Yuval Atsmon, Max Magni, Molly Liu, Lihua Li
The Chinese have taken to consumerism with ease, embracing thousands of new products, services, and brands -- including a decided taste for luxury. By 2020 and within the course of one decade, real consumption will have doubled to $4.8 trillion and China will then be the world’s second-biggest consumer market after the United States.
Yet in some respects, private consumption remains stubbornly low. Chinese consumers still save, on average, over one-third of their incomes, compared with 4.4 percent in the United States. And as a proportion of GDP, private consumption is well below that of other countries, accounting for 33 percent of GDP in 2010, compared with 71 percent in the United States and 65 percent in the United Kingdom, for example. In fact, Chinese domestic consumption’s share of GDP has fallen over the past decade as the value of investment has risen.
The Chinese government, keen to rebalance the economy, has responded by flagging domestic consumption as a top priority in its latest five-year economic plan. This is good news for companies selling to the Chinese, although of course it will take time for such measures to take effect. In the meantime, what are the factors shaping Chinese consumers’ spending habits?
Inflation—running close to a three-year high in August 2011—is one. Another is the fact that some product categories have reached levels of penetration that presage falling growth rates. McKinsey’s 2011 Consumer Report, like those of 2010 and 2009 (two parts), is a snapshot of the buying behavior of China’s urban consumers. As such, it will help marketers consider how consumers are responding to these and other shaping factors, and how best to capture spending growth at this particular stage of the market’s development.
The report highlights the survey results in three main areas. First, it looks at current consumer sentiment and spending patterns, and finds Chinese consumers to be resilient in the face of inflation. Second, it examines where future market growth lies and shows how this differs both by category and region. And third, it highlights the evolving needs of today’s consumers and how they are influenced.
Here are some of the key findings.
Download the full PDF version of this report.