“Although the growth rate of overall consumption in lower tier cities has slowed down, consumers still actively engage in social activities in their daily lives. Meeting with friends over tea, coffee or alcohol has become a weekly routine, while outdoor activities, ranging from niche to popular ones on the internet, have become increasingly favoured. These activities not only provide opportunities to consume but also offer mental enjoyment and cultural confidence through the creation of new social opportunities and the novel idea of mutual benefits. Brands can effectively create a new content-based socialising ecosystem in lower tier cities and differentiate themselves by incorporating innovative cultural elements into their packaging and offering ‘lifestyle+’ scenario experiences that integrate regional features.”
– Gloria Gan, Senior Analyst
This Report looks at the following areas:
- Indoor social scenario: the third space to enjoy tea, coffee and alcohol.
- Outdoor social scenario: the potential and threshold of outdoor socialising.
- Interpersonal socialising: effective communication and mutual benefit.
- Marketing communication strategy: the virtual and reality experiences of online marketing.
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Overview
- What you need to know
- Key issues covered in this Report
- Objective and methodology
- Quantitative research methodology
- Figure 1: The sample structure for each city is as follows:
- Qualitative research methodology
- Figure 2: Interviewed cities in the qualitative research
- Figure 3: Profiles of respondents to the qualitative research
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Executive Summary
- The market
- Demands for sustainable development and differentiation emerge
- Figure 4: GDP sector compositions, by city tier, 2019-21
- Salary growth slows, and consumption momentum weakens
- Figure 5: Per capita annual salary, by city tier, 2019-21
- Figure 6: Total retail sales and year-on-year growth rate of consumer goods, by city tier, 2019-21
- Financial confidence continues to fluctuate
- Figure 7: Confidence in improving future finances, by city tier, 2020-23
- The consumer
- The third space to enjoy tea, coffee and alcohol
- Figure 8: Socialising frequency across different scenarios, by age, 2023
- The potential and threshold for outdoor socialising
- Figure 9: Selected preferences for outdoor activity – Yes, by age, 2022
- Effective communication and mutual benefit
- Figure 10: Elements of the package to pay attention to when buying food and beverage gift boxes, by age, 2022
- The virtual and real-life experiences of online marketing
- Figure 11: Activities on social media – selected, by age, 2022
- What we think
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Introduction to Lower Tier Cities in China
- Demands for sustainable development and differentiation emerge
- Figure 12: GDP sector compositions, by city tier, 2019-21
- Salary growth slows while consumption momentum weakens
- Figure 13: Per capita annual salary, by city tier, 2019-21
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- Figure 14: Total retail sales and year-on-year growth rate of consumer goods, by city tier, 2019-21
- The pull effect of the metropolitan economy is expected
- Figure 15: Total domestic highway mileage, by city tier, 2020-2021
- The increase in flexible employment and work-on-the-go brings new opportunities for the development of low tier cities
- Figure 16: Type of employment, by city tier, 2020-June, 2023
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- Figure 17: Company types, by city tier, 2020-23
- Demands for sustainable development and differentiation emerge
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Market Factors
- Financial confidence continues to fluctuate
- Figure 18: Confidence in improving future finances, by city tier, 2020-23
- Upgrading demand has declined and high-end consumption become more cautious
- Figure 19: Trading up and down, tier 3 or lower cities, Q1 2022 vs Q1 2023
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- Figure 20: Trading up and down, tier 3 or lower cities, Q1 2022 vs Q1 2023
- Chain service brands tap into lower tier cities, driving the innovation and quality improvement of consumer experience
- Figure 21: Changes in the number of stores of Helen’s, Miniso and Haidilao in different cities, by city tier, 2021 vs 2022
- Figure 22: Convenience store shopping frequency – once a day or more, by city tier, 2019 vs 2023
- The influence of short videos has expanded, accelerating the conversion of traffic value to user value
- Figure 23: Changes in short video usage – every day, by city tier, H1 2021-H1 2023
- Domestic travel is recovering strongly, and the combination of local cultural tourism resources and commerce has attracted attention
- Figure 24: Mentions and engagement of ‘Zibo’ (淄博) on social media channels, January-June 2023
- Financial confidence continues to fluctuate
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Interviews with Industry Experts
- Leverage the value-for-money advantage of small town model through store, equipment and menu adjustment
- Figure 25: Expert interviewees’ take on lower tier city market and consumer perceptions, 2023
- Focus on household consumption habits and the construction of logistics networks
- Figure 26: Expert interviewees’ take on lower tier city market and consumer perceptions, 2023
- Initiate conversations on consumption scenarios integrating regional features
- Figure 27: Expert interviewees’ take on lower tier city market and consumer perceptions, 2023
- Explore ‘down-to-earth’ communication methods and channels
- Figure 28: Expert interviewees’ take on lower tier city market and consumer perceptions, 2023
- Leverage the value-for-money advantage of small town model through store, equipment and menu adjustment
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The Third Space to Enjoy Tea, Coffee and Alcohol
- Regulars of milk tea shops and teahouses drive repurchases
- Watching dramas and dating occasions boost the consumption frequency of milk tea
- Figure 29: Teahouses – interview excerpts, 2023
