“Under the influence of the overall environment, there has been a shift in mindset among consumers in lower tier cities, with co-existing ‘compensation demands’ driving spending on self-pleasing, and ‘protection demands’ prompting investment in the future. There is also a simultaneous focus on the need for real consumer satisfaction offered by products themselves, and the need for a sense of identity brought by brands. Consumer behaviour is gradually becoming reserved, with consumers expecting more sincere and straightforward spending experiences while showing a distaste for cheap gimmicks. Brand values still hold their ground, but these need a more genuine approach when dealing with consumers in lower tier cities. Focusing on maintaining official channels can help brands provide more interactions and foster a sense of trust.”
– Frank Zhang, Senior Research Analyst
Key issues covered in this Report
- Changes in consumer psychology: living in the moment and safeguarding the future.
- Changes in the definition of ‘good value’: returning to the self and price anchoring.
- Filtering and judging information: being selectively influenced and simplifying decisions.
- Brand style and concepts: strengthening sense of identity and putting concepts into practice.
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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
- What you need to know
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Executive Summary
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- 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
- Changes in consumer psychology: living in the moment and safeguarding the future
- Figure 8: Behaviours of discretionary spending and investment, by age, 2023
- Changes in the definition of ‘good value’: returning to the self and price anchoring
- Figure 9: Selected ways of improving finances, by age, 2022
- Filtering and judging information: being selectively influenced and simplifying decisions
- Figure 10: Online purchase channels of personal care appliances, by age, 2023
- Brand style and concepts: strengthening sense of identity and putting concepts into practice
- Figure 11: Marketing strategies that increase consumer favourability towards smartphone brands, by age, 2023
- What we think
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Introduction to Lower Tier Cities in China
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- 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 and 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, 2020-23
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- Figure 17: Company types, by city tier, 2020-23
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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 consumption scenarios and marketing methods in lower tier city, 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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Changes in Consumer Psychology: Living in the Moment and Safeguarding the Future
- Post-pandemic ‘compensation mentality’ drives spending on self-pleasing
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- Figure 29: Trading up and willingness to self-reward with regard to travel – interview excerpts, 2023
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- Figure 30: Trading up and willingness to self-reward with regard to staying at home – interview excerpts, 2023
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- Figure 31: Trading up and willingness to self-reward with regard to skincare – interview excerpts, 2023
- Growing awareness of long-term investments in health and education
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- Figure 32: Trading up and willingness to self-reward with regard to fitness and self-improvement – interview excerpts, 2023
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- Figure 33: Spending on family – interview excerpts, 2023
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- Figure 34: Trading down – interview excerpts, 2023
- Indulgent spending and protection-oriented investment both valued
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- Figure 35: Behaviours of discretionary spending and investment, by age, 2023
- More pronounced demand for investing in tech devices for health among 30-39 year olds
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- Figure 36: Reasons for using smart watch/wristband, by age, 2023
- Reopening and creating new plans to turn ideas into action
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- Figure 37: Ctrip’s 318 Global Travel Bargain Festival, 2023
- Putting ‘invisible effort’ into lightening the health burden of foods
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- Figure 38: Lay’s x Niao Niao ‘Invisible efforts – are they worth it?’, 2022
- Post-pandemic ‘compensation mentality’ drives spending on self-pleasing
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Changes in the Definition of ‘Good Value’: Returning to the Self and Price Anchoring
- Shifting from external to self-defined notions of ‘good value’
- Figure 39: Changes in the definition of ‘good value’ – interview excerpts, 2023
- Figure 40: ‘Lower prices for the same product’ – interview excerpts, 2023
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- Figure 41: ‘Cheaper alternatives’ – interview excerpts, 2023
- Becoming weary of big promotions, consumers look to sincere ‘no-gimmick’ marketing
- Figure 42: Big promotions – interview excerpts, 2023
- Discretionary spending control more accepted than ‘brand downgrading’
- Figure 43: Selected ways of improving finances, by age, 2022
- Practicality is fulfilment and conformity is safety, especially for older consumers
- Figure 44: Keywords in small kitchen appliance marketing content, by age, 2023
- Themed shopping festival at consumers’ doorstep focuses on affordability with ‘no gimmicks’
- Figure 45: Juhuasuan’s ‘Super Bargain Festival Half-price Art Exhibition’, 2023
- Inviting ‘down-to-earth people’ to give practical introductions of products’ selling points
- Figure 46: Luo Yonghao x NetEase Selected’s ‘What is a Good Thing?’, 2022
- Shifting from external to self-defined notions of ‘good value’
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Filtering and Judging Information: Being Selectively Influenced and Simplifying Decisions
- Identifying practical information and increasing awareness of saving time and money
- Figure 47: Accessing information and making decisions about consumer goods – interview excerpts, 2023
- Figure 48: Changes in attitudes towards product recommendations – interview excerpts (more easily influenced by recommendations), 2023
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- Figure 49: Changes in attitudes towards product recommendations – interview excerpts (less easily influenced by recommendations), 2023
- ‘Celebrity live streamers’ still effective in promoting lifestyle essentials
- Figure 50: Live stream shopping experiences – interview excerpts, 2023
- Figure 51: Favourite types of live streamers – interview excerpts, 2023
- Live streams’ emotional value and atmosphere more appealing to middle-aged people in lower tier cities
- Figure 52: Reasons for continuing to follow a live streamer, by age, 2023
- Consumers in lower tier cities buy more personal care appliances from Douyin than those in tier 1 and 2 cities
- Figure 53: Online purchase channels of personal care appliances, by age, 2023
- Popular live streams interact with celebrities to bring a sense of atmosphere
- Figure 54: Crazy Young Brother hosts shopping live streams with celebrities, 2023
- Gaining trust from local consumers through localised expressions
- Figure 55: Xiaohongshu’s ‘Chongqing people understand life, Xiaohongshu understands Chongqing people’, 2023
- Identifying practical information and increasing awareness of saving time and money
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Brand Style and Concepts: Strengthening Sense of Identity and Putting Concepts into Practice
- Chinese style and environmental concepts are important sources of brand favourability
- Figure 56: Brand labels – interview excerpts, 2023
- Demand for brand values is low, and is mainly reflected in avoiding negativity
- Figure 57: Brand values – interview excerpts, 2023
- Brands promoting Chinese culture viewed more favourably by consumers in lower tier cities
- Figure 58: Marketing strategies that increase consumer favourability towards smartphone brands, by age, 2023
- Environmental concepts universally accepted, and middle-aged consumers more eager for eco-friendly materials
- Figure 59: Claims of sustainable brands, by age, 2023
- Breaking down antagonism and painting a picture of ‘Greater China’
- Figure 60: BYD’s ‘Together is what makes Chinese cars’, 2023
- Experiencing implementation of environmental concepts from a first-person perspective
- Figure 61: Anta’s ‘Mountain and River Project’, 2023
- Chinese style and environmental concepts are important sources of brand favourability
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Appendix
- Abbreviations
- Abbreviations
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