Smaller cities offer growth in China

14 October 2009

BEIJING: Smaller cities throughout China could become the catalyst for future sales growth in the country, and offer brands the opportunity to enter a diverse range of new markets, a report by ZenithOptimedia said.

The company's study, entitled Ready to shop: unlocking the potential of China's frontier markets, was based on research among 1,020 consumers in ten cities across the world's most populous nation.

It argued that smaller, less developed "tier three" and "tier four" cities are seeing economic growth as much as double that of their "tier one" counterparts, a group that includes Beijing and Shanghai.

ZenithOptimedia found that 44% of respondents in cities ranked at these lower status levels agreed they had not been impacted by the financial crisis, a figure that was just 24% for urban centres in tier two.

The 46% of participants in "tier four" who had recently bought a new home appliance also stated that they gained valuable information about their options from watching television.

This compared with the total of 48% registered among their counterparts in tier three on this measure, and 51% in tier two.

By contrast, 36% of tier four residents regarded television as being the medium which exerted the greatest degree of influence on their ultimate purchase decision, falling to 31% in tier three and 26% in tier two.

Digital platforms, like online search, are similarly growing in prominence when it comes to shaping the products people choose in sectors containing for more difficult-to-acquire products, like cars.
Word-of-mouth from family and the local community was also accorded a high status overall, factors that are particularly important as brands are not yet fully established in many of the developed areas assessed by ZenithOptimedia.

Malcolm Hanlon, China ceo of the company, said "clients like L'Oreal and Coca-Cola have asked about the tiers three to five in China, as their business in tiers one and two is saturated."

"These markets represent 75% of the urban population and are a huge magnet for business and brands wanting to expand," he added.

Data sourced from Media; additional content by Warc staff