Both the consumer focus groups and questionnaire survey

China’s Middle-Class Consumers: Online Shopping Habits

In recent years, both the uptake and frequency of online shopping and overseas onlineshopping by China’s middle-class consumers have been climbing significantly. Accordingto a survey on the mainland middle class carried out by the Hong Kong TradeDevelopment Council (HKTDC) [1], these consumers shop online about 5.25 times amonth on average, with 73% of the respondents shopping online at least once a week.Smartphone apps are used to place orders online much more than computer browsers,which suggests that consumers have already developed the habit of using smartphonesto create their “mobile lifestyle platform”. 53% of the respondents remarked that sharingon social media could trigger their impulse to buy, while only 15% said they would not bepersuaded by the promotional gimmicks used by shopping websites to buy goods outsidetheir purchase plans.

Uptake and Frequency of Online Shopping and Overseas Online Shopping Both Up

China’s online shopping market is growing in leaps and bounds. According to figuresreleased by the National Bureau of Statistics, nationwide online retail sales rose fromRMB1,303 billion in 2012 to RMB5,155.6 billion in 2016. Its share of total retail sales ofconsumer goods climbed from 6.2% in 2012 to 15.5% in 2016.

At the focus groups, participants made the following remarks:

“Online shopping offers more and more choices. Tmall offers more and more internationaltop brands, jd.com has also launched overseas online shopping. There are also Amazon, vip.com … as well as all kinds of “overseas purchasing platforms”, you can basically buyproducts from all over the world.”

“There are many designer brand fashions online, including D2C, Shangpinhui etc. Taobaohas also created ‘Quality by China’ launching independent designer fashions with uniquecharacteristics. Shoppers can buy clothes which are not often found in shopping mallswhich can save them the embarrassment of wearing the same clothes as other people.”

To these consumers, the internet has already evolved from a “tool” to a “lifestyle”. This isdue not only to the proliferation of various kinds of mobile phone apps, but also to themature development of online payment systems such as Alipay, WeChat Pay and JDBaitiao. All these apps have set the internet free from desktop computers and created a“mobile lifestyle platform” for smartphone users.

According to findings of the HKTDC survey, both the uptake and frequency of local onlineshopping and overseas online shopping by mainland middle-class and upper-classconsumers have risen markedly in the past few years. Respondents shopped online anaverage of 63 times a year, or 5.25 times a month, a much higher frequency than themonthly average of 1.43 times found in the 2013 survey. 73% of the respondents saidthat they shop online at least once a week, with female respondents shopping online 66

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times a year on average and male respondents 60 times. Respondents used overseasonline shopping outlets 1.5 times a month on average, with 63% of the respondentsshopping on them twice a month or once every two to three months. The higher thehousehold income, the higher the frequency of overseas online shopping.

Both the consumer focus groups and questionnaire survey show that the “online lifestyle”is already commonplace among consumers on the mainland. Many daily activities, suchas eating, drinking, entertainment, travelling and shopping, can be carried out via mobileapps, while consumer attitude has also shifted from “skeptical” to “ready to try”, to“getting used to it”. Consumers tend to find shopping online stress-free because it allowsthem to pick and choose at their own pace and in a relaxed manner. Business operatorsare finding that designing their webpages so as to attract consumers attracted by thisaspect of online shopping is becoming an increasingly demanding task.


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Smartphones Create Mobile Lifestyle Platforms

It was found at the focus group discussions that the “palm-top lifestyle” has alreadybecome the norm for many consumers. Through various mobile apps and shoppingplatforms, it has become increasingly convenient for consumers to buy all kinds ofproducts and services. Middle-class consumers are increasingly opting for online shoppingto purchase medium-end to high-end products as it offers convenience as well as door-to-door delivery.

At the focus groups, participants made the following comments:

“Nowadays many apps compare prices and recommend discounts to users.”

“Many food ordering apps allow users to order food even from faraway restaurants.Although it takes a bit more time, it offers many more choices.”

“To dine out at a restaurant, one can make reservation by apps. You can hang around inthe neighbourhood before going to the restaurant at the appointed time.”

