Mark Tanner finds that Chinese consumers aren't all out spending up a storm, rather they're being quite selective and focused on quality products

By Mark Tanner*

Walking the streets of a Chinese city, things look quite rosy. The malls are busy, cafes and restaurants are heaving and shiny new EVs zip past on the street. The headline numbers are similarly pleasing. The index measuring purchases outside of manufacturing is its highest in 12 years, Chinese consumers’ incomes continue to rise, and they have trillions of dollars saved from the pandemic.

Yet if we scratch the surface, not everyone is out spending up a storm in the post-pandemic sunshine. We only need to look to some of China’s biggest holders of consumer data – Alibaba and JD – to see some clear signals that many Chinese consumers are still needing a nudge to spend and are as price sensitive as ever.

Last month, JD unexpectedly launched its ‘largest ever promotion’ subsidizing sales to the tune of ¥10 billion ($1.45b) to ensure it remained price competitive. Last week, Alibaba announced it was launching a new budget shopping channel, 99 Temai, as part of one of Taobao’s strategic pillars to increase its price competitiveness.

Few foreign brands can compete with Chinese brands when it comes to offering the cheapest product on the shelf or screen, and they shouldn’t. The increased price sensitivity doesn’t mean consumers are seeking to buy the lowest cost item, it means that they need to be shown a strong value proposition.

Chinese consumers are seeking quality products more now than ever. That’s why the premium segments of most FMCG categories continue be among the fastest growing. Its why iPhones have been the top-3 selling smartphones, and why China’s luxury sales are expected to expand by a third this year.

In that quest for quality, Chinese consumers are making fewer purchases on a whim. Purchases decisions are more pragmatic and consumers are shopping around more than ever for the best deal. This was evident in last year’s Singles’ Day festival where 69% of consumers shopped across three or more platforms, versus 56% in 2021.

In addition to price competitiveness, Alibaba’s other strategic pillars for 2023 – livestreaming, content, private domain traffic and local retail – are also relevant for individual brands, albeit sometimes approached differently than Alibaba. Livestreaming and relevant content are important as a means to communicate a resonant value proposition. With consumers shopping around, private domains and brand-owned channels can both build loyalty and be sustainable to the P&L. Local retail, although referring to logistics and distribution in Alibaba’s case, reflects the importance of being where consumers want to buy, and ensuring your brand is relevant at a local level.

*Mark Tanner is the CEO of China Skinny, a marketing consultancy in Shanghai. This article was first published here, and is re-posted with permission.