China’s consumption upgrading nurtures new e-commerce niche

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Xiaomi products are displayed during a news conference in Hong Kong. Reuters

BEIJING (Xinhua) – For Tong Jun, a 32-year-old financial professional, price tags and brand names are no longer major concerns when making a purchase. Premium quality has the final say.

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Well-heeled but still calculating, Mr Tong craves more bang for the buck when he spends. “Good things do not necessarily come at high prices,” Mr Tong believes.

That is also the much-touted motto of China’s burgeoning premium e-commerce platforms, which offer high-quality products at affordable prices to cater to a growing niche market nurtured by the country’s rising middle-class consumers.

Mr Tong spent nearly 20,000 yuan (about 2,912.8 U.S. dollars) on online shopping last year, and most of the money went to homemade products instead of pricey big international brands.

“Don’t label me ‘consumption downgrading,’” Mr Tong said. “I just value quality over vanity now, and aesthetic and style also matter.”

Mr Tong is one of the estimated 250 million new middle-class consumers by best-seller business writer Wu Xiaobo’s definition. These consumers, most of whom are well-educated, are more rational in purchase decisions, putting more emphasis on the products’ overall value than just their brands.

Popular products in China usually feature local cultural elements, stylish appearances, premium quality and affordable prices, Mr Wu said, calling it a “new consumption trend.”

Mr Tong’s purchases mostly came from two online stores: Xiaomi Youpin and NetEase Yeation, each being e-commerce platforms branched out by tech tycoons, who sell a wide range of products from smart TVs to electronic toothbrushes and feature styles such as normcore and simplicity.

While selling products made within the Xiaomi group, Youpin also covers selected items from third-party manufacturers. Health and smart products and housewares such as fingerprint locks and wall-mounted washing machines were the best-selling products on Youpin last year.

NetEase Yeation, on the other hand, mainly follows the factory-to-consumer (F2C) approach, or the original design manufacturer model, in which the company partner with makers of high-quality goods and sells directly to consumers, shortening the supply chain and cutting brand premium.

Established e-commerce players like Taobao and JD.com also rolled out their own version of premium e-commerce platforms to gain a slice of the niche market.

Domestic internet market observer iiMedia Research forecasted that e-commerce players will gradually expand from online platforms to offline stores and integrate their strengths to offer consumers a smoother experience.

Xiaomi Youpin opened its first brick-and-mortar store in the eastern Chinese city Nanjing last May. NetEase Yeation’s first physical store opened in its headquarter Hangzhou last December. The latter even partnered with a start-up hotel to showcase its products.

Premium e-commerce platforms are likely to encounter challenges in quality monitoring, after-sales service and products diversification as they grow, just as their traditional peers did, Mr Cao predicted.

“When it comes down to it, their future hinges on the development of Chinese consumers’ preferences,” Mr Cao said.

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