Confident Chinese Consumers Drive Need For Improved Logistics
Chinese consumer spending continues to rise, as a result of expanding disposable income resulting from wage inflation, including a 14 % increase in migrant workers’ average salaries during the last twelve months.
Market-research firm Nielsen reported that the China Consumer Confidence Index rating of 111 in 2014 was three points higher than the same period last year and above the global average of 96. China consumer confidence maintains a leading position among the world’s six largest economies, which all demonstrated consumer confidence gains.
For the three months to June, the willingness-to-spend measurement increased two points over the previous quarter to reach 46 percent. This rising willingness to spend was reflected across several categories such as clothing, dining out, holidays, children’s education and out-of-home entertainment.
Patrick Dodd, managing director of Nielsen China said “deepening urbanization is a key driver behind the high level of confidence and new consumers with cash to spend will emerge in the coming decade”.
Third-tier cities reported the highest levels of consumer confidence with the sub-index reaching 113 points, followed by 112 points in fourth-tier cities – reflecting how the increasing economic prosperity is spreading inland.
Thus the need for improving nationwide logistics networks to enable the efficient and effective distribution of consumer products throughout the rapidly expanding cities in the hinterlands.
The logistics sector in China is massively fragmented, with AT Kearney reporting that companies are using an average of twelve transportation providers and five warehousing operators to implement a nationwide distribution network.
Shippers in China are now expecting better logistics solutions than are currently available and may be prepared to pay more for better service. PwC surveyed 250 logistics and purchasing managers across China and found that logistics service providers received mediocre grades in nearly every category of service. The report concluded that businesses in China are willing to compromise on the omnipresent issue of price - in exchange for more reliable, flexible and comprehensive service.