The 7 most promising markets in China

What are the most promising market in China in 2013? An analysis realized by our Partner Daxue Consulting.

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Market in China

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Digital goods & gaming

Following the top two game expos in the world, the Electronic Entertainment Expo and Tokyo Game Show, ChinaJoy is the 3d in the world and the N°1 game expo in Asia. This show that electronic game market from China occupies an important position in the global economy.

China’s online games industry generated 300 million RMB in 2001 and then boomed reaching an astonishing 2.71 billion RMB turnover in 2009. In 2011, two online games made in Korea and introduced in China by Tencent – one called CrossFire and the other one Dungeon and Fighter- reached and shared the first two rank positions with sales of 5.46 billion RMB and 2.95 billion RMB respectively. Another domestic online game named Meng Huan Xi You developed and operated by NetEase took the third place with 2.76 billion RMB. As you can see, within 2 years, one single game did more than the entire industry in 2009!

Although China is regarded as an emerging market, many electronic games businesses, such as Xbox, PlayStation, Wii, have been counterfeited or poorly operated in China as it as been judged as “seriously harming the healthy growth of young people“ since 2002.

Baby food

China has 60 million babies under the age of four and the demand for milk to feed those kids is huge, Synlait Milk chief executive John Penno says. As a consequence, we can easily find out that China has a huge baby food market including purees, infant formula, etc.

According to a marketing research in China about retail sales in the baby food industry, baby food and baby formula milk market had exceeded 400,000 tones and reached 422,000 tones in 2010 from 385,000 tones in the previous year.

From a GDP share perspective, baby food spending share of GDP in China reached 0.12% of total GDP in 2011 compared to 0.10% during the previous year. Another market report from China released by the Canada’s Agriculture and Agri- Food displayed some key figures and showing a very promising trend for baby food consumption and retail sales (as seen in the table below).

Market research China

 

All these figures show, baby food market in China has been expanding and will certainly exhibit a robust growth for the next decades. Why? Basically for 2 reasons: first, China has already entered a stage of “after 80” and “after 90” generations who are always picky on baby food and safety. Secondly, a sustained and steady increase of Chinese GDP is a basis for the overall growth consumption of baby food market.

Education

According to a report named “China’s Education Development Report” released by Ministry of Education of the People’s Republic of China, Education and Training industry have already been regarded as the most promising industries in China. What’s more, this report estimated that education and training market will generate a total value of 500 billion RMB in the next 5 to 10 years. Another market analysis and forecast report illustrated that 10,000 education and training companies had already been established in 2009 and still expanding in first-tier cities.

This industry can be classified into several types. First, language teaching organizations for people from kindergarten to university are very popular such as New Oriental Group, Ambow Education Holding Ltd., and TAL Education Group. Secondly, vocational schools for IT engineers, accountants, and construction project managesr are also one of the most important sectors.

The huge profit brought by this market drives a flock of people to dive in this industry. Let’s take a one-to-one tutor for a middle school student as an example. The tuition fee charged by an education and Training Company is about 120 RMB per hour, however, the teacher can only receive 1/4 of the whole fees.

Healthcare

Pharmaceuticals and medical devices are two promising segments of healthcare market development in China because of unprecedented economic rise and fast growing healthcare spending. Over the period of 3 years from 2004 to 2009, the figures from a market analysis indicated that total cost for healthcare had doubled, rising from 759 billion RMB to 1.72trillion RMB.

From the market share in 2009 to see, China’s healthcare industry is basically divided into following sectors: Pharmaceuticals (31%), Biotechnology (25%), Medical devices (17%), Medical services (11%), Health administration (4%), and others (11%).

China MArket Survey

However, in front of this rapid development of healthcare industry, individuals still undertake most of healthcare costs themselves and no national insurance system supports it. Therefore, a special column from Fox China Online told that Chinese government should encourage foreign companies to invest and establish a program of privatization for hospitals in China in order to be included into Chinese insurance and medical system to balance demand and supply.

Cosmetics

State Statistics Bureau of China released a market research for China displaying a set of data showing that the total sales volume of cosmetics in China reached 134 billion RMB in 2012, with year-on-year growth of 17.0%. Take new emerging online cosmetics shops as examples, the overall circulation on Jumei website is the largest wit a number of visitors reaching 840,000 per day in January, 2013. As the chart shows below, the website called Lafaso ranks second with a total of 624,000 visitors per day during the same month. But it is reported that Lafaso is more advantageous for customers.

Some Chinese consultants pointed out that cosmetics industry will keep a rapid growing trend till 2016 with approximately 270 billion RMB market in beauty and personal care product. On the other hand, the structure of population, the level of consuming affected by income, and customer behaviors will decide the market volume in the future.

 

Very high luxury

In 1995, China was almost a forgotten market for luxury brands. Only few but visionary brands came to China. At that time, the famous Beijing street Wangfujing could be regarded as the mother of Chinese luxury market. During the period from 2000 to 2005, the time for luxury products was coming. The market turnover increased from 2 billion RMB in 2000 to 25 billion RMB in 2005 with a 60 percent to 70 percent annual compound growth.

From 2006, China luxury market rushed into an explosive growth period. Especially when the economy of Europe and America experienced a downturn and crisis, China has become the driving engine of the entire luxury market at a worldwide level.

When we looked at the development path of luxury goods in different tier cities in China, those luxury brands expanded their chain stores incredibly in second- and third- tier cities to grasp as many customers as possible. This was the case for LV, Armani, Hugo Boss, Mont Blanc which have already implemented more than 100 physical stores in China.

Travel & leisure

china-touristBased on the market report published by Chinese Tour Research Institute in 2012, 82 million Chinese tourists went abroad for travelling which means an astonishing year-to-year growth of 16.7%. A total of 98 billion U.S. dollar drove China into the largest tourist country in Asia.They are already Top Customer in the USA.

Consultants in Chinese tourism industry have estimated that the next ten years will be another period of fast growth in tourism. As for f travelling, it will evolve from tour groups into individual travel, in-depth/theme tours, and tailor-made luxury tours. Tailor-made luxury tours are including international high-end hotels, such as Aman Resort and Westin, taking first class cabin, such as Emirates airline in an Airbus A380, and experiencing an extraordinary and unique tour, for instance an adventure in the Antarctic Pole, or enjoying an aurora experience in the Arctic Pole. The market of travel and leisure seems highly fragmented and some concentration is to expected as it happened to the giftbox company ( Smartbox like) D’ELysée bought by a former subsiduary of leading French hotel chain.

According to a research in China, there are more than 2.7 million Chinese people whose personal property is over 6 million RMB. Among those people, 60 percent of people estimate that they would like to choose a high-end service for travelling during their leisure time. In 2010, Ctrip, as one of the biggest travel agencies in China, promoted a 60 days global tour service for 500,000 RMB per person in only 20 places. And once published online, those 20 places were sold out in a few minute.

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Daxue Consulting