China’s fast-growing middle class offers insights into consumer trends

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An interview between PwC and Claude Sarrailh, CEO of Metro JinJiang Cash & Carry, about how the company is keeping up with consumers in China in this fast-changing market.

Part of the Global Consumer Insights Survey 2019

In the past 10 years of PwC’s Global Consumer Insights Survey, Chinese consumers have repeatedly shown themselves to be among the first adopters of technologies and trends that later catch on in other places. In this year’s survey a staggering 86% of Chinese respondents said they use mobile payment services, compared with a median of 43% in other countries surveyed. A massive new Chinese middle class is also creating enormous consumer demand. So, in many ways, China has become a consumer behaviour bellwether.

PwC spoke in January 2019 with Claude Sarrailh, CEO of Metro JinJiang Cash & Carry — the China division of German wholesale company Metro Cash & Carry — about how the company is keeping up with consumers in this fast-changing market.

PwC: What kinds of opportunities and challenges are you finding in delivering an excellent customer experience in the Chinese market?

Claude Sarrailh: The most important opportunity in China is understanding that there is a growing middle class, upper middle class and affluent class. In the past 10 or 20 years, about 30% of the Chinese population has moved from a more modest economic class to one of these with more discretionary income. If I can understand which of my customers are in these more affluent classes, I can make more relevant offers, instead of just taking a guess.

PwC: What does a strong customer experience look like for these consumers?

Sarrailh: Customer experience is a big issue for big-format retailers like Carrefour, Auchan, Walmart and us. The bottom line in China is that you have to bring more to the customer experience — and that “more” can be personal delivery, it can be imported foods — but you have to differentiate yourself beyond simply having a lot of locations.

Fast delivery of products, especially, is critically important to Chinese consumers. That’s much more important than where your brick-and-mortar stores are located, even if you have a lot of them and even if they are in convenient places. Customers here expect almost everything to be delivered within 30 minutes. You can’t simply count on the fact that you are a big company with many locations.

PwC: That customer expectation is in line with our survey results, which showed that getting a product as quickly as possible was ranked highest on a list of delivery-related services customers might care about. Can you give an example of this focus on fast delivery as a customer expectation?

Sarrailh: In China, I could order a coffee — a single Americano drip coffee — and get it delivered directly to me in 15 to 20 minutes. The businessman who is providing this delivery service used to work for Starbucks and decided to start his own coffee company, with a focus on delivery. In just two years he built the first coffee delivery company in China.

PwC: How important is data to customer experience, and have you had any challenges in this area?

Sarrailh: Yes, so we’ve begun moving to two different channels. Six years ago, we started out partnering with Alibaba, but that business has tapered off. For one thing, it’s very expensive. And second, you don’t have access to customer data. You don’t own your customers anymore, and this is the worst thing that can happen to a retailer — there’s no way you can tailor your customers’ experience to their needs.

So now we are moving to new platforms. One is using peer-to-peer, or P2P, sales. We work with companies like Net One, which is based in Hong Kong, and JD Daojia, a subsidiary of JD.

The advantage of using these companies is both that your costs are much lower — something like 5% to use their platform; the customers will pay the delivery fee — and you have access to your customer data.

PwC: Are you also using mobile experiences, since the Chinese are very passionate about their smartphones?

Sarrailh: Yes, that’s our second platform. There is a local version of WhatsApp, called WeChat, that has even more functionality than WhatsApp. Using WeChat, you can connect customers directly to your e-commerce business, and you have access to your customers’ data. If I sell something, I know it is a certain customer who has bought it, so tomorrow I can send him a related offer. And with WeChat, you have access to 600 million people pretty quickly.

This is what will drive our success — this transformation from the mega-platform of Alibaba to the simpler, independent P2P and WeChat ones. And these are the only options that give us access to customer data.

PwC: PwC’s 2019 Global Consumer Insights Survey showed that 35% of respondents said they choose sustainable products to help protect the environment. Is sustainability important to your Chinese customers, too?

Sarrailh: Yes, very much so. There is the issue of pesticide and fertilizer use. China is the biggest user of pesticides and fertilizers worldwide — not because they want to introduce toxins into their food supply, but because they need to feed their population. So on one hand they want to really reorganize their food production internally to make it more sustainable with fewer chemicals, but still with a high level of productivity.

Chinese consumers absolutely care about the quality of the products and how many chemicals are in the products.

PwC: Are you seeing any trends that address that?

Sarrailh: Yes. It ties back to the desire of Chinese customers to have products delivered. There are small companies now in remote areas of the countryside that will take produce grown on farms there — farms not using the high amount of fertilizer that the industrial farms do — and deliver them to cities. One of these companies can deliver produce and craft-made products from remote regions to 90% of the country within 24 hours.

So Chinese consumers are more willing to broaden what they eat and consume from remote places in the country, because they are asking for, and getting, quick and easy access to these products.

PwC: In the West, we often take for granted the idea that the customer is the focus of everything an e-commerce company does. Does that customer focus come naturally to your employees?

Sarrailh: We have 12,000 lower-level people working in the stores, and we do a lot of work to try to motivate them, in terms of connecting with the customers. But, realistically, I think where there really is that focus is in the sales forces and in management.

In a fast-growing economy, you don’t need to put that first, at least not yet. Over time, you become customer-driven when you start to have issues with keeping your customers happy and engaged. We are continuing to try to get all our employees to appreciate that.

 

Contact us

John G. Maxwell

Global Consumer Markets Leader, Partner, PwC United States

Tel: +1 (646) 471 3728

Oz Ozturk

Global Advisory Consumer Markets Leader, Partner, PwC United Kingdom

Tel: +44 (0)7703 563 054

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