BEIJING: Chinese consumers are becoming increasingly likely to make "self-indulgent" and "individualistic" purchases, McKinsey has indicated.
A new report from the global consultancy suggested that China's "new mainstream consumer" has an income in excess of US$16,000 and with very different spending habits from the majority of the population.
"A fast-growing segment of the population is becoming more self-indulgent in purchasing activity, more individualistic in wants and needs, and more loyal to favorite brands – even while maintaining some of the traits for which Chinese consumers are renowned, such as spending lots of time in stores comparing products," the report added.
McKinsey forecast that this cohort will make up a majority (51%) of China's urban population by 2020. In 2010, it accounted for just 6%.
The consumer trend identified in the report will require companies to alter their products and marketing strategies, according to Max Magni, head of McKinsey's Consumer Practice in Greater China.
“Instead of the big, trustworthy brands that many companies have used to good advantage up to now, more diverse portfolios of brands and niche products will be advisable,” he said, including some “that ‘speak directly' to consumers' emotions”.
The report reveals the new mainstream consumer to be less concerned about price and durability than before and 50% more likely than mass consumers to consider the emotional benefits of the product they are buying, such as its potential as a signifier of "individuality".
Age is another factor, with 41% of younger consumers in the new mainstream consumer class more likely to “always pay premiums for the best products”, compared to 31% of older consumers in the same income group.
"To maximize returns in China, companies will have to devote enormous energy and resources to reaching both the mass and new mainstream sides of the consumer dichotomy," added Yuval Atsmon, co-author of the report.
Data sourced from McKinsey; additional content by Warc staff