which is the largest market in china for humvees?

Which is the largest market in China for Humvees?

Which city did The Guardian refer to as ‘Invisible City’?

What is the most common (and free!) advertising medium in small towns?

Ad for Locksmith

Ad for a Stampmaker – fake it!

The Real China RevealedInsights into the mainland’s 2nd and 3rd Tier cities

51% population64% of GDP

4.5% population4% of GDP


Where is the money currently?

Source: Asian Demographics

Only 33.5% of all retail sales in China now come from the 24 largest cities.

National Bureau of Statistics / Access Asia

7

Relative affluence of inhabitants in the main 8 cities will decline

Beijing, Guangzhou, Hangzhou, Nanjing, Ningbo, Shanghai and Shenzhen

Chongqing, Chengdu, Kumming, Qingdao, Tianjin, Shijiazhuang and Xiamen

Secondary cities in the provinces of Jiangsu, Zhejiang, Shandong and Fujian.

Compounded annual growth rate of affluent households is 17.9%

Number of affluent households in the 8 cities will more than double but contribution will be down to 33% by 2012

Note: currently middle class are those with Rmb 28-48K - here forecast of those earning Rmb 80K+; even with some inflation, they should enjoy good standards of living by 2012


Defining the TiersFirst-Tier CitiesFour municipalities: Beijing, Chongqing, Shanghai, TianjinCities with total retail sales of more than RMB30bn, annual per capita income of RMB11,000 and high per capita retail sales as proportion of income:10 provincial capitals: Changchun (Jilin), Chengdu (Sichuan), Guangzhou (Guangdong),Hangzhou (Zhejiang), Harbin (Heilongjiang), Jinan (Shandong) Nanjing, (Jiangsu),Shenyang (Liaoning), Wuhan (Hubei), Xi’an (Shaanxi)Four leading cities: Dalian, Qingdao, Shenzhen, Xiamen

Second-Tier Cities17 provincial capitals: Changsha (Hunan), Fuzhou (Fujian), Guiyang (Guizhou), Haikou(Hainan), Hefei (Anhui), Hohhot (Inner Mongolia), Kunming (Yunnan), Lanzhou (Gansu),Lhasa (Tibet), Nanchang (Jiangxi), Nanning (Guangxi), Shijiazhuang (Hebei), Taiyuan(Shanxi), Urumqi (Xinjiang), Xining (Qinghai), Yinchuan (Ningxia), Zhengzhou (Henan)50 prefecture-level cities, including, Ningbo, Suzhou, Wuxi, Wenzhou, Nantong,Dongguan, Zhanjiang15 more cities with populations of between 500,000 and 2mn

Third-Tier CitiesApproximately 200 county-level cities

Fourth-Tier CitiesApproximately 400 capitals of county towns

Seeking insights into the other half

Research Objectives

Understand the consumer in low tier markets and how they are different from (or similar to) top tier cities – in terms of attitudes towards life, brand consumption & media habits.

The retail communication study - brand and communication presence at different types of retail stores.

Shopper profile and shopping basket - observations of shopping behavior, including shopper profile and the products & brands in their shopping basket; planned vs impulse buying

Study sample

Home interviews & photographs – 3419 families Retail environment – 295 hypermarts, supermarket

s, convenience stores, mom-n-pop stores Shopper exit interviews – 530 Qualitative in-depth family & expert interviews – 20

Market Coverage

North

Beijing

Shanghai

Maoming

Xi’an

Yichang

Mudanjiang

Wuhan

Lanzhou

Tier 1

Tier 2

Tier 3

JinanTaiyuan

Shijiazhuang

Nanning

Tai’an

Hailin

Xianyang

LinxiaLinfen

Zhangjiakou

Xinyi

CenxiXinyi

West

South

22 cities in 10 provinces, across tier 1 to tier 3

51% population64% of GDP




Topline findings and implications

Consumer Lifestyle - attitudes to family

Family is more important thancareer for me

76.2%67.7% 67.5%

Tier 1 Tier 2 Tier 3

Families should make an effort to eattogether regularly

94.6% 89.0% 88.1%


Tier 1 residents feel almost guilty of giving their careers preference over family, hence justifying priorities to themselves.

Many Tier 2-3 families eat together anyway.

Consumer Lifestyle - attitudes to life

I am satisfied with my life

53.6% 46.9% 46.9%


I am satisfied with my family’s livingstandard

55.3%44.6% 48.0%


Consumers living in tier 1 cities are more satisfied than those in the Tier 2-3.

Over half of those living in Tier 2-3 are not satisfied.

• “A big city has many more opportunities for earning and spending” – Nanning respondent

Consumer attitudes - risk The majority plays safe, yet there i

s a substantial number of those willing to take risks – in equal measure across the tiers

• Nude portfolios in Nanjing

• “My daughter has left high school and is learning how to dance” – Mr Wang, Lanzhou

I like doing things that are a bit risky

37.7% 37.2% 37.0%


Consumer attitudes - risk The majority remains debt-averse;

China continues to be a high savings nation.

Change marginally greater in Tier 1 cities

• “I am confident that I will get a raise this year and will pay off my credit card bills” – Jr. Executive in Shanghai.

