China’s
Connected
Consumers
2016
A mobile evolution

kpmg.com/cn

China’s Connected Consumers 2016 | 2

Contents
01

Mobile evolution in China

02

02

Preparation and research

06

03

Purchase

08

04

Payment

1405

Post-purchase feedback

1606Strategy

18

About this Survey
KPMG International commissioned Intuit Research to conduct an online survey of global consumers on their current
and future online shopping behaviours and preferences. In total, 18,340 qualified surveyed responses were received.
The respondents are located in more than 56 countries, and each had purchased at least one consumer product online in
the past 12 months.
Out of the global surveyed responses, 2,560 were from China. This report analyses the findings from these specificrespondents.
In addition to examining the online shopping behaviours and decision processes of the respondents, the survey also exploredtheir future plans for online purchases, preferences for payment options, and factors affecting their attitudes towards thecompanies they buy from.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

1 | China’s Connected Consumers 2016

EXECUTIVE SUMMARY
China is at the forefront of mobile evolution in e-commerce. As smartphone
penetration among consumers continues to grow, e-commerce is fasttransforming into mobile commerce, or ‘m-commerce’. Take this year’sSingles’ Day festival for example, where Alibaba reported record high total
mobile sales. We expect next year’s Singles’ Day to produce figures in linewith this positive trend.
Our latest China’s Connected Consumers report reveals that China hasestablished itself as a major player in the digital era. The annual report, now
in its third year, has tracked and discussed the behaviours and preferencesof China’s consumers, and we are clearly seeing signs of a mobile evolution.
More than 90 percent of the China respondents in our study made at least
one online purchase using a smartphone in the past 12 months. This is a staggering figure,especially when compared to other markets – especially the US and UK – where consumers madepurchases with their smartphones far less frequently.
The dramatic rise in online and mobile activity points to a Chinese consumer who is increasingly
sophisticated, influential and hungry for information. The average consumer also has a higher
propensity to spend, and expects to be able to shop for a greater variety of products.
Importantly, the survey also finds that Chinese consumers are extremely connected, and actively
interact with brands and each other on the internet. This is bringing the importance of digital media
and online platforms to the fore.
On the other hand, our survey finds that consumers also regularly visit brick-and-mortar stores.
This underscores the need for brands to focus on both online and offline platforms and create
effective online-to-offline strategies to adapt to changing consumer demand and remaincompetitive.
Interestingly, the survey shows that payment options is an important factor for consumers indeciding which company or website to buy from when shopping online. Our study finds that bankcredit cards and Alipay are still likely to be the preferred method of payment in the near future,
while payment options provided by messaging platforms are gaining in prominence. Most notably,
consumers in China expect to pay with cash less frequently in the coming year, indicating thatcards and electronic payment mechanisms are becoming the norm.
The internet is not just a convenient place for consumers to research and purchase items. It is also
a popular avenue for shoppers to share their feedback via social media channels post-purchase.
Our survey finds that consumers in China are much more vocal than in 2015 about sharing theiropinions on their purchase online. With high consumer engagement on online platforms, social
media is becoming an essential and influential tool for brands to keep consumers updated on theirproducts and services, as well as to win new customers.
With smartphone use in China skyrocketing, we expect m-commerce to increasingly become thenorm. We see a number of multinational companies looking to secure an online footprint in China
to capitalise on the m-commerce boom. It is vital that companies understand both the value andpotential of digital platforms, and openly embrace the mobile evolution. They must therefore lookto provide consumers with a truly integrated and connected experience throughout the entire
shopping journey – from initial product research, to purchase, final payment and post-purchasefeedback.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 2

01
Mobile evolution in China
Product
research

Our survey highlights
the mobile evolution in
China. More than 90 percent
of respondents made atleast one online purchaseusing a smartphone in thepast 12 months, a muchlarger percentage than in the
US and UK. This is significant
as China’s consumers
lead the global transition
to mobile commerce. The
meteoric rise in online andmobile activity points to a
Chinese consumer that isincreasingly sophisticated,hungry for information,
more likely to spend andkeen on accessing a greater
variety of products.
Egidio Zarrella,
Clients and Innovation Partner,
KPMG China

