Marketing to Consumers in Tier 1, 2, 3 Cities - China - January 2015


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Mintel

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Consumers in tier one to three cities make up for more than 70% of the total urban population in China, making them the target of the majority of leading companies that have been trying to increase their product user base – especially in the lower tier cities – for further growth.

However, Chinese consumers are diverse; people living in different city tiers have different spending power, live in different retail environments, with their interests and needs varying as well, which can all have business implications for companies and brands when marketing to consumers in different city tiers.

This report focuses on the following aspects when studying the differences across city tiers: consumers’ spending priorities, shopping needs and habits as well as leisure preferences.

Introduction

Methodology
Abbreviations

Executive Summary

Overview of tier one to three cities and consumers’ lifestyle
Figure 1: Lifestyles, October 2014
Spending priorities
How do consumers plan to allocate their spare money?
Figure 2: Interested areas for spending spare money, by city tier, October 2014
In which categories are consumers trading up?
Figure 3: Consumers who have bought premium or ultra-premium products in each category, by city tier, October 2014
Shopping attitudes
What stands for a high-quality product?
Figure 4: Factors influencing quality perceptions, by city tier, October 2014
What are consumers’ shopping habits?
Figure 5: Shopping preferences, October 2014
Leisure activities
What leisure activities are consumers most interested in after work/school?
Figure 6: After-work/school leisure activity preferences, by city tier, October 2014
What leisure activities are consumers most interested in over the weekend?
Figure 7: Weekend leisure activity preferences, by city tier, October 2014
What leisure activities are consumers most interested in during longer vacations?
Figure 8: Public holidays leisure activity preferences, by city tier, October 2014
Figure 9: Paid vacation leisure activity preferences, by city tier, October 2014
Key issues
Differences in marketing to consumers from three city tiers
Tier three cities: ready for embracing new products
Opportunity for marketing “total solutions” to consumers in tier one cities
Different leisure services to appeal to consumers in tier one to three cities.
What we think

Issues and Insights

Differences in marketing to consumers from three city tiers
The facts
The implications
Tier three cities: ready for embracing new products
The facts
The implications
Opportunity for marketing “total solutions” to consumers in tier one cities
The facts
The implications
Different types of leisure services appeal to consumers in tier one to three cities
The facts
The implications

Trend Application

Guiding Choice
Figure 10: Example of retailers highlighting bestselling items on shelves as references to guide consumer choices, Shanghai, China, 2014
Return to the experts
Locavore

Overview of the Tier One to Three Cities in China

Key points
Tier one to three cities make more than 70% of total urban residents
Figure 11: Number of residents in tier one to three cities, by city tier, China, 2013
Tier one cities: busy and crowded
Figure 12: Average number of residents per city, by city tier, China, 2013
Tier two cities: catching up with tier one but still a wider gap in leisure services
Figure 13: Average wage of employed staff and workers, average price of commercial housing sales, by sampling cities, China, 2012 and 2013
Figure 14: Pictures of a hypermarket in a tier two city, Changsha, Oct 2014
Tier three cities: modern retail and foodservice yet to be developed
Figure 15: Number of hypermarket outlets from top retailers, by sampling city, China, December 2014
Figure 16: Picture of a typical “supermarket” in a tier three city, Pingxiang, China, October 2014
Figure 17: Number of restaurants from top international foodservice providers, by sampling city, China, December 2014

The Consumer – Lifestyle of Consumers in Tier One to Three Cities

Key points
High satisfaction about the home city, low concerns about living cost
Figure 18: Lifestyles, October 2014
Consumers in tier one cities: strong health concern
Figure 19: Agreement with the statements “My work keeps me busy” and “I am quite healthy”, by city tier, October 2014
Consumers in tier three cities: eager to take part in out-of-home leisure activities
Figure 20: Agreement with the statements “I prefer going out rather than staying at home during my leisure time” and “I am used to going to surrounding cities for grocery shopping”, by city tier, October 2014

The Consumer – How do People Plan to Allocate Their Spare Money?

Key points
Spending on travelling is prioritised across all city tiers
Figure 21: Interested areas for spending spare money, by city tier, October 2014
Figure 22: Example of restaurant menu featuring introduction to the special dishes with a cultural perspective, Shanghai, China, 2014
Tier three cities could be a goldmine for technology products
City tier differences in the interested areas for spending spare money
Figure 23: Consumers who are likely to use spare money to eat better and to develop a hobby, by city tier, October 2014
Investing their savings is as important as spending
Figure 24: Consumers who are likely to use spare money to invest and to save up, by city tier, October 2014

The Consumer – In Which Categories are Consumers Trading Up?

Key points
Premiumisation is happening in almost all categories across city tiers
Figure 25: Price range of products bought most recently, by category, October 2014
Tier three cities: retail development limited their exposure to premium products
Figure 26: Consumers who have bought premium or ultra-premium products in each category, by city tier, October 2014
Tier one cities: still the home market for ultra-premium products
Figure 27: Consumers who have bought ultra-premium products in each category, by city tier, October 2014
Tier two cities: more value-driven consumers
Figure 28: Consumers who have bought medium or low-priced products in each category, by city tier, October 2014

The Consumer – What Stands for a High-quality Product?

