MEC research decodes e-commerce potential of women in 583 low tier cities. Women are half the population and control the majority of disposable income in their families, as they are often the principal purchaser of groceries and daily necessities. In China, many women also make purchase decisions for their parents and in-laws. In the past, they shopped in brick and mortar stores. Nowadays, 44% of women in tier 1 and 2 cities and 23% of women in low tier cities also shop online. The research from MEC uncovered that in terms of per capita spend on e-shopping in the past year, women in low tier cities, who spent an average of RMB 1757, were only RMB 339 behind the spend of their tier 1 and 2 counterparts.

1. From Steps to Clicks
Online Shopping Behavior of
Women in Low Tier Markets
Stephanie Chai, Liu Jie, Wang Yuan Yuan, Huang Jia, Wu Jin

2. Female purchase power in China
- Disposable income of Chinese They are avid online shoppers. Their average annual spending
females are on the rise Tier 1/2 cities: 44% on online shopping:
- Female contributes to 35.8% Tier 3/4 cities: 23% Tier 1/2 cities: Rmb2,096
of family income and spend Tier 3/4 cities: Rmb1,757
29.2% of her family’s money on Only Rmb339 behind
herself
- Many also make purchase
decisions for their families, their
parents & in-laws
Source: Huakun Female Lifestyle Survey 2011

3. E-commerce in China
China’s middle and E-commerce helps Broadband internet Credit Suisse forecast
affluent classes are marketers break out of the penetration is close to that China’s e-
spread all over the limiting reach of brick and 90% in tier 1 to tier 4 commerce will reach
country in pockets of mortar stores. cities. Rmb2,703 billion by
growth and wealth. 2015, accounting for
6.7% of retail sales.
Source: Credit Suisse Equity Research, March 2011

4. Digitization

5. Digitization taking low tier markets by storm
Media reach of tier 3/4 cities
-10%
93% 94%
85%
+25%
50%
-21% -30% PDD 2007
40%
32%
PDD 2009
29% 30%
24% 23%
26% PDD 2011
21%
6% 6% 7%
TV
TV (yesterday) Internet Newspaper
Newspaper Magazine (past 1 Radio Radio
Magazine (yesterday)
(yesterday) (yesterday)
(yesterday) (yesterday)
(yesterday) (past 1 week)
week) (yesterday)
Respondents: people aged 15-45 PDD 2007 n=6153 PDD 2009 n=7577 PDD 2011 n=5151
Data source: PDD2007, 2009, 2011

6. E-commerce is fast penetrating low tier markets:
Online shopping is among top 10 online activities
Top 10 online activities Tier 3/4 female Tier 1/2 female
Instant messenger (MSN, QQ) 74% 79%
Watch movies/ TV series/ TV programmes online 61% 47%
Use search engine for information 44% 70%
Online gaming 33% 60%
Read news on media websites (eg. Renmin, Xinhua) 33% 33%
Email 31% 37%
Listen to or download music/ ringtones 24% 20%
Browse daily life information 23% 48%
Online shopping 23% 44%
Visit SNS (Kaixin, Renren) 21% 24%
Data source: PDD2011

7. Women in low tier markets & online-shopping

8. With the massive economic growth,
Chinese consumers are becoming richer

9. The monthly HHI in tier 3/4 markets is still less
than that of tier 1/2 markets
8,147
5,062
Tier 3/4 Tier 1/2
Data source: PDD2011, CNRS2011

10. However, the rate of increase of monthly HHI in
low tier markets is faster
+45% 2011
8,147 2009
+58%
5,636
5,062
3,198
Tier 3/4 Tier 1/2
Data source: PDD2009, 2011 CNRS2009,2011

11. Lifestyle & consumption of women in low tier
markets have also changed, getting closer to
their counterparts in tier 1/2 markets

12. In fact, they have a strong demand for “imported
compared with domestic products”
63
56
35
2009 Tier 3/4 2011 Tier 3/4 2011 Tier 1/2
female female female
Data source: PDD2009,2011 CNRS2011

13. And trust for international and well-known brands
45
37
17
2009 Tier 3/4 2011 Tier 3/4 2011 Tier 1/2
female female female
Data source: PDD2009,2011 CNRS2011

14. They can be “more enthusiastic” than their
counterparts in tier 1/2 cities

15. 10% more tier 3/4 consumers “like to keep up
with the latest fashions”
52
42
Tier 3/4 female Tier 1/2 female
Data source: PDD2011 CNRS2011

16. 8% more tier 3/4 consumers are likely to “spend
money without thinking”
39
31
Tier 3/4 female Tier 1/2 female
Data source: PDD2011 CNRS2011

