Market Research China: identify trends in China

Market Research China: identify trends in China

[to see more about market research in Shanghai]

FMCG Trends in China

China’s FMCG sector suffered a bit of a setback at the start of 2014, with a 1.3% drop in growth from 7.4% last year to 6.1% by end of Q1. Consultants suggests that the slowdown is due to decreased growth in household spending and the rise of average prices, but the overall trend in FMCG in China is less negative. Below are the results of market research conducted in China to provide an insight into the market and to identify trends in China, and suggestions to counteract them.

Chinese consumers are more willing to pay for premium

identify trends in China

The steady rise in China’s GDP per capita, in comparison to the relatively sluggish European and American growth rates, has led to a consumer base that is more interested in paying for premium brands and goods. According to market research, in addition to prestige items like fashion accessories, the increased disposable income has resulted in many consumers upgrading their FMCG selection in circumstances where there is an obvious high-tier next step; for instance in food, beverage and personal care products. Overall, the Chinese market is becoming increasingly sophisticated, placing an increased emphasis on quality.

Premium trends: What to do about it?

n  Identify trends and knowing your customer’s needs and purchasing patterns is even more important than before. As China’s premium brand consumption grows, companies must have concise research keeping them up to speed with their demands and brand experiences.

New trend for Healthy lifestyle products

In addition to becoming more quality-focused, the growing Chinese middle-class is becoming increasingly health conscious. Certain FMCGs like milk and baby products, while recent health scandals have devastated consumer trust in local brands, are seeing a willingness to pay higher for a safer product showed market research in China. Particularly in lifestyle products such as health care and cosmetics, consumers are looking more and more towards premium brands, and we identify a trend for imported ones.

Healthy lifestyle trend: What to do about it?

n  Leveraging the Chinese desire for healthy products to achieve penetration requires informed branding and advertising. Companies should consider conducting focus groups and surveys to test a product’s impact on the market.

Market research in second and third-tier cities are showing greater growth

The slight dip in FMCG sales is mainly focused in the tier-1 cities such as Beijing and Shanghai. Market researches in Hangzhou, Qingdao or Jinan identified that the growth still remains high in second and third tier cities as disposable incomes there begin to rise. While still flagging behind the more sophisticated purchasing markets in tier-1 cities, the consumption trends remain similar. As secondary and tertiary cities continue to grow, market insight suggests consumption in those cities will begin mimic tier-1 cities.

Growing trend in second and third-tier cities: What to do about it?

n  Increasing a brand’s footprint means establishing a wider network of distribution. Although FMCG purchasing trends in China may be similar across cities of similar tiers, there is still a significant divide between spending habits in different geographical locations; on-site market research is invaluable.

Distribution channels for foreign brands in China

The need to engage with and recruit customers at a base level has made the hands-off wholesale distribution model obsolete. In addition to the murky nature of Chinese wholesale, brand loyalty can no longer be maintained through the attractiveness of a foreign brand. Foreign companies especially need to be more proactive in converting customers and establishing contact at the point-of-sale. This requires a larger physical presence. However, online channels should not be ignored.

What to do about it?

n  Market research, such as mystery shopping surveys, should be conducted to ensure that the consumer has a good first experience at the purchasing point to ensure penetration.

Ecommerce trend has taken off in China

market research china

Although market research showed that offline sales still dominate China’s market at nearly 97% last year, ecommerce has seen rapid growth even in Q1 2014, with 32% of households reported as having used an ecommerce site at least once in that period. Since FMCG are particularly popular among Chinese consumers, and consultants identify trend of reselling of foreign products, if foreign companies haven’t set up a means of selling their products directly on local ecommerce sites, it would be advisable to do so.

Ecommerce trend: What to do about it?

n  Establishing an ecommerce shop is simple for an individual who is physically present in China. However, as online shopping habits vary, companies should analyze local competitors’ practice to identify the unique selling points that will recruit customers away from cheaper, local FMCG alternatives.

Local producers edging foreign companies out

Recent market research suggests that foreign companies are slowly losing share in China to local companies. In addition to weak brand presence, foreign companies are suffering from a lack of penetration due to unclear advertising campaigns and local alternative products. Although large brands such as Walmart and Carrefour can overcome this, and have remained roughly stable, overall loss is noticeable.

What to do about it?

n  As was mentioned above, recruiting, converting and retaining customers is crucial. Considering the speed at which the Chinese market changes, local companies may have an edge in terms of market research in China, but foreign companies that put the effort into researching and establishing a dependable and trendy brand in China can expect to experience a degree of stability.