Key points
A well-known brand is still the most powerful quality badge
Figure 29: Factors influencing quality perceptions, by city tier, October 2014
Figure 30: Attitudes towards brand awareness, by city tier, October 2014
Authoritative claims with data support can strengthen value perceptions
Figure 31: Factors influencing quality perceptions, by age, October 2014
Tier one cities: stronger association between good quality and imported ingredients
Figure 32: People who associate high-quality product with “ingredients/raw materials imported from overseas” and “is manufactured overseas”, by sampling city, October 2014
Figure 33: Attitudes towards product origin, by city tier, October 2014
Tier two and three cities show stronger attachment to domestic products

The Consumer – What are Consumers’ Shopping Habits?

Key points
Consumers are open to trying new brands to search for better products
Figure 34: Attitudes towards trying new brands, by city tier, October 2014
Figure 35: Attitudes towards trying new brands, by household income, October 2014
Figure 36: Attitudes towards trying new brands among high earners, by city tier, October 2014
Guidance needed with too many choices
Figure 37: Attitudes towards product varieties, by city tier, October 2014
Figure 38: Online and offline shopping habits, by city tier, October 2014
Figure 39: Online and offline shopping habits, by age and city tier, October 2014
Importance of honest pricing
Figure 40: Attitude towards bargaining, by city tier, October 2014

The Consumer – What are Most Interesting Leisure Activities?

Key points
TV after work, going shopping on weekends and travelling during longer holidays
Figure 41: Leisure activity preferences, October 2014
After work: consumers in tier one cities look for more variety of leisure activities
Figure 42: After-work leisure activity preferences, by city tier, October 2014
During weekends: out-of-home leisure activities are preferred
Figure 43: Weekend leisure activity preferences, by city tier, October 2014
High earners in different city tiers are interested in different weekend leisure activities
Figure 44: Weekend leisure activity preferences among high-income consumers, by city tier, October 2014
Long holidays: growing interest in travelling with an interesting theme
Figure 45: People who are interested in travelling/sightseeing during public holidays and paid vacations, by city tier, October 2014

Appendix – The Consumer – Lifestyle of Consumers in Tier One to Three Cities

Figure 46: Consumer lifestyle, October 2014
Figure 47: Most popular consumer lifestyle, by demographics, October 2014
Figure 48: Next most popular consumer lifestyle, by demographics, October 2014

Appendix – The Consumer – How do People Plan to Allocate Their Spare Money?

Figure 49: Interested areas for spending spare money, October 2014
Figure 50: Most popular interested areas for spending spare money, by demographics, October 2014
Figure 51: Next most popular interested areas for spending spare money, by demographics, October 2014

Appendix – The Consumer – In Which Categories are Consumers Trading Up?

Figure 52: Price range of products bought most recently, October 2014
Figure 53: Price range of products bought most recently – Chocolate for snacking, by demographics, October 2014
Figure 54: Price range of products bought most recently – Fresh vegetables, by demographics, October 2014
Figure 55: Price range of products bought most recently – In-home alcoholic drinks, by demographics, October 2014
Figure 56: Price range of products bought most recently – Restaurants to eat out with friends/relatives, by demographics, October 2014
Figure 57: Price range of products bought most recently – Facial cream, by demographics, October 2014
Figure 58: Price range of products bought most recently – Shampoo, by demographics, October 2014
Figure 59: Price range of products bought most recently – Laundry detergent, by demographics, October 2014
Figure 60: Price range of products bought most recently – Shoes, by demographics, October 2014
Figure 61: Price range of products bought most recently – Large durable appliances, by demographics, October 2014
Figure 62: Price range of products bought most recently – Cookware, by demographics, October 2014
Figure 63: Price range of products bought most recently – Mobile phone, by demographics, October 2014
Figure 64: Price range of products bought most recently – Hotels for holidays, by demographics, October 2014

Appendix – The Consumer – What Stands for a High-quality Product?

Figure 65: Factors influencing quality perceptions, October 2014
Figure 66: Most popular factors influencing quality perceptions, by demographics, October 2014
Figure 67: Next most popular factors influencing quality perceptions, by demographics, October 2014

Appendix – The Consumer – What are Consumers’ Shopping Habits?

Figure 68: Shopping attitudes, October 2014
Figure 69: Most popular shopping attitudes, by demographics, October 2014
Figure 70: Next most popular shopping attitudes, by demographics, October 2014
Figure 71: Other shopping attitudes, by demographics, October 2014

Appendix – The Consumer – What are Most Interesting Leisure Activities?

Figure 72: Leisure activity preferences, October 2014
Figure 73: Most popular leisure activity preferences – After work/school, by demographics, October 2014
Figure 74: Next most popular leisure activity preferences – After work/school, by demographics, October 2014
Figure 75: Most popular leisure activity preferences – Weekends, by demographics, October 2014
Figure 76: Next most popular leisure activity preferences – Weekends, by demographics, October 2014
Figure 77: Most popular leisure activity preferences – Public holidays, by demographics, October 2014
Figure 78: Next most popular leisure activity preferences – Public holidays, by demographics, October 2014
Figure 79: Most popular leisure activity preferences – Paid vacations, by demographics, October 2014
Figure 80: Next most popular leisure activity preferences – Paid vacations, by demographics, October 2014