Rural shoppers offer growth in China

21 May 2012

BEIJING: Brand owners in China could benefit from "thinking differently" about automatically favouring urban over rural shoppers, and thus gain access to a market worth $500bn per year, Nielsen has argued.

The research firm stated that the number of people living in Chinese cities rose by 21m last year, taking totals on this metric to 691m, or 51% of the country's population.

Despite this, it also suggested that companies failing to target the 650m consumers inhabiting rural markets stood to miss out on sales reaching approximately $500bn a year.

"There is a commonly-held belief in China that as a marketer or a brand owner I can wait for people in village areas to come to my brand through urbanisation as a process," Dale Preston, Nielsen Greater China's SVP, analytics and consulting, said. "People need to think about that a little differently."

In the first instance, Nielsen reported, rural buyers make 20% fewer shopping trips than their peers in the city, but spend a third more per visit.

Currently, the average monthly expenditure among consumers in the countryside is RMB418 ($66) a month, measured against RMB1,199 for urban residents. The former group, however, is becoming increasingly affluent, Preston stated.

"In rural areas, consumers' lifestyles are improving, they're getting more money, and so what they're doing now is wanting to experience brands for the very first time. They're going into, many of them once a month, an urban area and experiencing all the new brands and products they can buy," he said.

Another key trend reshaping China's metropolitan centres on the abundance of migrant workers, Nielsen continued. At present, 20% of urban residents are in this category.

More specifically, 45% of this group are blue collar workers, 35% are students and 21% work in semi-skilled blue collar roles. According to the World Bank, migrant workers send $45bn a year home, and some transfer 80% of their earnings in this way.

Looking ahead, a projected 32% of the 900m people living in the country's cities will be migrant workers. As such, the sales impact of this shift on big cities will be less than 5%.

"Migrant workers don't behave the same as urban residents. They don't consume goods the same, and in fact many of them send a large amount of their money back home ... and it improves the lifestyle in villages," said Preston.

Data sourced from Nielsen; additional content by Warc staff