Many brands and e-commerce outlets are feeling the impact of the Chinese economic slowdown. A new report by Nielsen, Vipshop, and Tencent News points out some surprising opportunities in small cities.
According to a study based on data from the e-commerce platform Vipshop (known for the sale of luxury goods at reduced prices) and Nielsen, between November 17 and November 25, seventy five percent of 2,000 respondents stated that profitability was one of the main factors that influenced their purchase decision. However, there were notable differences among consumers residing in first and second tier cities in China.
Traditionally, the top tier cities in China are recognized as the most economically developed regions. Compared to smaller cities, residents of top-tier cities are exposed to the latest trends and more foreign brands: they are rich and sophisticated buyers. However, the report points to an inverse trend: consumers in first-tier cities tend to be rational buyers and are more price-sensitive, while consumers in lower-tier cities are updating their purchase options and switching to premium brands.
This change, concluded the managing director of the Shanghai-based marketing agency, China Skinny, Mark Tanner, is due to the fact that first-tier cities are farther in the curve of consumer maturity, since a Premium product is not a novelty, but it is an aspirational product for consumers in lower-tier cities.
The high cost of living also influences the behavior of many first-tier consumers, "especially those who are not fortunate enough to live with their parents and have to pay high rents, food and beverages, and expensive lifestyle temptations with their own salaries," Tanner said.
Another surprise was that consumers have a value awareness that leads them to, sometimes, prefer brands or products of Chinese origin. Even so, attitudes towards local brands differ between first and lower tier cities. Data at the city level shows that first-level consumers are still skeptical about the quality of local brands.
Regarding the attitudes towards the discounts that consumers prefer, the agencies indicate that it is preferable to offer immediate discounts on the original prices, as many of the respondents agreed with the statement: "I do not like complex discount campaigns." More men than women prefer to buy high-priced items, during the promotional season. Meanwhile, women living in second-tier cities, in particular, like to access promotions through social networks.
More than half of the consumers of luxury products live outside China's 15 major cities, so it seems that luxury brands and retailers can not afford to ignore consumers in the smaller cities of China.
