Table of Contents
Executive Summary
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- Overview of the Chinese economy and people in 2014
- The economy
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- Figure 1: Annual GDP (RMB billion) and year-on-year growth rate, 2005-14
- The people
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- Figure 2: Total Chinese population and trends, by urban and rural, 2005-14
- Consumer expenditure
- Consumer spending in 2014
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- Figure 3: Consumer expenditure, by sector (RMB billion), 2014
- Forecast for the next five years
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- Figure 4: Best- and worst-case forecast total consumer expenditure, 2009-19
- International brands versus domestic brands
- Brands originating from different countries have different perceived advantages
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- Figure 5: Perceptions of brands from different countries, January 2015
- Preference between Chinese and international brands: Mixed results
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- Figure 6: Consumer preference between Chinese and international brands and culture, January 2015
- Defining an international brand
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- Figure 7: Definitions for international brand, January 2015
- Spending more on services
- Experiential indulgence
- Dishonest business practices are most resented
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- Figure 8: Most annoying service defects, January 2015
- Attractive value-added services
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- Figure 9: Most appealing additional services, January 2015
- What we think
China Today – The Economy
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- Key points
- Slower but higher quality economic growth driven by consumption
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- Figure 10: Annual GDP (RMB billion) and year-on-year growth rate, 2005-14
- Online retail sales of consumer goods exceeds 10% out of total
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- Figure 11: Retail sales of consumer goods (RMB billion), by online and offline channels, 2014
- Increased disposable income drives consumer spending
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- Figure 12: Growth in per capita annual disposable income and spending, 2013-14
- Investment is more popular than simply saving money
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- Figure 13: Percentage of per capita annual spending out of disposable income, 2014
China Today – The People
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- Key points
- Steady population growth into urban areas
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- Figure 14: Total China population and trends, by urban and rural, 2005-14
- New births expected to decline significantly over the next decade
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- Figure 15: Age structure of the Chinese population, by gender, 2013
- The new generation of little emperors & empresses
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- Figure 16: Fertility rate (1st birth), by women’s age, China, 2003-13
- Pursuit of high quality family life
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- Figure 17: Marriage and divorce rate, 2006-13
- Old Gold
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- Figure 18: China total population, by age group, 2005-14
Expenditure Overview
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- Key points
- Sector breakout
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- Figure 19: Consumer expenditure, by sector (RMB billion), 2014
- Steady growth expected to continue
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- Figure 20: Best- and worst-case forecast total value sales, 2009-19
- Winners in the next five years
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- Figure 21: Fastest-growing market sectors, at current prices, by % growth, 2014-19 (est)
- OTC and Pharmaceuticals
- Leisure and entertainment
- Holidays
- Slower growth sectors for the next five years
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- Figure 22: Slowest-growing market sectors, at current prices, by % growth, 2014-19 (est)
- Home
- Beauty and personal care
- Foodservice
In-home Food
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- Key points
- What we think
- Chinese in-home food market continues to grow
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- Figure 23: Consumer expenditure on in-home food, 2009-14
- Figure 24: Proportion of new food product launches with selected claims, China, US and UK, Feb 2014-Jan 2015
- The market faces ongoing challenge to encourage consumers to trade up
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- Figure 25: Best- and worst-case forecast value sales of in-home food market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Build up consumer trust of brands and product quality
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- Figure 26: Preference between domestic and international brands on selected food categories, January 2015
- Consumers are interested in health benefits but moving away from benefits created by artificial additives
- Consumers desire multiple sensory experiences
Foodservice
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- Key points
- What we think
- Roads to recovery in the Chinese foodservice market
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- Figure 27: Consumer expenditure on foodservice, 2009-14
- Sophisticated taste and the desire for dining experience can fuel the foodservice market
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- Figure 28: Best- and worst-case forecast value sales of the foodservice market, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Consumer preferences between domestic and international brands
