Source: Beijing Review Published: 2018-10-18
Liu Han used to carry delicacies to eat when she went home in the northwestern province of Qinghai during the National Day holiday week from October 1 to 7. But this year, she had a surprise for her parents. "I bought three electric toothbrushes costing around 600 yuan ($87) for them and myself," the middle school teacher working in Beijing said. "They had never used such a gizmo before but soon found it useful."
Like Liu, thousands have upgraded their lifestyles during the holiday known as the "Golden Week," a peak period of consumption and traveling. In recent years, economic and social development has propelled Chinese consumer spending toward upmarket and improved demands and taste. In view of this, the holiday has become an important indicator of domestic consumption upgrade and economic potential.
Consumption upgrade lies in changes in consumption options triggered by altered markets and consumers' purchasing power and concepts. The most notable phenomenon is the boom in online shopping and New Retail, which is data-driven and centers on consumer experience. "It can be hard to buy certain brands at local stores, but online shopping offers various choices and is so convenient," Liu said. In addition, outbound tours and customized tour groups have also become increasingly common.
According to a report by All View Cloud (AVC), a Chinese big data service provider, the middle-income group in China today mainly constitutes of people born in the 1980s and early 1990s. Most of them are well-educated and able to identify high-quality products amid the overwhelming number of advertisements while pursuing personal styles and fashion. Therefore, middle-income spenders tend to consume more rationally and focus more on the quality and value of products. With new consumption concepts, they will lead the future trend of consumption in China and become the main force of consumption upgrade.
Click till you drop
"Currently, the domestic consumption market maintains fast and stable growth with a rising momentum of consumption upgrade," Zhao Ping, an official with the China Council for the Promotion of International Trade, told People's Daily. During the National Day holiday, Chinese online consumption has risen to a new peak.
The sales of domestic appliances during the Golden Week demonstrate the improved purchasing power of Chinese buyers. Statistics from Suning, an online-to-offline retail company, show that the sales of washing machines and refrigerators increased by 42.1 percent and 35.3 percent respectively year on year. Dishwashers and high-speed blenders also saw sales improve by 90 percent and 1,065.82 percent respectively. Since consumers are becoming increasingly concerned about multiple functions and the quality of products, the sales of healthy air conditioners surged by 92 percent year on year during the Golden Week, contributing nearly 40 percent to the total growth of air conditioner sales.
The Chinese are also eating their way to a healthier life of higher quality. A report released by Hema, an offline New Retail grocer affiliated to e-commerce giant Alibaba Group, says that its sales nationwide increased by 500 percent year on year during this holiday, indicating that consumers have higher requirements on the quality and freshness of food.
According to data from Ele.me, one of the largest food delivery service platforms in China, orders of expensive foods jumped. In the last three days before October 1, sales of hairy crabs and grape wines increased by 16.8 percent and 58.9 percent respectively year on year.
In addition, imported goods witnessed another spike in sales. Data from Tmall, Alibaba's online business-to-consumer marketplace, shows that the sales of imported goods increased by 100 percent from October 1 to 3, compared with the corresponding period last year.
Although residents in large cities such as Beijing and Shanghai are still the major forces of consumption upgrade as per holiday sales data, smaller cities have also contributed to the growth, thanks to the network created by e-commerce, which meets their needs better.
According to the AVC report, the low housing and consumer prices in small cities and towns are leaving residents with more disposable income than in large cities, and e-commerce has made it possible for these people to shop online. "In the next decade, over 300 million Chinese residents in small cities and towns will enter the middle-income group," the report says.
Travel broadens spending
The boom in tourism is another barometer of consumption upgrade during the Golden Week. A report released by online travel agency Ctrip shows that tourists are more willing to spend for a better travel experience. Customized trips and private tour groups have become new options.
A rising proportion of people are choosing outbound tours during the holiday.
Data from Fenqile.com, an online financial service provider, shows that more and more Chinese are traveling abroad during the Golden Week although domestic tours remain the mainstay. The number of people traveling with groups has decreased while many are choosing customized VIP tours or do-it-yourself trips. For more people, shopping and experiencing local foods are no longer the only activities on their trips. Instead, experiencing local culture and acquiring knowledge have become the new objectives.
"Many Chinese chose time-honored attractions as travel destinations during the holiday, reflecting their rising focus on culture," said Bian Yongzu, a research fellow with the Chongyang Institute for Financial Studies at Renmin University of China, in an interview with China Radio International.
More tourists are turning to smart gadgets such as motion cameras to better enjoy their trips. Data from Suning shows that the sales of drones and portable translators increased by 280 percent and 1,107 percent respectively during the holiday week. Many families also bought smart door locks to ensure property safety. The sales of such security locks improved by 1,057 percent.
Red Bull was no longer the top drink choice for self-driving tourists; the sales of the more expensive Starbucks coffee improved by 300 percent year on year in the holiday week.
The expansion of consumption upgrade from large to smaller cities is also showing in tourism. According to Fenqile.com, Xi'an in northwest China's Shaanxi Province and Kunming in the southwestern province of Yunnan ranked second and third respectively in terms of the number of residents leaving their hometowns for traveling during the holiday.
Consumption upgrade is not only related to improvement in people's living quality but also in their consumption concepts. Middle-income consumers mainly in their 20s and 30s are shifting to smart, high-quality and personalized products, their upgraded lifestyles forcing domestic products to upgrade. The development of online retail and better services have boosted consumer spending, a strong driving force of domestic economic growth.
However, to meet consumers' ever-growing demands better, domestic production needs more breakthroughs and imagination.
"China needs to drive its economy with innovation and develop more new technologies, industries, business forms and modes so as to release the potential of domestic consumption through innovating ways of supply," Zhao from the China Council for the Promotion of International Trade said.
Golden Week Consumption
Chinese tourists made 726 million visits to parks, scenic spots, museums, concerts and other attractions at home, up 9.43 percent from the same period of 2017.
The country's tourism sector earned total revenue of 599.08 billion yuan ($86.8 billion), a rise of 9.04 percent from one year earlier.
Retail and catering industries reaped combined revenue of 1.4 trillion yuan ($203 billion), up 9.5 percent from one year earlier.
(Sources: Ministry of Culture and Tourism, Ministry of Commerce)
Bian Yongzu is a research fellow at the Chongyang Institute for Financial Studies at Renmin University of China.