HKTDC Research: At your service - a rising sector for the Mainland middle class
Executive summary
Urbanisation is a strategy adopted by the Chinese government in switching to a domestic demand-led, in particular consumption-led, economic growth model. As a result of the rising income of urban residents, change in the pace of city life, and increasing importance placed by urban medium and high income earners on social status and enjoying life, the consumption of urban residents has extended to areas beyond satisfying basic needs, such as consumer services including entertainment, travel and cultural activities.
Hong Kong companies wishing to develop the mainland market must have a good understanding of the mainland consumers. This consumer survey is targeted at the mainland consumer services market with a view to understanding the demand of mainland urbanites for consumer services and the characteristics of this market. Consumer services cover an extensive scope. Focusing on sectors such as catering, beauty, fitness, entertainment, travel and training, this survey aims to reveal the basic consumption characteristics of consumers in these areas for the reference of Hong Kong companies in their attempt to develop the mainland market.
This survey was conducted between January and February 2011 in eight mainland cities, namely Shanghai, Beijing, Guangzhou, Chengdu, Wuhan, Shenyang, Nanjing and Changsha. With 200 eligible respondents interviewed in each city, a total of 1,600 respondents in the eight cities were polled. The major findings are summarised as follows:
The mainland middle class is more confident about spending than before. 84% of the respondents agree or totally agree that compared with a few years ago they like to go out and spend money more now. Apart from being more ready to spend money, the majority of respondents indicate that they pay attention to trends and hope to keep up with the latest trends.
As the social environment changes, today middle-income urbanites face greater work pressure and are pressed for greater efficiency. Under such circumstances, the majority of people find they do not have enough time. Hence, they tend to buy “services” to “gain time”. Meanwhile, 79% of the respondents agree or totally agree that work pressure is becoming increasingly heavy which in turn increases their demand for services which can alleviate or relieve pressure.
Middle-income urbanites nowadays have more gatherings with relatives and friends as well as more family activities than before. In the past, social gatherings mostly took place at home. But as people’s income rises, gatherings are taking more diverse forms. Apart from entertainment at home and dining out, going on short-distance weekend outings in the countryside has also seen a marked growth.
The rise in demand for service consumption is not only quantitative but also qualitative. Consumers are attaching more and more importance to quality and taste. 74% of the respondents point out that consumer services are a key indicator of a quality and trendy life, they even reckon that “taste” is more important than “price performance ratio”. As such, they are willing to spend more money to try out new niche services and higher quality services. 73% agree that “I am increasingly willing to spend more money in order to get higher quality services”.
Where catering is concerned, compared with three years ago, 44% of the respondents now dine at restaurants more often. The main reasons for not dining at home are: “more dinner gatherings with friends, colleagues and relatives”, followed by “working overtime more often, making it impossible to eat at home”.
In eating out, per capita spending on a simple meal is Rmb46.2, while that on a better one is Rmb127.3. When choosing restaurants for dining out with family, relatives and friends, the main considerations are the taste of the food, and the environment, popularity, location, and signature dishes of the restaurant.
Where beauty service is concerned, compared with three years ago, 31% of the respondents who patronise beauty parlours indicate that they patronise beauty parlours more often now. Among female respondents who have the habit of visiting beauty parlours, 91% patronise the venue at least once a month.
Consumers tend to view beauty parlours more as a place for relaxation and relieving pressure than a place purely for receiving professional skincare treatment. 46% of the respondents agree that “apart from the beauty service, visiting beauty parlours can also give me rest and relax my body and mind”, followed by “visiting beauty parlours to get more professional beauty service” (18%).
In the past year, the total spending of the respondents at beauty parlours averaged Rmb2,832. Among respondents who visit beauty parlours regularly, 55% of them “currently hold a beauty parlour beauty card”. The application fee of these beauty cards is Rmb1,901 on average.
Where fitness is concerned, compared with three years ago, 29% of the respondents visit fitness centres more often now. The main reason for working out at fitness centres is that people now attach more importance to physical health and personal image.
In the past year, the total spending at fitness centres averaged Rmb1,782. Among the respondents, 50% “currently hold a fitness centre VIP card”. According to the first mention rate, when choosing a fitness centre, the key consideration factors are location proximity and chain brand.
The majority of consumers are trend followers. The same is true for consumers of leisure and entertainment activities. 62% of the respondents agree that “I would not proactively explore new leisure or entertainment activities, but when a new one emerges, I’m happy to try it out”.
Based on first mention rates, the key consideration factors for choosing leisure or entertainment activities include: good for physical and mental wellness, suitable for gathering of friends, and latest fad of the time. Comfortable environment is also a consideration factor. This shows that mainland middle-class people go after a comfortable environment for leisure activities outside their busy life.
