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The Mainland Cities of the Greater Bay Area (2): Consumer Product Preferences

As the economies of the nine mainland cities in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) continue to grow rapidly and the incomes of local residents continue to rise, consumer demand for new, high-quality products is also increasing. A survey conducted by the Hong Kong Trade Development Council (HKTDC)[1] in the past year looked at which products consumers in the nine mainland GBA cities were willing to spend more money on. It found that 46% were keen to spend more on upmarket clothing and footwear, and the same proportion on high-end skincare products/cosmetics/perfumes. 45% were willing to increase their expenditure on personal electronic products, a similar percentage on imported/organic food, and 44% on smart household products. This suggests that today’s consumers attach greater importance to upgrading their personal image, pursuing a smart lifestyle, and increasing their everyday enjoyment.

The survey also found that growing numbers of consumers are buying imported skincare products/cosmetics/perfumes and bespoke household products. The majority of consumers now prioritise quality, instead of low prices as they did in the past. Companies which can provide consumers with high price-performance ratio products and good after-sale service are likely to capitalise on the huge opportunities arising from the growth of the nine mainland GBA cities.

Price-Performance Ratio: A Changing Concept

As the economies of the nine mainland GBA cities develop, the attitudes of the people who live there towards consumption are becoming more mature and rational. They are also becoming more demanding about the quality of the products and services they buy. 88% of respondents in the survey agreed with the statement “price-performance ratio does not only refer to the price and quality of the product, but also to the added value and after-sale service provided by the business operator”. In other words, the professional services offered by companies have become part of consumers’ assessment of whether a product provides good value for money. One of the participants in the survey’s consumer focus group discussion remarked: “I am not good at operating electronic products, so when I buy these items, as well as looking for good product quality and functions, I also need after-sale support showing me how to operate the product. If there are technical staff or a detailed short video available to give me guidance, I would be happier with that product and brand.”

88% of respondents in the survey said their demand for clothing, make-up and accessories has increased as the importance attached to social etiquette has risen. 87% reckoned that buying smart household products can make daily life easier and more enjoyable. This shows that most people now want to improve their personal image and make their lives more convenient. With mainland enterprises growing stronger, consumers are becoming more receptive to domestic brands, with 80% of respondents saying that domestic brands are now more hi-tech and trendy and no longer inferior to foreign products. Consumers are increasingly open and receptive to the products of different brands, categories and new technologies.

Chart: Consumption Attitude
Chart: Consumption Attitude

Emphasis on Personal Image and Smart Living

This open attitude towards consumption among the inhabitants of the nine mainland GBA cities is reflected in their consumer behaviour. They are spending more money on different kinds of products, especially products that can help them enhance their image, engage in smart living and keep healthy. The survey found that 46% of respondents are spending more on upmarket clothing and footwear and high-end skincare products/cosmetics/perfumes than they were a year ago, 45% have increased their expenditure on personal electronic products and imported/organic food, 44% on smart household products and 41% on health food/supplements. These figures show that consumers attach approximately equal levels of importance to their personal image, smart living and health. As income levels rise, consumers are also spending more on other products. In the past year, 30% of respondents increased their spending on imported red wine/liquor, jewellery, and professional sporting goods, 26% on bespoke products and 22% on small home appliances for singles.

Consumers in Guangzhou, Shenzhen and Dongguan are keener on buying upmarket clothing and footwear and high-end skincare products/cosmetics/perfumes than their counterparts in other cities. This is probably because the residents of these cities participate in more everyday social and business activities. One male consumer from Guangzhou said: “I think wearing a suit from a well-known German brand makes me stand out. It boosts my confidence when socialising at the workplace. This helps grease the wheels.”

Table: Products on Which Consumers Spent More Than A Year Ago (%)
Table: Products on Which Consumers Spent More Than A Year Ago (%)

Rising Health Awareness

When the respondents in the survey were divided up by gender and age, it was found that some products are more popular with certain groups than others. For instance, high-end skincare products/cosmetics/perfumes find much more favour among women than they do with men, personal electronic products and imported red wine/liquor are preferred more by men, while young consumers and male consumers are keener than other groups are on professional sporting goods. Three categories of products - upmarket clothing and footwear, imported/organic food, and health food/supplements - were found to be popular across different genders and ages.