“In the past when (I) rented apartments (I) often came across undesirable units askingfor high rents and yet the environment was rather poor. Later on (I) used home leasingapps which would screen the units before putting them online. This has not only spared(me) the pain of going through an intermediary, but also saved (me) more thanRMB1,000 in rent a year through getting ‘red packets’ by posting likes.”

The survey finds that the use of smartphone apps to place online orders has farsurpassed that of computer browsers. 60% of the respondents said they usually use theirsmartphone apps to place orders for shopping, compared to 21% who use computerbrowsers. Female respondents use smartphone apps to shop online more often than theirmale counterparts.


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Online Special Offers and Promotions Appeal to Consumers

According to the findings of the questionnaire survey, when consumers make purchasesat shopping sites, they are easily lured by special offers to buy products outside theirintended purchases. 48% of respondents said that in order to take advantage of couponsoffered by shopping sites or price cuts on designated products, they would choose otherproducts in addition to their intended purchases. 42% said they would buy productsoutside their planned purchases in order to bring their total order up to the amountentitled to free delivery. The survey also found that only 15% of the respondentsindicated that they would not be lured by promotional gimmicks offered by shoppingsites.


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The survey shows that female consumers are more easily encouraged to buy productsoutside their planned purchases by the promotional gimmicks of online stores. 48% offemale respondents would buy products outside their planned purchases in order toqualify for free delivery, a percentage markedly higher than the 36% of their malecounterparts. 38% of female respondents are attracted by “guess what you like” productsoffered by shopping sites while only 32% of the male respondents respond to suchpromotions. However, it is interesting to note that just 18% of the male respondents saidthey would only buy the brands and products that they had planned to do – only 11% oftheir female counterparts would do similar.


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High-income households are more likely to be lured by online data analysis and targetedproduct promotions. 50% of those with a monthly household income of over RMB40,000agree that they would be attracted by “guess what you like” products offered on shoppingsites, while 39% said they would be attracted by products similar to their plannedpurchases. Both of those figures are higher than the overall average. However, only 35%of the respondents with a monthly household income of over RMB40,000 said that theywould buy products outside their planned purchases in order to qualify for free delivery.

Penchant for Trying New Mobile Apps

According to the survey, consumers like to try new mobile apps on their smartphone. Inthe last six months, the respondents installed an average of 11.6 mobile apps on theirsmartphone. However, they don’t necessarily keep those apps very long. Of those 11.6apps, on average only 7.4 apps still remain, a retention rate of merely 63%. Men tend toinstall new mobile apps more often than women. In the six months preceding the survey,male respondents installed an average of 12.5 new mobile apps on their smartphone,while the figure for females was 10.8. There was no apparent difference in mobile appretention rates between the two genders.

Among the different mobile apps, shopping apps have the highest installation rate,topping the list at 90%, followed by leisure and entertainment apps at 71%. Femalerespondents favoured shopping and leisure and entertainment apps while malerespondents leant more towards social networking and information apps.


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The most important reason given for installing a new app is that it is popular and widelyused. 62% of respondents put this as their primary motive. Female respondents are morelikely to install new mobile apps to take advantage of special offers, while replacing oldapps with better versions is more often given as a reason for installation by males.

WeChat Moments the Main Connection among Friends

The “mobile lifestyle platform” is the force driving WeChat Moments to becoming themain channel used by mainland middle class to connect with friends. The survey findsthat although 66% of respondents would still share and exchange latest ideas and lifeexperiences with friends in the form of “face-to-face gathering”, only 15% said this is themost frequently-used method of communication with friends. 77% said WeChat Momentswas their most frequently-used form of communication.


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According to the consumer focus group discussions, exchanging and sharing latest ideasand life experiences via WeChat Moments is the most efficient way of disseminatinginformation. Respondents made comments such as:

“Moments is the best channel for me to discover new restaurants because (theinformation) is shared by people (I) know after they have tried, so there is no bluffing.”

As the information shared on WeChat Moments comes from friends, it is considered morereliable. It travels fast and reaches target audiences. Such information sharingencourages and attracts people to modulate their behaviour and, in turn, can change andstimulate their consumption mentality very effectively. This is particularly the case insome inner circle WeChat groups with a high frequency of communication, whereexchanges between people can be non-stop. Information on what products and servicesare good or bad can be passed around very quickly, increasing the pressure to buy - orindeed the resistance against buying.

