strongly influenced by online product
information and the chatter on social
networks. Given their exposure to

the digital world, it makes sense that

they are also more concerned about
issues such as online fraud. The buying
considerations and preferences of this
archetype are illustrated in Figure 22.

Figure 23. Young urban professionals (Yuppies)

Buying Considerations

Consumer Preferences
Price

Brand Conscious
Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Young urban professionals (Yuppies)

Like the fashion-forward consumers,
yuppies are young with money to spend.
However, whereas fashion upstarts tend
to reside in Tier 1 cities and be drawn to
electronic goods, yuppies are more likely
to be seen in Tier 3 cities, buying books,
personal care products and travel-related
items and experiences. For yuppies, the
overriding concern in making many of
their purchases is the status that such a
purchase will convey. In fact, yuppies self-

esteem is closely linked with their ability

to buy products that reflect their desired
social status. Their brand awareness is
extremely high. Yuppies are also one
of the most digitally savvy archetypes,
with 85 percent having online shopping
experience and engaging in e-commerce
quite frequently. Approximately 40 percent
make purchases via their smart phones.
Given their digital connectivity, it stands
to reason that social networking plays a

big role in shaping their preferences. But

yuppies dont spend all of their money in
the online world. They also make regular
visits to branded stores and internationally
renowned supermarkets. The buying
considerations and preferences of this
archetype are illustrated in Figure 23.

The Allure and Challenges of Chinas Changing Consumer Market30

Figure 24. Exclusive service buyers

Buying Considerations

Consumer Preferences
Price

Brand Conscious
Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Exclusive service buyers

For this group, which makes up about 6
percent of Chinas urban consumer market,
service quality and convenience are
exceptionally important factors. Members
of this archetype are quite demanding
when it comes to service excellence
and receiving a highly personalized
experience. This is understandable, given

the high levels of spending made in the

service-dominated areas of tourism and
healthcare. Women outnumber men in this
archetype. They tend to be young, live in
Tier 1 cities, and pay special attention to
product performance and the efficiency
of the consumer experience. All exclusive
service buyers are experienced in online

shopping and use social networks

and websites as their primary sources
of product information. The buying
considerations and preferences of this
archetype are illustrated in Figure 24.

Figure 25. Conservative middle-income shoppers

Buying Considerations

Consumer Preferences
Price

Brand Conscious

Convenience

Price
Sensitive

Features

Quality

Personalization

Impulsive

Service

Class

Trading Up

Appearance

Conservative middle-income shoppers

Along with exclusive service buyers,
conservative middle-income shoppers
have the greatest buying power in
urban China. Yet despite their relatively
high levels of disposable income,
these individuals adhere to more
conventional purchasing practices.
Typically older, these consumers are very
pragmatic when it comes to making
their purchasing decisions. Quality

31

and brand recognition are important

product considerations for them.
Home appliances, household goods,
and healthcare products and services
account for most of their consumer
product purchases. Interestingly, the
conservative archetype is the only
upper-income archetype with relatively
few online shopping experiences. These
individuals prefer to shop in large,

well-known stores, and are greatly

influenced by TV advertising and
word-of-mouth channels when making
their purchasing decisions. The buying
considerations and preferences of this
archetype are illustrated in Figure 25.

Case study

Blurring borders:
A banks venture into e-commerce
In response to its customers continuing
transition to online consumption, a large
Chinese bank moved into the e-commerce
territory by launching a B2C eBusiness
platform, offering financial and nonfinancial products. By applying Accentures
analytics-powered, cross-industry
segmentation model, the bank was able to
precisely target retail consumers with the
greatest need for online financial products
(see Figure 26). In addition, the bank was
able to improve its understanding of the
financial and non-financial needs of target
customer groups.

Armed with these types of insights, the

bank launched its new e-commerce
business strategy and is well on its way
to growing revenue through its online
offerings. It has taken advantage of
digitization and industry convergence in
China and is now using retail insights to
drive financial services success.

Figure 26. Current and future penetration of consumer credit products

Future demand of consumer credit products (%)
45

Fashion-forward consumers
Yuppies
Internet civilians

40
Aspirational
wage earners

Exclusive service buyers

35

30

Average
Price-sensitive families
Thrifty householders

Conservative middle-income shoppers

25

20

15
15
20
25
Current penetration of consumer credit products (%)

30

35

40

45

The Allure and Challenges of Chinas Changing Consumer Market32

A winning consumer strategy in

a changing digital market place
Winning in China has never been more
challenging. Consumers are savvier, more
socially connected and more demanding
than ever before. Disposable income
differences are narrowing. Loyalty is
fleeting. And competition from multinational and home-grown companies is
becoming ever more intense.
Fortunately for consumer packaged
goods companies and retailers, the
challenges associated with operating
in China are offset by the tremendous
opportunities for growth. Digitization
and industry convergence hold
particular promise. They are the
new frontiers of growth, innovation,
differentiation and competitive
advantage. But seizing these growth
opportunities requires deep knowledge
of consumers and an ability to act
on that knowledge to drive high
performance.
To win consumers in a changing digital
market place in China, consumer
packaged goods companies and retailers
must implement strategies specifically
designed for urban consumer archetypes.
Before you can do that, however, there
are four things you need to do:
Invest in technology platforms that
will enable you to gain and integrate
consumer data from different sources.
Invest in building analytics
capabilities so that you can truly
understand changing consumer
behaviors and the path-to-purchase
journeys of the consumers you want
to reach.