Purchase

Payment

Postpurchasefeedback

As China’s online retail market soars to new heights, smartphone penetration
among consumers is also rapidly increasing, essentially transforming e-commerce
into mobile commerce (m-commerce). The impact m-commerce is having in China
is evident from this year’s Singles’ Day festival, where Alibaba recorded total mobile
sales of approximately USD 14.6 billion (RMB 99 billion), representing 82 percent
1of total sales in 2016, and a 49 percent increase in total mobile sales from 2015 . A
number of multinational companies are actively seeking to secure an online footprintin China to capitalise on the m-commerce boom.
One of the drivers for m-commerce growth is that consumers in China have a highlevel of confidence in the security of third-party payments. In addition, e-commerce ismaking shopping more convenient and accessible to consumers in China – especiallythose in third or fourth tier cities, who may not have much access to physical stores.
Our survey results support the view that China’s consumers are leading the
global transition towards m-commerce. In fact, more than 90 percent of the China
respondents made at least one online purchase using a smartphone in the past
12 months. This is in stark contrast to other markets – especially the US (74%) andUK (74.6%) – where consumers made purchases with their smartphones lessfrequently (see Figure 1.1). This is also higher than the Asian average of 84 percent, as
well as India (87.8%), another high-growth economy. In addition, nearly half the China
respondents purchased a product online at least two to three times a month in thepast year, dwarfing the global average of 27.9 percent (see Figure 1.2).
China’s flourishing online and mobile markets have been aided by the country’s
steady GDP growth rate of 6.7 percent this year, which has been largely driven
by consumption. According to data from the National Bureau of Statistics (NBS),
consumption contributed to 66.4 percent of China’s GDP in 2015, up 15.4 percentage
points from 2014. Furthermore, Beijing’s 13th Five-Year Plan aims to continue thistrend through supply-side reforms to provide better goods, boost online shoppingand stimulate the service sector. Through this government-backed strategic focus on
stimulating domestic consumption, e-commerce is undoubtedly becoming a new
growth engine.

1. ‘Alibaba Group Generated RMB 120.7 Billion (USD 17.8 Billion) of GMV on 2016 11.11 Global Shopping Festival’, Alibaba Group, 12 November 2016,
http://alibabagroup.com/en/news/article?news=p161112© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

3 | China’s Connected Consumers 2016

Figure 1.1 : Consumers who used a smartphone at least once to make an online purchase in thepast 12 months

90.4 %

87.8 %

84 %

China

India

Asia

    More than 90
percent of the China
respondents made at least
one online purchase using a74.6 %

74 %

69.9 %UK

US

Globalsmartphone in the past
12 months.

Source: KPMG Survey analysis, 2016

“Some people say e-commerce doesn’t contribute to economic growth because people stop going to malls and buy cheaper
goods online. On the contrary, e-commerce is making a lot of positive contributions to the economy,” says Jessie Qian, Partnerin-charge of Consumer Markets at KPMG China. “E-commerce is bringing goods to consumers in a more convenient and costeffective way, and is a very meaningful channel to increase domestic consumption. Three or four years ago, some companies in
China might not have been 100 percent sure about the value of e-commerce. But now, FMCG manufacturers and retailers view it
as essential, and we see a lot of our clients putting very high growth targets into e-commerce.”
NBS data also shows that total retail sales of consumer goods reached RMB 30.09 trillion in 2015 – an increase of 10.7 percent
from 2014 – while online retail sales jumped 33.3 percent year-on-year to hit RMB 3.88 trillion in 20152. The findings fromthis survey indicate that this momentum is set to continue in China’s booming e-commerce market, especially as domestic
marketplaces such as Alibaba and JD.com become more prominent. According to Alibaba, total sales on Singles’ Day this year
was USD 17.8 billion (RMB 120.7 billion), a 32 percent increase compared to 2015. We expect this positive trend to continue next
year as China’s consumers rapidly enter the Digital age. Building on this momentum, Alibaba recently announced plans to launch a
number of pilot programmes for Singles’ Days shoppers, including one in Hong Kong.

    
Nearly half the
China respondents
purchased a productonline at least two to threetimes a month in the past

Figure 1.2 : Consumers who purchased a product online at least 2-3
times a month in the past 12 months

48.5 %

40.3 %

China

Asia

year, dwarfing the global
average of 27.9 percent.

32.2 %
2 ‘China’s Economy Realized a Moderate but Stable
and Sound Growth in 2015’, National Bureau of
Statistics of China, 19 January 2016,
http://www.stats.gov.cn/english/
PressRelease/201601/t20160119_1306072.html

North
America

31.4 %
WesternEurope27.9 %
GlobalSource: KPMG Survey analysis, 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 4

The meteoric rise in online and mobile activity points to a Chinese consumer that is increasingly sophisticated, hungry for
information, more likely to spend and keen on accessing a greater variety of products. The survey finds that consumers opt to shop
online primarily because of the ability to shop at all hours, compare prices and secure better deals, as well as the convenience of
not having to travel to a physical store. Although desktops and laptops are still the most commonly used devices for shopping,with smartphone use in China skyrocketing (see Figure 1.3), we expect m-commerce to become the preferred medium for many
consumers throughout their entire shopping journey, encompassing initial product research, purchase and final payment, as wellas post-purchase feedback.
The survey also finds that Chinese consumers are actively interacting with brands and each other on the internet. This is bringing
digital media to the fore, and companies operating in China need to embrace the growing influence of m-commerce and carefully
develop strategies to enhance the overall shopping experience for consumers.

