Daily Management Review

Chinese Consumer Market Will Continue to Grow Despite the Recession


12/23/2015


Despite slowing economic growth, China will be one of the fastest growing consumer markets in the future world. According to a study of The Boston Consulting Group and AliResearch Institute, its volume will increase to $ 6.5 trillion by 2020. Such a jump will be triggered by change of generations, raising incomes and rapid development of online trading.



Img by Calvin Teo
Img by Calvin Teo
The Chinese consumer market will continue to grow, despite the economic slowdown. According to the report, published on Tuesday, it will remain one of the fastest growing in the world, at least until 2020. During this time, its volume will increase by $ 2.3 trillion, which, for example, 1.3 times more than the current level of the UK and German entire markets.

BCG and AliResearch forecast that five years later, the consumer market in China will reach $ 6.5 trillion. This will happen even if the Chinese economy will slow to 5.5% per year. There emerge three major trends which will encourage the consumer’s market development: a generational change among consumers, increasing income and wealthy segment of the population, as well as rapid development of online trading.

The average income of the Chinese population has been growing annually by 11% since 2010. This, as well as citizens' confidence in the fact that their incomes will continue to grow, resulted in the highest index of consumer sentiment from the crisis 2008-2009 years. During the last few decades, most of the consumer spending accounted for the middle class and low-income segment of the population. By 2020, however, 81% of all purchases will be performed by families with income of more than $ 24 th. per year. According to the forecast, by this time the number of such families in China will grow to 100 million, what will compose 30% of the total population. By comparison, the current figure is 17%. Five years ago, representatives of the upper layers of the middle class and wealthy citizens made up only 7% of the total Chinese population. Over the forecasted period, the indicator of consumer activity will grow by 17% with an average of around 9% of the population.

Another important factor stimulating growth Chinese consumer market will be the change of generations. Over the next five years, 18 - 35 y.o. age group will represent the most active market buyers. Younger generation usually behaves much more active: their buying activity is growing at 14% a year, while people older than 35 years increase their spending on consumer goods at half the speed. As a result, by 2020, the younger generation will make 65% of all purchases.

Finally, the third factor in the Chinese consumer market’s growth will be development of online trade. As estimated by BCG and AliResearch, this kind of trade will add a total of about 20% by 2020. In absolute terms, the growth rate of e-commerce will amount to $ 1.6 trillion. For comparison, offline retail sales will grow by 6%. As noted in the study, one of the main advantages of online shopping is its accessibility even in remote villages, where a number of consumer goods are not available offline.

"Given that the very nature of consumption is changing dramatically, strategies, that brought our success in the past, are obsolete, - said one of the study's authors and a leading expert at BCG Youchi Kuo.- Now, companies more than ever should focus on the right market segments and product categories and also presented their goods in the fast-growing segment of online retail."

 






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