I could take on debt to allow me to buythe things I want

20.1% 17.9% 18.9%


I consider myself an ambitious person

38.3% 34.5% 34.4%


Tier 1 residents are only slightly more ambitious than the lower tiers; the majority still does not consider itself very ambitious.

• “I want to be like Yo Yo Ma”

Consumer attitudes - ambition

Again, small differences between the tiers. Lower tier consumers have huge access to fashion & beauty, even if it is not always branded. It’s also cheap.

• “Why should I spend 200 kuai on a pair of branded jeans when I can pick up 5 stylish pairs here?” – Young woman, Cenxi

I like to keep up to date with the latestfashions

35.8% 34.1% 37.7%


Consumer attitudes - fashion

I enjoy trying new things

59.1% 54.6% 53.5%


Novelty is a big draw. Consumers are looking for new ideas in every sphere of consumption. Again, across the tiers, and to a slightly greater extent in Tier 1.

Consumer attitudes - novelty

Implications - 1• The brand stories, particularly those around the themes

of risk, fashion, family, ambition can be the same across the tiers.– However they need to be calibrated.– Risk-aversion can be countered with confidence.

• Brands and communication will need to offer the new even in the lower tiers – tired clichés and similar products will not work.

• Brands and communication for low tier consumers can actually make them feel good about their condition, rather than inadequate.

Attitudes towards brands & advertising

Advertising helps me find productsor services that I want

67.7%61.9% 66.4%


Clear role for advertising – it is the source of knowledge about brands

Fair numbers find value in brands; greater numbers in Tier 1 cities

I am willing to pay extra to buy well-known brands

38.4% 34.7% 31.6%


Attitudes towards the foreign

I prefer to buying foreign brand even theprice is higher

24.1% 17.8% 16.3%


I like to try products from other countries

36.4% 28.7% 26.6%


Openness to foreign brands significantly less in lower tier towns.

Greater price sensitivity …belief that foreign brands are more expensive.

Brand Preference - Top 10 Favorite Brands

Top 10 brands in Tier 1

14.6%

12.4%

10.4%

7.8%6.9%6.6%5.4%4.9%4.4%

19.8%

Haier NOKIA

Samsung NIKEADIDAS SONY

Li Ning MOTOROLAOlay PHILIPS


15.5%

13.7%

11.9%

8.0%6.3%5.5%5.5%5.1%5.0%4.5%

Haier NOKIA

Samsung Li Ning

PHILIPS NIKE

Lenovo SONY

Olay Panasonic


19.4%

11.9%

10.3%

7.8%7.2%6.9%5.6%4.5%4.4%4.3%

Haier Samsung

NOKIA Li Ning

Lenovo TCL

NIKE Chang Hong

Olay Da Bao

Influences on purchase decision

I usually compare prices beforedeciding where to shop

70.5% 66.1% 70.9%


Still a price-driven, price-sensitive market

Price influences both store and brand choice

Index to Average By Tier

60

80

100

120

140

160

Price Brand Previousexperience

Recommendedby friends/relatives

Promotion Package Recommendedby sales man


Most Important Factors influence purchasing(%)8872

4828 22

9 6

Total %

Average

Influences on purchase decision

Influences on purchase decision Price and brand are most important,

across the tiers

In Tier 1, people value their own experience; in Tier 2, others’ opinions matter; in Tier 3, packaging and salesperson’s / shopowner’s recommendation matters more.

• Reflects how and where they mostly shop

Shop vs Brand - relative importance

11% 14% 18% 20% 20% 21% 21% 22% 23% 27%38% 40%

54%

89% 86% 82% 80% 80% 79% 79% 79% 77% 74%62% 61%

46%

0%10%20%30%40%50%60%70%80%90%

100%

Automob

ile

Motorcy

cle

Digital

Cam

era

Air con

dition

er

Refrige

rator TV

MP3 Play

er

Was

hing M

achin

ePC

DVD play

er

Skinca

re

Cosmeti

cs

Appare

l

shop brand

Do you first decide which shop to buy or which brand to buy?

Shop vs Brand - relative importance

General speaking,

the more expensive the product, the more important the brand!

Influence of the Little Emperors

• Kids have significant influence on the family during shopping as sources of new information, but the proportion is lower as one moves down the tiers.

• They are among the first to latch on to new trends.

Children’s opinions should not beconsidered when doing family shopping

13.5%24.8% 27.2%


Influence of the Little Emperors

• “We spend 40% of our income on our son, to make sure he has a good education and is comfortable” – couple in Linxia, MHI: Rmb 1100

• “Bu jidao” – their son, upon being asked who the cartoon character on his T-Shirt was (it was Mickey Mouse)

Implications - 2

• Role of advertising / brand communication experienced by consumers is mostly informative.– Opportunity to use emotion, creating value systems

and move to imagery and storytelling.• MNC brands need not emphasize country of

origin. For the low tier, cultural assimilation would be a good strategy.