- Originality, uniqueness, and novelty partnership to embrace creativity
- Find the right balance of healthy diet and exotic flavours
Non-alcoholic Drinks
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- Key points
- What we think
- The market is cooling thanks to the structural change
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- Figure 29: Consumer expenditure on non-alcoholic drinks, 2009-14
- The slowing economy leads to decline in growth rate
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- Figure 30: Best- and worst-case forecast value sales of non-alcoholic drink market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Imported PPDs enjoy higher level of trustworthiness but domestic versions are thought to be more compatible with Chinese tastebuds
- Purity versus added flavours
- Added benefits show potential
Alcoholic Drinks Out of Home
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- Key points
- What we think
- The hype in the on-trade market is dying out
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- Figure 31: Consumer expenditure on alcoholic drinks out of home, 2009-14
- No pain, no gain: Restructuring process hits performance
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- Figure 32: Best- and worst-case forecast value sales of the alcoholic drinks out of home market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Consumers show polarised views on domestic and international brands
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- Figure 33: Consumers attitudes towards domestic and international brands, January 2015
- Food pairing shows potential to attract female consumers
- Lack of drinking occasions hampers further development of the wine segment
Alcoholic Drinks in the Home
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- Key points
- What we think
- Disappearing high-end segment hampers growth
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- Figure 34: Consumer expenditure on alcoholic drinks in the home, 2009-14
- Premiumisation of the beer segment will help growth to pick up
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- Figure 35: Best- and worst-case forecast value sales of the alcoholic drinks in the home market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- International brands closing the gap in premium segment
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- Figure 36: Preference towards international and domestic brands, by income, January 2015
- Xiaojiu (mini Baijiu) products showing potential when targeting young consumers
- Female segment shows potential in the beer market
Beauty and Personal Care
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- Key points
- What we think
- Beauty and personal care market grows steadily
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- Figure 37: Consumer expenditure on beauty and personal care and year-on-year growth rate, 2009-14
- Continued strong performance, yet the growth rate will slow down
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- Figure 38: Best- and worst-case forecast value sales of the beauty and personal care market, at current prices, 2009-19
- Male grooming still leads growth for 2015
- Fine fragrance market will struggle for growth in 2015
- Key consumer findings
- Urban consumers have developed sophisticated brand preferences
- Innovation will lead success for domestic brands
OTC and Pharmaceuticals
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- Key points
- What we think
- OTC and pharmaceuticals continue to grow
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- Figure 39: Consumer expenditure on OTC and pharmaceuticals, 2009-14
- Widening access fuels future growth
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- Figure 40: Best- and worst-case forecast value sales of the OTC and pharmaceuticals market, at current prices, 2009-19
- Big health, diversification, differentiation
- Traditional Chinese Medicine is in favour
- Men are more likely to choose Western medicine
Clothing and Accessories
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- Key points
- What we think
- Rising incomes fuelling trading up to higher value clothing
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- Figure 41: Consumer expenditure on clothing and accessories, 2009-14
- A sluggish economy and consolidation will impact growth in the next five years
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- Figure 42: Best- and worst-case forecast value sales of the clothing and accessories market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Consumer preference between domestic and international brands busts the foreign brand preference myth
- The menswear market highlights trends in demand for brand kudos, more online shopping and greater individuality
- Not all consumers aspire to luxury, creating more opportunities in the “masstige” segment of the market
Household Care
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- Key points
- What we think
- Healthy growth in the household care market
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- Figure 43: Consumer expenditure on household care, 2009-14
- Lower GDP growth rate will impact the household care market
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- Figure 44: Best- and worst-case forecast value sales of the household care market, at current price, 2009-2019
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Consumers are looking for natural ingredients in terms of household care products
- Launching products with innovations to satisfy consumer needs
- Leverage packaging to maintain consumer purchasing interest
Technology and Communications
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- Key points
- What we think
- Healthy growth in the technology and communications market
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- Figure 45: Consumer expenditure on technology and communications, 2009-14