17. Online-shopping behavior

18. More active in offline modern channels
2011 3/4 female
Tier Tier 3/4 female 20113/4 female e-shopper
Tier Tier 3/4 female e-shopper
77 79 79
70 71
59
42 41
39
32 35
31
Shopping Convenience Independent Wet market Grocery store Street vendor
mall/center store/Mini- supermarket/
supermarket Hypermarket
Modern channels Traditional channels
Data source: PDD2011

19. Except for TV, female online-shoppers in low tier
cities consume more media
Tier 3/4 female Tier 3/4 female e-shopper
88
77 80
71
63
57
34 37
31 30
20 17
12
6 6 6
（yesterday) （past 1 week) （yesterday) （past 1 month)（yesterday)（past 1 week)
（past 1 month)（yesterday)*
TV OOH Internet Magazine Newspaper Mobile Cinema Radio
Data source: PDD2011

20. Online-shoppers adopt a variety of ways to
access the internet
87% 31%
86%
22%
31% 13%
23% 7%
Blue for Total
Orange for online-shopper
Data source: PDD2011

21. They are also heavy users of mobile internet,
gaining access from both in and out of home
Tier 3/4 female mobile internet user Tier 3/4 female e-shopper who uses mobile Internet
75
68
47
44
33
29
22 21
16
10
2 0 1 3
At home On the go
On going At work At school At someone Internet Others*
else's home café*
Data source: PDD2011

22. 18% of female online-shoppers search for information and
16% write/read Weibo via mobile internet. Highly likely
that they share shopping information and experiences
anytime anywhere
Tier 3/4 female Tier 3/4 female e-shopper
17 18
16
12
For information Write/read microblog
Data source: PDD2011

23. They also want to purchase on the spot
Source: Digital Natives @ apps.com, MEC 2011

24. Female online shoppers in tier 3/4 markets are
younger than those in tier 1/2 markets
Tier 3/4 female e-shopper
Tier 1/2 female e-shopper
50
47
42
27 33
19
22 23 12
12 13 11 6
6 5 3 2
1 3
1
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Data source: PDD2011, CNRS2011

25. Women of North China are the most active online-
shoppers. Whereas for low tier markets, it is the
women of NW China that are most active
Tier 3/4 female e-shopper Tier 1/2 female e-shopper
34
25
24 22 26 21
18
11 10 12 10 9 10
5
North China Northeast* East China Northwest Southwest South China Central
China
Data source: PDD2011, CNRS2011

26. Top 5 categories tier 3/4 female online shoppers
like to purchase
Clothing/Accessory/shoes/bags
Skincare/cosmetics/perfume
Household products
Sport/leisure/outdoor products
Books/audios/softwares/magazines
IT digital products
Beauty & hair
Food*
Home appliances*
Baby care/children's wear*
Catering*
Mobile phones/ communication…
Others*
Air tickets*
Art Shows/ movies/ tickets*
Flowers/ gifts*
Photo*
Travel/holiday*
Automobile* Tier 3/4 female e-shopper
Pub/KTV* Tier 1/2 female e-shopper
Club/Gym*
Data source: PDD2011, CNRS2011

27. More of them buy clothing/accessory, sport/leisure, IT
digital products and beauty & hair online than women in
tier 1/2 markets
Clothing/Accessory/shoes/bags
Skincare/cosmetics/perfume
Household products
Sport/leisure/outdoor products
Books/audios/softwares/magazines
IT digital products
Beauty & hair
Food*
Home appliances*
Baby care/children's wear*
Catering*
Mobile phones/ communication…
Others*
Air tickets*
Art Shows/ movies/ tickets*
Flowers/ gifts*
Photo*
Travel/holiday*
Automobile* Tier 3/4 female e-shopper
Pub/KTV* Tier 1/2 female e-shopper
Club/Gym*
Data source: PDD2011, CNRS2011

28. With the development of online shopping in tier 3/4 cities,
household products have lots of upside potential
Clothing/Accessory/shoes/bags
Skincare/cosmetics/perfume
Household products
Sport/leisure/outdoor products
Books/audios/softwares/magazines
IT digital products
Beauty & hair
Food*
Home appliances*
Baby care/children's wear*
Catering*
Mobile phones/ communication…
Others*
Air tickets*
Art Shows/ movies/ tickets*
Flowers/ gifts*
Photo*
Travel/holiday*
Automobile* Tier 3/4 female e-shopper
Pub/KTV* Tier 1/2 female e-shopper
Club/Gym*
Data source: PDD2011, CNRS2011

29. They only spend 339 RMB less on online-
shopping than their counterparts in tier 1/2 cities
Average annual expenditure
2009 2011
online (RMB)
Tier 3/4 female e-shopper 713 1,757
Tier 1/2 female e-shopper 1,450 2,096
Data source: PDD2009,2011, CNRS2009,2011

