Converging sustainability and digitalisation in China’s evolving consumer market

Fri 01 Mar 2024

The junction of sustainability and digitalisation in China’s dynamic market presents both challenges and opportunities. Julie Laulusa, Member of Mazars’ Group Executive Board and Managing Partner for Mainland China, guides us through the paradoxes that are redefining consumer behaviour, and points towards a future where digital advancement harmonises with sustainable practices.

“Brands should adapt to local conditions when formulating sustainable strategies for the Chinese market, based on the sustainable values of Chinese consumers.”

Julie Laulusa, Member of Mazars’ Group Executive Board and Managing Partner for Mainland China

The Chinese market presents a complex landscape due to its diverse economic and social development stages, which have given rise to a significant generational gap among Chinese consumers. The disparities in urban development across the country, the growing presence of women in the workplace, and technological advancement have also played a role in shaping consumer behaviour in recent years.

To better understand these changing dynamics, Mazars has conducted an annual survey of Chinese consumers over the past three years. Our latest research report, Sustainable consumption of Chinese consumers: today and beyond highlights an unusual blend of sustainability concepts that incorporate international elements with distinct Chinese characteristics. This local flavour of sustainability emphasises ‘common prosperity’ and spans various aspects such as environmental protection, health, and economic development.

Generational and geographic differences also shape consumer attitudes toward sustainability, with younger consumers valuing education, equality, and diversity alongside traditional sustainability concepts. They also pay more attention to a brand’s ‘political stance’. Respondents in lower-tier cities want to reduce wealth disparity, while those in first-tier cities focus more on diversity and inclusion. These differences highlight the need for brands to adapt to local conditions when formulating sustainable strategies for the Chinese market.

One theme is central throughout the research, though: growing consciousness towards sustainability. More than 90% of Chinese consumers are willing to invest more in sustainability, with over 80% believing sustainable consumption will comprise over half of their future consumption. Younger generations also show a keen interest in sustainability-related products and activities such as recycling. In order to transition towards a sustainable future, the role of digitalisation is becoming increasingly important as it affects the way in which companies interact with consumers and helps firms remain competitive in a rapidly involving digital landscape.

The consumer paradox

“Consumers need to be better informed and educated, and should align aspirations with practices, forging a path where progress meets responsibility.”

Julie Laulusa, Member of Mazars’ Group Executive Board and Managing Partner for Mainland China

But while most consumers are showing keen interest in supporting sustainability practices, a critical contradiction we have noticed is the disparity between consumer intentions and actions. A recent survey by the Harvard Business Review found that 65% of consumers favoured purpose-driven brands, yet only 26% followed through in their purchasing decisions. Consumers therefore need to be better informed and educated, so they can align aspirations with practices, forging a path where progress meets responsibility.

In digitalisation, luxury brands face a paradox between exclusivity and mass digital reach, alongside consumer privacy concerns. Consumers want personalised digital services but are hesitant to share personal data, creating tension between digital convenience and privacy.

Sustainable innovation

Fabrice Megarbane, President of L’Oréal North Asia and CEO of L’Oréal China, emphasises that within the global French cosmetics group L’Oréal, the strategy is twofold: providing eco-friendly options and fostering an engaging, educational experience, which in turn empowers consumers to be active participants in the sustainability cycle.

L’Oréal has experienced these contradictions in consumer behaviour. While approximately 75% of consumers opted for recycled packaging when ordering products from its website, only a few returned the packaging for reuse.

To address this, L’Oréal has implemented several strategies for sustainable innovation, such as expanding product lines to offer more sustainable choices and educating consumers about low-carbon and sustainable options. The company’s approach also includes a campaign that turns sustainable actions into a rewards game, enhancing consumer participation in eco-friendly practices. By linking recycling and loyalty programmes, consumers in China can return empty containers to its Lancôme stores and benefit from a voucher for discounts on future purchases. L’Oréal has also developed refillable products across many of its brands, enabling consumers to work with the company to reuse and recycle products.

According to Megarbane, there is a real challenge in closing the gap between sustainable intentions and actions, a notion also referred to as the ‘Say-do Gap’. To address this, the beauty group’s strategy comprises both offering eco-friendly options and creating an engaging, educational experience, which in turn empowers consumers to be active participants in the sustainability cycle.

Beyond materialism

Another significant shift we see in Chinese consumer habits is a move from material to ‘spiritual’ consumption. This reflects a growing preference for experiences that provide emotional and social value over the mere possession of goods. Consumers are increasingly spending on activities that offer shared experiences with family and friends such as food and wine, and hotels and travel. This is expected to have a great impact on China’s food and beverage industry, which is projected to reach $1.3 trillion by 2025 accroding to research and development service provider: Zhongyan Technology Co., Ltd., and its tourism sector, predicted to be the world’s largest at $3.9 trillion by 2032.

Alongside this, the demand for personal luxury goods is escalating, driven by a consumer base that is increasingly seeking products that not only signify status but also resonate with their individuality and lifestyle. This trend is pronounced among Millennials and Gen Zers, who are leading the way in luxury consumption, showcasing a blend of sophistication and a desire for unique experiences.

Brands should engage with these younger consumers by offering immersive experience spaces or online pop-up shops and live streaming. Aligning with the evolving preferences and digital savviness of these youthful consumers can lead to successful engagement and brand loyalty.

Digital transformation

“The digital transformation of traditional enterprises in China has changed from an ‘option’ to ‘mandatory’ for leading enterprises”

Julie Laulusa, Member of Mazars’ Group Executive Board and Managing Partner for Mainland China

Digitalisation is also reshaping how Chinese consumers discover and interact with brands. L’Oréal’s digital strategy has proven to be highly effective and includes partnerships with platforms like Tmall and JD.com, as well as live streaming.

According to Megarbane, China was the ideal market to implement L’Oréal’s digital transformation strategy because the country already has an advanced digital ecosystem, whose approach is consumer-centric. Indeed, Megarbane notes that by placing the consumer at the heart of L’Oréal China and using digital capabilities to collect and transform data into consumer insights and business actions, the beauty group can anticipate trends, innovate, adapt its communication, build a strong brand, and grow its market share.

More than half of Chinese enterprises are prioritising digital as their next strategic step. By 2021, China’s digital economy reached $5.5 trillion, accounting for over a third (38.6%) of its GDP. This expansion, far outpacing the country’s GDP growth rate, underscores the widespread adoption of digital practices across all industries. The transformation, driven partly by the pandemic, is not just a trend among leading enterprises but a necessity. It shows China’s robust and forward-thinking approach to digitalisation, which is why it is outlined – and therefore encouraged – in the government’s 14th Five-Year Plan.

The focus on data-driven decision-making is crucial for staying competitive in a rapidly evolving digital marketplace, where understanding and responding to consumer needs is essential. There is an emphasis on intelligent data analysis and customer insights. Companies are leveraging digital technologies to better understand consumer behaviour and preferences, allowing them to create more targeted and effective business strategies.

“Brands that understand the unique aspects of Chinese consumer behaviour and tailor their approaches accordingly will lead the way.”

Julie Laulusa, Member of Mazars’ Group Executive Board and Managing Partner for Mainland China

Integrating sustainable practices with robust digital strategies should be a priority for every enterprise’s future development. Brands that understand the unique aspects of Chinese consumer behaviour and tailor their approach accordingly will lead the way. As more Chinese consumers look to increase consumption sustainably, brands will play a pivotal role in promoting awareness and adapting to these preferences in a market that values both innovation and tradition. In doing so, companies can successfully steer a path through a land where sustainability and digitalisation are not just trends but can be the foundations for consumer preferences and business strategies.