Small cities to drive spending

Middle income consumers in small cities will contribute most to China's spending growth, says BCG

The report from international consultancy, Boston Consulting Group, claims that China's middle-income and affluent  consumers (MACs) are under less pressure from a slowdown in economic growth and will likely spend more than their big city counterparts.

The survey, of more than 7,000 households with an income between 5,000 to 8,000 yuan ($823 to $1,317) per month, showed 29% of interviewees in Tier 4 cities planned to increase their spending, compared to 22% in Tier 1 cities.

Some 46% of Tier 4 respondents also said they planned to "trade up", versus 37% in Tier 1 cities.

Despite government efforts to cool house prices in cities like Beijing and Shanghai, they continue to balloon, causing residents to feel the pressure on their spending power.

Opportunities for international brands are likely to be greater in smaller cities, where the presence of other competitors remains minimal. Furthermore, marketers will have greater scope for influencing the behaviour of new MACs, says BCG.

However, the report also warned brands could not duplicate marketing strategies across different cities. Consumers in the Guangzhou cluster have a proclivity for foreign brands, while consumers in western Xi'an strongly favour local ones, for example.

Lubes marketers should take into consideration the regional differences in lubes requirements. For example, the clement south might require more two-stroke lubes for motorcycles, while northern provinces will require lubes with greater viscosity ranges for the massive variations in temperature between seasons.

Choosing how to approach consumers will also be key. Mobile use varies greatly between different Chinese cities and not all small cities have access to high-speed internet that can readily support bandwidth-intensive flash graphics.