With regard to travel, compared with three years ago, most respondents take tours more often now. About 40% of them indicate that they visit Hong Kong and foreign countries more often than before. In the past year, their average frequency of joining a 2-3 day domestic tour was 2.3 times and of joining a domestic tour of over three days was 2.2 times.
52% of the respondents agree that “the main purpose of going on a tour is to enjoy a new environment and relax”. This shows that consumers tend to see travelling as a way to relax and alleviate pressure.
With regard to training, among the training courses taken in the past year, the following are mentioned by the largest numbers of respondents: vocational skills (28%), corporate management (18%) (including sales management, logistics management etc), foreign languages (mainly English) (14%), and computer (14%).
For training courses taken in the past year, self-financing and employer sponsorship each accounted for half. The average training fee paid by respondents who have taken training courses in the past year was Rmb3,703, while the training budget for the coming year is Rmb4,097. When choosing training courses, the key consideration factors include the professional standard of the teachers, the course fee, and the reputation of the organiser.
Mainland middle-class consumers view Hong Kong as an “international city” and have the impression that Hong Kong offers “high quality services”. They also agree that Hong Kong services are better than those of the mainland. 86% of the respondents agree that the standard/quality of Hong Kong services is superior to that of the mainland’s; 80% agree that the management system of Hong Kong’s service sector is superior to that of the mainland’s; 83% agree that Hong Kong’s service sector is superior to that of the mainland where trendsetting is concerned. Hong Kong only got a lower score in “more value-for-money than the mainland”.
The majority of mainland middle-class consumers have a better impression of the projects managed and operated by Hong Kong companies across different consumer service sectors. All in all, they find the consumer services managed and operated by Hong Kong companies have the following advantages: high service standards, professional (people and facilities), better environment, and sound management.
In sum, Hong Kong companies wishing to enter the mainland consumer service market may consider the following strategies:
As mainland middle-class consumers go after “fashionable trends” and “high quality” in their service consumption, they are increasingly demanding where “comfort, taste” and “trendiness, fun” are concerned. Respondents demanding improved consumer services mainly look for service attitudes, professional standards, service “ambience” and facilities. Given that Hong Kong’s consumer services can meet the expectations of most of the respondents, Hong Kong companies should capitalise on their strengths and make good use of Hong Kong’s advantages -- “high quality services + trendiness + sound management” -- in a bid to attract mainland middle-class consumers who are becoming increasingly demanding.
It is worth noting that consumer services mainly rely on word-of-mouth. If management and service standards fail to keep up, the overall image of Hong Kong’s consumer services will be compromised.
Making good use of word-of-mouth is an important marketing strategy. This survey finds that “recommendation by relatives and friends” is a major vehicle in attracting consumers to try new consumer services. The majority of mainland middle-class consumers like to share their special experiences and chat about the latest fads with their relatives and friends. Hence, service providers should devote great efforts to promoting their services, offering new and high quality service experience to consumers in order to build a professional image in the mind of the consumer.
Middle-class consumers are generally willing to pay more for improved services. However, at the current stage it is not necessary for service providers to make excessive efforts to provide “improved environment” as most of the middle-class consumers still cannot afford to pay too high a price for an upgrade.
The Internet has gradually become an important channel through which consumers obtain market information. Although recommendation by relatives and friends still takes the lead in terms of influence on purchase decision, popularisation of the Internet can help create word-of-mouth. Therefore, taking advantage of the rapid growth of the Internet and making good use of online media can reap great benefits. For instance, online resources can be utilised to accelerate the speed of spreading word-of-mouth or carry out marketing through group buy websites.
The needs of consumers in different consumer service sectors are different. Meeting these different needs can help promote market development and sales:
- Catering: specialty signature dishes should be offered. This does not only satisfy taste buds but also makes the host proud when entertaining relatives and friends. As the consumer always goes after improved service attitudes and hygiene, making improvements in these aspects can help service providers succeed amidst intense competition.
- Beauty: as consumers view beauty parlours as a place for alleviating pressure and relaxation, service providers can consider introducing more of these elements to their services.
- Fitness: a wide range of services should be made available offering not only body workout but also other choices such as gymnastics, yoga and boxing. The venue should be spacious, clean and tidy, and the equipment should be complete and advanced. The need for privacy in doing certain exercises should also be met.
- Entertainment: emphasis should be placed on trendiness, fun, and affinity. Attention should also be paid to enhancing the comfort of the environment.
- Travel: when people choose a travel agent, they mostly attach importance to the services offered. Hence, more attention should be paid to the management of service details, adopting the “customers first” attitude, establishing standardised service systems, and providing different options of personalised service.
- Training: brand building is of prime importance (both for the organisation and for the teachers). Efforts should be made to promote the experience and track record of the organisation and introduce internationalised course design.
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