The Manager Magazin has some great figures about Chinese demographics. I summarized and translated them and added some own thoughts and conclusions. Although they are originally not directly connected to the Internet and online marketing, numbers like the following are always a good source to draw some interesting conclusions about online marketing (which you will find at the end of the post).
- In the Tier1 cities like Shanghai, Peking, Guangzhou and Tianjin live only 6% of the Chinese population. They represent 13% of the gross domestic product.
- These cities are a strong competitions in terms of (foreign) investments and some markets are already close to saturation.
Tier 2 cities:
- In the 300(!!) Tier2 cities live 53% of the urban population. They represent 64% of the gross domestic product.
- Definition of a Tier2 city: Cities with up to 6 million inhabitants and a per-capita GDP of 34,000 RMB in average.
- These Tier2 cities offer a constantly increasing consumer market with a yearly income of 3,000 to 6,000 USD per household.
- Seen as a group, the Tier2 cities grow by 15% per year. 60% of them are located close to the coastal provinces in the eastern part of China.
Offline and online sales:
- Supply chains are far than efficient for foreign companies in China. Only 10% of the turnover is sold directly via retailers, whereas 42% of the turnover reach the consumer through three or more interconnected dealers in the supply chain. The result if a lack of insight into the behaviour of Chinese consumers.
- Only very few companies have direct access to consumers and sell their products online. Examples are Anheuser-Busch or Amway.
Some own thoughts / conclusions:
- 59% of Chinese people live in cities (Tier 1 + 2) representing 77% of the gross domestic product. Reversely, 41% live in rural areas (= roughly 560 million people), they stand for 23% of the GDP .
- The Tier2 cities are of growing importance. More and more companies try to open up this huge potential. From my experience, foreign companies have their headquarters in the Tier1 cities to set up business and gain first experience. But the potential to make money lies in the Tier2 and Tier3 cities. And this is not only true for cost reduction in manufacturing but increasingly for sales and market share growth.
- Parallely, the Internet penetration increases and this will sooner or later also bring online marketing and e-commerce along.
- Interesting will be how search engine market shares will develop. Right now, Baidu has a market share of almost 100% in rural areas. In the Tier1 cities it’s market share is reduced to about 40%, Google holds some 40% as well (I wrote an article before how market shares and demographic development interact in China). Anyway, this is a question about years, I suppose. But also makes clear that search engine market shares in China are not fixed yet. A lot of space to move is still available.
- What a potential for direct sales channels and e-commerce! Anyway, still some problems to solve like nationwide use and acceptance of credit cards for online payment, reliable and quick logistics and delivery services, etc. But with young Chinese generations heavily using the Internet already now, participating in social networking and web 2.0 tools, this is a good basis for the development of e-commerce activities. Not to mention the distances in China…