However, when consumers’ income levels are also taken into account, it is clear that health food/supplements is the category that most maintains its level of popularity across different income ranges. Around 40% of the respondents in all income brackets said they had spent more on health food/supplements in the past year.

The findings of this survey, then, show that consumers in general place a lot of emphasis on good health. As one of the participants in the consumer focus group remarked: “I normally spend quite a lot on health-related products and also buy health supplements and fitness equipment. I even spend a great deal of money on improving the health of my parents. I think my friends are the same and we are more than willing to splurge on keeping healthy.” Another young consumer said: “I and my friends and colleagues spend a long time sitting in the office every day. If we don’t pay attention to our health, we would have a lot of health problems.”

Table: Products on Which Consumers Spent More Than a Year Ago, by Gender and Age (%)
Table: Products on Which Consumers Spent More Than a Year Ago, by Gender and Age (%)
Table: Products on Which Consumers Spent More Than a Year Ago, by Monthly Household Income (%)
Table: Products on Which Consumers Spent More Than a Year Ago, by Monthly Household Income (%)

The table below shows which product categories are the most popular among consumers of different genders, age groups and income brackets:

Table: Products on Which Most Consumers Spent More Than a Year Ago
Table: Products on Which Most Consumers Spent More Than a Year Ago

Preference for Imported Cosmetics

Although 80% of respondents said domestic brands are becoming more hi-tech and trendy, when it comes to the purchase of skincare products/cosmetics/perfumes, 58% of them (and 71% of female respondents) said they still tend to buy imported goods. It seems likely that consumers regard imported cosmetics and skincare products as being of higher quality than domestic brands. A 28-year-old female respondent said: “I use the cosmetics of well-known brands even for my daily make-up because their quality is assured.” Another, aged 44, added: “Cosmetics of international brands are more prestigious, their products are innovative and the materials used are high-end, so I am not worried that they may contain substances that are harmful to the skin.”

In most other product categories however, consumers do not appear to have a marked preference for imported varieties. Only 36% of respondents said they tended to buy imported health products or personal electronic goods, and just 25% preferred imported home appliances to their domestic rivals. This may be due to the rising quality of domestic brands and the fact that domestic products may be better suited to meet the needs of Chinese consumers. A participant in the consumer focus group said: “When I shopped for a dishwasher, I compared products of domestic and foreign brands and found that the design of domestic brands is better suited to Chinese tableware. I finally bought a domestic brand.”

It is worth noting that only 16% of the respondents tend to buy imported food although imported/organic food is one of the product categories on which most respondents spent more money in the past year. This finding is probably related to food culture - while the presence of imported/organic food gives consumers more options, domestic food remains the staple of local cuisine. While consumers are keen to purchase imported food, they are at the same time extremely unlikely to stop buying domestic food products.

Table: Imported Products Which Consumers Tend to Buy More, by Gender and Age (%)
Table: Imported Products Which Consumers Tend to Buy More, by Gender and Age (%)

Jewellery: The Most Sought-After Luxury Products

Consumers buy luxury and affordable luxury products for varying reasons and purposes. These might include rewarding oneself, showing off, and hoping to win the approval of others. Among these various products, the most likely to be bought are watches and jewellery, purchased by 61% of respondents in the survey. The next most popular category is skincare products/cosmetics/perfumes, bought by 44% of respondents. One survey participant said: “I find that when I wear affordable luxury brand garments when socialising with others, more people accept my opinions. This makes me feel more confident and appreciated. At the same time, I wear affordable luxury brand garments to spur myself on. I feel that I need to keep making efforts to move up to a higher level in order to match the status and image of wearing affordable luxury brands.”

