This report looks at the following areas:
- The current retail market landscape and opportunities for offline retail
- Consumers’ purposes for using brands’ DTC channels and their overall attitudes towards DTC retailing
- Differences in DTC channel choices when purchasing products across different categories (foodservice, daily necessities, clothing/shoes/accessories, outdoor and leisure sports gear)
- Reasons why brands’ DTC channels attract consumers to shop (in physical stores and online, respectively)
- Consumers’ concerns about shopping on brands’ private channels
Brands' DTC strategies should focus on deepening their connections with consumers by creating immersive store spaces that showcase their distinctive style and design, offering live streams that emphasise storytelling over selling and producing meaningful content that conveys lifestyles and values.
Diana Shao, Director, China Insights
Market Definitions
This report defines direct-to-consumer retailing as a way for brands to sell products directly to consumers without intermediary channels such as dealers and retailers. The main DTC channels covered in this report include both online and offline options, outlined as follows:
- brands’ official flagship stores on comprehensive shopping platforms/short video platforms
- brands’ official websites
- brands’ official apps
- brands’ official WeChat mini-program
- brands’ WeChat shopping communities
- brand’s official live streaming
- brands’ offline stores/counters in shopping malls
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Executive summary
- Key issues covered in this Report
- Definitions
- What you need to know
- The market
- Market factors
- The consumer
- Brands' DTC channels are widely utilised
- Graph 1: frequency of using brands' DTC channels*, 2023
- Rich and practical information or content is crucial for brands' DTC channels to attract and retain consumers
- Graph 2: purposes of using brands' DTC channels, 2023
- Brands' official flagship stores serve as the primary purchase channel, while official live streaming has surged in popularity
- Graph 3: brands' DTC channels used when purchasing the following products over the past 12 months, 2023
- The coverage of offline stores is crucial for foodservice/on-premise food and drink brands, while official apps and WeChat mini programs enhance user stickiness
- Graph 4: made foodservice purchases or bought on-premise food/drinks through brands' DTC channels in the past 12 months, 2023
- On-site product experiences are irreplaceable, and a positive purchasing experience is also key to attracting consumers to the store
- Graph 5: reasons for shopping at brands' physical stores, 2023
- While meeting consumers' shared demands for purchasing experiences, DTC channels can leverage unique features to differentiate themselves
- Graph 6: reasons to shop at brands' online DTC channels, by channel, 2023
- Brands' private channels need to find a balance in their product portfolios
- Graph 7: concerns about shopping on brands' private channels, 2023
- Consumers expect to develop relationships with brands through DTC channels that extend beyond mere shopping
- Graph 8: attitudes towards brand DTC retailing, 2023
- Issues and insights
- What we think
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The market
- Market factors
- Retail and consumption continue to recover moderately in January-April 2024
- Graph 9: month-over-month growth rate of total retail sales of consumer goods, by consumption type, 2023-24
- Urban residents' disposable income has shown better growth
- Graph 10: the year-on-year growth rate of per capita disposable income of residents nationwide (the actual growth rate after price adjustment), 2019-24
- Online shopping has gained momentum, and there are increasing opportunities for physical retailing
- Graph 11: year-on-year growth rate in online retail sales of physical goods, 2019-24
- Graph 12: share of online retail sales of physical goods in retail sales*, 2019-24
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The consumer
- Frequency of using brands' DTC channels
- Brands' DTC channels are widely adopted, with nearly 80% of consumers having established usage habits
- Graph 13: frequency of using brands' DTC channels*, 2023
- Young consumers are less dependent on brands' DTC channels
- Graph 14: frequency of using brands' DTC channels, by age, 2023
- High-income consumers prefer brands' DTC channels
- Graph 15: frequency of using brands' DTC channels, by monthly personal income, 2023
- Purposes of using brands' DTC channels
- Rich and practical information or content is crucial for brands' DTC channels to attract and retain consumers
- Graph 16: purposes of using brands' DTC channels, 2023
- Meeting the needs of older women to explore new products, and offering interactive activities and lifestyle guidance to younger men
- Graph 17: purposes of using brands' DTC channels, by gender and age, 2023
- Provide diverse content, services and experiences to enhance the stickiness of brands' DTC channels
- Graph 18: purposes of using brands' DTC channels, by usage frequency, 2023
- Brands' DTC channels used when purchasing products across different categories
- Brands' official flagship stores serve as the primary purchase channel, while official live streaming has surged in popularity
