Chinese Consumers Becoming More Discerning: Nielsen and Vipshop

Many brands and e-tailers are feeling the pinch from the Chinese economic slowdown. A new report from Nielsen, co-produced with Vipshop and Tencent News, finds some surprising silver linings in small towns.

Data from the e-commerce platform Vipshop (known for selling luxury goods at discounted rates) and from Nielsen on over 2,000 consumers from November 17 to November 25, found a common theme: 75 percent of respondents listed “cost-effectiveness” as a top factor influencing their shopping decision. But there were striking differences between consumers who reside in first- and lower-tier cities.

Traditionally, the first-tier cities in China are often recognized as the more economically developed regions. Compared to smaller cities, residents in first-tier cities are exposed to the latest trends and more foreign brands — they are affluent and sophisticated shoppers. However, the report points to a reverse trend: first-tier city consumers tend to be rational shoppers and are more sensitive to pricing, but lower-tier cities’ consumers are upgrading their shopping choices and moving to premium brands.

This change, concluded by the managing director of the Shanghai-based marketing agency China Skinny, Mark Tanner, is a result of first-tier cities being further along the consumer maturity curve, as a premium product is less of a novelty but still seen as aspirational by lower-tier city consumers. The high cost of living also has a bearing on many first-tier consumers’ behavior, “particularly those who aren’t fortunate to live with their parents and have to cover high rents, food and beverage and more costly lifestyle temptations from their own wages,” said Tanner.

Another surprise: value-conscious consumers are increasingly looking to homegrown Chinese brands. The report gave the sales of cell phones as an example — from January 2017 to January 2018, the sales volume of Huawei mobile phones in first- and second-tier cities on the Vipshop platform grew 96.3 percent and 61.68 percent year-on-year respectively, which far outpaced iPhone sales growth.

Even so, attitudes towards homegrown brands differ among first- and lower-tier cities. First-tier city consumers still remain skeptical about the quality of local brands, the data showed.

In terms of discount approaches consumers like, offering immediate discounts off original prices is most preferred, as many respondents agreed with the statement: “I don’t like complex discount campaigns.” More male than female consumers like to purchase high-priced items during the promotional season. Female residents in second-tier cities particularly like to access promotions through social media.

With more than half of all luxury consumers living outside the top 15 cities, the takeaway seems to be that luxury brands and retailers can’t afford to ignore consumers in China’s smaller cities.


Consumer Insights, Market Analysis