Digital innovation key to wooing lower-end consumers

The rapid adoption of digital technology by low to middle-end consumers in China creates great opportunities for companies to achieve growth and increased market share, the World Economic Forum's Annual Meeting of the New Champions in Tianjin was told on Tuesday.

This means companies that can create value through digital innovation will be well placed to take advantage of greatly increased spending by these consumer segments, according to research by management consulting firm Accenture.

"Online shopping is popular among lower-income Chinese consumers in small and medium-sized cities, as they can shop as conveniently as the high-end consumers in China's biggest cities," said Gianfranco Casati, Accenture's group chief executive for growth markets.

"This trend, driven by the availability of affordable mobile devices, such as smartphones and tablets, is creating new opportunities for growth, particularly as it eliminates the barrier created by a lack of access to physical stores.

"Successfully capturing these opportunities requires companies to place digital at the heart of their strategies, and understand and embrace the demands of the different segments of China's digital consumers."

Urban consumers in the low and middle-end segments represent 70 percent of nationwide urban consumers in China and spent approximately $2 trillion in 2013 — nearly two-thirds of all mass urban consumer spending.

According to Accenture's analysis, spending by low and middle-end consumers could reach $4 trillion by 2020.

Gong Li, chairman of Accenture Greater China, said, "Winning digital consumers from this lower-end segment is not easy as they are both frugal and concerned with quality.

"Companies chasing growth amongst this segment will need to plan for the lack of business infrastructure and logistics to deliver quality products and services, difficulty generating scale and efficiency from scattered smaller cities near rural areas, and the different expectations of these digital consumers, who not only have lower incomes but also lower brand awareness and loyalty."

chenyingqun@chinadaily.com.cn