33

Develop a consumer engagement

blueprint that will guide you in
delivering the most satisfying and
valuable consumer experiences. For
consumer packaged goods companies,
this blueprint should be focused on
building brand loyalty. For retailers,
the goal of the blueprint should be to
provide a seamless and personalized
shopping experience.
Identify opportunities for
unconventional growth. China
remains a land of tremendous
opportunity. Consumer packaged
goods companies and retailers
that stake your claims in digitally
contestable markets will be the ones
to succeed.
Accenture research and experience
suggest there are additional actions
consumer packaged goods companies
and retailers can take to further
differentiate yourselves in the urban
Chinese market.
For consumer packaged goods
companies, these actions include:
Pursuing consumer-driven
innovation by engaging consumers,
encouraging collaborative design or
crowd-sourcing.
Eliminating the complexity, cost
and time inherent in analog processes
and channels.
Building new marketing and sales
capabilities based on a digital
foundation.
Rethinking and adapting to a new
digital operating model.

For retailers, the actions include:

Integrating operations through
seamless, cross-channel
merchandising, stocking, marketing,
inventory management, pricing
strategies, management scales and
incentives.
Investing in seamless connections
between various technology
platforms.
Collaborating with technology,
data, analysis and process partners
to deliver a seamless shopping
experience.

References
1 Doing it their way, The Economist,
January 25, 2014.

13 Winning the hearts of the Chinese

Consumer, Accenture, 2013.

Executive Sponsors: Luis Ceniga,

Chan Tzeh Chyi, Roger Yu

2 China: Beyond the Miracle, Barclays, March

2013.

14 Twilight of the Brands, The New Yorker,

February 17, 2014.

Program Director: Xuyu Chen

3 World Economic Outlook Database-April

2014, International Monetary Fund.

15 Chinese advertisers digital marketing

budget in 2013 will reach 23 million yuan,
iResearch, May 9, 2013.

Research Team: Laura Lin, Jason Long,

Catherine Mao, Gong Zheng,
Amy Chng, Sheryl Yu

16 2013 Chinas online shopping

transaction volume will reach 1.85 trillion,
ClickZ Network, January 15, 2014.

Acknowledgements: Jeff Beg, Alex

Broeking, Steven Maass, Tina Senior,
Ted Liu, Bessie Wo, Selina Zhao

4 Creating Prosperous and Livable Chinese

Cities: The New Resource Economy City
Index Report, Accenture and the Chinese
Academy of Sciences, 2013.
5 Population Aging in China: A Mixed
Blessing, The Diplomat, November 10, 2013.
6 New Style Urbanization Plan (2014-2020),
Xinhua News Agency, March 16, 2014.
7 2013 Chinas online shopping transaction
volume will reach 1.85 trillion, ClickZ
Network, January 15, 2014.
8 US Online Retail Sales to reach $370
Billion by 2017, Forrester Research, Inc.,
March 13, 2013.
9 Xiaolu Wang, Grey Income and National
Income Distribution2013 Report,
Comparative Studies, October 2013.
10 Xiaolu Wang, Grey Income and
National Income Distribution2013 Report,
Comparative Studies, October 2013.
11 China Tourism Statistics Bulletin, China
National Tourism Administration, September
2013.
12 Chinese travelers the worlds biggest
spenders, CNN Travel, April 12, 2013.

17 Press Conference, Ministry of Commerce

Peoples Republic of China, January 16,
2014.
18 33rd Statistical Report on Internet
Development in China, China Internet
Network Information Center (CNNIC),
January 16, 2014.
19 Ibid.
20 Ibid.
21 Chain Mobile Shopping Market Snapshot
in 2013, China Internet Watch, February 12,
2014.
22 With 600 Million Social Media Users,
This is Chinas Web in 2013, Tech In Asia,
January 17, 2013.
23 Accenture, 2014.
24 The Worlds Greatest Bazaar, The
Economist, March 21, 2013.
25 Banks New Competitors: Starbucks,
Google, and Alibaba, HBR Blog Network,
February 20, 2014.

The Allure and Challenges of Chinas Changing Consumer Market34

Contact Us

About Accenture

Disclaimer

To learn more details of this report,

please contact:

Accenture is a global management

consulting, technology services and
outsourcing company, with approximately
289,000 people serving clients in
more than 120 countries. Combining
unparalleled experience, comprehensive
capabilities across all industries and
business functions, and extensive research
on the worlds most successful companies,
Accenture collaborates with clients to
help them become high-performance
businesses and governments. The company
generated net revenues of US$28.6 billion
for the fiscal year ended Aug. 31, 2013.
Its home page is www.accenture.com.

This report has been prepared by and is

distributed by Accenture. This document
is for information purposes. No part of
this document may be reproduced in any
manner without the written permission of
Accenture. While we take precautions to
ensure that the source and the information
we base our judgments on is reliable, we
do not represent that this information is
accurate or complete and it should not be
relied upon as such. It is provided with the
understanding that Accenture is not acting
in a fiduciary capacity. Opinions expressed
herein are subject to change without
notice. It is not intended to provide advice
on your specific circumstances. The names
corresponding to the photos in the report
are purely fictitious and any similarity is
purely coincidental.

Till Dudler
Managing Director, Global Strategy
Consumer Goods and Services
till.dudler@accenture.com
Rajat Agarwal
Managing Director, Consumer Goods and
Services, Asia Pacific
rajat.agarwal@accenture.com
Woolf Huang
Managing Director, Consumer Goods and
Services, Greater China
woolf.w.huang@accenture.com

Copyright 2014 Accenture

All rights reserved.
Accenture, its logo, and
High Performance Delivered are
trademarks of Accenture.

14-1995 / 11-8616