- Figure 30: Photos of Mintel’s visit to a milk tea shop in Huai’an, Jiangsu and the ‘nepeta lemon soda’ specialty product from a local milk tea shop in Xuchang, Henan, 2023
- Innovative services are key to retaining teahouse regulars
- Figure 31: Teahouses – interview excerpts, 2023
- Figure 32: Photo of a respondent from Xingtai, Hebei trying stove-boiled tea with friends, 2023
- Coffee houses and bars still need ‘plus’ to boost appeal
- Coffee houses cannot win lower tier cities through sophistication; they need more specialty
- Figure 33: Coffee houses – interview excerpts, 2023
- Figure 34: Photos of Mintel’s visit to a local specialty coffee shop Coffee Folk in Huai’an, Jiangsu, 2023
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- Figure 35: Photos of Mintel’s visit to Manhua coffee shop in Shiyan, Hubei the respondent frequently visits, 2023
- Healthy and chill bistro-style bars could be a catalyst for nightlife in lower tier cities
- Figure 36: Bars – interview excerpts (positive feedback), 2023
- Figure 37: Bars – interview excerpts (negative feedback), 2023
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- Figure 38: Photos of Mintel’s visit to a local bar in Xuchang, Henan, 2023
- Figure 39: Photos of Mintel’s visit to a local new-style bar 皖N茶酒bar in Lu’an, Anhui, 2023
- Young people aged 18-29 pay more attention to socialising in the third space
- Figure 40: Socialising frequency across different scenarios, by age, 2023
- Both young men and young women prefer an anime/ACG marketing style when choosing tea shops
- Figure 41: Preference for co-branding marketing styles of teahouses, by age and gender, 2023
- Upgrading the social lifestyle experience at small town coffee shops
- Figure 42: Café on warm’s marketing activities in Shantou, 2021-23
- A bistro can also be an ’emotional sanctuary’ for young people
- Figure 43: Suzhou Taohuawu Bistro’s slogan and its marketing activities, 2023
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The Potential and Threshold for Outdoor Socialising
- The tent economy needs to lower the threshold and improve convenience
- Figure 44: Camping – interview excerpts (positive feedback), 2023
- Figure 45: Camping – interview excerpts (negative feedback), 2023
- New short trip themes such as fishing and nature drawing are yet to be developed
- Figure 46: Outdoor leisure and entertainment activities – interview excerpts, 2023
- Young people aged 18-29 share more outdoor activity experiences, while 40-49 year olds pay more attention to finding like-minded friends
- Figure 47: Selected preferences for outdoor activity – Yes, by age, 2022
- The focus of leisure concentrates on one’s own physical and mental health
- Figure 48: Attitudes towards leisure time – select ‘Strongly agree’, by age, 2023
- Camping+ (Plus) expands a lot of space
- Figure 49: The co-branding initiatives of Hi King Campsite, 2023
- Whether niche or internet celebrity, outdoor activities could drive interest-based socialising
- Figure 50: Douyin 2022 Outdoor Fishing Festival in Weihai, Shandong Province, 2022
- The tent economy needs to lower the threshold and improve convenience
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Effective Communication and Mutual Benefit
- Reducing ‘ineffective socialising’ while increasing ‘mutual benefit’
- Figure 51: The distinction between effective and ineffective socialising – interview excerpts, 2023
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- Figure 52: Socialising topics – interview excerpts, 2023
- The idea of mutual benefit and upholding an extraordinary taste in social persona
- Figure 53: Gift-giving – interview excerpts, 2023
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- Figure 54: Creating social personas – interview excerpts (positive feedback), 2023
- Figure 55: Creating social personas – interview excerpts (other feedback), 2023
- Packaging and novelty are important factors for 20-29s to consider when giving gifts
- Figure 56: Consideration factors when buying food and beverage as gifts for others, by age, 2022
- Young people in their 20s show enthusiasm for Guochao trend even in terms of packaging preferences for gift-giving
- Figure 57: Elements of the package to pay attention to when buying food and beverage gift boxes, by age, 2022
- National culture brings a sense of subtlety to life
- Figure 58: The sundial product design of Guotai 24 solar terms liquor, 2022
- Museum-style gift boxes create multiple layers of freshness
- Figure 59: Tea Stone Tea24 Gift Box, 2023
- Reducing ‘ineffective socialising’ while increasing ‘mutual benefit’
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The Virtual and Reality Experiences of Online Marketing
- A real-person livestreamer could resonate more with the audience than a virtual one
- Figure 60: Attitudes towards virtual idols/virtual livestreamers – interview excerpts, 2023
- Figure 61: The changes of preferred styles of livestreamers respondents follow – interview excerpts, 2023
- The emotional value of virtual products is recognised
- Figure 62: Interests and attitudes towards virtual products (eg gaming skins) – interview excerpts, 2023
- Consumers aged 30-39 in lower tier cities pay more attention to socialising with acquaintances online
- Figure 63: Activities on social media – selected, by age, 2022
- Meeting people with common interests through social media is more important for consumers aged 30-39
- Figure 64: Reasons for using social media, by age, 2022
- Integrate virtual and real-life experience to create a content-based socialising ecosystem
- Figure 65: The Group Running activity launched by Nike, 2022
- Figure 66: Nike invites overseas star Giannis Antetokounmpo to launch the virtual China tour and livestreaming event, 2023
- Crossover of in-game skins brings about the most surprising inspirations
- Figure 67: The first digital jewellery in-game skins by Honour of Kings and Bulgari Jewellery, 2023
- A real-person livestreamer could resonate more with the audience than a virtual one
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Appendix
- Abbreviations
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