Figure 1.3 : A mobile evolution
China’s consumers have firmly entered the mobile era. According to data from the Ministry of Industry and Information
Technology (MIIT), China’s mobile users exceeded 1.3 billion at the end of 2015, with 29.6 percent of them using 4G3.
Furthermore, China sold 457 million smartphones in 2015, up 17.7 percent from 20144.
Market research company eMarketer estimates that mobile commerce sales accounted for almost half the share of
e-commerce sales in 20155. This year, retail mobile commerce sales in China are forecasted to grow by 51.4 percent toaccount for 55.5 percent of retail ecommerce sales in the country in 2016. By 2019, mobile users in China are expected tospend nearly $1.5 trillion on mobile commerce.

Retail m-commerce sales in China, 2014-2019
2014

2015

2016

2017

2018

2019

Retail m-commerce sales(billions)$180.40$333.99$505.74$737.07$1,039.84$1,410.72% change

211.5%

85.1%

51.4%

45.7%

41.1%

35.7%

% of retail ecommerce sales

38.1%

49.7%

55.5%

61.0%

66.3%

71.5%

% of total retail sales

4.7%

7.9%

10.9%

14.5%

19.0%

24.0%

Source: eMarketer

Note: Converted at exchange rate of US$1 = RMB 6.15. Includes products or services ordered using the internet via mobile
devices, regardless of the method of payment or fulfillment. Includes sales on tablets. Excludes travel and event tickets.
Excludes Hong Kong.

3. ‘2015 operations report for the telecommunication industry’, MIIT, 21 January 2016, http://www.miit.gov.cn/n1146312/n1146904/n1648372/
c4620679/content.html
4. ‘Notice of the Ministry of Industry and Information Technology on the Quality of Telecommunications Services (No. 1 of 2016)’, MIIT, 28
January 2016, http://www.miit.gov.cn/n1146285/n1146352/n3054355/n3057709/n3057719/c4625586/content.html
5. ‘Ecommerce Turns into Mcommerce in China’, eMarketer, 23 March 2016, http://www.emarketer.com/Article/Ecommerce-TurnsMcommerce-China/1013736© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

5 | China’s Connected Consumers 2016

Figure 1.4 : Most popular products purchased online by China’s consumers
Food/Groceries

56.7%
53.9%

Women’s Apparel

56.7%
55.8%

Electronics/Computers/
Peripherals

51.2%
50.9%

Men’s Apparel

48.8%
49.9%

Books/Music

47.4%
47.9%

Cosmetics/Skin care

44%
42.4%

Accessories

43.2%
41.5%
43.1%
46.6%

Household goods andappliances

42.8%
43.8%

Women’s Shoes

37%
39.3%

Men’s Shoes
Bags/Leather goods

34.6%
34.6%

Telecommunications/phones

33%
35.7%

Furniture/Home decor

31%
34.8%
29.4%
29.2%

Children’s ApparelSporting goods/Equipment

Last 12 months
Next 12 months

26.1%

Source: KPMG Survey analysis, 201633%

Food/groceries (56.7%),
women’s apparel (56.7%)
and electronics/computers/
peripherals (51.2%) were thethree most popular products
purchased online by China’s
consumers in the last year. Overthe next 12 months, the same
three categories are expected to
top the shopping list.
Most notably, China’s
consumers plan to buy awider variety of goods in the
coming year. Men’s apparel,
books/music, household
goods and appliances,
women’s shoes, men’s shoes,
telecommunications/phones,
furniture/home decor andsporting goods/equipment are
expected to be purchased by agreater number of shoppers.

E-commerce is bringing goods to consumers
in a more convenient and cost-effective way, andis a very meaningful channel to increase domestic
consumption. Three or four years ago, somecompanies in China might not have been 100 percent
sure about the value of e-commerce. But now,
FMCG manufacturers and retailers view e-commerce
as essential, and we see a lot of our clients putting
very high growth targets into e-commerce.
Jessie Qian,
Head of Consumer Markets (China),
KPMG China© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 602
Preparation and research
While consumers in China frequently research and purchase products online,
our survey finds that they also regularly visit brick-and-mortar stores. As a result,companies are increasingly recognising the need to focus on both online and offline
platforms and create a truly integrated omni-channel shopping experience.
When researching their potential purchase, our study shows that China’s
consumers predominantly choose to browse online. Nearly two-thirds of thesurvey respondents went online to search for reviews and recommendations
when researching products, with a significant number also visiting the company’s
website (see Figure 2.1). In comparison, 48.6 percent and 39.4 percent of thesurvey respondents from the UK and the US, respectively, conducted an online
search. However, more consumers in India (63.6%) – and in Asia (65.6%) in general– research products online than in China. Importantly, the results show that even if
consumers end up buying a product at a physical store, a majority of them will have
explored websites and compared prices online before making their purchase.

