9 Oct 2015
Jinan: Profile of a Consumer Market
1. Economic Overview and Development Planning
Jinan is a large sub-provincial city, and the capital of Shandong, a province on China's eastern coast with a thriving economy. It is not only the political, economic, scientific and technological, educational and cultural centre of the province, but also a regional financial centre serving the whole of Shandong as well as eastern China. In 2014, Jinan's GDP reached Rmb577.1 billion, growing 8.8% over the previous year, of which, primary industries accounted for 5.2%, secondary industries 38.4%, while tertiary industries accounted for 56.4%. Calculated in terms of permanent population, per capita GDP was Rmb82,052, an increase of 7.9% over the previous year.
In 2014, the value-added of Jinan industries reached Rmb221.5 billion, up 8.8% year on year. Key industries registering a relatively fast growth included general equipment, metals, pharmaceuticals, auto manufacturing, chemical raw materials and chemical products, computers, communications equipment and electronics. High-tech industries were seen taking up an increasing share. In 2014, the industrial output of high-tech industrial enterprises above a designated scale grew by 10.5%, constituting 41.6% of the total industrial output value of all enterprises above a designated scale.
The new planning concept of ‘one city centre, three districts’ has been incorporated in the 12th Five-Year Plan for Jinan, where the landscape of the old city centre commercial district (the ‘one city centre’) has been renovated as planned, and the development of the eastern city district, western city district and Binhe new area (the ‘three districts’) has been speeding up. Upon redevelopment, the old city centre has taken up the principal functions of commerce and finance, business offices, culture and entertainment, as well as education and scientific research. The eastern city district will become an important political, economic and cultural centre, with emphasis on the development of high-tech industries, high value-added manufacturing industries and processing industries. The western city district will be devoted to the development of higher education, high-tech industries as well as residential and daily living facilities. The Binhe new area in the northern part of the city will serve as a function expansion zone, new urban development area, sight-seeing area and leisure living area to provide facilities for business offices, tourism and leisure as well as residence and daily living.
Under Jinan’s Urban Commercial Network Plan (2012-2020), Jinan will focus its development on five major commercial sectors, namely city image business, retail business, leisure business, channels business, as well as science and technology business, involving a total of 126 major commerce and trade functional zones and projects. In addition, efforts will be made to develop five commerce and trade radial districts and forming three consumer districts, each with a 15-minute walking distance, biking distance and public transport travel time. An inter-city commerce and trade district and a regional commerce and trade district will also be developed, so as to step up the commerce and trade exchanges with other cities and provinces, and further with the whole world.
2. Jinan's Consumer Market
2.1 Growth in Retail Sales
Total retail sales of consumer goods in Jinan reached Rmb296.4 billion in 2014, up 12.5%. Its consumer market has shown sustained growth in recent years. In 2014, retail sales of daily-use articles, books, newspapers and magazines, home appliances and audio equipment, cultural products and office supplies, petroleum and related products as well as automobiles all registered annual growth rates of 10% or above.
Retail sales of consumer goods in Jinan have seen steady growth in tandem with the development of the urban economy and the improvement of people's living standards. Sales of some modern household consumer goods have registered more rapid growth. In terms of the ownership of consumer durables, Jinan has witnessed rapid growth in the ownership of cars, home computers and mobile phones in recent years. But increases in ownership of home appliances, like TV sets, refrigerators and washing machines, are not significant because the ownership level was already quite high.
2.2 Per Capita Disposable Income and Consumption Expenditure
In 2014, per capita disposable income of urban households in Jinan was Rmb38,763, up 8.7%, while per capita consumption expenditure was Rmb22,981, up 6.1%. Between 2009 and 2014, per capita disposable income showed an average annual growth of 11.3% while per capita consumption expenditure increased by 9.3% annually during the same period.
3. Characteristics of Jinan’s Consumer Market
3.1 Population Structure
Jinan’s permanent population in 2014 was 7.067 million, growing by 10.6% compared with 2005.
According to China’s sixth population census, there were 2.013 million households totalling 5.994 million people in the city in 2010, with an average of 2.98 members in each household, 0.24 persons fewer than the 3.22 in 2000.
Of the city’s permanent population, 50.3% were male, people aged 0-14 accounted for 13.6% of the total population, 15-64 year-olds accounted for 77.2%, while the rest were aged 65 and above. Compared with 2000, the share of people aged 0-14 in total population dropped 4.3 percentage points, those aged 15-64 rose 3.2 percentage points, while those aged 65 and above climbed 1.2 percentage points. 19.9% of the population received education at university/ tertiary levels or above, 50.3% have received secondary school education, and the rest have reached primary school level or below.
