Spotlight on China July - August 2011 15/08 - Kantar Worldpanel

A fresh look at D city consumers
– 4 areas of critical importance uncovered
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Since April 2010, Kantar Worldpanel China started to look deeper into our lower tier D city shoppers. They represent 34
million households and 1,300 cities on their own and also provide a crucial link to rural shoppers as many rural consumers
will travel to the nearby D cities to shop.
The results of our investigation were sometimes surprising as they show that the key priorities for Chinese consumers have
different meanings in these areas and some of the assumptions that marketers used to make were incorrect. This article
using data from the household panel and also some qualitative interviews we conducted with our panelists using online
questions on retailer decision and interviews on overall attitudes.
Kantar Worldpanel identified 4 main areas of critical importance for shoppers in D cities- Personal Relationships,
Convenience, Quality and Trust.
Personal Relationships
Whilst family is key to all shoppers; however, in D cities family ties are much closer than in other tiers. They are more likely to
have young children and also to have larger HH Size suggesting parents also sharing the home.
Kantar Worldpanel visited the homes of some of our panelists in a mid-income HH in Fujian Province and also a lower
income one in Shanxi Province. Kantar Worldpanel discovered that households were buying personal care products for
everyone to share. Despite the fact there were many users, D cities were buying smaller sizes in personal care than other
city tiers. This represents an opportunity for manufacturers for drive loyalty and consumption rates by increasing pack sizes
available.
Another key point about personal relationships is D cities is about how shoppers make their purchase decisions. When our
fieldwork team interviewed our panelists it was found that the majority considered recommendations from friend and family
the most important factor in deciding to purchase a new product. They also ranked ‘Attractive advertising’ as the least
important reason in choosing their retailer.
Convenience
D City retailer landscape is less developed than other tiers with limited Hypermarket presence (though there are local chains
following Hypermarket format in some of the more affluent cities) and reliance on grocery stores. D city shoppers are used to
smaller formats and therefore place less value on long opening hours and having huge product ranges and more on a high
level of personal service. This means that retailers should consider how they can use smaller formats to penetrate these
areas and ensure staff are friendly and attentive.
Quality
Premium products generally have lower penetration and shares in lower tier cities. Affordability is not the only reason for this
as many households in D cities have high disposable incomes. One big issue stopping D city shoppers buying more
premium products within their city is accessibility. They are willing to travel to larger cities to buy special products- cosmetics
and electronics were particularly popular. Our panelists said they could get better prices and quality assurance in the more
developed areas.
One expectation is that D cities shoppers would be using the internet to source goods as this channel is very popular in C
cities, yet the penetration reveals there was a drop when you got to D Cities. KWP found from asking the panelists that they
went online to look at products, but they did no follow through and purchase. Some reasons suggested were that going
online is less convenient as delivery times are slower, but the main barrier was the fear that the quality would not be good.
Panelists made comments such as ‘Need to find trust-worthy shop’ and ‘No quality guarantee’ as being key reasons for not
purchasing online. This demonstrates the potential retailer own shops could play if they can prove their credentials and
inspire trust.
Trust
The concern about fake products is more pressing for D city shoppers as with more independent and small retailer chains it
is very hard for shoppers to be clear on if a branded product is real or not. To encourage shoppers to pay extra for branded
good manufacturers and retailers need to work hard to provide reassurance that their product is real. Given word of mouth is
a key factor in making a purchasing decision a poor product experience from buying a fake could impact family friends or
families’ decisions in future.
Overall when thinking about how to target shoppers in D cities, marketers need to fully understand how they can relate the
following key decision making factor to the local consumers.
Personal relationship: family being Important in influencing decisions
Convenience: smaller shopping with essential products formats and good service
Trust: consumers will not buy your products unless they can trust they are real
Quality: there is a demand for premium goods and the internet offers a great opportunity to break the accessibility barrier,
but only if you build confidence in quality offered.
Currently 50% of China’s population is in the rural areas. In the next 20 years this will decline to 30%. Many will move into D
cities and therefore it is essential to get in early to set up your product reputation and distribution to benefit from these major
shifts in China’s population.
If you have any further questions or are interested in seeing any of the photos we took from trips to Fujian and Shanxi D
cities then please contact your client service team.
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