Figure 2.1 : Consumers who did an online search for reviews and recommendations when
researching products    Nearly twothirds of the China survey
respondents went online
to search for reviews and60.8 % 65.6 % 63.6 % 55.2 %
China

India

Asia

Globalrecommendations when
researching products, witha significant number also
visiting the company’s
website. In comparison,
48.6% and 39.4% of
the survey respondents

50.2 %
WesternEurope48.6 %

39.4 %

UK

USfrom the UK and the US,
respectively, conducted
an online search.
Source: KPMG Survey analysis, 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

7 | China’s Connected Consumers 2016

Furthermore, online research is not
limited to the confines of the home or
the workplace. In fact, nearly 70 percentof the China respondents have looked
up a product on their smartphone ortablet while in a physical shop, further
underpinning the convergence of theonline and offline worlds. While thisfinding is in line with the global average,a larger number of consumers in China
research products on their smartphones
while in a physical shop compared to lastyear (see Figure 2.2).

Figure 2.2 : Consumers who have looked up a product on their smartphone while in aphysical shop     Nearly 70 percentof the China respondents
have looked up a producton their smartphone ortablet while in a physical2016

74.5 %

69.4 % 76.7 %North
AmericaUS

China

71.1 %
Asia

shop. While this finding
is in line with the global
average, a larger numberof consumers in China
research products on theirsmartphones while in a
shop compared to last

2015

62 %

69 %

China

Global63.9 %
WesternEuropeyear.
Source: KPMG Survey analysis, 2016

Given the convergence of digital and physical shopping channels in China, brands and retailers need to devise an effective onlineto-offline (O2O) strategy to adapt to changing consumer preferences and remain competitive. Retailers that develop platforms
with both online and offline elements are best positioned to provide the best consumer experience. For those who find it moreconvenient to shop on the internet, an online platform can supplement their entire shopping journey. On the other hand, some
shoppers prefer to use online platforms as a source of information and price comparisons, before going to a physical store to testout products before making a purchase.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 803
Purchase
Creating a comprehensive O2O strategy is vital as our survey finds that consumers in China are influenced by both online andoffline factors when deciding what to buy. Compared to last year, the number of consumers who bought a product after seeing itin an online shop increased from 19 percent to 42.6 percent this year (see Figure 3.1). Similarly, 31.1 percent of consumers were
triggered by something they saw in a physical shop, up from 24 percent last year. The findings underscore the need for brands
to not only focus on developing online platforms, but to also establish a strong physical presence where buyers can touch, feeland experience the products. As highlighted in last year’s report, as proof of this trend, we continue to see a number of online
platforms launching pop-up shops in malls or cooperating with physical stores to give buyers a real world experience of theirproducts.

Figure 3.1 : Main triggers for online purchasing in China
Something I saw inan online shop

42.6%

19%

Something I saw ina physical shop

24%

I saw a friend with it
I first saw it mentioned in
an online review

15%

22.2%

21.2%

N/A

My friends and I talked
about itSomething I saw inan online advertisement

31.1%

20.6%
19%
19.5%

N/A

17.2%

I first saw it mentioned in asocial media post or blog
I first saw it in a print
magazine or newspaper
Source: KPMG Survey analysis, 2016

12%
12%

22%

Online 2016
Online 2015
Offline 2016
Offline 2015

Today’s retail market isundergoing profound disruption
and we are seeing technology
advances in mobile, the powerof analytics and demographic
shifts reshaping our markets
and the competitive landscapefaster than many companies
can respond. The findings
underscore the need forbrands to not only focus ondeveloping online platforms,
but to also ensure they havea strong physical presencewith the likes of pop-up shops
where buyers can touch, feeland experience the products.
To be in the forefront, retailers
need to take steps to transformtheir companies into digitalfirst, customer centric and fully
integrated omni businesses.
Anson Bailey,
Head of Consumer Markets(Hong Kong), KPMG China© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

9 | China’s Connected Consumers 2016

Figure 3.2 : Regional comparison of the top three triggers for online purchasing
Something I saw in an online shop

24.3%

29.6%

41.6%

US

Global

42.6%
China

38.9%

25.7%

Asia

UK

India

Something I saw in a physical shop

21.6%

20.1%

31.1%

21.6%

China

UK

I saw a friend with it

UK

17.9%

22.2%
China

India

14.3%

Asia

Asia

12.4%

16.8%

US

Global

8.2%

18.5%
Global

22.6%
India

US

Source: KPMG Survey analysis, 2016

Compared to last year, the number of Chinese consumers
who bought a product after seeing it in an online shop increased
from 19 percent to 42.6 percent this year. Similarly, 31.1 percentof consumers were triggered by something they saw in a physicalshop, up from 24 percent last year.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 10

When it comes to purchasing goods, our survey finds that China’s consumers consider
pricing, promotions, convenience, enhanced delivery and return options and the availabilityof a variety of products as the most important factors when shopping online (see Figures 3.3
and 3.4). They also want to know as much information about the product as possible before
making a purchase, and value service, experience and the atmosphere when choosing whereto shop.

