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Cashed-up Chinese consumers are buying more domestic brands

Wealthy Chinese consumers are spending up large on domestic brands sold online, according to new data from local e-commerce giant JD.

The data shows that 490 out of 572 high-performing brands which surpassed RMB100 million (US$14 million) in transaction volume from January to April this year were domestic. Out of 230 brands surpassing a transaction volume of RMB 300 million ($42.2 million) during the period, 79 were domestic brands – and 125 out of 151 brands surpassing RMB500 million ($70.3 million) were also domestic.

Key insights from JD’s data suggested that domestic brands are gradually becoming the top choice of Chinese consumers as quality improves, with the proportion of domestic brand consumption increasing year-by-year in 1st-tier cities as more well-educated and well-paid consumers buy more. Female consumers aged below 25 pay more for domestic brands and pay more attention to them, and in general, domestic brands are attracting more high-income consumers.

Furthermore, almost all consumers of domestic brands throughout last year were shown to be sensitive to product reviews, indicating an emphasis on product quality and the general pursuit of high-quality consumption.

Last year, growth rates of domestic brands in terms of the quantities of products, brands, and orders were all more than 20 per cent higher than those of international brands year on year. That growth gap further expanded to 30 per cent in the first quarter this year following the coronavirus outbreak.

In terms of transaction volume for domestic versus international brands for the whole of last year, the proportion of domestic brands in categories including maternal and baby, sports and personal care increased rapidly. In particular, facial cleaning products, female care products and other categories exceeded more than 150 per cent on average. Imported products grew the most in categories such as toys and musical instruments, cleaning and paper products.

E-commerce channels helped domestic brands reach lower tier markets throughout last year, with 5th and 6th tier cities remaining the primary driving force of consumption of domestic brands. Even so, the situation is evolving in 1st tier cities, which are slowly turning to embrace more domestic brands.

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