The e-commerce channel, growing at an annual rate of 35%, is now the primary growth engine for China’s FMCG market, according to a report of consulting firm Bain. It has achieved high levels of penetration and become a core sales channel in subcategories.
Relying on Alibaba’s data, Bain identified eight strategic segments of China’s online consumers that collectively account for 80% of FMCG platform users and represent over 90% of gross merchandise volume:
- Rookie White Collars
- Wealthy Middle Class
- Small-Town Youth
- Gen Z
- Urban Gray Hairs
- Small-Town Mature Crowd
- Urban Blue Collars
Rookie White Collars are educated people in their early 30s who live in tier 1–3 cities. Their careers are advancing. They work in a fast-paced environment and greatly value convenience—hence, they prefer online shopping.
They represent higher per-capita spending on Tmall and Taobao, with annual spending growth of around 20% from 2016 to 2018 according to Bain’s report.
Wealthy Middle Class consists of financially stable consumers, typically in their early 40s in tier 1–3 cities, and primarily work as civil servants or in corporate middle or senior management.
They are less passionate than their younger counterparts when buying the latest new products. They are more rational consumers, they value quality, and a higher proportion of their online purchases are premium products.
Supermoms are women who are pregnant or have children under the age of 12. They live in Tier 1–3cities and are concerned about raising healthy families while taking great care of their own careers—and their own health and beauty.
They are the main shoppers for their families and are willing to pay a premium for convenience. Among all groups, they have the strongest spending power. It is reflected in the number of categories and brands they buy, their shopping frequency and the amount they spend.
Gen Z consists of students or others born after 1995 in tier 1–3 cities. They are digital natives. Unlike their older counterparts, they value trendy items over established brands and are major fans of insurgent brands.
This group represented the fastest per-capita spending growth on Tmall and Taobao FMCG, with per-capita spending growing 30% annually from 2016 to 2018.
Small-Town Youth are consumers in their 20s in tier 4 or smaller cities. They take their cues from big-city youth, eagerly following the latest urban trends. Without the pressure of exorbitant housing prices, they have considerable disposable income at their fingertips.
The slow pace of life also provides them with enough time to enjoy games, video streaming, and other online leisure activities. Their income and free time make them a huge potential force in online shopping.
Urban Gray Hairs are consumers born before 1970 who live in tier 1–3 cities. The majority of them are retired and have substantial pensions. This group could be considered a hidden gold mine for online sellers.
They now spend relatively little online. In fact, their per-capita spending dropped 20%annually from 2016 to 2018.
Small-Town Mature Crowd consumers are older than 35 and live in tier 4 or smaller cities. With their slow pace of life, they typically have an abundance of time to watch videos or news online. They make most of their purchases offline, a preference that allows them to socialize with acquaintances face-to-face.
They registered the lowest per-capita FMCG spending on Tmall and Taobao of any group in 2018.
Urban Blue Collars are less affluent consumers in tier 1–3 cities who are typically engaged in such professions as catering, transportation or retail. They are familiar with the same e-commerce infrastructure and online channels that influence their middle-class counterparts.
Compared with the Rookie White Collars or Wealthy Middle Class groups, they are more concerned about value for their money when shopping online and tend to buy fewer items. Their per-capita spending on Tmall and Taobao is far below that of middle-class shoppers and grew at a relatively slow 5% rate from 2016 to 2018.
Bain also suggested 4 steps on how brands can win:
- Clearly understand the targeted strategic consumer groups and their preferences in products and content/promotion channels
- Identify key growth drivers to customize a category- and brand-specific strategy
- Optimize product portfolios, marketing, and channel strategy—choosing key growth initiatives for reaching and converting targeted consumers
- Systematically review and continuously improve strategic initiatives
CIW annual subscribers can download the report here.