Figure 3.3 : The top reasons for buying a product online rather than goingto a shop in China

58.6%

Ability to shop 24/7    China’s
consumers consider
pricing, promotions,

Ability to compare prices

convenience,

52.3%

enhanced delivery
and return options
and the availability

41.6%

of a variety of
products as the mostimportant factors

Online sale/better prices

when shopping
online.

Convenience of not having to go out to shops

35.5%

36.2%

Greater variety/selection

To save time

30.7%

Source: KPMG Survey analysis, 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

11 | China’s Connected Consumers 2016

Figure 3.4 : Key drivers when shopping for products online
in China

84.2%

I only buy items that havedetailed and transparent
product information

Service/experience/atmosphere
are the most importantconsiderations for me whenchoosing where to shop

70.2%

I choose to buy from shops or
websites with the most options fordelivery/pickup or returns

I trust larger global brands morethan I trust smaller or local brands

61.7%

77.1%

70.1%

I shop online for the lowest prices

Source: KPMG Survey analysis, 2016

While laptops or desktop PCs are still the most prevalent device of choice tomake online purchases, mobile phones are gaining traction. Nearly a quarterof China’s consumers prefer to use mobile phones to make their online
purchases, compared to 5.2 percent and 8.5 percent of consumers in the
US and globally, respectively (see Figure 3.5). In fact, more than 90 percentof the China respondents said that they had used a smartphone to make an
online shopping transaction in the past 12 months.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 12

Figure 3.5 : Preferred device to use for online purchases
Western Europe
North America
Asia
US
Global
China

58.9%
60.4%
48.2%
57.5%
56.9%
42.8%

Laptop or
desktop PC

Western Europe
North America
Asia
US
Global
China

26.6%
29.4%
25.4%
31.6%
26.9%
27.7%

No preference

Western Europe
North America
Asia
US
Global
China

4.5%
4.5%
18.7%
5.2%
8.5%
22.3%

Mobilephone
Source: KPMG Survey analysis, 2016
© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

13 | China’s Connected Consumers 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 14

04
Payment
Since the middle of last year, foreign companies have been able to apply for licences for bank card clearing businesses. We expect
to see more competition between the local and international players in the market for e-commerce payments.
Interestingly, the survey shows that about a third of consumers find payment options the most important factor in deciding which
company or website to buy from when shopping online. Bank credit cards and Alipay are the most preferred means of payment
for e-commerce transactions, while some consumers are also starting to use payment options provided by messaging platforms,
such as WeChat, Sina Weibo and Tenpay. Together, these three brands take up 47.5 percent according to the survey, and are gaining
prominence in China’s payment market.

Figure 4.1 : Top methods used to pay for online purchases in China
Credit card

70.1%
72.2%
69.5%

AlipayWeChatCash on delivery

26.5%

Bank transfer

11.9%

6.4%
9.8%

34.6%

22.1%

9.7%

PayPalDebit card

78.8%

17.7%

17.1%
15.9%

In the past 12 months
Over the next 12 months
Source: KPMG Survey analysis, 2016

Over the next 12 months, bank credit cards and Alipay are still likely to be the preferredpayment alternative to cash. Most notably, while cash on delivery was used relatively
often as a means of payment over the past 12 months, consumers in all major markets
expect to pay with cash less frequently in the coming year (see Figure 4.2). In China,
only 9.7 percent of the survey respondents expect to use cash in the next 12 months,
compared to 22.1 percent this year.Interestingly, more than half of India’s surveyed
consumers still use cash to settle payments, although this figure is expected to dropfrom 65.9 percent to 52.5 percent in the coming year. Furthermore, while the numberof consumers using Alipay is projected to remain steady, the decrease in consumers
planning to pay for goods with cash suggests that other cards and electronic payment
methods are becoming the norm. One reason for this is that consumers in China
have greater confidence in the security of third-party payments compared to theircounterparts in the West, says KPMG China’s Qian. “Furthermore, credit cards havenot been readily available for some Chinese consumers, so third-party mechanisms
are becoming an alternative way of making payments in a convenient and secureenvironment,” adds Qian.
© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

15 | China’s Connected Consumers 2016

Figure 4.2 : Past and expected use of cash on delivery to pay for online purchases
2015

65.9%

14.7%
Global

22.1%
China

26.2%

26.2%

India

Asia

UK

    
Consumers inall major markets expect
to pay with cash lessfrequently in the coming
year. In China, only 9.7
percent of the survey
respondents expect touse cash in the next 12

6.5%

US

months, compared to2016

22.1 percent this year.

