China’s tier 3 and 4 cities offer an untapped marketplace for future growth potential which retailers are largely missing out on, according to a new report by Euromonitor.
Approximately 65 per cent of fast moving consumer goods sales came from Tier 3 and lower tier cities in China, the report says.
In order to seize opportunities in these tiers, a number of brands have been working to target a potential customer base.
“Companies such as Starbucks plan to have a total of 1500 outlets by 2015 and many of the new openings will be in Tier 3 and lower areas,” says senior consulting manager, James Chen.
“However, five years ago around 70 per cent of their company’s 400 total outlets were located in Tier 1 cities.”
Chen says using a tier strategy, businesses can best identify their target markets and begin utilising strategies to reach those Chinese consumers.
Euromonitor International has released a new white paper discussing China’s growth and a newly created City Tier Classification system titled Cities in China: Economic and Consumer Dynamics for Successful Business, and downloadable online.
As China implemented an evolving growth structure over the last decade or so by expanding domestic consumption and investment, it promoted urbanisation and increased per capita disposable income, creating more balanced development between urban and rural areas.
“The rapid economic growth makes China a lucrative market to many businesses looking to grow their share and services,” says Euromonitor.
However, to make the most of that growth, companies should create territory strategies to connect with potential consumer bases. Euromonitor analysts have analysed the business environment and consumer trends by city in China, developing tiers for each. These tiers highlight the economic and demographics of each city, making it easier for businesses to identify their target market(s).
“For example, Tier 1 and Tier 2 cities make up more than 55 per cent of the national GDP value but they also register high penetration of modern retail and foodservice. Tier 3 and 4 cities on the other hand, offer an untapped marketplace for future growth potential.
