Last Updated on September 2, 2024
While most brands scramble for the attention of ultra-high-net-worth individuals, consumers from low-tier cities in China remain a largely untapped market to this day.
And with around 70% of the country’s urban population belonging to low-tier cities, this is an important audience segment for foreign brands to consider if they want to expand their local reach.
Read along as we learn about lower-tier city consumers, their unique online shopping habits, and the top platforms marketers can use to reach them.
What are lower-tier cities in China?
The Chinese city tier system typically ranges from Tier 1 and 2 (the most developed cities) to Tier 4 and 5, which includes less developed, smaller cities. China’s lower-tier cities are urban regions ranked below the top-tier category in terms of economic development, population size, infrastructure, and overall influence.
Low-tier cities are often located in inland provinces and have a slower pace of life compared to the bustling first and second-tier cities. With significantly lower living costs in these regions, these consumers naturally have more leisure time, which changes the way they spend their resources.
Local Shoppers at Qingdao, Shandong Province (Source: China Daily)
The Chinese government has been promoting the development of lower-tier cities as part of its broader strategy to balance regional development and reduce the pressure on megacities. As a result, these initiatives are attracting both domestic and international investors.
Like established first-tier cities, these urban regions have a growing middle-class consumer population. As their incomes rise, residents of these cities are increasingly purchasing more goods and services, including luxury items.
Profile of Lower-tier City Consumers in China
Low-tier consumers don’t have the same online shopping patterns and behaviors as customers from first-tier cities. Here are the factors that can affect the constantly evolving consumption trends in this audience segment.
- More young individuals are settling down in low-tier cities.
- These consumers put value on membership programs and perks.
- Over the years, lower-tier cities have seen rapid adoption of e-commerce platforms.
- Social Shopping and Group Buying are key trends in these under-penetrated markets.
- Live streaming is more popular in low-tier regions than in higher-tier cities in China.
5 Platforms To Reach Chinese Consumers from Lower-tier Cities
1. Pinduoduo
Pinduoduo is among the most popular social commerce platforms in China. It’s mostly known for its group-buying features and discount deals, allowing users to invite peers to buy products at lower bulk prices.
As the app continues to cater to the needs of consumers interested in saving money, around 36% of its user base is unsurprisingly from China’s lower-tier cities.
The social commerce platform also provides free product incentives, which perfectly aligns with the price-sensitive consumer spending trends in low-tier cities.
The platform accommodates major product categories, from mother and child goods to food and beverages. However, its focus is primarily on agricultural products, which cater to the rural areas near the vicinities of low-tier cities in China.
While most Pinduoduo users from these Chinese cities are eager to find discount deals for small purchases like diapers, it’s worth noting that these customer bases are also willing to spend their money on luxury items like watches, jewelry, and cosmetics.
2. Kuaishou
Social media users from low-tier cities have also embraced user-generated content as the most reliable source of information when shopping online. Unlike Douyin, Kuiashou’s videos are less about following trends and more about users sharing their daily lives online.
It resonates deeply with lower-tier city urban residents who prefer relatable and genuine content over polished, celebrity-driven posts.
For consumers in lower-tier cities, Kuaishou is not just a platform for entertainment but also a vital tool for online shopping. Many users turn to the app’s short videos and live streams to discover new products.
The platform’s strong emphasis on community and trust among users means that recommendations from influencers or even fellow customers are taken seriously. This consumer behavior is crucial for e-commerce channels, especially in markets where consumers might be more cautious about online shopping due to product quality and price range concerns.
3. Taobao
Consumers in lower-tier cities utilize Taobao in ways that are distinct from their urban counterparts. They are generally more price-sensitive and value-conscious, often seeking deals and promotions to maximize their purchasing power.
In 2020, Taobao responded to these consumption trends by launching “Taobao Deals.” It specifically caters to these needs by offering lower-cost items and frequent promotions.
As of early 2024, approximately 465 million Taobao’s mobile app users were from lower-tier cities. This is a significant portion of the platform’s customer base and a strong reminder of how influential Taobao is in these markets.
4. Bilibili
Bilibili has rapidly evolved from its roots as a niche community focused on anime and subcultures to become one of China’s leading video platforms. Its interactive social features make it a particularly effective channel to engage young populations.
While it initially attracted users primarily from first and second-tier cities, the platform is now seeing significant growth from lower city tiers.
As of 2023, approximately 54.3% of Bilibili’s new users came from third- and fourth-tier cities. These consumer bases are increasingly drawn to the diverse user-generated content offered by the platform, including anime, gaming, music, education, and lifestyle categories.
5. JD.com
In regions with limited physical retail options, JD.com provides online access to various goods, including electronics, fashion, home appliances, and other foreign goods.