15.8%

9.6%
9.7%

Global

China

Asia

US

4.5%

UK

52.5%

2.5%

India

Source: KPMG Survey analysis, 2016

Consumers in China havegreater confidence in the securityof third-party payments comparedto their counterparts in the West.
Furthermore, credit cards have notbeen readily available for some
Chinese consumers, so thirdparty mechanisms are becoming
an alternative way of making
payments in a convenient andsecure environment.
Jessie Qian,
Head of Consumer Markets (China),
KPMG China© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 16

05
Post-purchase feedback
The internet is not just an essential and convenient place for consumers to research and purchase items. It is also becoming
the preferred avenue for shoppers to share their feedback post-purchase. Our survey shows that more than half of the China
respondents share their purchase, views, opinions or other feedback online, with a large proportion of them choosing to do thison the website where they bought their product from. In comparison, the global average is 30.7 percent, while 39.5 percent,43.4 percent, 16.7 percent and 62.5 percent of consumers from the US, Asia, UK and India, respectively, share their views online.
China’s consumers are also much more vocal than last year, when only 41 percent of the respondents shared their feedback
online.

Figure 5.1 : Consumers who shared their purchase, views, opinions or other feedback online after
buying a product51.6 %

62.5%

43.4%

39.5%

China

India

Asia

US

30.7%

16.7%

GlobalUK

More than half of the China
respondents share their purchase,views, opinions or other feedback
online. In comparison, the global
average is 30.7 percent, while
39.5 percent, 43.4 percent,16.7 percent and 62.5 percent of

Source: KPMG Survey analysis, 2016

consumers from the US, Asia, UK

With consumers actively engaging with online platforms – and increasingly
accessing these platforms through their smartphones – social media
views online.
is becoming an essential and influential tool for companies to educate
consumers on their products and services, as well as to win new customers.
The survey results further underscore the significance of social media, with nearly two in three consumers conducting online
searches for reviews and recommendations during the research process, and more than a third speaking with their friends orfamily about the planned purchase.

and India, respectively, share their

Many brands are picking up on this trend, and are harnessing social media, championing brand ambassadors and winning celebrity
endorsements as part of their O2O strategy to drive both online and offline sales. Some brands collaborate with Key Opinion
Leaders (KOLs) – which include celebrities, industry experts and online bloggers – to help drive awareness and generate interest in
the brand and its products. Furthermore, companies can also use data analytics technologies to track how much online traffic the
KOLs generate and better predict their return on investment.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

17 | China’s Connected Consumers 2016

Figure 5.2 : Top websites for sharing feedback
Facebook
Manufacturer or brand’s website
Sina Weibo
WeChatSeller’s website

13.3%
15.6%
19.4%
38.6%
53.8%

China

Whatsapp
Manufacturer or brand’s website
Facebook
Seller’s website

16.6%
18.3%
30.5%
46.8%

GlobalSource: KPMG Survey analysis, 2016

In order to thrive, it is becoming increasingly important thatcompanies understand the value and potential of social media.
Companies need to go beyond merely establishing a social
media presence, and instead embed themselves in online
communities by closely following social media patterns andtrends, becoming more responsive to consumer feedback,and educating their existing and potential customers on theirproducts and services.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 18

06
Strategy
The consumer market in China is becoming increasingly competitive, with multinationals and local brands – each with their own
strengths – vying for the same piece of the pie. Local brands nowadays sometimes have better market intelligence and distribution
channels than foreign brands, and can often offer high quality products and better pricing. Coupled with the increasing purchasing
power of the average Chinese consumer, the rapid urbanisation of China’s population and Beijing’s 13th Five-Year Plan strategy tospur domestic consumption, the retail market is bound to grow exponentially. To stay ahead of the competition, companies needto create a brand that consumers can trust, reward customers for their loyalty, foster innovation and regularly develop new andunique products. They should also seek to provide excellent customer support and offer exclusive promotions to loyal customers.

Figure 6.1 : Which of the following types of companies are you most likely to be loyal to? One that:

Companies doing businessin China should consider harnessing
the power of data and deploying
data analytics technologies toimprove their operational efficiency
and generate growth. China is

43.
7
%
51.8%

offers special promotions
exclusive to loyal customers

at the forefront of the use andsophistication of data analytics
tools, and companies are realising

has excellent
customer support

the value of historical information tobetter understand spending patterns,
predict future consumer behaviour
and create personalised customer
experiences.