Daxue Consulting, Market research China

See also: mystery shopping Beijing

Sources:

http://www.kantarworldpanel.com/cn-en/news/2014-shopper-report

http://www.marketresearchworld.net/content/view/4950/77/

http://www.strategyand.pwc.com/media/file/Going_to_Market_in_China.pdf

http://www.chinadaily.com.cn/business/2014-04/17/content_17439873.htm

Market research on Coffee shops in China

Market research on Coffee shops in China

China has a rapid growing coffee culture as the consumption grows 10 to 15 per cent yearly while in the rest of the world the average is about 2 per cent. Though China is far from being the largest coffee market, but many are believed that it will soon surpass many European countries and Japan, being the second largest market after the US. Our focus is a market research on coffee shops in China.

Though deeply influenced by the thousand-year-tea-drinking culture, Chinese are more and more open to western lifestyle. It is a part of the overall expansion of western food and way of life in China.

Foreign brands dominating the Chinese coffee shop market

Coffee shops in China

http://image.baidu.com

The very first foreign brands coming to China was Nestlé (雀巢), which now owns around 75% of the instant coffee market. But according to market research in China, this segment is seen as inexpensive (1.5 RMB per packet), convenient and lower quality among Chinese.

Unlike Nestle, Starbucks targeted the high income consumers. While China is already the largest market for Starbucks in the world, the brand will keep investing in China, aiming to have 1500 stores in more than 70 cities by the end of 2015. With an operating margin of 33,7 % in the China/ Asia Pacific region, Starbucks dominates China’s coffee shop market with 60% share. Still, Starbuck meets some slight troubles in China. Its pricing is comparatively much higher than in the US, and Starbucks have been even criticized by CCTV (China Central Television) in 2013.

Also, Starbuck has to deal with an always more fierce competition in Coffee shops market in China. As the British coffee chain Costa Coffee entered China in 2006, situation has slightly changed. It quickly captured public attention and now has a share of 8,9% in retail market. By 2016, Costa aims to have 500 stores. Other brands such as 85 Degrees from Taiwan are also entering Chinese market these years; it offers coffee with lower price and it is famous also for the fresh baked bread and pastries what Chinese consumers often drink coffee with. It is estimated to have 450 stores by 2017.

Key strategies to enter into coffee shop market in China

Compared with more than 400 cups of coffee for an average American on a per year basis, 4 cups per year for a Chinese is way too small to consider China market of coffee shop as a well-developed market. Even compared to its Asian neighbour Japan, who also has a long tradition of drinking tea instead of coffee, Chinese market for coffee still have not been fully developed. Therefore, potentiality is so huge that many other foreign brands are eying this under developed market.

Some key strategies that foreign companies should bear in mind that:

Firstly, according to market research in China, Chinese consumers consider drinking coffee as a social event; seldom people drink coffee alone or on the road, they prefer to drink coffee in a comfortable environment with friends. Thus, installing a coffee shop needs a more spacious venture.

Secondly, Chinese consumers dislike the bitter taste espresso. Just like what Starbucks did, they add fruity taste Frappuccino and other sweet drinks to adapt the taste of Chinese consumers, other newcomers should not keep the old rule, innovation and localisation are needed to get successful in China.

Thirdly, if companies want to launch business in big cities where the pre-existing competition is already fierce, the pricing strategy is essential. How to keep price low while maintaining a sustainable development is a key issue worth studying.

Coffee shop market research

Market research in China

Daxue Consulting

References:

http://www.bloomberg.com/news/2012-04-01/starbucks-heads-for-smaller-china-cities-as-coffee-shops-triple.html

http://www.theguardian.com/business/2014/apr/29/costa-coffee-profits-whitbread

http://www.forbes.com/2010/04/28/starbucks-china-consumers-markets-economy-coffee.html

Online Shopping Industry in China

Online Shopping Industry in China

Online retailing in China is going through a period of exceptional boom. Regardless of world economic condition, online retailing in China has experienced an explosive growth. Customers appreciate online price advantages over offline stores and love purchasing online. The number of online buyers reached 310 million by the end of 2013, quadrupled from the figure in 2009. And the total online sales achieved 1184 billion RMB with an annual growth of 42.0%. It is estimated that the figure will reach 4000 billion RMB in 2017. Among best-selling products, the categories of apparels, accessories and footwear won the first place, followed by cosmetics and electronics.