3.2 Characteristics of Consumers
The retail market of Jinan has become increasingly competitive in recent years. While a number of shopping centres, such as Parc66, Wanda Plaza, Shimao International Plaza, Dinghao Plaza and Uni Park, have come into operation, some traditional shopping centres, such as Harmony Plaza, Inzone Phase 3, Guihe Phase 2 and Elite City Guihe Plaza, are catching up to upgrade or expand their operation rapidly. Various international brand names have also flocked to Jinan within a short period of time. As a result, the shopping ambience and spending levels of the city have been upgraded significantly, which has in turn made an impact on the consumption concepts and spending habits of Jinan’s consumers.
The consumers of Jinan still have a high brand loyalty. Local Jinan brands, such as Inzone, Guihe, Sanlian and Hualian, are still highly regarded by local people. Famous international luxury brands such as Louis Vuitton, Gucci and Prada, are still securely established in the local upmarket shopping centres of Inzone, Guihe and the like, relatively immune from the influence of foreign commercial enterprises. As always, big spenders are mainly white-collar workers of state-owned enterprises, and teachers of tertiary education institutions. Other new shopping malls are mostly positioned to target the young, trendy, white-collar and moderately lavish consumers.
With nearly a hundred universities and colleges, high schools and tertiary education institutions in the city, students are a significant component of Jinan’s consumer market. They are mostly attracted to electronic products, stores with special features and entertainment premises. In respect of electronic and digital products, the renewal and replacement rates are high among young consumers.
As far as the consumption of clothing, food, housing and transportation is concerned, the middle-aged and senior residents of Jinan are inclined to choose clothing of reputable brands because of their quality assurance, and they give less consideration to aesthetics and status symbol. Yet for social upstarts, particularly the newly-emerged post-1980s and 90s consumer groups, they begin to pay more attention to brands and culture. Many brands that are newly introduced to the city are selling very well, and some even attract long queues of consumers, such as Uniqlo, H&M and Starbucks.
People in Jinan always have a passion for food and drinks. Long queues are very common in eateries, from outdoor barbecue, seafood to all kinds of food and drinks premises in shopping centres. Upmarket restaurants that used to be very busy seem rather quiet these days as a result of the state policy. However, peaceful and elegant tea houses and coffee shops still appeal to many businesspeople and young consumers.
Cultural and entertainment consumption on fitness centres, mega movie screens, private theatres, tours to nearby attractions, night-time economy and the like is growing significantly. Both the hardware and software of the traditional cultural market of Jinan have been upgraded. While the renovated Baiwang Cultural Market has been open for business, the renovation of the adjacent Xinshijie (New World) Cultural Market has also commenced. As always, Yingxiongshan (Hero Hill) Cultural Market is packed with people during weekends, whereas Yaowanglou, Daguanyuan antiques market and Qilu antiques market continue to be the major marketplaces for antiques as well as calligraphy and paintings.
Female consumers always have strong purchasing power for jewellery and cosmetics. Hong Kong jewellery brands, such as Chow Tai Fook and Chow Sang Sang, as well as other domestic brands, like Taiyang gold store and Qilu gold store, are all very popular. International first-line cosmetic brands, including Estee Lauder and Lancome, also have good sales performance in Jinan.
As regards consumption on luxury goods, although the introduction of luxury brands has come rather late in Jinan, its development is very rapid. Famous international brands, such as Cartier, Rolex, Omega, Gucci, Dunhill, Bally, Armani, Zegna and Givenchy, have already set up in Jinan. International luxury brands like Louis Vuitton, Burberry and Hugo Boss have also gradually found their way into Jinan in recent years. The consumer group for luxury goods is growing in size. With strong purchasing power, the city’s middle class and new rich have formed a stable clientele of top-notch brands, the majority of them being male consumers.
The people of Jinan are fond of one-day tours to nearby destinations. The mountain areas in the south, the Yellow River Forest Park in the north, the new Quancheng Polar Ocean World in Dezhou, as well as Oulebao Dream World, Laiwu Snow Field, Zhangqiu Baimai Spring and Changqing Expo Park are always seen with long queues of people and vehicles during weekends.
Since the consumer market of Jinan has been upgraded, while the standards of other markets in the neighbouring cities are relatively low, the economic superiority of Jinan as the provincial capital is particularly outstanding. Jinan has become the popular weekend destination for consumers from neighbouring places, such as Tai’an, Laiwu, Dezhou, Liaocheng and Zibo, as can be seen from the licence plates of cars found in the underground carparks of major shopping malls in Jinan.
4. Profiles of Jinan’s Major Commercial Districts
In respect of commercial development, there are four mature commercial districts in Jinan. The leading district is Quancheng Road commercial district, followed by Jingsi Road - Daguanyuan, Honglou on Huayuan Road, and the Western Market. Among them, the most mature and widely recognised one is Quancheng Road commercial district, which lies in the most prosperous section of Jinan, and has a contemporary look. New commercial districts, like Beiyuan Avenue, Yingxiongshan Cultural Market, Shanda Road Technology Market, Old East Gate and Kuangshan Auto World have also made their names with their unique characteristics.