- Technology and communications market seeing an optimistic future
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- Figure 46: Best- and worst-case forecast value sales of the technology and communications market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- No significant difference in perceived product quality, but consumers still prefer using international brands rather than domestic brands
- Domestic and international technology brands are clearly separated in consumers’ perceptions
- Chinese consumers are upgrading technology products
Leisure and Entertainment
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- Key points
- What we think
- A fast-growing market thanks to the boom of lottery and film industry
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- Figure 47: Consumer expenditure on leisure and entertainment, 2009-14
- Amusement and theme parks to act as future growth engines
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- Figure 48: Best- and worst-case forecast value sales of the leisure and entertainment market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Common leisure habits: watching TV after work, going shopping on weekends and travelling during longer holidays
- People prefer international films but Chinese pop music
- Consumers moving from the TV set to watch more online videos
- Out-of-home leisure service providers can target mums and family visits
Home
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- Key points
- What we think
- Dynamic growth trend in different home appliance and gadget segments
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- Figure 49: Consumer expenditure on home goods, 2009-14
- Aspiration for healthy and smart lifestyles continues to drive growth
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- Figure 50: Best- and worst-case forecast value sales of the home market, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- International brands are relatively more appealing to consumers in tier one to three cities over domestic brands in the household appliance market
- Consumers desire a healthy living environment
- Consumers look for high-technology home appliances/gadgets which bring them convenience
Transport
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- Key points
- What we think
- Transport market grows steadily
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- Figure 51: Consumer expenditure on transport, 2009-14
- Slowing growth in the next five years
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- Figure 52: Best- and worst-case forecast value sales of the transport market, at current prices, 2009-14
- Winners for 2015
- Losers for 2015
- Key consumer findings
- Consumers show more preferences for JV rather than domestic brands when buying vehicles
- Safety is viewed as first and foremost issue in transport market
- Spending power of female consumers
Holidays
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- Key points
- What we think
- The holiday market thrives over 2009-14
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- Figure 53: Consumer expenditure on holidays, 2009-14
- Domestic holidays still prevail, while outbound holidays are growing
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- Figure 54: Domestic and outbound Chinese travellers, by person visits, 2009-14
- Continuous demand for holidays propels market
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- Figure 55: Best- and worst-case forecast value sales of the holidays market, at current prices, 2009-19
- Winners for 2015
- Outbound travel has more momentum to boost
- Losers for 2015
- Traditional travel agencies would have to transform to catch up with OTAs
- Key consumer findings
- Consumers’ preferences for online booking have led to severe competition among OTAs
- Chinese prefer last-minute booking
- Local food is an important attraction to Chinese travellers
Personal Finance and Housing
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- Key points
- What we think
- Personal finance and housing market is out of the woods
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- Figure 56: Consumer expenditure on personal finance and housing, 2009-14
- Utilities have grown slowly in 2014
- Lower interest rates having an effect in 2014
- Health insurance leads the growth of personal insurance sector
- Personal finance and housing will grow strongly in the next five years
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- Figure 57: Best- and worst-case forecast value of the personal finance and housing market, at current prices, 2009-19
- Winners for 2015
- Health insurance will continue to be driver of growth
- Losers for 2015
- Falling interest rate means lower mortgage costs in the short run
- Key consumer findings
- Chinese consumers pay much attention to saving
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- Figure 58: Financial priorities in the next 12 months, December 2014
- Consumers are prioritising saving money for mortgages
- Flourishing housing market will contribute to the loan market
Miscellaneous
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- Key points
- What we think
- Bargains fuel the clothing and accessories market
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- Figure 59: Consumer expenditure on miscellaneous products and services, 2009-14
- A sluggish economy and consolidation will impact growth in the next five years
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- Figure 60: Best- and worst-case forecast value sales of miscellaneous other expenditure, at current prices, 2009-19
- Winners for 2015
- Losers for 2015
- Key consumer findings
- The over-55 population is growing as a total proportion, but remains significantly underserved, indicating huge new market potential
- Middle income Chinese consumers are looking to invest in health, wealth, education and home improvements.
