Trend towards premium products boosts online spending

Consumer goods sales saw a rebound from February to May with double digit growth, boosted by growing spending through online shopping channels. 

Consumer goods sales saw a rebound from February to May with double digit growth, boosted by growing spending through online shopping channels, picking up from only 2.3 percent in the previous period and 4.3 percent in 2017.

Overall, consumer expenditure through e-commerce channels grew 32 percent in the 12 weeks ended May 18, while hypermarkets and supermarkets also reported recovery of 4.1 percent in sales value, according to the latest report of Kantar Worldpanel which tracks 40,000 households' purchasing behaviors across the country. 

JD.com is catching up with the current market leader, Alibaba's B2C site Tmall, and as consumers become sophisticated, price discounts are less attractive when they shop online for daily necessity goods. Online retailers are also pushing forward the convergence of online and offline resources to boost synergies. 

Walmart and YH Supermarket gained the most market share after they adopted new retail formats to suit the changing market landscape. Walmart is also extending its collaboration with Tencent to optimize their shopping and payment experience. 

There's still room for growth in terms of digital channels in county level cities, as penetration still lags behind first and second tier cities.

The annual China shopper report, released by Bain & Company and Kantar Worldpanel, also pointed out that despite mild growth of the overall consumer market, shoppers are spending more on premium goods that deliver health benefits or elevate their lifestyle.

"We're seeing an increasing number of categories with high growth speed which are driven by premium products and the increased sophistication of Chinese shoppers,” said Jason Yu, general manager of Kantar Worldpanel in China.

From silicone-free shampoo to not-from-concentrate juice that’s more natural and nutritious, Chinese consumers are embracing products that boast pleasure, health and wellness.

“We've seen local consumer brands' better performance compared with foreign brands, and a major reason behind this is speed and an agile operating model, which is so critical in this fast changing market,” said Bruno Lannes, China partner in Bain’s China Consumer Products practice.  

The report suggests consumer brands take advantage of channel dynamics and anticipate future retail consolidation, as well as developing high-value and personalized products to make the most of the premium goods trend.


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