Sharing on Social Media Can Trigger Impulse to Buy

Social media allows middle-class consumers to express their choices better and positionthemselves so that friends around can understand them more easily. According to thesurvey, 66% of respondents agreed with the statement that “I would share my views ordaily life experiences so that my friends can understand me better”. The proportion ofrespondents with a monthly household income of over RMB40,000 agreeing with thisstatement is as high as 73%.

53% of the respondents agreed that “the information shared by friends can trigger myimpulse to buy”. The percentages of female respondents and those on high monthlyincomes agreeing with that statement are even higher, at 58% and 62% respectively. Inview of this, making good use of social media in promotion and disseminating the rightinformation to target customer groups is a promotion and brand- building strategy thatshould not be overlooked.


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Physical Store Increasingly Being Used as Marketing and Customer Touch Point

How to integrate online and offline sales channels has become a marketing strategydemanding the attention of industry players. When asked which forms of O2O have beenused in making purchases, 58% of respondents said that they had tried“choosing/experiencing at physical store first before buying online”, while 55% said theyhad tried “choosing the right product online and experiencing it at physical stores before


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going back online to buy”. This suggests that most of the respondents using these O2Oforms will eventually make their purchases online.

It was found at the focus groups that consumers have developed the habit of visitingphysical stores even after shopping online. If no discounts are offered at the physicalstore, they will look and try out products there but will mostly not buy there. Then theywill go online to search and buy products that offer discounts, products available inoverseas purchasing, or similar products. In view of this, “advertising and brandpromotion” is becoming an increasingly important role for physical branded stores.


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This has important repercussions for the nature of such physical stores. In order toattract consumers to visit them more frequently, they must pay more attention to theirbusiness format. For instance, “shops using special themes” and “supermarkets focusingon a particular sector” are the most popular business formats, both of which managed toattract 53% of the survey’s respondents to visit them more frequently.

As the internet lifestyle continues to be a growing trend, offline experiential stores mustperform the functions of establishing brand image, advancing brand promotion andproviding services in addition to conducting sales. With middle-class consumers becomingincreasingly choosy, ordinary shops are finding that they can no longer satisfy theirrequirements. Business operators should devote effort into turning their bricks-and-mortar stores into venues offering unique experiences with characteristics and a story totell. The development and design of physical stores should place emphasis on specialfeatures and target specific consumer groups.

Online shopping sites are set to become important sales channels. However, the strategythey adopt in order to attract target customers is totally different to that employed byconventional physical shops. As online products become increasingly diverse, strategiessuch as targeted promotions aimed at specific customer groups, effective analysis ofproduct demands, active interaction with social networking groups, as well as detailedproduct information, can help to offer better services to target customers.

Appendix


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Background

With its high spending power and penchant for consumption, the mainland middle class isthe main target of Hong Kong manufacturers and traders eyeing the mainland market.HKTDC Research has carried out several studies on mainland middle-class consumers inthe past for the purpose of tracking and understanding their spending patterns, mentalityand changes in lifestyles in order to provide points of reference for Hong Kong companieswishing to tap the mainland market.

Apart from trying to discover the general characteristics of middle-class consumptionbehaviour, the present survey also explores the impact China’s 13th Five-Year Plan hason middle-class consumption and way of life. One of the policy directions of the Plan ispromoting new consumption patterns, which includes encouraging the consumption ofgreen, fashionable and quality products, encouraging the development of custom-madeservices to meet the demand for personalisation, expanding service consumption, andadvancing online/offline integration. Moreover, to take into account the post-80sconsumers, who grew up in times when China experienced substantial economic growthand whose upbringing is very different from that of their parents, efforts were made inthis survey to reflect their consumption characteristics.

Methodology

The survey was carried out in January 2017 in eight mainland cities where a total of2,000 consumers were polled by online questionnaire. Before conducting thequestionnaire survey, six consumer focus group discussions were held in Shanghai,Wuhan and Chengdu (two in each city). The objective of the focus group discussions is tofurther understand the spending mentality of mainland consumers by way of qualitativeanalysis.


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[1] See Appendix for details of the survey.

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Documents

Both the consumer focus groups and questionnaire survey