The Consumer – Perceptions of Brands from Different Countries
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- Key points
- Brands originating from different countries have different perceived advantages
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- Figure 61: Perceptions of brands from different countries, January 2015
- Chinese brands need to move beyond simply being perceived as more affordable
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- Figure 62: Percentage of consumers who associate brands from different countries as being “relevant to me”, by monthly household income, January 2015
- Gaps to be filled in offering “good customer service” and being perceived as “classic”
The Consumer – Preference for Chinese versus International Brands and Culture
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- Key points
- Preference between Chinese and international brands: Mixed results
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- Figure 63: Consumer preference between Chinese and international brands and culture, January 2015
- International brands have a higher aspirational impact on women
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- Figure 64: Consumer preference between Chinese and international brands and culture, by gender, January 2015
- Younger generation is not necessarily more fond of international brands
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- Figure 65: Domestic versus international brand lovers, by age, January 2015
- City tier and working environment make a difference
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- Figure 66: Domestic versus international brand lovers, by city tier and company type, January 2015
The Consumer – Defining International Brands
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- Key points
- General definition for an “international brand”: A globally well-known brand that provides consistent product and service quality
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- Figure 67: Definitions for international brand, January 2015
- Coming from a developed country, using imported ingredients and being produced overseas are key drivers for international brand lovers
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- Figure 68: Definitions for international brand, by domestic and international brand lovers, January 2015
- Imported products can target high-income females in tier one cities
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- Figure 69: Definitions for international brand – “Made from imported ingredients/materials” and “manufactured in foreign countries”, by gender, income and city tier, January 2015
- Having an official website in multiple languages helps build credibility
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- Figure 70: Definitions for international brand – “Multiple languages available on brand’s official website”, by age, January 2015
The Consumer – Attitudes towards Chinese and International Brands
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- Key points
- Consumers are thinking better of Chinese brands
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- Figure 71: Attitudes towards Chinese brands, January 2015
- Chinese brands on the track of closing the gap to gain high-end users
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- Figure 72: Attitudes towards Chinese brands (% of consumers who agree or strongly agree with the statements), by income, January 2015
- High-end international brands can still capitalise upon people’s vanity
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- Figure 73: Agreement with the statement “As long as the product quality is good, it doesn’t matter whether it’s a Chinese brand or an international brand”, by domestic and international brand lovers, January 2015
- Opportunities and watch outs for Chinese and international Brands
- Brand history, innovation and proven success in overseas markets can add credibility to a Chinese brand
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- Figure 74: Agreement with statements about brands, January 2015
- International brands can entice consumers by positioning themselves as trend-leaders
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- Figure 75: Agreement with the statement, “Products that are popular overseas is worth trying”, by demographics, January 2015
- Opportunity for International brands to offer localised products
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- Figure 76: Agreement with the statement, “It is worth paying more for products designed specifically for Chinese consumers”, by income and brand preferences, January 2015
- Chinese consumers looking to be treated fair by international brands
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- Figure 77: Agreement with the statement, “International brands priced higher in China than overseas put me off from buying them”, by age and income, January 2015
The Consumer – Most Annoying Service Defects
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- Key points
- Dishonest business practices are most resented
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- Figure 78: Most annoying service defects, January 2015
- Friendly staff and efficient services to appeal to the young generation – males in particular
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- Figure 79: Most annoying service defects, by demographics, by demographics, January 2015
- High-end consumers expect well-trained service people
The Consumer – Service Offerings Most Interested In
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- Key points
- Scope for the expansion of trade-in services
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- Figure 80: Additional services most interested in, January 2015
- Young consumers value customisation services
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- Figure 81: Additional services most interested in, by age and gender, January 2015
- High earners look for exclusive services with higher standards
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- Figure 82: Additional services most interested in, by income, January 2015
The Consumer – Attitudes towards Spending
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- Key points
- Good shopping experience attracts affluent people
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- Figure 83: Attitudes towards “It is worth paying more for a better shopping experience*”, by income and city tier, January 2015
- Experiential indulgence becoming the latest sought-after “treats”
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- Figure 84: Consumer attitudes towards “I prefer spending on services* to spending on products as treats”, by city tier, January 2015
- Do uniqueness and big brand names contrast with each other?
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- Figure 85: Attitude towards on “Uniqueness of a product is worth paying more for than a big brand name.” by gender and age, 2014 versus 2015
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