Though metropolitan cities account for the main part of online shopping sales, the sales contribution from second tier cities has shown a steady increase. The top 10 cities of online sales are Shanghai, Beijing, Shenzhen, Hangzhou, Guangzhou, Nanjing, Suzhou, Tianjin, Wenzhou and Ningbo.

Electronics and information industry is chosen as one prioritized industry for governmental assistance since 2006, which is a strong support for e-business. Simultaneously, the rapid economic development raises the level of dispensable income. The competition between telecom companies has made Internet connection more affordable and finally contributed to the popularity of online services, including online shopping.

online shopping China

B2C Market Creates Large Opportunities for Businesses

Taobao is the largest online shopping marketplace in China. It operates under the same business model as eBay, providing an online marketplace, payment solutions and technological infrastructures to match buyers and sellers. The annual sales of Tmall in 2013 were over 1000 billion RMB. In 2012, Tmall dominated 56.7% market share in B2C market, followed Jingdong (19.6%) and Su Ning (5.5%). Some other second-tier players are Amazon, Dangdang, Guomei, YHD and VIP.com.

In 2013, the increase rate of B2C market (68.4%) was much higher than C2C market (30.9%) online. The reason propelling this trend can be summarized in three aspects.

First, from the market side, C2C market is tending to be mature and stable, while B2C is a beginning market with less barriers of entry.

Second, from the enterprise side, apart from traditional B2C e-business websites, businesses without online sales channels become aware of the importance of e-business.

Third, from the customer side, with the gradual development of online shopping, customers` opinion towards online products has been changed with increasing demand of value for money. Compared to products provided by C2C market, the value of B2C products is believed to be better guaranteed. It is estimated that till 2016 the sales of C2C market will draw equal with that of C2C market.


market research China

Main Factors Influencing Online Buying Decisions

Major factors affecting online purchasing decisions include reputation of sellers, after sales services, other buyers’ feedbacks, delivery timing and quality, price, brand recognition, web surfing speed, promotions, advertisements and user interface of websites. Internet, friends and families are major sources of information for online shopping websites. These channels have outpaced the traditional offline advertisements. Among online advertising tools, important components are search engines advertisements and links exchange with other websites targeting similar group of audiences.

Other Trends in the Chinese Online Shopping Market

With more international enterprises expected to enter Chinese online shopping market and more online specialist stores to emerge, complementary services like logistics and payment will continue to be improved. In addition to manufacturers, large retailers likeCarrefour also open their online stores. Their presence will provide morechoices to customers and have great impacts on online businesses. Another trend is, to defend against large online competitors in their advantages of scale economies, a number of online SMEs have formed alliances and share online expertise, marketing techniques, lists of customers, and hold joint promotional activities periodically. The goal of joining forces is to maximize sales at smallest expense by combining different types of online shops which do not involve direct competitions.

Advices for Foreign SMEs

For market entry strategies, foreign companies could set up their own representative offices or work with local agents, distributors or resellers for importations. For those who do not have business experience in China, it is suggested to collaborate with a well-established local partner in the beginning.

To exploit the local knowledge of partners, the preparation is not only an online store registration but also a complete planning covering logistics, marketing campaign, legal issues (e.g. import permit for certain products such cosmetics and foods, counterfeiting problem), market and customer analysis (e.g. buyer preference and purchasing habits).

In terms of online expansion strategies, with Internet-based franchise concept, manufacturers grant other independent franchisees the right to sell the products on franchisees’ web shops and provide supports. Brand companies should select trustful partners who are determined to ensure service levels and implementations.

It is important for foreign companies to operate in a Chinese way. First, companies should understand the market and target customers. Second, to provide convenient and flexible payment methods, for instance, fund transfer via post and banks, third party payment systems like Alipay, Tenpay and Pay Bao as well as cash on delivery, is a good way to prevent customer dissatisfaction. Third, interactive communication via instant messengers is extremely essential for online shopping in China. Usage of Aliwanwan, QQ and MSN messenger helps to promote the product and increase the sales. In summary, localization, flexibility and innovation are primary principals to success.

 

Daxue Consulting, Market research in China

http://english.people.com.cn/98649/8561698.html

http://www.chinainternetwatch.com/category/online-shopping/

http://www.euromonitor.com/internet-retailing-in-china/report

 

Consultancy in China

After China`s accession to WTO, further internationalization of Chinese enterprises gives rise to the emergence of consultancy and stimulate its expansion in China. Consultancy industry is playing an increasing role in promoting China`s economic growth. With the entry of international consulting companies into China`s consultancy market, local consultancy industry began to learn from advanced competitors and has been gradually rising up. Consulting service has penetrated into every corner of economic development of China and is resulting in profound changes.

