McKinsey Report Pinpoints Four Major Trends Among Chinese Consumers
The recent Singles' Day generated record sales but record debt and slowing income may dampen buying enthusiasm.
Chinese consumers are more confident than they've been in a decade, and they are spending more on discretionary items. But rising household debt and increasing costs may spur a new, more cautious period.
That was among the four key trends of a recent study by the management consultancy McKinsey & Co.
The report, "Double-clicking on the Chinese consumer," also found that:
Chinese consumers have become more health conscious.
The buying power of Generation Z — born in 2000 and after — is on the rise and will account for one of every consumer dollar spent by 2030.
Consumers tend to favor Chinese brands, but above all, they are seeking value and quality in goods and services, and great service after their purchases. They are also looking for companies that can address their personal tastes.
Even as the study highlighted Chinese consumers' growing appetite for goods and services, and their ability to pay for them, it also underscored dramatic shifts in their profile. Chinese consumers are less uniform in what motivates them to make purchases. They are more open to new products, such as health foods, and to brands.
This all has created new challenges for Chinese companies and others looking to reach these buyers.
McKinsey surveyed more than 10,000 Chinese consumers between the ages of 18 and 65. The study covered 44 cities and seven rural areas and towns.
The report pointed out that this year's Singles' Day generated a record $25 billion in sales, a 40 percent jump over last year's total. Singles' Day, held each year on Nov. 11 (or 11/11) is a two-decade tradition that has morphed into the world's largest online retail event.
But the report also noted that in 2017, China's leverage ratio reached 266 percent and that household debt hit 50 percent. Both numbers represent all-time highs. Meanwhile income growth has slowed from 10.1 percent in 2012 to 6.3 percent in 2016, while real estate and tuition, among other items, have risen.
"The rising cost of real estate, the need to pay for children's education, and the need to support elderly family members in a greying society combined with slowing income growth and rising prices, are casting a long shadow on what is otherwise a very bright outlook for Chinese consumers," the report said.