30. Furthermore, the rate of increase is actually
much higher
Average annual expenditure
2009 2011
online (RMB)
Tier 3/4 female e-shopper 713 1,757 +146%
Tier 1/2 female e-shopper 1,450 2,096 +45%
Data source: PDD2009,2011, CNRS2009,2011

31. And they are willing to spend more of their
annual household income on e-shopping than
their counterparts in tier 1/2 cities
+64%
+13%
Spent on e-shopping / monthly HHI (%)
2.3
1.8 1.6 2011
1.4
2009
Tier 3/4 female e- Tier 1/2 female e-
shopper shopper
Data source: PDD2009,2011, CNRS2009,2011

32. Implications

33. Implications - 1
Offline and online channels and platforms are intertwined
• Consumers tailor their usage of offline and online channels and
platforms based on availability, immediate needs, size of shopping list,
convenience in terms of time spent or geographical distance. Offline and
online should no longer be seen as standalone silos, but should be
treated as integral components of a single business model. The key is
to drive traffic from offline to online and vice versa as consumers move
along the purchase pathway.

34. Implications - 2
From e-commerce to social commerce
• Social commerce refers to the use of social strategies to anticipate,
personalize and energize the shopping experience. Chinese consumers
are very social in their purchase process. They want confidence in what
they buy from their friends, and insight from their community. They are
prolific reviewers and readers of online product reviews. As this evolves,
the marketing mix will likely be more and more driven by consumers.
Marketers need to use new ways to sense and shape demand. The role
of brands is to be consumer’s friend and mentor, forging emotional
linkages with consumers. Brands can also create conversations with
consumers and provide them with materials to talk about in the social
space.

35. Implications - 3
Building trust
• The issue of trust is central to building an effective, long-lasting online
relationship with consumers. This is especially true for the China market,
as consumers have an underlying wariness of fake products being sold
online. Reviews and recommendations from friends and fan communities
serve to alleviate some of the distrust. However, there are multiple facets
of consumer trust online, such as product quality, internet safety,
efficiency, return policy, warranty etc. Success for any e-commerce
player in China involves tackling the various components affecting trust
along every step of the purchase pathway.

36. Implications - 4
Mobile strategy
• 70% of female online shoppers of low tier cities use their mobile phone to
access the internet at home, so a mobile strategy to offer convenience
and flexibility is necessary. The mobile strategy should be integrated into
the e-commerce and communication plan via the use of gamification,
augmented reality, social couponing and mapping/geospatial
technologies etc.

37. Research methodology

38. Research methodology
• This is a data mining exercise, drawing from GroupM Knowledge Center’s Project Deep
Dive (PDD) surveys. PDD looked at consumption and media behavior of consumers in
low tier cities (provincial level cities, county level cities and counties).
• 3 waves (2007, 2009 and 2011) of PDD survey data were used. The latest 2011 survey
has a wider coverage, with the age bracket of respondents extended from 15-45 to 15-64
years old.
• Given that the respondents of PDD 2007 and PDD 2009 were in the 15-45 age bracket,
only data of those who are from the same age group in PDD 2011 were used for YOY
comparison.
• As for slides not involving YOY comparisons, the data were based on an age range of 15
to 64 years old. Due to the difference in the age group being used, the results may vary
slightly between slides.

39. Bibliography

40. Bibliography
• Altimeter (2010) – Rise of Social Commerce : A Trail Guide for the Social Commerce
Pioneer, November 2010
• BCG (2010) – China’s Digital Generations 2.0: Digital Media and Commerce Go
Mainstream, May 2010
• BCG (2011) – The World’s Next E-Commerce Superpower, November 2011
• Huakun Female Lifestyle Survey 2011
• KPMG International (2011) – Going Social
• Credit Suisse (2011) – Equity Research: China Internet Sector, March 2011
• McKinsey Quarterly (2009) – The promise of multichannel retailing, October 2009
• McKinsey Quarterly (2010) – China’s Internet Obsession, February 2010
• MEC (2011) – DigitalNatives@apps.com

41. For more information, please contact:
Theresa Loo
National Director – Strategic Planning, Analytics & Insight
MEC China
29/F, 989 Changle Road
Shanghai China 200031
Direct line: +86 21 2307 7790
Switchboard: +86 21 2307 7800
theresa.loo@mecglobal.com
Project Manager & Editor: Stephanie Chai
Data Analyst: Wang Yuan Yuan (Ivy)
Report write-up: Liu Jie (Jane)
Researchers: Amanda Song, Huang Jia (Fish), Wu Jin (Mandy), Cai Jing