valuing the opinions o others,74 percent o Chinese consumersresponding to our most recent survey trust the comments about companiesthat are posted by people they know(compared with 68 percent in 2011).Interestingly, however, it is not justthe opinions o riends and amily that matter. In 2011, more than a thirdo Chinese consumers based their purchasing decisions, at least partly,on posts made by complete strangers.In 2012, that number climbed tonearly 44 percent.The lure o online opinion sharingexplains the popularity o sites such asDianping, on which people rate restau-rants and merchants in approximately 2,300 cities across China. By 2012,the website had more than 48 millionmonthly active users who had postedsome 20 million reviews on more than1.5 million member merchants. The sitereports more than 1.2 billion monthly page views—60 percent o which comerom its 40 million unique mobile users.To take ull advantage o the socialmedia channel, companies need a clear understanding o its potential or theorganization. It also requires them toenhance their analytics capabilities toidentiy and monitor customer-relevantsites and opportunities, respond tocomments rom consumers about their brands, and continuously assess thesocial media presence o competitors.
Companies looking to improve their art and extend their reachinto the vast Chinese consumer market must, at a minimum,understand the general market conditions and drivers. However,it is not enough or them to have a passing amiliarity withtheir art; they must become masters. Consider the ollowing:
China is not yet a consumption economy.
The contributiono household consumption to China’s GDP was just 38.8 percentin 2010, compared with 71 percent in the United States and50 percent to 60 percent in most European and other BRICcountries. The government is striving to reverse this trendwith policies aimed at increasing domestic consumption sothat it accounts or 45 percent o GDP by 2020. How muchChinese consumers will be willing to spend remains to beseen, since they have one o the highest savings rates in theworld (38 percent o earnings).
Income disparity is alarming.
The chronic income disparitybetween urban and rural residents continues to widen. In 2011,the average disposable income o urban Chinese consumerswas 323 percent higher than that o their rural counterparts.While the government has launched a series o social andeconomic initiatives aimed at increasing incomes or bothrural and urban individuals by at least 7 percent each yearby 2015—resulting in 7 percent o households having annualdisposable incomes o more than $25,000, compared with just 2.4 percent in 2010—we do not expect the gap betweenurban and rural households to narrow signifcantly.
Urbanization is accelerating and will continue to driveconsumption.
Approximately 13 million people in China moveto cities each year. In 2000, the proportion o urban dwellersclimbed to 36 percent, up rom 20 percent in 1980. By 2015, it isexpected that 60 percent o the population will reside in urbanareas. And by 2020, there will be 70 to 100 cities in China withmore than one million people. This dramatic urbanization is, andwill continue to be, a main driver o China’s domestic consumption.
Proound demographic changes are making the consumermarket landscape more complex.
China’s population is aging.The number o people over the age o 65 will increase by morethan 51 percent rom 2010 to 2020 and will account or14 percent o China’s total population. Thanks to the country’sone-child policy, its workorce is simultaneously shrinking and willactually decrease by 2020. Given that the social security saetynet won’t cover the majority o older residents, younger workerswill be aced with a heavier burden to support the seniors.
The rise o online consumers marks a new rontier or rowth.
The prevalence o mobile Internet applications and smartphonesis accelerating the rate o online consumption. By 2015, thenumber o Internet users in China will soar to more than 800million, up rom 538 million as o June 2012. Internet access isgrowing ubiquitous in consumers’ daily lives or shopping andentertainment. Online shopping accounted or 3.3 percento China’s retail sales in 2010 and will increase to 8 percent(with sales volume o more than $360 billion) by 2015.
Understanding the undamentals o China’s consumer market