Changes in China’s Consumer Market and Korean Companies’ Strategies
China’s consumer market continues to expand
and shift toward online platforms. This report finds that Korean companies
interested in the Chinese market must target China’s e-commerce channels in
line with this trend.
According to a report titled “Changes in
Consumer Market in China and Korea’s Differentiated Entry Strategies,” released
on March 16th, China’s consumer market in the first half of 2020 was sluggish as
a result of the COVID-19 crisis. However, during the second half of the year,
the market recorded 0.9% and 4.6% of positive growth in Q3 and Q4,
respectively. The monthly sales of consumer goods recovered starting from
August, followed by the year-on-year increase of 5.0% in November and 4.6% in
The Chinese consumer market is expanding, boosted
by the increase of online consumption of items such as food and household goods.
As of June 2020, the number of viewers on online platforms for a mobile version
of home shopping surpassed 300 million for the first time, which is a 16.7%
jump compared to the previous year. Moreover, there are reports of daily orders
of 20 million group buying, mainly in Tier 2 and Tier 3 cities.
Store-based retail distributions that
accounted for about 76.7% of total distribution channels in 2019 fell to 72% in
2020. In contrast, non-store distributions reached 2%. Among non-store
distributions, sales through e-commerce channel sales jumped by 20.4% year-on-year.
Overall, China’s domestic consumption through online channels is expanding.
Excluding automobiles, the sale of consumer
goods in China in 2020 was 35.3 trillion RMB (equivalent to 6,100 trillion KRW),
which was a 4.1% drop from the previous year. In contrast, the online sales of
tangible goods such as food and household products rose by 14.8% year-on-year
to reach 9.9 trillion RMB (about 1,700 trillion KRW), accounting for
approximately 25% of the total consumer goods sales. By item, consumption of
petroleum and related products (-15.0%), precious metals (-8.8%), and clothing
(-8.5%) declined while demand for communication equipment (15.0%), cosmetics
(13.6%), beverages (9.3%), household goods (6.4%), etc increased.
Meanwhile, China's consumer goods imports
in 2020 rose 8.2% year-on-year to 1.57 trillion RMB (about 270 trillion KRW),
and imports of accessories and cosmetics increased by more than 30%. Since
China's State Council is also implementing policies to boost consumption,
including the decision to set up 46 new pilot zones to meet the demand for
imported consumer goods on top of the existing 59 integrated pilot zones for
cross-border e-commerce. This trend is expected to expand further.
A survey from 233 Chinese buyers showed
that 37.7% of Korean products are distributed online, and 67.7% of the buyers
responded that it is necessary to expand the online distribution of Korean
products in the future. As for items expected to grow in popularity, the buyers
named Korean food, cosmetics, beauty products, baby products, and kitchenware.
This report proposes that Korean companies should
adopt different strategies: ▲ diversify online to offline (O2O) services to
expand consumer contact points, ▲ design customized products that reflect
individual taste, and ▲ strengthen social media marketing.
Park So-young, a senior researcher at the Korea
International Trade Association, said, “China's huge domestic market is undergoing
a drastic transformation with the e-commerce sector as the center, and this is
the same for imported products,” and added, “In order for Korean companies to increase
their presence in the China's consumer market, which exceeds 6,000 trillion KRW,
they must quickly adapt to these changes and work on customized strategies the
acknowledges local buyers' perception of Korean products."