At the dawn of the decade China was very much a cash-based society. Most transactions were untraceable exchanges of notes and coins and it wasn’t unusual for consumers to have stacks of red bills stashed away under their mattresses.
Whereas China’s older generations have lived through austere periods that have hard-coded an inherent need to save for a rainy day, a tribe of younger consumers has surfaced who have only ever known prosperous times, lured by the bright lights of consumerism and with it, a much more liberal view towards spending.
Chinese born after 1980 are the most educated and urban consumers, and as a result earn more on average than older age groups. Whilst their incomes are rising faster than in any other major economy, their retail spending is growing even faster. Much of the gap is being filled by consumer credit. Short term consumer lending is growing at 35% annually, often unserved by traditional lending channels, providing opportunities for some 1,800 online credit platforms as at the end of July this year.
Arguably more influential in driving consumer spending has been the ease and convenience of mobile payments where daily transactions now number 50 times that of the US. Much like credit cards have done in the West, China’s mobile payments marginalise some of the visible and psychological barriers consumers faced physically taking cash from a wallet.
Mobile payments have driven spending both in physical and ecommerce stores, and also created new categories for spending. Payments are now embedded in social media and other apps allowing purchases for services, games, gifting, tipping KOLs and plenty more. Alibaba’s new ‘Smile to Pay’ doesn’t even need a smartphone to pay. Beijing is an avid supporter of mobile payments as it backs its agendas of fostering innovative industries and transitioning to a consumption-based economy, and also provides a detailed footprint of citizens’ movements and habits.
So what does all this mean for brands hoping to attract Chinese consumers? Quite a lot. For a start, any ecommerce site, social media account or app would be wise to enable transactions through Alipay and/or WeChat Pay. Similarly, sales are likely to increase for physical retail both in China, abroad, and in between – Finnair has seen sales of onboard purchases increase over 200% on China routes since introducing Alipay. There are added benefits such as gaining new WeChat followers with WeChat Pay and integrating into the popular AliPay app and receiving improved consumer insights.