New retail estimated to make up 22.4% of total Chinese consumer spending in 2018

New retail is quickly becoming the driving force behind the development of China’s consumer market. New research* from the world’s leading market intelligence agency, Mintel, reveals that new retail is estimated to account for 22.4% of total consumer commodity retail sales in China in 2018, up from just 8% in 2013, nearly trebling its share of consumer spending over the five year period. Furthermore, Mintel forecasts reveal that new retail will represent 25% of consumer spending in 2019, and reach 33% by the end of 2023.

Indeed, the outlook for China’s new retail industry remains positive; Mintel estimates the market to reach a total retail value of RMB 9,004 billion in 2018. Furthermore, it is forecast to reach RMB 18,894 billion by the end of 2023.

Matthew Crabbe, Regional Trends Director, Asia-Pacific, at Mintel, said:

“New retail, which combines online C2C (consumer-to-consumer), b2C (small business-to-consumer), B2C (business-to-consumer) and OTS (online takeaway services), is forecast to make up a third of China’s total consumer spending in the next five years. Further, while the industry is expected to surpass the RMB 9 trillion mark by the end of this year, there is still significant room for growth with the market forecast to double in value by 2023. New retail is developing a convergence not just of online and offline shopping, but also other consumer services such as food delivery, entertainment and car hailing, among others. This merging of online and offline retail and services is now becoming what Mintel dubs as ‘next retail’.”

There are various signs that indicate new retail is morphing into ‘next retail’, which sees retail converging with the wider consumer services environment. Mintel research shows a staggering four in five (80%) urban Chinese online shopping consumers* say that they use online food delivery services; while at least seven in 10 watch video streaming content (74%) and use car hailing apps (72%) and social media (70%).

“For today’s modern Chinese consumer, shopping is increasingly about having an enjoyable experience that they can share with others. On top of just price and convenience, the ‘fun factor’ in shopping is also becoming important. Even online shopping is not a standalone activity anymore; it is now often combined with watching movies or playing online games. The proximity between retail and entertainment is growing into what we see today as ‘retailtainment’. As online and offline increasingly converge into an overall shopping experience, so will the respective aspects of retailtainment. In all these, it is important that retailers and brands make shopping an enjoyable experience for consumers.” Matthew continued.

Meanwhile, China’s rapid economic development and leapfrogging e-commerce development in the past few decades have led to Chinese consumers’ willingness to adapt to and adopt new technologies and innovations in retail. As a matter of fact, three in five (61%) urban Chinese online shoppers prefer to use self-checkout terminals; meanwhile, 58% are open to the idea of using smart fridges to order replacement grocery and two in five (41%) to shopping at an unmanned store. What’s more, 62% of consumers are happy with the idea of using biometric data to pay for their shopping purchases. All that said, half (50%) of China’s online shoppers are expressing concerns about how retail companies are using their personal data.

“Chinese consumers are widely accepting of new technologies and there is a remarkably high level of openness to new retail technologies. In fact, Mintel research shows they are anticipating many of the new technologies that are only just emerging, and show a high degree of interest in, and potential uptake of, many of these new innovations. Indeed, consumers are willing to use biometric data to pay for purchases, for example using their faces to confirm payment. However, uptake of this technology will only continue to grow if retailers can ensure the security of the personal data they hold. Our research shows that there remains a significant amount of concern surrounding this topic. As such, retailers and brands should be very clear about how they store and use consumer data, and also effectively communicate this to them.” Matthew added.

Consumer attitudes towards the shopping experience confirm that they want time-saving convenience coupled with an enjoyable experience. The majority (83%) of urban Chinese online shoppers agree it is time-saving to buy products online, while over three in four (77%) say that both online and offline shopping should be more entertaining. It seems Chinese consumers are also looking for friendlier and more helpful retail staff to help improve the shopping experience; 85% of online shoppers say that customer service quality is as important to them as product quality, while 82% say that retailer staff (eg in-store staff, home delivery) need to be more attentive to customers.

“‘Next retail’ is becoming the keystone of a new type of consumer market, one that blurs the lines between shopping and all other consumer spending and activity, integrating lifestyles, and creating even deeper socialisation and personalisation of the relationship between retailers, brands and consumers. This integration is also blurring the boundaries between online and offline businesses. As competition for consumer attention increases, retailers and brands can find new, innovative ways to serve shoppers, either in-store or online, both within China and overseas. China is undoubtedly at the leading edge of deployment of new technologies in the pursuit of new retail integration.” Matthew concluded.

*Base: 2,768 internet users aged 20-49 who have shopped online in the six months to May 2018

Press review copies of Mintel’s New Retail China 2018 report and interviews with Matthew Crabbe, Regional Trends Director, Asia-Pacific, at Mintel, are available on request from the press office.