The kind of luxury and affordable luxury brands that respondents prefer to buy differs from city to city. 70% of those in Shenzhen and 67% in Dongguan tend to buy luxury and affordable luxury brand watches and jewellery - significantly higher numbers than the 61% average across all nine cities. In Zhuhai, 47% of the respondents said they favour luxury and affordable luxury brand clothing and footwear, higher than the 39% overall average. Respondents in Zhaoqing outstripped the average when it came to purchasing luxury and affordable luxury brand household products/smart home appliances (31%), handbags/luggage (30%), sporting goods (25%) and food (17%).

When the respondents were divided up according to age and gender, the different preferences regarding luxury/affordable luxury products were more or less the same as those the survey uncovered when looking at figures for the past year’s spending. Male respondents are more likely to buy personal electronic products, while female respondents prefer skincare products/cosmetics/perfumes; younger respondents are keen on skincare products/cosmetics/perfumes, while middle-aged consumers choose branded health products. The rest of the findings do not differ much from the overall findings.

Table: Luxury or Affortable Luxury Products Which Consumers Tend to Buy More (%)
Table: Luxury or Affortable Luxury Products Which Consumers Tend to Buy More (%)

Bespoke Products: Increasingly Popular

The survey found that while bespoke furniture, jewellery, clothing and footwear are becoming increasingly common purchases, the demand for bespoke electronic products is growing even faster. Household products/smart home appliances is the most popular bespoke product category, with 35% of respondents saying they would tend to buy them, followed by watches and jewellery (34%), personal electronic products (32%), and clothing and footwear (31%).

Bespoke electronic products are gaining popularity not only because they are an expression of individuality but also because they can meet one’s daily needs. Consumers can get home appliances which meet their individual needs by combining different parts and components made to various specifications. Some mainland enterprises are already offering made-to-order personal computers and refrigerators. One young respondent said: “I like computer games, so I ordered a bespoke personalised notebook computer which comes with a 4K screen and a mechanical keyboard. The image quality and the feel are better for playing games.”

While consumers enjoy the flexibility of combining parts and components with different specifications, their demand for personalised electronic products also includes buying home appliances with specific functions. Consumers looking for a higher quality of life are more willing to buy unique home appliances. For example, in the focus group, a 29-year-old female respondent from Shenzhen said: “There are now a great diversity of small home appliances such as bread machines, coffee machines, small ovens and juicers. Because I enjoy the DIY process, I want every one of these machines.” As people look for diversified and personalised life experiences, small and compact home appliances for single people are becoming increasingly popular. It should be noted that although these products are designed for single people, retailers are not confining their efforts to targeting the singles community.

Among the different kinds of bespoke products, household products/smart home appliances and watches and jewellery are popular with respondents in all age groups, while bespoke electronic products are most favoured by respondents in the 31-35 age group. More mature respondents tend to prefer bespoke clothing and footwear, with 38% of those aged 41-45 saying they tend to buy such products. Younger respondents tend to buy more bespoke sporting goods and food, while men are more interested in bespoke sporting goods than women are. Since consumers in the nine mainland GBA cities prefer imported cosmetics and skincare products, it is not surprising that the percentage of respondents buying bespoke skincare products/cosmetics/perfumes is rather low.

Table: Bespoke Products Which Consumers Tend to Buy More, by Gender and Age (%)
Table: Bespoke Products Which Consumers Tend to Buy More, by Gender and Age (%)

Price Premium on Bespoke Products

Consumers are willing on average to pay a price premium of 29% on bespoke products. Respondents with a higher monthly household income are, perhaps unsurprisingly, more willing to pay more for bespoke products. 45% of respondents with a monthly household income of Rmb40,000 or above said they would accept a 20-50% price premium on bespoke products compared to ordinary products of the same kind, while only 27% of those earning a monthly household income of below Rmb8,000 hold the same view. However, it should be noted that although on average 53% of respondents with a monthly household income of Rmb40,000 or above are willing to pay a price premium for bespoke products, this high rate is largely down to the fact that a small number of respondents are willing to pay a price premium of over 200%. Generally speaking, as long as businesses keep the price premium on bespoke products within the 30% range, they can attract the majority of consumers.

