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Must-know for companies that want to do business in China. Oleg Beriev's presentation at the Russian Export Day 2017 forum

A well-developed e-commerce sector, the middle class making up 11% of the population, a deep penetration of digital products in the market, consumers well-versed in technology, confidence about future income growth and more than half of the population willing to spend and buy things, - those are the distinguishing features of the massive and extremely promising Chinese market that so many medium-sized and large companies all over the world are trying to get a foothold in.

Mildberry opened an office in Shanghai in 2014, and since then the company's been expanding its local projects portfolio and expertise, constantly studying and interacting with the Chinese audience.

On April 20, Mildberry Managing Partner Oleg Beriev made a presentation at the annual Russian Export Day business forum where he shared his knowledge about Chinese consumers and the company's experience in developing brands in China in co-operation with Russian and international companies, market researchers, distributors, and government sector companies.  

"In the next ten years, we are going to see some drastic changes in the make-up of the Chinese consumer market as new categories of consumers  will be emerging with their own unique character, preferences and identity. The Chinese are getting richer very fast: some forecasts predict that the average per capita income in urban areas will double rising from $4,000 to $8,000 between 2010 and 2020. This means that the average per capita income in China will be comparable to that of South Korea today, albeit still significantly lower than in some of the more developed nations such as the US (about $35,000) and Japan (about $26,000). The middle class in China makes up just 11% of the population. At the same time, compared to, say, the Americans, Chinese consumers are a lot more optimistic about their future income: 55% say they are confident that their income will increase significantly over the next five years, while in the US only 32% of the surveyed consumers expressed the same conviction, and in Britain only 30%," Oleg Beriev said.

The structure of consumer spending in China is also changing, he noted. The Chinese are spending an ever increasing share of their income on entertainment, travel and various performances, while the share of income being spent on groceries and beverages consumed at home remains the same.

Oleg Beriev devoted a significant part of his presentation to the Chinese millenials, who today make up 31% of the country's total population numbering 415 million people, which is more than the entire working population of the US and Western Europe combined.
"They are far better educated and know a lot more about the world than their parents and that is definitely having an effect on their preferences when it comes to choosing what to by and to their consumption style. Despite some claims to the contrary, young people in China are still living on a rather limited income making 3-4 dollars an hour, but they have the same access to digital technologies as their counterparts from more economically developed countries. Less than 5% of the Chinese millenials have their own cars, but they make about 40% of their purchases online," Mr Beriev noted.

He debunked the popular myth that young Chinese consumers are supposedly given to acting on impulse: according to him, the reality is that most of them have a 30-dollar-per-week budget and tend to be quite frugal with their money, always shopping around for the best price available. The only things that they are willing to spend money on apart from travel are smart phones and fashionable accessories.
"A lot of people in China buy new smart phones every 1 to 2 years, it is seen as a sign of belonging to a certain class of people and an important element of their identity," Oleg explained.

He cited a Goldman Sachs study which found that Chinese millenials were spending up to 30 hours per week on their mobile devices, bringing the discussion to the part about e-commerce.

"75% of Chinese generation Y regularly make purchases on-line, and e-commerce having finally got full access to people's pockets, has reached 30-40% of total consumer sales. The Goldman Sachs study also demonstrated that a vast majority, 85% of Chinese consumers, want to see more on-line services. This is clearly leading to a fusion of distribution channels in which real and virtual sales models are merging," Oleg believes.

In conclusion, he reminded those present of one of the most important distinguishing features of China: "Anyone who sees potential in China and wants to tap into that potential needs to understand that in the time that I have been telling you here about what the Chinese market is like it has already changed."