Egidio Zarrella,
Clients and Innovation Partner,
KPMG China

31.6% 27.9% 27.9%

listens andresponds to yourfeedback

offers you
customised
promotions basedon your shopping
patterns

32.7%
has a loyalty or
membershipprogramme

makes repeatpurchases easy
(i.e. subscriptions)

Source: KPMG Survey analysis, 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

19 | China’s Connected Consumers 2016

Figure 6.2 : The most important attributes of the companies or brands that consumers trust the most
They educate consumers about their products

45.6%

40.2%

53.6%

US

40.6%

China

Asia

51.2%

28.1%
UK

GlobalIndia

They are open and honest regarding negative news or events

51.5% 43.1%
China

Global

39.1%
US50.5% 50.2%
38.2%
Asia

India

UK

Source: KPMG Survey analysis, 2016

To stay ahead of thecompetition, companies
need to create a brandthat consumers can trust,
reward customers for theirloyalty, foster innovation andregularly develop new andunique products. They should
also seek to provide excellent
customer support and offer
exclusive promotions to loyal
customers.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 20

In an increasingly competitive global consumer market, the successful brands and retailers will be the ones that understand that
consumers’ shopping habits and expectations are rapidly evolving. The typical consumer in China expects retailers to provide
detailed and transparent information about their products, as well as real-time information on their stock levels (see Figure6.3). In order to enhance their offering in these areas, companies should consider harnessing the power of data and deploying
data analytics technologies to improve their operational efficiency and generate growth. China is at the forefront of the use andsophistication of data analytics tools, and companies are realising the value of historical information to better understand spending
patterns, predict future consumer behaviour and create personalised customer experiences.

Figure 6.3 : How has an increasing amount of information
about companies, products and prices affected your shopping
habits and expectations?

89.2 %

79.9 %The typical consumer in
China expects retailers to provide
detailed and transparent information
about their products, as well as

I expect brands to provide evenmore information about products

I expect retailers to have real-time
information on their stock levels

real-time information on their stocklevels.

77 %I am more likely to shop online for the lowest prices
Source: KPMG Survey analysis, 2016

Furthermore, with the surge in smartphone activity in China set to continue, brands should ensure that they create seamless
online and mobile-friendly platforms, and develop effective O2O strategies to enhance the overall shopping experience, drive
sales and build brand value. As highlighted in last year’s report, for online channels, integration might include encouraging people
to sample products in physical stores, or enabling shoppers to check on real-time stock availability. On the other hand, brick-andmortar stores could urge customers to become members of online communities to get better promotions and updated productinformation, download brand apps or use QR codes to instantly access web pages.
At the end of the day, the Chinese consumer has an abundance of choice in the market, which presents both opportunities andchallenges to retailers. For brands to grow and win new customers in China, the key lies in truly knowing who their customers are,and understanding their demands and shopping preferences. With the right strategy in place – and the products to support it –retailers have ample opportunity to succeed in China’s rapidly expanding and fast-evolving retail market.

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

21 | China’s Connected Consumers 2016

Figure 6.4 : What should companies focus on in order to build consumer trust?
Protect customer data and information

62% 65.8%
56.4%

52.2% 63%
China

48.9%
India

US

UK

GlobalAsia

Introduce new and more trustworthy brands

36%
China

26.1%

29.1%

US

23.3%
UK

Global

34.5%

45.9%
India

Asia

Source: KPMG Survey analysis, 2016

Figure 6.5 : Most likely factors to motivate consumers to try a new brand or shop
Positive online reviews and referrals

54.5%

With the surge insmartphone activity in China set

Low-priced products (best price for value)

46.9%

Sale

to continue, brands should ensurethat they create seamless online
and mobile-friendly platforms, anddevelop effective O2O strategies todrive sales as well as brand value.

Unique or authentic products

44.9%

With the right strategy in place – andthe products to support it – retailers
have ample opportunity to succeed

Online sale or promotion

in China’s rapidly expanding and fast-

40.5%
Innovative products

36.6%

evolving retail market.
Jessie Qian,
Head of Consumer Markets (China),
KPMG China

Source: KPMG Survey analysis, 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 22

About KPMG
KPMG China operates in 16 cities across China, with around 10,000 partners and staff in Beijing, Beijing Zhongguancun, Chengdu,
Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong
Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced
professionals efficiently, wherever our client is located.
KPMG International is a global network of professional services firms providing Audit, Tax and Advisory services. KPMG International
operates in 155 countries and regions, and have 174,000 people working in member firms around the world. The independent
member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each
KPMG firm is a legally distinct and separate entity and describes itself as such.
In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG
China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of
1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together
with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese
member firm’s appointment by some of China’s most prestigious companies.

