10 Recession-Driven Consumer Trends in China

How TNS Global's Ashok Sethi Expects the Global Economy Will Change Consumer Trends and Behavior in China

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SHANGHAI (AdAgeChina.com) -- Marketing pundits in the West believe products like condoms, DVDs, lipstick and junk food sell better during economic recessions. Will Chinese consumers' behavior follow a similar pattern?

Not always, said Ashok Sethi, the regional director of methodology at TNS Global in Shanghai. He recently conducted a study in urban China this year to validate -- or explode -- these beliefs.
Ashok Sethi
Ashok Sethi
Overall, Mr. Sethi found the average urban Chinese consumer is facing the crisis with stoic optimism. Half of respondents said they believe that, despite the downturn, their incomes in 2009 will actually increase in comparison to 2008.

Thirty-one percent expect to make the same amount this year as in 2008, and only 19% expect a decline. Their optimism is based on the fact that most consumers in China feel that their lives will only be slightly affected by the global economic meltdown.

But they also think 2009 will be a time for reflection and an opportunity to seek balance, whether between work and play, friends and family, saving and spending, and excitement and peace.

Mr. Sethi identifed ten trends in consumer behavior that marketers in China should expect this year:

1. Health is wealth
When people can do little about their economic health, being physically healthy becomes even more important. Although gyms will still be popular, many consumers are adopting more natural, free exercise like walking and jogging.

2. Goodbye luxury
Chinese consumers say they plan to spend less on designer jewelry, bags and watches in 2009 than they did last year. Luxury goods manufacturers expecting China's appetite for luxury to make it their largest market in the world will have to wait until the global economy turns around.

3. More skin care and more colors
Chinese consumers still feel a glowing skin and luminous lips are a handy shield against the pain of the economic crisis. The need to look good is never more pronounced than when the times are tough.

4. Skill enhancement and training
Learning has always been seen in China as a ladder to success. Dealing with difficult times calls for enhanced skills and capabilities. What could be a better time to invest in self enhancement than when employment is scarce, salaries are low and the work load light? English language courses, already a booming business in China, will get a further bump. Consumers will try to teach themselves software, web page designing, even special skills like belly dancing to enhance their chances for fruitful employment and a healthy pay check.

5. Digital world
With nearly 300 million internet users, the largest in the world, China was already hurtling towards a digital age before stock prices began hurtling downwards. The internet is where the Chinese go to look for a better job, download free movies and songs and chat with friends about everything from make-up tricks to interview tips. In tough times, they rely on the internet even more to search for a better job, complain about their existing but poorly-paid jobs in blogs and chat rooms, and upload videos for leisurely escapism. Relatively inexpensive 3G mobile services will make phones just as valuable as computers in the coming months.

6. Home sweet home
The role of family life will be further enhanced and flavored, literally, by home cooking wafting from the kitchen. Chinese plan to cook more at home in 2009 compared to last year.

Competitors to home cooking, whether cheap fast food restaurants or road side stalls, are likely to lose business from middle class consumers. However, McDonald's, KFC and popular local chains like Nan Xiang Xiao Long may still see growth in 2009, as affluent consumers trade down from more expensive restaurants.

If you spend more time at home, it makes sense to vacuum and tidy up the place. Chinese homes will look neater in 2009, and the lower workload at the job may lead to greater efforts at home. Spending on household items will see a bump.

7. Shop wisely
Shopping at hypermarkets is appealing, but navigating all those aisles takes time, something frenetic Chinese used to lack. With more time to spare in a slower economy and more incentive to economize, consumers are more likely to shop at hypermarkets than the ubiquitous but pricier supermarkets and neighborhood convenience stores. The search for value and bargains will also point shoppers to the internet for even better deals. Online is the only retail channel that will grow even faster than hypermarkets this year.

8. In-home entertainment in, out-of-home entertainment out
If slow internet speeds make it hard to download a feature film, Chinese have the easy (if illegal) option of spending a dollar on a pirated DVD to plug into the living room entertainment system. An evening for two at a cinema can cost thirty times that much, including snacks and tickets. Sales of cinema tickets are likely to remain high, however, as long as the movie industry comes up with compelling attractions.

But the good news ends there for the entertainment industry. Bars and karaoke flourish during economic booms. Executives will be spared the out-of-tune warbling of potential business partners this year. Fewer imported spirits like cognac and whiskey will be poured, although the sale of beer at home or at low-priced eateries is unlikely to be affected.

9. Social harmony back in vogue
Chinese feel guilty for neglecting their immediate and extended families. The recession is the ideal time to catch up with friends, take the children to the park and visit parents. Children may pay a heavy price for this affection though, because parents with the time and inclination will push studying even more.

10. Sex and love
Chinese consumers say they don't plan to change their sexual habits during the recession, although penny-pinching businessmen may be forced to give up expensive mistresses, particularly if they continue to demand luxurious gifts. Couples may decide to postpone having a child until household income recovers. Some women are bucking this trend though, by rushing to have a "financial crisis baby," because the law prevents Chinese employers from laying off pregnant women and nursing mothers.

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