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McKinsey’s new report reveals Chinese consumers’ shifting trends
Véronique Saunier | 17 January 2018

Three out of four Chinese consumers prefer to buy local brands of apparel and footwear, according to a new report titled “Double clicking on the Chinese consumers” by McKinsey Global & Company. When asked if they would rather purchase foreign brands of apparel and footwear or domestic ones, 42 per cent of respondents answered they prefer to buy local brands and 34 per cent answered they somewhat prefer to buy local brands.

This is a drastic change from past surveys in which Chinese consumers were showing a strong interest in international brands. Over the years, they gradually acquired an interest in local brands and recently they have developed a sharp eye for brands that deliver value for money. 

Across the majority of categories surveyed, brand origin matters less than before. Consumers today have very clear expectations and they apply them to local and foreign brands alike. First and foremost, they want value for money. That’s followed by quality products—they want their unique tastes catered to—and, lastly, they demand good aftersales service. In 8 of the 17 categories surveyed, including apparel and footwear, respondents showed clear preference for local brands because they deliver in these three areas. 

“In this year’s survey, we have observed consumers taking a more nuanced view of the brands they choose, both global and local,” McKinsey’ s  Shanghai office Senior Partner Daniel Zipser says.

“Chinese brands have upgraded their products and packaging - both in terms of consumer perception and reality. Consumers perceive value often superior to foreign brands. Not only because of low prices, but also because of good and often more features. This trend has not yet happened in the luxury segments, where products remain imported. It is common though in the segment where products are "made in China" by both Chinese and foreign brands,” explains Zipster.

However, the above figures are to be taken with a grain of salt as often, consumers cannot differentiate whether a brand is foreign or local. While the survey showed that brand origin matters less than before, it also highlighted a level of confusion among consumers; there is increasing ambiguity between the country of origin and the country of manufacture. Many believe that global brands with a longstanding presence in China are local brands. On the other hand, Chinese brands that have packaged themselves as international are often mistaken as foreign. It is fair to say, then, that Chinese consumers buy local brands not because they’re local but because they believe they offer better value, the product is more suitable for them, and that the service is superior.

To summarize both foreign and local brands have opportunities to grow in China providing they can appeal to the increasingly nuanced needs of consumers.

The ‘post-90s’ generation is emerging as a new engine of consumption
The research also sheds new light on one of the fastest-growing and increasingly influential segments of Chinese consumers: the “post-90s” generation which McKinsey defines as people born between 1990 and 1999. Comprising 16 percent of China’s population today, this consumer group, by McKinsey’s projections, will account for more than 20 percent of total consumption growth in China between now and 2030, higher than any other demographic segment. 

McKinsey has further sorted them into five distinct segments, including the “Happiness Seekers” who represent 39 per cent of the post-90s. These consumers value quality and will do their research before shelling out money for things: 55 per cent frequently check labels and ingredients, versus 47 percent of overall respondents. 53 per cent say they would pay a premium for an environmentally-friendly product, versus 46 per cent of overall respondents. And 54 per cent emphasize what they are getting from a product over the brand, compared with 44 percent of respondents overall.

Chinese getting more health conscious and sporty
Generally speaking, China’s population is growing more concerned about quality of life and is becoming more health conscious, reveals the report. McKinsey has identified three key segments – the “Back to Basics”, “Balance Seekers” and the “Exercise Enthusiasts”. These individuals are more willing to spend money on sports activities and buy specialized sportswear with 69 percent of the “Balance seekers” admitting to buying running gear compared with 47 percent on average. Nike, Reebok, Adidas are already “running” on this trend by not only planning to open more outlets but also by promoting healthy living through the development of health apps and clubs which naturally leads consumers to buy more sports equipment and shoes.