Table: Consumers Willing to Pay Price Premium for Bespoke Products, by Monthly Household Income (%)
Table: Consumers Willing to Pay Price Premium for Bespoke Products, by Monthly Household Income (%)

Low Rate of Goods Return in Online Shopping

Many mainland enterprises offer a free goods return service on their online shopping platforms. Some pointed out that consumers may purchase a large quantity of products and returning those goods which they then find unsuitable. However, this survey found that the rate of goods return by consumers in the nine mainland GBA cities is not high. Only 44% of respondents agreed that “because online shopping offers a goods return service, they would buy more first and return the goods if they are not satisfied”. Even among young consumers, fewer than 50% agreed with this attitude. The survey also found that only 7% of the respondents had returned goods and 29% indicated that they would not return goods bought online. This shows that consumers in general do not abuse the goods return service.

Table: Attitude Towards Goods Return, by Age (Agree Rate*%)
Table: Attitude Towards Goods Return, by Age (Agree Rate*%)
Table: Rate of Goods Return in Online Shopping, by Age (%)
Table: Rate of Goods Return in Online Shopping, by Age (%)

 

Conclusion

Consumers in the nine mainland GBA cities are increasingly interested in upgrading their personal image, pursuing smart living, and keeping healthy. As the quality of mainland products improves, some imported goods such as personal electronic products, which used to be popular with consumers, are now no longer always their first choice. However, consumers are still keen on buying imported skincare products/cosmetics/perfumes.

Jewellery items are consumers’ favourite luxury/affordable luxury product, while the most popular bespoke products are household products/smart home appliances and jewellery. Consumers are willing to pay a price premium of about 30% on bespoke products. Hong Kong companies wishing to take advantage of consumer market growth in the nine mainland GBA cities should look to provide the right products and formulate promotion strategies that are most appropriate for the attitudes and preferences of local consumers.


[1] For background information on this consumer survey, please see Appendix.

 

Appendix

Survey Background

In the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area issued by the State Council in February 2019, nine cities in Guangdong province (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing), as well as the two special administrative regions of Hong Kong and Macao, were designated to form the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), which is set to command an important strategic position in national development. Over recent years, the nine mainland GBA cities with their large population, have seen rapid economic growth and the average income of the residents is higher than the national average. This reflects the huge potential of the consumer market in the area. In light of this, the Hong Kong Trade Development Council (HKTDC) conducted a consumer market survey of the nine mainland GBA cities in order to gauge local people’s consumer sentiment, their attitude towards the consumption of different products and services, and their consumption preferences, characteristics and trends. Recommendations, based on the findings of the survey, are then made to Hong Kong companies to help them tap into the market of the nine mainland GBA cities more effectively.

 

Methodology

The present survey was carried out in November 2019 in the form of an online questionnaire.  A total of 2,160 consumers in the nine mainland GBA cities were covered. Before conducting the questionnaire, two focus group discussions were held in the cities of Guangzhou, Shenzhen, Zhongshan and Huizhou to try to get a deeper understanding of consumers’ attitudes in the nine cities and thus provide a degree of qualitative analysis.

  • Design of the Focus Group Discussion
Table: Design of the Focus Group Discussion
Table: Design of the Focus Group Discussion

  • Design of Online Questionnaire Survey
Table: Design of Online Questionnaire Survey
Table: Design of Online Questionnaire Survey

  • Average Monthly Personal Income of Respondents
Table: Average Monthly Personal Income of Respondents
Table: Average Monthly Personal Income of Respondents

  • Average Monthly Household Income of Respondents
Table: Average Monthly Household Income of Respondents
Table: Average Monthly Household Income of Respondents

  • Marital Status of Respondents (%)
Table: Marital Status of Respondents (%)
Table: Marital Status of Respondents (%)

  • Have Children or Not (%)
Table: Have Children or Not (%)
Table: Have Children or Not (%)

  • Education Level of Respondents (%)
Table: Education Level of Respondents (%)
Table: Education Level of Respondents (%)

  • Occupation of Respondents (%)
Table: Occupation of Respondents (%)
Table: Occupation of Respondents (%)

Remarks: Figures may not add up to 100% due to rounding
Content provided by Picture: C.H. Poon
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