China's Imperial New Consumers
|Our Correspondent||Apr 27, 2013|
For at least 50 years, the world's salesmen have been mesmerized - largely to no avail - with the idea of 1.3 billion Chinese consumers, a market so vast it is almost unimaginable. It has also mostly been a market too tough to crack.
Today, however, as the government actively pushes for a shift away from an export-led economy, China is expected to become the world's second-biggest consumer market, with enough purchasing power to buy nearly a seventh of the world's total products by 2015 - two years from now, finally providing vast opportunities for both global and domestic merchants.
These new consumers are a unique class. Hundreds of millions of them have migrated from farm to city where they are working in assembly and other industries. They are also the "young emperors," the fruits of the country's one-child policy, put into place in 1979 by the Communist Party in an attempt to alleviate social and economic problems by slowing the growth of its enormous population.
That means almost everybody under the age of 40—the prime consumer purchasing years - coming into their own as the leading purchasers in Chinese society. And, while a staggering number of them are rich according to the Hurun Report - 1.02 million US dollar millionaires and 63,500 "super-rich" with assets US$16 million or more, the average Chinese per capita income by purchasing power parity was estimated at US$9,100, ranking the country 122nd in the world according to the CIA World Factbook.
These young consumers break down into three groups - adolescents between the age of 10 and 19, emerging adults aged 20-29 and full adults 30-39. Each cohort, according to a new study by researchers Qiu Jing and Lin Ruiming for the Seoul-based Samsung Economic Research Institute, grew up under different circumstances and each has different priorities. Unlike emerging adults and full adults, both of which conform to international patterns and have more females than males, the post-1990s generation has far more boys than girls as amniocentesis, abortion and other control methods came into play to fulfill the Chinese ambition to have sons instead of daughters.
"While both the Post-80s and Post-90s generation are mostly only children and hence the "little emperors" of their family, they differ substantially from each other in terms of parental/ family wealth accumulation," the researchers note. "The Post-90s generation has brighter financial prospects and a larger expenditure budget than the Post-80s generation due to their parents' higher accumulation of family wealth. In other words, as the younger generation gradually replaces the older generation to become the mainstream of Emerging Adults in China from 2010 to 2020."
They will on average be able to spend more. China entered the Internet Age in the late 1990s and early 2000s, when the eldest Post-90s children were still in primary school. Unlike the Post-80s generation who needed time to learn and transition to an online world, the Post- 90s generation grew up with the Internet from birth and more prone to shop online.
They are quicker than earlier generations to take their information from the Internet, usually by their mobile phones or other devices. Since they have no siblings and have fewer neighborhood peers to play and socialize with, they would rather stay at home than engage in outdoor activities, giving rise to their labeling as an "otaku" generation, a Japanese word referring to people with an obsessive, often obsessive interest in computer games or electronics. They also tend to trust social networking sites and weibo above other sources of information.
"The older generation of peasant workers - the rural Post-60s and Post-70s generations –gave birth to new urban children in large cities, while younger-generation peasant workers themselves have themselves poured into the cities to seek opportunity," the report notes. "Accordingly, in contrast to many rural Post-80s children, the Post-90s generation has had access to urban amenities nearly from birth. This background has had a significant impact on their social identities and consumption tendencies."
These new consumers have been given almost unimaginably far more opportunities than their predecessors to broaden their horizons and become exposed to different cultures, with the one-child policy giving them more comfortable financial prospects and larger budgets.
As their western counterparts have for generations, they judge themselves and others by what they buy. They have been exposed to foreign and domestic brands and they look for brand names and have the means to do so. Parents can and want to give their child financial support and credit is available to them through credit cards and bank loans, which are no longer taboo as they were to their elders.
"The new generation of rural migrant workers are losing their identities as farmers, despite being born into farming families in rural areas," the authors note. "Like the old generation of migrant workers, they work hard in cities with little pay and little access to social welfare. However, these new migrant workers are better educated than their predecessors and wish to become a part of the cities where they work. They try hard to keep up with the latest trends and desire to be "fashion icons" in their new urban homes."
While the typical young migrant may only live in a five-sq m basement flat, with half of his room occupied by the bed under a leaky roof, "this new migrant worker still manages to buy a fancy wallet, a shiny watch, and a tablet computer, paid off by a new credit card. The typical young migrant prioritizes brand names far above living conditions."
Compared with the older generation, the young are less willing to form cliques and care more about their own independence, freedom and distinctiveness. "The older generations emphasize 'us,' while the younger generations prize 'me.' Young people in particular spend money to reflect their personal tastes and sensibilities. Emotional considerations, like whether a product reflects the user's sense of individuality, are paramount in their purchasing decisions."
China's young generation, the report says, "has long been described as being a pampered lot without discipline or drive. Fully exposed to commercial society, they are accustomed to a world in which junk food, the Internet, and other modern conveniences are ubiquitous, while being seen as indifferent to the classical pursuits cherished by their forefathers."
They are better educated and informed than previous generations, with a broader vision of the world, and more access to the essence of human civilization. "Such changes have induced young consumers to pay much more attention to environmental and social concerns than previous generations."
Because they have little experience with hardship and more exposure to different cultures, they are more optimistic, more open-minded and more individualistic, compared with previous generations, the report concludes. As a result, they love big brands, pursue self-expression in their purchases, immerse themselves in the digital world, and are interested in environmental and social sustainability at the same time. In order to win the market, companies need to prepare for the new generations of young consumers, and adjust their branding and marketing strategies in line with those trends.