New Ogilvy & Mather China study shows how 2nd-4th tier consumers hold the key to not only China’s, but the world’s economy
SHANGHAI, January 7, 2013 - With 200 million households belonging to the consuming classes, China’s second to fourth tier cities are arguably the most important consumer segment in the world. But they are tight-fisted. In 2011, first tier markets had a disposable income value of 1 trillion RMB, while second to fourth tier cities had a combined disposable income value of roughly 8 trillion RMB. It is no surprise that advertising spend in Tier 2 to 3 markets was more than four times greater than Tier 1 markets, as the consuming class population is 7 times bigger.
Ogilvy & Mather China’s consumer insights and trends team Discovery revisited lower tier markets in their most recent study, “China Beyond – Change & Continuity,” marking the third time in the last seven years that the team has focused on lower tier cities. Based on research over a span of nine months, the 200+ paged book is packed with data, illustrated with photos and rich in stories about the everyday lives of the people who inhabit these cities.
“‘China Beyond – Change & Continuity’ is sweeping in its scope, a book that leaves no nook or cranny in the lower tier landscape unexplored. From the intimate domestic spaces to the online bridge to the world, from the frenetic warren-like wholesale markets to the expansive parks where the young whizz on rollerblades in the shadow of granite statues of revolutionaries, this is a record and commentary of a China that is once again poised at the brink of change,” said Scott Spirit, Chief Strategy Officer, WPP Group.
The book finds that while some constants remain, a lot of change has occurred as well. While traditional values such as family ties remain intact, a new breed of youth has emerged who do not necessarily wish to abide by their families’ expectations.
Spurred by job creation, the availability of high quality housing and education, and a relaxed pace of life, the first wave of reverse migration is now in full swing – particularly those who migrated to Beijing, Shanghai and Guangzhou a decade ago and have now realized that after years of hard work, they are still unable to afford homes, cars or their child’s education. With these interests at heart, shoppers are embracing e-commerce with enthusiasm and snapping up deals on products that are unavailable in their local stores. Alibaba’s Tmall, a hugely popular e-commerce platform for local and international brands to sell in mainland China, have rendered bigger brands as more accessible to these lower tier consumers. These lower-tier residents are hungry for new experiences and have time at their leisure, so that local businesses able to can often occupy these consumers for hours.
“China’s lower-tier settings are no longer a world away,” said Shenan Chuang, CEO of O&M Greater China. “The changes in the consumer landscape are driven by the expansion of the Internet and other digital innovations that have allowed Chinese consumers to be much more cognizant of the world outside their cities or towns than they once were, even if they’ve never migrated themselves.”
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About ‘China Beyond Change & Continuity’
“China Beyond” is an in-depth ethnographic and quantitative study into consumers, brands,communication and retail opportunities in China’s second to four tier cities. From August 2011 to March 2012 the Ogilvy & Mather China Discovery team, in cooperation with TNS China, conducted field research in three provincial capitals (Chengdu, Changsha and Shenyang), three prefecture level cities and three county towns in Sichuan, Hunan and Liaoning provinces, covering a diverse expanse of geographic, cultural and economic regions. The study was conducted through home interviews with 48 families, 60 retailers and 15 internet cafe owners, combined with observations in shopping malls and public parks. Eighty percent of the respondent families were native to their city, 20 percent were migrants. Thequantitative study, amongst 2,200 middle class families, surveyed their beliefs and attitudes towards family, life, risk, novelty, ambition and fashion. The study also aims to map out their shopping, media and entertainment habits and identify influences on purchase decisions.
About Ogilvy & Mather
Ogilvy & Mather is one of the largest marketing communications companies in the world. In 2012,O&M was named Cannes Lions Network of the Year and Most Effective Agency Network by the Effies Global Effectiveness Index. The company is comprised of industry leading units in all of the following disciplines: advertising; public relations and public affairs; branding and identity ;shopper and retail marketing; healthcare communications; direct, digital, promotion and relationship marketing; consulting, research and analytics capabilities; branded content and entertainment; and specialist communications. O&M services Fortune Global 500 companies as well as local businesses through its network of more than 450 offices in 120 countries. It is a WPP company (NASDAQ: WPPGY). For more information, visit www.ogilvy.com, or follow us on Twitter at @OgilvyWW and on Facebook.com/Ogilvy.