With another 200 Million Chinese people expected to join the middle class by 2025, who will be making the purchasing decisions in these household and what will they be buying?
It`s the mothers. The highest percentage of a Chinese family’s disposable income is spent on their child after that it's the household. Mothers, by and large, decide how that money is spent and what brands they spend it on. This means that they control a very large portion of China consumer spending which is often much larger than their husband`s purchasing power. Any company attempting to sell consumer goods in China must understand this demographic and how they think. But what are the top priorities for mothers?
Health, Education, Household goods & Cars is what we believe mothers care about. Whilst middle class consumers have rising purchasing power and are increasingly willing to pay more for higher quality, brand names, and differentiated features, they are still price sensitive and recognizing who is doing the purchasing is essential to success in the marketplace. Brands need to connect emotionally and forge a strong brand position.
Health. The expansion of the middle class is not just stimulating investment in private hospitals but also in dental services, cosmetic specialties, rehabilitation services and elderly care. Spending that would previously have been seen as a luxury items is becoming a standard cost of living for the middle class. Patients usually want to go to clinics attached to the highest-reputation hospitals and private health insurance is now a necessity for many families to facilitate this.
Education. In a country as populated as China it`s all about differentiating yourself for the other thousands of equally qualified people and with the one child policy still in force the child is the center of the family. Academic achievement reflects successful parenting and tiger mothers often only allow their children to engage in activities that would help further their academic ambitions: Exam preparation classes, Foreign language lessons, Arts and music classes, role play centers for social education and physical exercises. No expense is too great to further the potential of the families child.
Household goods. Buying habits are changing in a subtle shift away from a focus on ‘Value for money” to quality and value added goods that have a track record for good safety. As urbanization accelerates, consumer spending is becoming more like that of the West’s middle class. Urban Chinese are shopping to meet emotional needs, driving a skyrocketing demand for middle-class goods, food, and entertainment.
Cars. Nothing says you have made it better than a car. Demand simply keeps on rising for both domestic and foreign brands with China becoming BMW`s biggest market in 2013. Increasingly it is women who now make the final decision about which car to purchase and forefront in their minds is Quality & Safety.
As marketers focus on China’s middle class they will also have to prepare to serve an even more affluent upper tier of that demographic which, in many cases, will be located outside of China’s first-tier cities. According to consulting firm McKinsey, China will soon undergo a shift from its current “mass middle class” to a new category of upper-middle-class Chinese consumers. Calling this cohort the “new mainstream,” the firm identifies them as consumers with household incomes between ¥106,000 and ¥229,000 ($16,000-$34,000). Perhaps even more striking, their numbers will swell from just 14 percent of urban households today to 54 percent by 2022, according to McKinsey’s estimates. It is not uncommon for women to keep the family bank accounts in their own names and give their husbands a weekly allowance hence it will be the mothers of this new mainstream that will be holding the purse strings and the demographic that must be catered to. Chinese women are emerging as one of the most confident bodies of consumers in the world. And they have the money to keep on spending.