It appears as though Kanye West has officially welcomed China to the good life.
A new report by Nielsen illustrates that Chinese customers are showing an increasing affinity for premium products, refusing to leave anything out. They are spending more on everything from skin moisturizer to baby formula to banking. An ordinary toothbrush? Don’t even think about it.
Research elucidates that the Chinese are perfectly willing to spend more and trade up to premium products that they perceive as higher quality or status. Their growing buying power is what is driving the rapid sales growth in China.
And the Chinese are not discriminating. They’re willing to spend more for fast-moving consumer groups and trading up in almost every category. As Lynn Xu, vice president of Nielsen BASES and Nielsen Greater China, puts it, “Chinese consumers have developed a more sophisticated taste for life.” That must be nice.
But how can the Chinese afford all of these luxuries? The answer: China has seen a fourfold increase in average household income in just over a decade. Nielsen explains, “Between 2000 and 2012, disposable annual income in China jumped from an average of 6,280 RMB ($1,022 USD) to 24,564 RMB ($3,999 USD), according to the Chinese government. And in just the past three years, total assets in Chinese banks have grown 146 percent.”
Now that the Chinese have more disposable income, they’re ready to focus more on product quality and safety, not only in the stores, but also on the roads, as evidenced by the tripling sales of luxury cars in the past five years. Nielsen research even shows that that luxury car and luxury SUV sectors are growing at a faster rate than the total market.
The Chinese are like dream consumers, and the country’s growing number of millionaires and billionaires are not the only ones responsible for this reputation. Average-income consumers are cashing in on the premium products just as much, if not more than the wealthy.