Implications - 2

• Tier 2 & 3 show a lower degree of shopping confidence and individuality than Tier 1 shoppers– Role of word of mouth much greater; need to motivate

shopowners / shop assistants as well as current users– Need for constant reassurance

• Opportunity to involve kids to spur brand choice and aid shopping, even in the low tier

Some other differences between the tiers …

Food habits

Have you visited a fast food restaurant in the past 12months?

82.4% 74.1%60.1%


Tier 1 has significantly more consumers eating at fast food restaurants (such as KFC, Yoshinoya, McDonalds …) than Tier 3; Tier 3 families remain conservative with their eating habits.

Planned purchase – consumer durables

2.8%

3.1%

3.5%

16.5%

6.4%

3.9%

12.3%

6.2%

2.5%

3.2%

4.4%

17.7%

10.3%

5.7%

12.3%

8.8%

1.3%

3.0%

6.7%

18.4%

7.9%

4.2%

14.8%

9.1%

TV

Washing machine

Refrigerator

Digital Camera

Air conditioner

DVD player

Computer

Mobile phone


Which ones do you plan to buy a new

one next 12 month?

Planned purchase – consumer durables More consumers in tier 1 intend to buy

new TV in next 12 months.

• Replacement market - upgrades

More consumers in tier 2 plan to buy new DVD player, air conditioner and washing machine.

More consumers in tier 3 are willing to buy new mobile phone, computer, digital camera and refrigerator.

• Both first-time purchases – consumers entering category for the first time.

Shopping Frequency & Distance

5% 2% 2%5% 8% 4%

25% 22% 23%

31% 31%27%

20% 25%26%

8% 5%10%

6% 7% 8%

0%

25%

50%

75%

100%

Tier1 Tier2 Tier3

Not Clear/ Don’t Know

Once A Month OrLess

2-3 Times Per month

Once A Week

2-3 Times Per Week

4-6 Times Per Week

Once A Day Or More

Shopping Frequency Shopping Distance

26% 25% 19%

46% 55%

50%

20%16%

27%

9% 5% 4%

0%

25%

50%

75%

100%

Tier1 Tier2 Tier3

Very far

A little far

Neither too farnor too near

Very near

Sample: 250 245 135 Sample: 250 245 135

Shoppers in tier 1&2 markets go shopping a little more frequently than those in tier 3 markets.

And there are more shops near residence zone in tier 1&2 markets than in tier 3 markets

Shopping Frequency & Distance

Impulse Shopping

Tier 1

7%

44%

32%

17%

Every time Ishop

Almost everyshopping trip

Once in awhile

Never

Tier 2

7%

52%

24%

18%

Tier 3

7%

47%

24%

22%

Interestingly, shoppers in Tier 2&3 markets do a bit more impulse shopping than those in Tier 1.

Influencing Factors of impulse shopping(Total sample: 460)

Total %

Tier 1 Index

Tier 2 Index

Tier 3 Index

Discount 58% 104 103 89

Free gifts 38% 116 108 59

Music / radio with ads 33% 83 107 116

Product tasting / sampling 24% 112 102 78

Standalone displays for specific brands 14% 90 94 128

Shelf display for specific brands 13% 133 81 81

TV sets with ads 9% 122 105 56

Impulse Shopping: Influences

Discounts are the most effective promotion that trigger impulse shopping.

Free gifts and sampling are more attractive in tier 1 markets.

Radio ads and standalone display are attractive in tier 3 markets.

Impulse Shopping: Influences

Shopping environment

TV: Program Type Preference

Index to Average By Tier

80

100

120

Nationa

l news

Films /

TV se

ries

Loca

l new

s

Internati

onal

news

Legal

Sports

Health

& F

itnes

s

Educa

tion &

Care

er

Food

and co

oking

Music

Busine

ss/Fi

nancia

l News

Nature

& Envir

onmen

t

Military


Really Like % by Program Type41% 41% 39%

34% 29%23% 19% 19% 19% 18% 17% 17% 16%

Total %

Average

TV: Program Type Preference

Tier 1 likes sports, music, food, business, nature and environment programs

• Time to chill (but can’t abandon the quest for money)

Tier 2 prefers local news most

Tier 3 are more skewed to national / international news, education & career

• Looking for ways to advance, want to know what’s happening in the world

Internet usage

Mean hours spend on them(Monday- Friday)

11.38.4 9.2


Mean hours spend on them(Saturday.- Sunday)

5.64.1

6.2


Internet users spend half as much time surfing the Net during weekends compared with weekdays, in Tier 1 and 2 cities; the difference is relatively lower in Tier 3 cities.

• A reflection of many more opportunities for entertainment and socializing in the upper tiers.

Implications - 3• Significant differences in food habits

– Low tier remains conservative; need to stimulate demand, offer traditional cuisine in new and convenient formats

• Consumer durable co.s must have a multi-tier strategy

• Sense of direction for channel planning across the tiers– Use TV to build image, focus on softer brand values;

use local / in-store media to enable comparison and trigger impulse – opportunity to localize

Thank you!

which is the largest market in china for humvees?

Documents

largest cities

tier citieswhere

market coveragenorth22

xiamen secondary cities

low tier markets

total retail sales

shopping basket observations

shopping behavior