Quancheng Road is the most ancient commercial street in Jinan and its position is unparalleled over the past five decades. Tourist attractions in this district include Jinan’s landmark of Quancheng Square, as well as Baotu Spring, Daming Lake, Heihu Spring, Pearl Spring, Wulong Spring, Furong Street and Jiefangge (Liberation Pavilion), which are all the pride and major attractions of this city of springs.
Major shopping malls in this commercial district include Parc66, Shimao International Plaza, Guihe Plaza, Inzone Plaza, Inzone underground shopping mall, Hong Shine Fon, Tifun Plaza and Wal-Mart. Most of the home appliance stores in Jinan are concentrated here, including the flagship stores of Sanlian, Suning, Gome, D Phone and Guanzhilin. Catering and entertainment facilities also flourish in this area. On top of famous eateries such as South Beauty, Inzone Landai and Jinsanbei, there are countless pubs, karaoke bars, coffee shops and foreign gourmet restaurants here.
Jingsi Road - Daguanyuan (Grand View Garden) is Jinan's most ancient commercial district, with a history of more than 100 years. This area used to be one of the busiest commercial districts of Jinan. To Jinan residents, Ouya Grand View Garden shopping mall, People’s Market and Renfang underground shopping mall have always been their favourite shopping destinations. Since 2012, however, the popularity of these shopping venues has been affected following the upgrading and renovation of old shopping malls, and the emergence of new shopping centres.
Jingsi Road has always been regarded as Jinan’s financial centre. China Construction Bank, Bank of Communications, Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, Huaxia Bank, China Merchants Bank, China Everbright Bank, Shanghai Pudong Development Bank and Qilu Bank all have offices in the neighbourhood. There is also Dongtu Building that serves as the cultural consumption centre in the area. Upon conversion of its 4th and 5th floors into an antiques market, the building has become a popular marketplace for the industry and is regarded as an antiques market of the highest standard. As a department store originally, the Ouya Grand View Garden across the street has also converted several floors to form an antiques cultural market.
Honglou on Huayuan Road
The mix of commercial formats in this district is one of the most diverse in Jinan, and its size and popularity is second only to Quancheng Road district. Guihe Plaza Honglou Store, Inzone Plaza Honglou Store, RT-Mart, Gome, and a large number of brand-name clothing stores, restaurants and entertainment facilities are located here. There are numerous small shops in the district that draw in a lot of consumers. However, the overall spending level of the district is low, as the consumers are mostly students, due to its close proximity to tertiary education institutions. Yet there are also long-term residents of Jinan and teachers of tertiary education institutions who have stronger spending power. The consumption here is mainly on low- to medium-end daily necessities. Spending on luxury goods and light luxury goods are less common.
The Western Market commercial district also has a long history and was so named because it was located in the western section of the old Jinan trading port. After the opening of the port of Jinan in 1904, the Western Market gradually became a commercial and trading centre for small commodities in the western part of Jinan. Both Hualian Commercial Building and Jiahua Shopping Plaza are regarded as the centre of this commercial district, which is also home to five wholesale markets, including a wholesale market for small commodities, Wei’erkang stationery market, Luyang shopping mall, Western Market clothing city and Heping commercial city. Huaiyin District, where the Western Market is located, is the area with the largest number of large-scale specialised markets in Jinan. Prior to 2012, it was the largest and most prosperous commercial district in western Jinan. Yet, with the opening of Harmony Plaza and China Resources Vanguard, which have boosted the spending level of the neighbourhood, the commercial popularity of western Jinan has begun to shift southwards.
Beiyuan Avenue Home Products
Beiyuan Avenue is one of the commercial districts with the biggest cluster of home products malls in all of China. Stores selling building materials and household goods with a total floor area beyond 3 million sqm in this district also serve the households of the neighbouring areas of Jinan. Yet, with the slackening of the real estate sector over recent months, the household market of this district has also begun to adjust its operation. For example, some stores are shifting its focus to the business of rosewood furniture. The district’s major operation of home products business has also spurred the development of other commercial formats, including home appliances, supermarkets, clothing, catering, entertainment and auto accessories.
Yingxiongshan Cultural Market
This commercial district originated from the Xinshijie shopping mall, with lots of shops selling small commodities. Subsequently, Yingxiongshan Cultural Market, Baiwang shopping mall, Renfang shopping mall and Chinese Food Street emerged to form this commercial district. The significant position of the Shandong Provincial Sports Centre as a focal social venue, with a strong commercial cluster impact, coupled with the recent opening of Inzone Yuhan Store, has turned it into the most important commercial district on Jingshi Road. With antiques, artistic works of calligraphy and painting, as well as sports as the major attractions, various commercial formats of small commodities, supermarkets, department stores, entertainment, cinemas and auto stores also flourish in this area.