Consultancy in China cover the whole business landscape

Market research Shanghai

Nowadays in China, consulting services are divided into several categories which cover a wide range of industries from sciences to engineering, from education to business, such as comprehensive consulting, financial advisory in China, investment banking, management consulting, market planning, market research, advertising, public relations, human resource, head hunting, information services, engineering and technological consulting, accounting and law. The support of consulting companies is from various channels: government, academic institutions, state-owned enterprises, listed companies or self-operated. Overseas and local management consultancies offer a variety of services throughout the country, from customer relationship management to supply chain management, from human resource to marketing strategy, etc. Management consultancy industry has covered all aspects that a company might need to enter China market.

Consultancy in China still shows great potential

By the end of 2012, the number of registered consulting companies was about 130 thousand in China, among of which management consultancies accounted for around 10%. The real amount of consultancies in China was no more than 100. However, only a limited number of management consulting institutions employ more than 300 people and has annual sales over 10 million RMB.

While at the same time, there are more than 8 million business entities in China, including state-owned enterprises (6.62%%), private-owned enterprises and joint ventures (79.06%), enterprises located in Hong Kong, Macao and Taiwan (1.23%), foreign-owned enterprises (11.75%). Still, the growth of consultancy and the value of investment in this industry in China are revealed in main trends below.

First, consultancy and information technology has been linked inextricably with each other. Competitive knowledge of IT is a booster for the prosperity of consultancy. In the future, e-commerce among a small group of consulting companies will become a reality.

Second, more regulations and policies will be established by the government. There is also an increasing demand from the government and public institutions. Intensified social and economic reform calls for professional consultancy team to provide service to guarantee the implementation, ration and effectiveness of policies. This demand breaks the traditional belief limiting consultancy in commercial and technological area.

Third, with the development of international cooperation, it is expected to see international or local consulting companies in China stand out to lead the fads in consultancy sector, create applicable theories for the world and attract foreign investment to China.

See also : Daxue Consulting in Reuters / China news

Market research on cars in China

China` spectacular economic growth over the past 20 years has been reflected in the emergence of the world`s fastest growing consumer market and a dynamic, burgeoning middle class. As incomes in China have risen, so have Chinese consumers` interest in products that were previously out of their reach, for example, cars. In 2013, car sales in China exceeded 22 million vehicles and this figure made China the very first country to sell more than 20 million vehicles in a year. Market research on cars in China is crucial to understand this trend.

The market of cars in China is still open for growth

Although China`s automotive market growth is slowing down, it is still expected to reach 31 million new registrations in 2020 with a much higher annual increasing rate (nearly 6%) than any other economy in the world. It is not surprising that car manufacturers are placing China at the very center of their long-term growth strategies.

Currently, Volkswagen is the undisputed sales leader. However, within the market, there are segments that are still expanding much faster; most notably luxury car. According to BBC News, the luxury car market in China has enjoyed a growth rate around 37%.

Along the path to be mature, there are still plenty of opportunities for other local foreign auto manufactures to capture market shares. Considering market divisions and product distributions, car manufacturers need to address a diverse mix of values to influence consumers` buying decisions.

Future trends for cars in China

Market research on cars in China

There are several trends for automotive market in China in the next decade, according to market research companies in China. First, sales of sport utility vehicles (SUVs) will triple, although sedans will remain the largest segment. Second, there will be more second-time buyers and they will buy more high-priced cars. Third, the volatile growth rates for new cars observed over the last two decades will likely continue. Furthermore, consumer behavior by region and car-model preference will vary greatly.

China` economy is expected to continue to grow at a rate between 7% and 8% yearly in the next 10 year. And the number of high-income urban households with over 80,000 RMB a year will expand to 58% of the population in 2020. Higher incomes plus low auto penetration now suggest that the market is far from saturation. The expansion of road systems will continue to stimulate consumers` expectation of self-driven journeys and thus, the demand for automotive.

Nevertheless, regardless of the expected development, car manufacturers and dealers should not ignore that the volatility in China car market, combined with chronic overcapacity, has brought challenges to doing business in China. Car manufacturers should put more emphasis on understanding consumers` needs and behaviours, for example, increasing weight on quality and safety. Recent Accenture research shows that Chinese consumers rely predominantly on four factors when buying cars: friends and colleagues (49%), family members (64%), manufacturer websites (53%) and social media (72%). A suggestion could be that auto manufacturers and deals turn their investment on TV to strong social media sites for further branding in China.