By Vivian Ni
Mar. 8 – Consumer goods retailers and female-oriented service providers across China are competing to launch promotional campaigns and offer discounts today in a bid to attract more female consumption. At the end of this year’s “International Women’s Day,” they hope to harvest profits from the wallets of the country’s increasingly wealthy female buyers.
In fact, not only on this symbolic day, but in Chinese people’s day-to-day lives, spending by women has become a significant contributor to the “great Chinese consumption power,” a concept that is becoming the mantra for international businesses nowadays. According to a Nielsen survey in 2010, the consumer confidence of Chinese women aged between 30 and 39 achieved the same level of men in that age group, and there is a growing tendency that younger Chinese women are willing to pay more for their favorite items than men.
“The future is female,” HSBC said assertively in a 2010 survey on luxury goods, highlighting the importance of female consumers to the investment decision-making of many global companies.
The changing face of Chinese women
Chinese women nowadays are receiving higher education, getting equal employment opportunities, and gaining increasing financial independence. Their income distribution to families has increased dramatically over the past few decades, from around 20 percent in the 1950s to 40 percent in the 1990s, and to over 50 percent today.
These social changes have shaped the new mindset of Chinese women (especially the younger ones), and made them more ambitious in consumption. Departing from a traditionally appreciated thrifty life style, women in China are more prone to enlarge their expenditures and lower their saving levels. Compared to the 55 percent savings rate back in 2006, Chinese women in urban areas only saved 24 percent of their incomes in 2009, according to a 2010 survey conducted by Women of China Magazine (WoC).
The improving gender equality has also offered more Chinese women the opportunity to move into leadership roles in corporate management and entrepreneurship. Among the world’s top 20 self-made female billionaires, 11 come from China, according to the 2011 China Rich List produced by Hurun Report, a Shanghai-based monthly magazine. The increase in female CEOs and entrepreneurs can potentially impact the business models of the financial market, as those women have a big say in the investment directions of company wealth.
As Chinese women make achievements in their careers, their family roles have changed as well – with Chinese families becoming less patriarchal and women having a greater voice. As a result, the consumption and investment preferences of women are now playing a larger role in the domestic spending structure.
Family decision maker
Women are the primary decision-makers when it comes to daily household consumption and bulk purchases for their families. In 2011, wives made about 77 percent of the household spending decisions, according to WoC.
The WoC research shows more than 60 percent of average household income went into consumption in 2011. On the list of Chinese women’s shopping priorities for 2012, household appliances were ranked third while real estate and vehicles are ranked fourth and seventh, respectively.
Businesses have started to learn some interesting household consumption patterns and the influence of women’s preferences. For example, what comes with house purchases is always furniture buying, and in China, it is mostly women who furnish the house, regardless of who pays. Therefore, furniture manufacturers that cater to the tastes of female customers may have a better opportunity to boost their sales.
Businesses should also learn that as family decision-makers, women do not only spend money on themselves, but also on every other family member. Therefore, women’s preferences may also determine the kind of suits their husbands are wearing, the kind of education their children are receiving, and the kind of healthcare products their parents or parents-in-law are using.
Another large part of the household budget is investment, taking up 13 percent of average household income in 2011. More and more Chinese wives are managing domestic finance through investments in stocks, real estate, banking products, funds and commercial insurance. Such a trend may create a new market space for women-centric financial solutions in the future.
In pursuit of better life quality
Chinese women nowadays are spending money to improve every aspect of their life.
It is in a woman’s nature to want to look beautiful, but with growing income and social power, their cult of beauty is more intense than ever. Clothing and cosmetics took the first and second place respectively on WoC’s 2012 shopping priority list and, according to findings by Nielsen, an increasing number of Chinese women are buying expensive, high-end beauty and skin-care products rather than traditional, simple cosmetics offering only whitening and moisturizing functions.
Manufacturers of “beauty tools” are not the only ones targeting female consumers – a variety of beauty service providers are also sharing the rapidly-expanding beauty market. Services for weight loss, fitness, beautification and aging prevention are burgeoning across China, expanding from the country’s first-tier cities to second and third-tier cities.
Followers of high-tech products
Thanks to improved educational opportunities, Chinese women are becoming more interested in using high-tech products. Purchases of mobile phones and electronic products are ranked fifth and sixth on WoC’s 2012 shopping priority list, and a 2011 Nielsen study shows 41 percent of surveyed Chinese women want to spend their extra money on electronics.
Over 70 percent of women responding to the WoC survey said they and their families had traveled for holiday during 2011. Those households spent an average of RMB8,858 on their vacations, a 56.3 percent surge from such spending in 2010. Women living in the cities of Shanghai, Changsha and Dalian spent the most on travel.
While traditionally, Chinese men have been regarded as the primary consumers of luxury goods, in large part because of the custom of giving gifts to business partners and government officials, Chinese women are now catching up in luxury consumption. They contribute over 50 percent to this market segment today, compared to the 20 percent contribution a decade ago.
China is expected to spend around US$14.6 billion on luxury goods this year and become the world’s largest luxury consumption market.
The emerging female consumption power is providing international companies with a more nuanced China picture. While China is often seen as a monolithic market, companies are now gaining a better understanding of the country’s gender power dynamics and conducting more studies on the differences in male and female consumer behavior as well as psychology. For instance, a study by the global management consulting firm McKinsey finds that, compared to men, women tend to shop more, and spend more on personal-care products and foods. In addition, Chinese women are both brand and price conscious, while men usually go after the brands they prefer. Such market segmentation will help businesses determine better product and marketing strategies.
Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information, please visit the firm’s web site or contact them at email@example.com.
Doing Business in China
Our 156-page definitive guide to the fastest growing economy in the world, providing a thorough and in-depth analysis of China, its history, key demographics and overviews of the major cities, provinces and autonomous regions highlighting business opportunities and infrastructure in place in each region. A comprehensive guide to investing in the country is also included with information on FDI trends, business establishment procedures, economic zone information, and labor and tax considerations.
The Greater Pearl River Delta: Business Guide to South China (Fourth Edition)
In this newly-released edition of our regional business guide to South China, we offer business-minded individuals an up-to-date reference source for all of the key issues concerning setting up and successfully operating a business in South China.
The Yangtze River Delta: Business Guide to the Shanghai Region (Fourth Edition)
This guide takes a practical, city-focused approach, walking you through the economy of important cities in the region with a level of specificity available through few other English sources. Its pages overview the region from a business standpoint, examine the economy of the region’s provinces and prominent cities in depth, and introduce the basics of establishing a business in the region.