The research firm Euromonitor recently predicted that China would pass Japan in consumer spending by the end of this year. By 2015, it could overtake the US too and become the world’s largest consumer market.
Chinese officials and economists have long been saying the country needs to move from manufacturing- and export-driven growth to an economy more “balanced” via consumer spending. Here’s how it might get there, says Alex Zhang of Frost & Sullivan, a business consultancy, in an interview with Quartz.
E-commerce sales are expected to reach $1.3 trillion in 2025, 34 times what they were in 2011, Zhang says. Last November, sales on “Single’s Day” dwarfed America’s Cyber Monday, hitting 30 billion yuan ($4.84 billion). Jeff Walters, a partner at the Boston Consulting Group, says e-commerce is also getting a boost from residents in smaller cities where retail chains haven’t set up shop yet.
Good news for Walmart, Carrefour, and their ilk: People are making fewer shopping trips, down to once a week from over three times a week 10 years ago, and buying more each time. Sam’s Club, the bulk retailer owned by Walmart, has its largest outlet by sales volume in Shenzhen, China.
Chinese are taking more holidays at home as well as abroad. By 2020, China should see more than 6 billion tourism trips in a year, up from 2.6 billion in 2011, Zhang says, funneling money into middle and upper-range hotels, tourist attractions, and airlines.
Consumer brands are marketing to local tastes via “China style” products like “Beijing roast duck” chips or green tea flavored Oreos. But Chinese residents, scarred by the number of food safety scares in the country, are still wary of made-in-China food. When it was discovered in February that Ikea’s iconic meatballs contained horsemeat, Chinese were more disturbed to learn that the item they believed was safely imported from Sweden was actually produced in China.
Jan Chipchase, of global insight research at Frog Design, says Chinese shoppers feel its their moral obligation (pdf. p. 65) to tell others about their experiences with a product or service. According to a 2012 report by the Boston Consulting Group, more than 40% of Chinese online shoppers read and post reviews.
While rumors can easily spread, the scrutiny may inspire more transparency and better service from companies. Yum Brands, for example, owner of the KFC’s chain in China recently apologized to the Chinese public after antiviral drugs and hormones were found in chicken. “[This culture] is actually a healthy thing to have,” Chipchase says. “We should be asking more questions.”