- Graph 19: brands' DTC channels used when purchasing the following products over the past 12 months, 2023
- The coverage of offline stores is crucial for foodservice/on-premise food and drink brands, while official apps and WeChat mini programs enhance user stickiness
- Graph 20: made foodservice purchases or bought on-premise food/drinks through brands' DTC channels in the past 12 months, 2023
- Consumers in Tier 1 cities tend to purchase food and drinks and daily necessities from brands' private channels
- Graph 21: brands' DTC channels used when purchasing packaged food and drinks (a), by city tier, 2023
- Graph 22: brands' DTC channels used when purchasing household cleaning and care products (b), by city tier, 2023
- Pet-friendly stores can help increase brand affinity, especially in the clothing, shoes and accessories categories
- Graph 23: consumers who have purchased the following categories in brand physical stores (a), by living situation, 2023
- Aligning with their audience's channel preferences, clothing brands should offer unique outfit ideas through refined content operations, boosting purchase conversions
- Graph 24: brands' DTC channels used when purchasing clothing, shoes and accessories, by age, 2023
- Reasons for shopping at brands' physical stores
- On-site product experiences are irreplaceable, and a positive purchasing experience is also key to attracting consumers to the store
- Graph 25: reasons for shopping at brands' physical stores, 2023
- Female consumers prioritise purchasing experiences, while men prioritise benefits and personalised purchase services
- Graph 26: reasons for shopping at brands' physical stores, by gender, 2023
- Reasons to shop at brands' online DTC channels
- While meeting consumers' shared demands for purchasing experiences, DTC channels can leverage unique features to differentiate themselves
- Graph 27: reasons to shop at brands' online DTC channels, by channel, 2023
- Brands' online flagship stores leverage platform infrastructure to enhance the overall shopping experience
- Graph 28: reasons to shop at brands' official stores on shopping/short video platforms (a), 2023
- Brands' official live streaming is favoured due to its exclusive channel offerings
- Graph 29: reasons to shop at brands' official live streaming (a), 2023
- Comprehensive membership benefits and personalised services are crucial for attracting consumers to brands' official websites/apps/mini-programs
- Graph 30: reasons to shop on brands' official websites/apps and WeChat mini programs, 2023
- Brands' WeChat shopping groups/communities and WeCom contacts need to enhance their capabilities in providing personalised services
- Graph 31: reasons to shop through brands' WeChat shopping groups/WeCom contacts, 2023
- Concerns about shopping on brands' private channels
- Brands' private channels need to find a balance in their product portfolio
- Graph 32: concerns about shopping on brands' private channels, 2023
- Gen Z and post-90s consumers have greater concerns about the purchasing experience on brands' private channels
- Graph 33: concerns of shopping on brands' private DTC channels, by generation, 2023
- Improve poor shopping experience and after-sales services on private channels to maximise traffic value
- Graph 34: concerns about shopping on brands' private channels, by frequency of using brands' DTC channels, 2023
- Attitudes towards brands' DTC retailing
- Consumers value the exclusivity and sense of belonging that brands provide
- Graph 35: attitudes towards brands' exclusive benefits/services, 2023
- Consumers prefer to share brands and content privately
- Graph 36: attitudes towards promoting brands in their social circles, 2023
- Brands' live streaming appeals to consumers because it offers professional product content and scenario-based showcases
- Graph 37: attitudes towards brands' official live streams, 2023
- Consumers are willing to try AI customer service, but the current results are less satisfactory
- Graph 38: attitudes towards brands' use of AI customer service, 2023
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Issues and insights
- Offline physical stores compete in delivering exceptional consumer experiences
- By creating unique store experiences, brands can effectively connect with consumers
- Shop in full bloom: Create atmospheric spaces with oriental aesthetics and traditional culture
- Utilise mobile experiential spaces with enhanced versatility to engage and captivate consumers
- Transforming retail spaces into curated exhibitions allows consumers to experience the brand's culture
- Brands' official live streaming ushers in a new era of storytelling
- Brands' live streaming should transcend the 'live stream = selling' mindset and focus on conveying the brand's story and core value concepts
- Position brands' private channels as the 'brand narrators'
- High-quality and attractive content is key for brands' private channels to retain consumers
- Brands launch podcasts as a way to engage and connect with consumers, offering discussions on a wide range of topics from poetry to philosophy
- Brand's community activity combines with charitable efforts, aligning with both interests and values
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Appendix – methodology and abbreviations
- Methodology
- Abbreviations
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