Where's the Future in China: Young or Old Consumers?
There's been a lot of talk about the ever-lowering fertility rates in China. Socially, there are all sorts of repercussions such as the many kids who will grow up without sisters, brothers, cousins, uncles or aunties. Economically, China's massive population advantage will diminish and there won't be enough people to work in its offices, factories, farms, logistics services, studios or military; hence the push for AI and robots to help fill the gap.
Beijing's challenge of encouraging more children faces structural societal and economic barriers. Consumers have become more confident and assertive, seeing them less prepared to settle for a partner who isn't quite up to scratch. It has also become more socially acceptable to grow old without children, and without a partner. This has delivered a critical mass of single consumers in China, who have been supported by brands developing singles-focused products and portion sizes, restaurants offering teddy bears to keep single diners company, communications and influencers catering to singles, and a host of other supporting infrastructure making it easier and affirming people's decision to buck the traditional family path.
Economically, the cost of raising children is a deterrent for many. It isn't cheap paying for the extracurricular classes that account for a large portion of the 31 hours the average 3-15 year old Chinese kid spends on learning outside of school each week. Buying healthy and safe infant formula and food comes with a cost too. The growing trend of family holidays, educational toys and sports gear all contribute. Although GDP per capita isn't a full representation of Chinese consumers' wealth, relative to GDP, China is the most expensive place after South Korea to raise a child according to a tally of 14 countries. Then there are the indirect costs such as spending large on an apartment to be in the right school zone.
The high cost barriers to raising a child in China may help the environment. It is great news for brands selling pet paraphernalia. Not the best news for Beijing though. National and locals governments are pulling all sorts of levers to nudge couples down the family path, the most recent being Beijing adding fertility services to insurance coverage. Although there was a bump in marriages last Tuesday, taking advantage of the auspicious 20220222 date, there is still much work to do. 10.62 million babies were born last year, an 11.6% drop from the 12.02 million in 2020, which followed an 18% plunge the year earlier.
So what are brands to do? Connecting at an emotional level has become ever-more important, as the heart helps reinforce the more functional claims, particularly for millennial parents. Although birth rates are declining, parents are spending more on their kids each year as they focus on giving them the best they can, within reason.
Some brands are looking to other customer segments that are growing. There are nappy brands shifting their focus from the young to the old as adult diaper sales are expected to exceed that of infants by 2025 in China. The other end of the lifecycle is ballooning as the average of six children per mother in the Mao years reach retirement age. China's over-60s are forecast to number 486 million by 2050, up from 258 million last year.
Whilst China's silver surfers are traditionally more price-sensitive than younger consumers, buying low cost domestic brands over premium foreign brands, they are increasingly open to quality imports that connect with them. In the beauty category, seven of the ten most preferred brands from online elderly are foreign. There are also a few foreign brands in the top-10 for food and beverage. As China's oldies get online in larger numbers, they become easier to reach by brands with thoughtful elderly-centric strategies. We've put together an infographic to help you understand a little more about how and where elderly Chinese are using their smartphones.
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