How brands can navigate China’s evolving consumer landscape

Discover how brands are transcending price competition to focus on long-term growth for Singles’ Day on Alibaba’s platforms amid the shifting consumer landscape in China.

Amid the ever-changing global consumer landscape, China remains a pivotal market for many brands and retailers. Despite reports of generally low consumer confidence, there have been pockets of growth in specific consumption categories and demographics. The key to success for individual retailers is to leverage the best platforms to attract consumers and solidify brand loyalty.

Taking a more nuanced and granular approach will enable brands to achieve healthy growth in the complex Chinese market. For instance, the 2024 McKinsey China Consumer Report suggests that consumer confidence of Gen Z (those born after 2000) remains high and that foreign brands continue to hold significant appeal among Chinese consumers. Looking at specific categories, urban outdoor apparel, sportswear, and health and wellness goods saw double-digit sales growth according to the McKinsey study.

Through an array of loyalty programs and features, Alibaba, a leading technology and e-commerce company, is helping global brands connect with middle-class and young consumers to drive long-term growth, rather than solely competing on prices.

Moving beyond price wars and targeting high-value consumers

In addition to price competition, high-spending consumers are also driving change in China’s evolving consumer landscape. Tailored e-commerce programs and features have become essential to attract these customers who purchase more product categories at a broader range of price points. For example, Alibaba’s China e-commerce platforms Taobao and Tmall Group capture the most valuable and engaged consumers in China with signature loyalty programs such as 88VIP. 

Taobao and Tmall Group’s 88VIP members spend significantly more than nonmembers and contribute a large share of sales for leading brands. 88VIP is China’s largest paid e-commerce membership group, which grew to more than 42 million members by June 2024. Annual spending by 88VIP members is nine times that of nonmembers, buying from five times the number of categories versus nonmembers. Of note, the Gen Z cohort of 88VIP members grew 67% over the past year. On average, they browse the Taobao app 25 days a month, showing high engagement. In China’s top-tier cities where consumer purchasing power is high, one out of every 10 Taobao users is an 88VIP member. 

This particular group of consumers is also comprised of trendsetters who actively explore new trends, lifestyles, and products. For example, the year-over-year growth in gross merchandise value contributed by 88VIP members is 3.3 times higher in the urban outdoor product category and 3.5 times higher in hobby-driven products, such as collectible toys, musical instruments, and cameras, compared to nonmembers.

While competitive pricing strategies are still crucial, offering tailored benefits and services to this consumer demographic is critical for growth. 88VIP customers contributed more than 90% of gross merchandise value (GMV) for La Mer during the 2024 Singles’ Day sales season. In an exclusive four-day sale to this group, La Mer recorded about RMB 1 billion (almost $140 million) in sales.

Brands can also leverage Alibaba’s robust platforms to cultivate a loyal customer base, including merchant membership programs in which brands reward their premium customers with shopping benefits and interactive experiences. From April to September 2024, 460 million new consumers joined merchant membership programs through Alibaba platforms. Merchants and brands saw a corresponding 26% year-on-year increase in repurchase orders by members in their programs. Merchant members also show higher repurchase rates and average purchase values than general consumers.

Investing in the customer experience 

Brands and retailers should also invest in improving the customer experience to build sustainable growth in the China market. Consumers in China are becoming increasingly focused on their shopping experiences, such as ease of returns and advantageous loyalty programs. 

Taobao and Tmall Group have offered several initiatives to help brands provide the best retail experience while maintaining efficient operations. One key measure is to tie brands’ customer experience scores with other operating metrics, awarding highly rated merchants with higher visibility and more traffic on the Taobao app. 

Technology is a major area of focus for brands looking to reach new consumers. To that end, Taobao and Tmall Group provides AI-based tools to more than 4 million merchants, assisting with content creation, marketing, and operations. These tools help brands reduce costs and improve efficiency, allowing them to focus on navigating complex consumer behaviors.

For instance, Taobao and Tmall Group’s AI tools help brands in their targeted marketing efforts, reducing wasted spending and focusing on high-value consumer segments. With the help of its AI-powered marketing tool Quanzhantui, nearly 290,000 merchants experienced sales growth for more than 1.6 million products.

Optimizing reverse logistics is another crucial growth area for these platforms. Taobao and Tmall Group’s return service, Tuihuobao, has helped more than 1 million merchants reduce logistics costs by up to 58%. This reduction proves especially beneficial during high-sales periods, such as Singles’ Day. The platform also revised its refund-only policy to encourage merchants to improve customer service. Since the launch of the upgraded policy in August 2024, the proportion of merchants with high Store Experience Scores (4.8 or above), part of Taobao’s proprietary evaluation system to assess experience quality, has increased to 36%. Highly rated merchants have greater autonomy in managing customer disputes, translating customer service value into greater operational efficiency. 

Singles’ Day 2024

Originally thought up in 1993 by four single university students, Alibaba transformed Singles’ Day in 2009 into the largest e-commerce shopping festival in the world, encouraging people to treat themselves. Amid global uncertainties and shifting consumer values, it has evolved into a pivotal sales period for brands to strategize long-term growth, uncover insights, and reach diverse consumers.

For 2024, Taobao and Tmall Group allocated RMB 10 billion (nearly $1.4 billion) to boost cross-platform traffic and RMB 3 billion (almost $418 million) to subsidize marketing costs, providing critical support to merchants during this important sales period. Additionally, Taobao’s integration with WeChat Pay also contributed to a record number of new users in the app in September. This offered added convenience to consumers on Taobao and Tmall during the shopping festival. 

These investments have translated into robust 11.11 GMV growth in 2024. A record 589 brands surpassed RMB 100 million (almost $14 million) in GMV, up from 402 brands in 2023. More than 179 brands from major categories, such as apparel, beauty, and consumer electronics, achieved this milestone, reflecting the interests of China’s middle-class consumers. Four designer and collectible toy brands successfully joined this league, reflecting the young generation’s growing enthusiasm and consumption drive.

As China’s consumer market evolves, brands must move beyond price wars and focus on value propositions, such as brand loyalty, customer experience, and operational efficiency. By leveraging these core pillars, brands will be well-positioned to succeed in this important market.

Note: This article was supplied by Alibaba.