Deloitte: Digital-driven new retail reinvigorates China’s imports
Published: 6 November 2018
Deloitte releases New retail reinvigorates China’s imports: New technologies, new models, new channels (the Report) at the first China International Import Expo (CIIE). This year marks the 40th anniversary of China’s reform and opening up, a period in which the country has experienced rapid economic growth. By further deepening reform and opening-up, China will inject more energy into economic and social development, expedite its economic transformation and drive industrial upgrading. At the same time, China’s consumer market continues to embrace international producers with renewed openness and dynamism. Stimulated by strong consumer demand, overseas brands will enter a new era of opportunity.
“CIIE is the world's first import-themed national expo, and will function as a new platform for the entrance of high-quality products and services into China. As a world leading professional services organization, Deloitte is honored to participate in the first CIIE in Shanghai. During the expo, we will focus on new retail and provide in-depth analysis of how new technologies, new models and new channels influence China’s imported consumer goods market, and provide onsite demonstration of our solutions”, says Vivian Jiang, Deloitte Asia Pacific Clients & Industries Leader, Deloitte China Vice Chairlady.
As the report indicates, China has made an outstanding contribution to global consumption growth compared with other countries and regions. Between 2013 and 2016, the average annual contribution of China’s final consumption expenditure (FCE) to global consumption growth was 23.4%, higher than those of the US, the Eurozone and Japan. Over the same period, China’s annual FCE growth rate of 7.5% also outpaced the US, the Eurozone and Japan. From 2006 to 2016, the sources of China’s imported consumer goods diversified. More countries and regions will have access to the Chinese market. In such a large, highly digitized market, China’s retail landscape has entered a new phase of reform focused on consumer demand and driven by digitization. New models, applications and products are continually being used in China, a trend with far-reaching significance for development and innovation in global retail.
Deloitte Asia Pacific Consumer Products and Retail Industry Leader Zhang Tianbing points out that wealth accumulation, scientific and technological progress, and regional economic development have become the three major forces spurring market expansion and reform. With the accumulation of wealth, the middle class is now the main influence on the Chinese consumer market. These consumers are now satisfied not just by quantity, but have also diversified their demand to encompass quality, high-end, healthy and experiential products and services, driving consumption upgrading in the Chinese market. The innovation and popularization of retail technology based on a series of underlying technologies including cloud computing, the Internet of Things (IoT), big data and artificial intelligence are driving the entire retail ecosystem to become more digitized, intelligent and efficient. Regional economic development has become the new engine of China's economic growth, and opening-up measures including tax cuts and free-trade zones provide strong support to the import market.
The report shows, “quality”, “healthy” and “diverse” have become the keywords in the new era of import consumption. Chinese consumers’ interest in and consumption of quality products are growing rapidly, and they prefer a diverse array of commodities. On one hand, consumers from the burgeoning middle-class are increasingly demanding more sophisticated, diversified products; on the other hand, the emerging main consumers of imported goods, i.e. generations born in the 1990s, are more willing to try imports in new sub-categories and from niche countries, as well as products trending on the internet. They have promoted the growth of a wide range of imports aimed at meeting segmented, diversified demand.
Given China’s unique digital environment, interaction and collaboration between online and offline channels is becoming more important for retailers and brand owners. When it comes to import consumption, the driving forces of digitization and institutional innovation have fostered explosive growth in cross-border e-commerce. Traditional patterns of import consumption are changing, bringing forth new market entities, marketing methods and channels.
The report also says that, driven by consumption upgrades, Chinese consumers are gradually diversifying and refining their purchasing preferences, which means demand in many categories still has growth potential. Consumer purchases of aquatic products, vegetables and fruits will continue to rise. Chinese consumers will want to buy more imported smart devices including photography equipment, water purifiers and robot vacuum cleaners. There is also substantial room for growth in healthcare products, rehabilitation equipment for the elderly, home audio-visual and walking aids due to China's aging population.
As China’s economic growth is set to continue with huge market potential and an increasingly open stance, and as consumers’ appetite for diversified, quality imports remains strong, foreign brands that aim to enter the Chinese market need to adopt a strategic approach. Zhang Tianbing concludes, “An imported brand should, based on its own characteristics and development strategy, use digital resources to really know its customers, interact with them and optimize its marketing methods and channels in the Chinese market. This will enable sustainable growth with the support of China’s omni-channel resources and technologies.”