The salient features of the explosive growth of China’s consuming middle class are captured in the McKinsey Quarterly report – Mapping China’s Middle Class (June, 2013) here -
- Urban consumers (those with $9,000 - $34,000 household income, which in Purchasing Power Parity terms(roughly 2.5 times) would be equivalent to those in Brazil/Italy) are expected to grow from 4% (2000), 68% (2012), to 75% (2022) of urban population.
- The share between the Upper Middle Class ($16,000 - $34,000) and the Mass Middle Class ($9,000 - $16,000) will be reversed from 14% v 54% in 2012 to 54% v 22% by 2022.
- The drivers of such growth are expected to shift from Megacities (Tier 1) to Tier 3/4 cities from a proportion of 40% versus 15% + 3% in 2012 to a proportion of 15% versus 31% + 8% by 2022.
- The new Generation 2 (G2) consumers (those up to 25 years of age) number 200 million, accounting for 15% of urban consumption in 2012. They will take up 35% of urban consumption and will be numerically three times larger than the United States baby boomers by 2022.
To find the holy grail to this massive and yet diversified growth, Mckinsey Quarterly comes up with a specific report - Winning the battle for China’s new middle class here which stresses the following -
- While functionality used to dominate purchases, the young upper middle class are increasingly attracted by emotional and aspirational factors
- As the market is non-uniformed across regions, age groups, and other differences, a dual track or multi-track strategy is advisable aiming at different market segments.
- Timing of transition from the lower to the higher end is the key, as well as -
- Innovative, on-the-ground, and interactive marketing methods where suitable.
The Next Chapter of China’s consumption is the rise of the Generation 2 consumers and e-tailing as their preferred mode of consumer experience. China is now the world’s largest e-tailing marketplace. Click here
As proof of transition to a demand-led consumer economy, a panel discussion of the Economist Intelligence Unit in late 2013 suggested that China by year end would have become the world’s largest grocery market, the largest luxury market, and also the largest e-commerce market. China is also expected to spend more on retail abroad than any other country. China is likely to overtake the US as the world’s largest retail market by 2016—four years before China also becoming the world’s largest economy in 2020. By 2022, China is estimated to account for a quarter of global retail sales.
Download Potential of China Retail Industry - Panel Discussion, EIU
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