Acknowledgments
Publications: Nina Mehra, Kanishk Verghese
Design: Nick Huang, Isabella Hung
Research: Intuit Research© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

23 | China’s Connected Consumers 2016

Contact us
Jessie Qian

Egidio Zarrella

Willy Kruh

Head of Consumer Markets (China)

Clients and Innovation Partner

Global Chair,

KPMG China

KPMG China

Consumer Markets: +86 21 2212 2508

: +852 2847 5197

: +1 416 777 8710

: jessie.qian@kpmg.com: egidio.zarrella@kpmg.com: wkruh@kpmg.ca

Anson Bailey

James McKeogh

Mark Larson

Head of Consumer Markets (Hong Kong)

Partner

Global Head of Retail

KPMG China

KPMG China: +852 2978 8969

: +852 2847 5018

: anson.bailey@kpmg.com: james.g.mckeogh@kpmg.com: +1 312 665 2126
: mlarson@kpmg.com
Dan Coonan

Grace XieLouis Liu

Global Executive,

Partner, Tax

Partner, Audit

Consumer Markets

Consumer Markets (China)

KPMG China

KPMG China: +86 21 2212 3422

: +86 59 2215 8899

: +44 20 7694 1781
: daniel.coonan@kpmg.com.uk: louis.liu@kpmg.com: grace.xie@kpmg.com

Elaine Pratt
Christoph Zinke

Global Marketing,

Wei Lin

Partner, Strategy

Consumer Markets

Partner, Advisory

KPMG China

Consumer Markets (China): +852 2140 2808

KPMG China: christoph.zinke@kpmg.com: +1 416 777 8195
: epratt@kpmg.ca: +86 21 2212 3508
: wei.lin@kpmg.com

Willi Sun
Director, Advisory

Kevin Liu

KPMG China

Partner, Advisory: +86 21 2212 3740

KPMG China: willi.sun@kpmg.com: +86 2212 3980
: kevin.liu@kpmg.com

Belle Morton
Director, Customer Advisory

Simon Tong

KPMG China

Partner, Advisory: +852 2847 5078

KPMG China: belle.morton@kpmg.com: +86 10 8508 7040
: simon.tong@kpmg.com© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

China’s Connected Consumers 2016 | 24

KPMG Publications
The 13th Five-year Plan
– China’s transformationand integration withthe world economy:
Opportunities for
Chinese and foreignbusinesses

Now or never:2016 Global CEO Outlook

Now or never:2016 China CEO Outlook

Outlook for e-commercein Hong Kong: CEO andConsumer perspectives

Seeking customer
centricity: The omni
business model

The future of retailsupply chains© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

25 | China’s Connected Consumers 2016

© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved. Printed in China.

Mainland China
Beijing

Beijing Zhongguancun

Chengdu8th Floor, KPMG Tower, Oriental Plaza
1 East Chang An Avenue
Beijing 100738, China
Tel : +86 (10) 8508 5000
Fax : +86 (10) 8518 5111

Room 603, Flat B, China Electronic Plaza
No.3 Danling Street
Beijing 100080, China
Tel : +86 (10) 5875 2555
Fax : +86 (10) 5875 2558

17th Floor, Office Tower 1, IFS
No. 1, Section 3 Hongxing Road
Chengdu, 610021, China
Tel : +86 (28) 8673 3888
Fax : +86 (28) 8673 3838

Chongqing

FoshanFuzhouUnit 1507, 15th Floor, Metropolitan Tower
68 Zourong Road
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Fax : +86 (23) 6383 6313

8th Floor, One AIA Financial Center
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Guangzhou

HangzhouNanjing

21st Floor, CTF Finance Centre
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Tel : +86 (20) 3813 8000
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8th Floor, West Tower, Julong Building
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Qingdao

Shanghai

Shenyang

4th Floor, Inter Royal Building
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Fax : +86 (532) 8907 1689

50th Floor, Plaza 66
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19th Floor, Tower A, Fortune Plaza
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Shenzhen

Tianjin

Xiamen9th Floor, China Resources Building
5001 Shennan East Road
Shenzhen 518001, China
Tel : +86 (755) 2547 1000
Fax : +86 (755) 8266 8930

Unit 06, 40th Floor, Office Tower
Tianjin World Financial Center
2 Dagu North Road
Tianjin 300020, China
Tel : +86 (22) 2329 6238
Fax : +86 (22) 2329 6233

12th Floor, International Plaza
8 Lujiang Road
Xiamen 361001, China
Tel : +86 (592) 2150 888
Fax : +86 (592) 2150 999

Hong Kong SAR and Macau SAR
Hong Kong

Macau

8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
23rd Floor, Hysan Place
500 Hennessy Road
Causeway Bay, Hong Kong
Tel : +852 2522 6022
Fax : +852 2845 2588

24th Floor, B&C, Bank of China Building
Avenida Doutor Mario Soares
Macau
Tel : +853 2878 1092
Fax : +853 2878 1096

kpmg.com/cn
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate
and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act uponsuch information without appropriate professional advice after a thorough examination of the particular situation.
© 2016 KPMG Huazhen LLP, a special general partnership in China, is member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative(“KPMG International”), a Swiss entity. All rights reserved. Printed in China.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Publication number: CN-CM16-0003c
Publication date: November 2016