Consumption upgrading boosts demand for imports

As domestic consumption keeps upgrading, Chinese consumers' demand for high-quality, personalized and diversified goods continues to grow. Not only is the consumption upgrading trend evident in tier-1 and tier-2 cities, it has also of late penetrated a swath of lower-tier areas. As the trend of upgrading consumption continues to gain momentum among Chinese consumers, there is growing demand for imported consumer goods.

According to the cross-border e-commerce management platform of the General Administration of Customs, the consumption of imported goods through cross-border e-commerce soared at a compound growth rate of 76 percent during the period between 2015 and 2018.

In China, government policy and consumer-led digitalization are two major growth drivers for imports of consumer goods.

China has been integrating further with the global market in recent years under its continuing opening-up policy. The Chinese government is actively adjusting tariffs on the one hand while lowering barriers for foreign goods to enter the Chinese market on the other hand, which have boosted the confidence of imported goods companies and the enthusiasm of consumers. This policy gave rise to a wide expansion of categories of consumer goods imports and greater choices of daily consumer goods to satisfy the increasing appetite of the Chinese consumers for diversified, personalized and quality imported goods.

Data released by the Ministry of Commerce in July 2019 show that imports of aquatic products, fruit and vegetables, shoes and the like have grown sharply over the past two years.

At the same time, China is experiencing a consumer-led digital transformation. With digitalization, the retail subsector of imported goods is being transformed, focusing on consumers, goods and markets. Emerging business models, such as cross-border e-commerce which was built upon a consumer-centered ecosystem, are gradually taking over the market share of general trade commerce more convenient shopping experience. Based on the consumer-led digital transformation, Chinese imported goods consumption patterns continue to evolve.

In the digital era, the focus of consumers has shifted from traditional consumption to emerging consumption and from commodities to services. Amid the digital transformation, Chinese general trade commerce for imported goods faces growing challenges from consumers who desire, among other things, a more efficient, convenient shopping experience and more personalized goods.

Leading disruptors such as Alibaba, Tencent and JD are devoted to facilitating penetration at a range of consumer touch points and propelling the transformation via resource integration. The evolving consumption pattern is actually the reimagining of the consumer connection at the moment in time that matters to them.

First, we see that shopping through social media platforms has emerged as the new pattern of consumption. The social e-commerce platform is largely built on social networks which consumers turn to for information, networking and other needs on a daily basis. Directing audiences to stores on social medial platforms and endorsing brands have emerged as a new channel for e-commerce shopping.

For consumers, social media e-commerce allows them to choose the right stores to make purchases and compare products as the orders are placed. It also facilitates communication and interaction with retailers through instant messaging as they shop, as well as the sharing of comments and shopping experiences post-purchase. These new models integrating social relationships with e-commerce will further stimulate and fuel the growth of consumption.

Alongside social e-commerce, the livestreaming industry in China has been experiencing dramatic growth in audience sizes and purchased consumer goods and related payment transactions. The interactive content-based sales not only help brands to interact more with users and guide consumption decisions, but also help users estimate the value and effect of goods promoted on e-commerce platforms, ensuring value-for-money purchases and buyer satisfaction.

As China's online retail sales growth slows, consumer-led digital transformation becomes the means of survival and revival for traditional consumer companies in this digital era. Retailers are eager to drive the evolving consumption pattern so that they can build meaningful connections with consumers and expand niche markets.

Winning in the new digital consumer-centric world requires a reimagining of consumer engagement. By taking up more time in the daily life of consumers, retailers can reinforce their connection with consumers and provide, with precision, personalized products and services based on consumer profiles generated from collected data, satisfying consumer demand around the clock.

Over the next few years, retail competition will no longer be bound by the conventional notions of products and geographic markets. Future competition will be a battle for consumers and their time, with the key criterion for market share being the percentage of the 24 hours in a day a market player can hold consumers' attention.

The author is managing partner and leader of Deloitte Asia-Pacific Consumer Products and Retail Industry.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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