Market Research
The Time To Tap China's Affluent Market Is Now, Says BCG
Financial planners in China would do well to create dedicated strategies for China's affluent given the market's unique demands and growing numbers, a study by the Boston Consulting Group shows.
In a report titled "The Age of the Affluent: The Dynamics of China's Next Consumption Engine," BCG notes that China's affluent consumer market, or those who are richer than the middle class but not as wealthy as the super rich, will account for 5 per cent of global consumption by the year 2020.
Unlike the middle class or the ultra-wealthy, majority of the affluent bank on emotion as the main driver of their spending decisions. They have several key attitudes that set them apart from either classes: they trade up for emotional gratification, seek status and recognition, travel more and adopt new brands.
An important subgroup of the affluent, for instance, called the "sugar generation," or children of current affluent consumers, account for 10 per cent of the affluent class -- a number expected to grow to 30 per cent in five years.
At present, there are around 120 million affluent individuals in China with an annual buying power of $590 billion. By 2020, this will reach 280 million, 35 per cent of China's urban population or 20 per cent of its total population. By then, the annual buying power of this class will have already reached $3.1 trillion. This is almost the same as Japan's total consumption in 2020, 28 per cent more than Germany's and thrice more than South Korea.
"Businesses need to establish lasting relationships with these consumers," said Jeff Walters, a BCG partner and a coauthor of the report. "The time to get to know them is now."
The report parallels the findings of "The $10 Trillion Prize: Captivating the Newly Affluent in China and India" by the Harvard Business Review. The figures are based on a Boston Consulting Group survey of 24,000 global consumers in 2011.