Consumption potential of China’s lower-tier markets continuously released

By Luo Shanshan, People’s Daily

Sinking into lower-tier markets has become the primary approach of China’s Internet industry to increase traffic, said a report released by Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce in 2019.

China’s Internet sector is trying to stimulate and tap into the huge market potential of third-tier and lower-tier cities as well as towns in rural regions, according to the report on the development of lower-tier markets and research on the value of e-commerce platforms.

As the Spring Festival, also known as the Chinese Lunar New Year, is fast approaching, China has entered a peak season of consumption.

Spring Festival shopping has always been an important ritual for the holiday, when many Chinese families make great purchases at Spring Festival shopping fairs, unleashing their consumer demand.

Enjoying the largest consumer base while representing the largest lower-tier market in China, the Spring Festival market in China is booming.

In the past, China’s lower-tier markets were not active and often meant high cost of marketing due to low income level, as well as imperfect infrastructure and commercial system, according to Xiao Xinyan, deputy director of the international market research institute of Chinese Academy of International Trade and Economic Cooperation.

With the improvement in people’s incomes and the development of the Internet, the lower-tier markets have become more easily to reach, and therefore got to unleash consumption potential continuously.

As data have shown, during this year’s online Spring Festival promotion of Chinese e-commerce giant JD.com, the total sum of consumption of buyers in third-tier and lower-tier cities had risen by 5.6 times year on year, and their consumption of imported products grew by 9.8 times from that of the same period in the previous year.

Moreover, Suning retail cloud stores, Chinese retail giant Suning.com’s smart retail platform focusing on counties and towns, have witnessed a growth rate of 113 percent in number of orders placed during the Spring Festival promotion.

On Jan.1, 2020, a total of 118 Suning retail cloud stores opened in China, making the total number of the stores reach 4,922. On that day, sales volume and the amount of sales in these stores increased by more than 220 percent and 180 percent respectively year on year.      

“I just placed the order yesterday, and the product was delivered to my home today. They also sent a man to help with the installation. It’s so convenient,” said Alimujhang Habunur, a man who lives in Tianshan town, Zhaosu county, the Ili Kazak Autonomous Prefecture of northwest China’s Xinjiang Uygur Autonomous Region. Alimujhang Habunur just bought a water heater online.

Alimujhang used to have to travel more than 400 kilometers to Yining city of Xinjiang to make purchases for Spring Festival, otherwise he had to wait until Spring Festival fairs open.

“We live in a sparsely populated area. A one-way trip to Yining takes us 5 hours. And there is no large shopping mall or supermarket in our county. We can buy some daily commodities at the local fair, but it’s hard for us to buy brand home appliances,” said Alimujhang, who was worried about the Spring Festival shopping.

Alimujhang heard that a Suning retail cloud store was recently opened in Zhaosu county, so he decided to try the store.

“At first, I just wanted to buy a suitable water heater, and then get the other staff at the Spring Festival fair,” Alimujhang disclosed, saying that with the help of the shop assistant, besides a 60-liter water heater, he also bought several boxes of nuts with special package for Spring Festival via the online platform of the store.

“You can choose home appliances at the store, and buy other products for the Spring Festival via the online platform. The goods can be delivered to people’s homes within 24 hours. Such shopping experience was unimaginable in the past,” said Alimujhang.

At present, there are more than 30,000 express delivery outlets and 63,000 express distribution spots in rural areas of China, covering 96.6 percent of the country’s rural areas, which enables people to do shopping online and have their purchases for Spring Festival delivered to their homes.

The constantly improving logistics performance and new retailing featuring integration of online and offline services which are making increasing efforts to move down into lower-tier markets have brought brand new shopping experience to consumers.

Various e-commerce enterprises have explored lower-tier markets of China by establishing service stations, convenience stores, and small shops, trying to solve the “last mile” of logistics, so that people can do Spring Festival shopping near their homes and don’t have to travel far away for the special purchases.

After working in Shanghai for 5 years, Zhang Fangfang returned to her hometown, Huaibei city of east China’s Anhui Province. She wanted to buy household supplies for her new home.

“I have decent income and bought my own house. It’s natural to pursue a life of higher quality,” said Zhang, who spent 1,999 yuan (about $290.07) on a dish-washing machine, 1,299 yuan on a robot vacuum cleaner, and 3,990 yuan on a three-door refrigerator with smart inverter.

Lower-tier markets have great demand and consumption potential for high-quality goods. There’s no obvious difference between the categories of products purchased online by consumers in lower-tier markets and that by people in first-tier and second-tier cities.

Consumer behavior in lower-tier markets has shown a trend towards diversified development.People in lower-tier markets attach more importance to the quality of products and their preference, and pay more attention to the quality and reputation of products than the prices.

People buy products from all over the world in an import-themed commercial street at a shopping mall in Tongcheng county, Xianning city of central China’s Hubei Province, on Jan.1, 2020, when the commercial street opened. (Photo by Liu Jianping/People’s Daily Online)