Its focus on authentic products and its reputation for quality make it a trusted source for online shopping, particularly in lower-tier cities where concerns about counterfeit goods are prevalent.
Furthermore, JD.com encourages localized promotions and discounts, which can stimulate consumption demand from price-sensitive low-tier city populations.
JD.com has a significant user base in lower-tier cities, with about 75% of users from these regions active during key shopping events like the 618 Shopping Festival.
This growth is supported by its low-cost channels like the “buy 9.9, enjoy free shipping” campaign, which has dramatically boosted user engagement in third-tier cities and below.
How Are Chinese Lower-tier Markets Different From First-Tier Cities?
● Lower-tier Consumers are not Impulsive Buyers
One reason for the lower economic output from these regions is that their consumers are not impulsive buyers. Audiences from lower-tier Chinese cities prioritize cost-effectiveness more than customers from top-tier segments.
According to a survey conducted by Accenture China, 83% of respondents from fifth-tier cities consider practicality when buying expensive goods online. They ask questions like “Is it worth the price?” or “Does the quality justify the cost?” before purchasing.
This starkly contrasts consumers from first-tier urban regions, where 40% of respondents agree that they buy pricier products to improve their quality of life.
With pragmatism overruling the need to show off their economic status online, low-tier city consumers in China are less likely to trust paid advertising campaigns or KOL promotions.
More than anything, these user groups seek authentic recommendations from word-of-mouth marketing strategies and reviews from their fellow online shoppers. It also explains why live-streaming is an effective channel for product recommendations in lower-tier cities in China.
● Strong Preference for Domestic Branding and Positioning
Unlike first-tier cities, consumers from lower-tier markets have slightly less exposure to international brands. Because of this, localization is one of the most effective customer acquisition strategies you can’t skip in capturing the interest of this audience segment.
Due to their localized offerings, packaging, and marketing messaging, lower-tier city consumers view domestic brands as better value for money.
To leverage the spending power of low-tier city consumers, foreign businesses must align their branding and promotional strategies to the developing tastes of this market segment.
The best cautionary example is L’Oreal Garnier’s market entry in China way back in 2006. Although the brand is famous globally, it doesn’t have the budget-friendly price tag that low-tier consumers in China are looking for, and it lacks the traditional luxurious value that other foreign competitors offer.
L’Oreal Beauty Counter at Xuchang, Henan province (Source: China Daily)
In contrast, the South Korean fashion brand Gentle Monster managed to appeal to low-tier markets despite its high price point. The secret? Simple yet effective brand localization strategies. They collaborated with domestic designers to boost the product’s local appeal.
They also tapped into the country’s booming e-commerce market, making their product widely available through online sales channels like Taobao, JD, and WeChat Mini-Program.
With half of China’s luxury consumption coming from second and third-tier cities, Gentle Monster played on its strengths and ensured that its products maintained premium quality, excellent craftsmanship, and localized appeal.
Xiaohongshu Influencers at Gentle Monster’s Exhibit (Source: Jing Daily)
● Significantly Less Market Competition
Most Chinese cities under this audience segment don’t operate under the same competitive market dynamics as first-tier regions. With fewer commercial resources in these regions, chances are your biggest competitors in top-tier cities are not yet prominent in lower-tier markets.
Starbucks understands this dynamic, so it’s not a surprise that most of its store openings last year were directed at smaller urban regions belonging to lower city tier systems.
Starbucks Branch at Yantai, Shandong province (Source: China Daily)
Don’t worry if your business is not capable of opening physical flagship stores like Starbucks. As mentioned, e-commerce and social media platforms are powerful tools in lower-tier cities, where traditional retail infrastructure might be less developed.
Platforms like Pinduoduo are particularly popular in these regions and can boost brand visibility, build communities, and drive direct sales.
Nike has also implemented this strategy, shifting its focus to localized social media content featuring its lower-price-point products. Thanks to this, the brand has built a strong presence beyond the major urban centers in China.
Your Trusted Digital Marketing Partner in the Chinese Market!
The demand from low-tier cities in China is undeniable, especially given the country’s increasing younger population and growing middle-class consumer groups. Without the element of impulsive buying, brands must innovate organic marketing strategies to appeal to this lower-tier consumer’s distinct online shopping patterns.
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At Sekkei Digital Group, we focus on guiding foreign brands to realize their full potential in China’s digital business landscape. With our extensive industry experience and knowledge, we can help your brand reach and connect its intended audience in lower-tier cities.
Whether you want to open a virtual storefront or launch a social media campaign directed to lower-tier city consumers, we have all the digital solutions you need. Get in touch with us today, and let’s get this collaboration started.
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