1 October 2019

China digital consumer trends in 2019

By Lambert Bu, Jacob Wang, Kevin Wei Wang, and Daniel Zipser

New research from a survey of 4,300 Chinese consumers suggests a path forward for brands and marketers seeking the next wave of growth.

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China’s rise as a global leader in e-commerce has been nothing less than stunning. This year, online retail sales are expected to swell to $1.5 trillion, representing a quarter of China’s total retail-sales volume, and more than the retail sales of the ten next largest markets in the world—combined (Exhibit 1).

Exhibit 1
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The country’s 855 million digital consumers—among some of the most avid users of mobile phones and social media in the world—represent one of the biggest prizes for global marketers.
Exhibit 2
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But things are getting a lot tougher: growth of online retail sales is cooling, dipping from the heady 40 and 50 percent annual rates seen in the early part of the decade to 25 percent compound annual growth in the past few years (Exhibit 2).

And an increasingly crowded marketplace has led to fierce competition among brands, pushing up the cost of acquiring new customers and retaining them. For example, the cost per thousand user views (CPM) of advertisements placed on Tmall’s baby channel has increased on average by 60 percent since 2017.

These and other challenges—such as the rising sophistication of Chinese consumers—are upping the ante for consumer-facing companies. Brands looking for the next wave of digitally fueled growth in China are grappling with a number of thorny questions:
Omnichannel shopping. Looking beyond the hype, are initiatives like omnichannel retail services really taking off in China, and where should companies place their bets to capture a return on investment?
Social media and commerce. China is the land of social media, and some brands are already monetizing the attention they are generating through social channels. How can companies tap into the trend? How can they start building relationships directly with consumers that enable them to collect more granular and actionable data?
Lower-tier cities. Most marketers have focused their attention on capturing consumers in high-tier cities. But with more than 50 percent of digital consumers residing in lower-tier cities, how can companies create a value proposition that appeals to consumers?
Key opinion leaders and consumers (KOLs and KOCs). KOLs and KOCs wield a lot of influence, but how should companies tailor their strategy to drive short-term sales while building the brand?
Shopping events and discounts. The major annual and semiannual shopping events, such as Double 11 and 618, are playing an increasingly important role in driving sales. But what effect are these events having on profitability, and are there other ways to leverage these events beyond slashing prices?

In an effort to find answers to these questions, McKinsey surveyed 4,300 digital consumers from across four city tiers and rural areas in China, and from a range of ages and income levels. To better understand their digital behavior, we asked them questions about their digital activities, how they allocate their spending, and their purchasing decision journeys.

We complemented this field research with category-specific expert interviews, as well as insights drawn from our experience working with some of China’s most innovative and fastest-growing domestic and multinational consumer-facing companies. In our latest report, we explore five major areas of opportunity for consumer-facing marketers:

digitally powered physical retail innovation: crafting an intentional strategy to tap into omnichannel behavior

social commerce: monetizing social attention and engaging with consumers through direct-to-consumer channels

small-town youth: identifying the next pocket of customer growth

KOLs and KOCs: fine-tuning the levers of consumer influence

sales events and discounts: data-enabled pricing and promotions

Download China digital consumer trends 2019: Discovering the next wave of growth, the full report on which this article is based (PDF–745KB).

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