29 Sept 2015
Yantai: Profile of a Consumer Market
1. Economic Overview and Development Planning
Yantai is a prefectural-level city in Shandong. Its overall economic strength in the province is second only to Qingdao. It is also an important city in the Bohai Bay Economic Zone. In 2014, its GDP amounted to Rmb600.2 billion, up 9.1% over the preceding year. The value-added of the primary industry was Rmb44.1 billion, up 3.9%; the value-added of the secondary industry reached Rmb321.2 billion, up 8.8%; and the value-added of the tertiary industry amounted to Rmb234.8 billion, up 10.4%. The city's per capita GDP was Rmb85,795, up 8.9%. Yantai is an important city for new- and high-tech and manufacturing industries. Its five pillar industries include machine manufacturing, electronic information products, food processing and the modern chemical industry. The marine industry has also witnessed rapid expansion and become an important economic growth area. In 2014, the value-added of the marine industry reached Rmb115.0 billion, representing an increase of 18.1% over the previous year and accounting for 19.2% of the city's GDP.
Yantai has formed clusters of emerging industries, including marine engineering equipment manufacturing, marine biotechnology, marine chemical industry and marine logistics, with marine engineering equipment manufacturing leading the marine industries. In recent years Yantai has adopted the goal of becoming North China's biggest marine engineering equipment R&D centre.
Yantai has completed the construction of three major shipbuilding industrial parks in the Development Zone, Penglai and Longkouwan. There are over 500 marine-related enterprises in the city, including 95 high-tech marine enterprises. Their special vessels and marine engineering equipment enjoy an obvious competitive edge in China's shipbuilding industry. Yantai has successfully secured its place as the world's fourth largest deep-water semi-submersible drilling rig construction base. It has a 25% share of global orders for offshore drilling rigs, ranking first among Chinese cities and third in the world.
The Opinions for Developing the Marine Economy of Yantai City in 2015 identifies emerging marine industries, coastal tourism, offshore fishery, shipbuilding, marine engineering equipment manufacturing and marine transportation and logistics as the priorities of Yantai's marine economy. The city aims to over-fulfil the targets set in the its 12th Five-Year Plan for the development of the marine economy, with an output value of over Rmb280 billion for its major marine industries in 2015.
Under the Urban Commercial Network Layout Planning for Yantai (2014-2020), Yantai plans to gradually develop a pattern of commodity markets with the Sanzhan Market as the core, supported by the modern logistics cluster in the west, the household goods, building materials and auto parts cluster in the south and the consumer goods cluster in the east. It will also build one city-level commercial centre and two city-level commercial sub-centres within the city and upgrade urban commercial services. South Avenue and Haigang Road in Zhifu District will become a ‘core city-level commercial centre’, Hengshan Road and Changjiang Road in the Development Zone will become a ‘city-level commercial sub-centre for business, and Zhenda Road and Guanhai Road in Laishan District will become a ‘city-level commercial sub-centre for leisure and recreation’.
The Commercial Services Development Plan of Yantai City (2014-2020) predicts that the value-added of Yantai's commercial services will reach Rmb13 billion by 2017, representing an annual growth rate of 15%. By 2020, the total value-added of its commercial services will exceed Rmb20 billion with the completion of a sound commercial services market system. The plan also puts forward the aim of attracting more enterprises to set up their headquarters in Yantai and accelerate the development of the headquarters economy, with Zhifu District and Laishan District as key areas, as well as Binhai Square financial and business district, Haigang Road central business district and Yingchun Avenue central commercial district as cores. The city's aim is to have over 180 business headquarters of various types by 2017 and over 230 by 2020.
2. Yantai’s Consumer Market
2.1 Growth in Retail Sales
In 2014, Yantai's total retail sales of consumer goods reached Rmb237.8 billion, up 12.7% year on year. Calculated in terms of consumption categories, retail sales of consumer goods amounted to Rmb217.1 billion, representing an increase of 12.4%, which is higher than the national and provincial average. Sales of food and beverages amounted to Rmb20.67 billion, up 14.9%.
Between 2006 and 2014, urban households’ ownership of most consumer goods showed an upward trend. This is particularly so for products affordable and favoured by the middle class, such as cars, mobile phones and computers.
2.2 Per Capita Disposable Income and Consumption Expenditure
According to a sample survey, the per capita disposable income of urban households in Yantai in 2014 was Rmb35,791, an increase of 8.6% over the previous year, and per capita consumption expenditure was Rmb23,529, up 6.9%.
3. Characteristics of Yantai’s Consumer Market
3.1 Population Structure
As of the end of 2014, the population with household registration in Yantai stood at 6.534 million, an increase of 0.3% over the previous year.
According to China’s sixth population census, Yantai had a permanent population of 6.97 million, accounting for 7.3% of the total population of Shandong. The city also has a migrant population of about 450,000. Among the permanent population, 50.6% were males; 11.0% were aged between 0 and 14, 77.6% were aged between 15 and 64 and 11.5% were aged above 65.
The education level of Yantai’s permanent population has risen notably. About 11% of Yantai people have a university education, 19% have senior high school education, 47% have junior high education and 23% have primary school education. Compared to the results of the fifth population census 10 years earlier, the number of people in the city who had received university education rose from 3,984 to 9,929 in every 100,000 people.
There were a total of 2.46 million households in Yantai, with an average 2.6 persons in each household, representing a drop of 0.2 persons compared with 2000.
3.2 Characteristics of Consumers
Yantai is a famous seaside tourism city. Its GDP ranks second in the province, trailing only Qingdao. Although traditionally classified a third-tier city, Yantai has always been a front runner in Shandong in terms of consumption standards and spending power. The arrival of famous commercial property companies, the opening of high-speed rail, the completion of the Penglai International Airport and other favourable factors have ushered in a period of rapid growth in Yantai people's consumption level.
Pragmatic consumption and high brand loyalty
Yantai consumers have high brand loyalty but are quite choosy. Local brands like Zhenhua Commercial Building, Siwin Food, Lanbai Dining, and Xinhui Jewellery have enjoyed high market acceptance for a long time. Foreign brands are rather slow in gaining acceptance and often require a long period of cultivation.
In terms of people's everyday consumption, such as clothing, food, housing and transport, Yantai consumers are quite pragmatic. A big chunk of their expenditure goes on food and housing. As their economic strength improves, spending on brand-name clothing, cosmetics, jewellery, digital electronic products and cars increases from year to year.
Yantai people are also becoming more demanding about food. When it comes to the diet, emphasis is shifting from food hygiene to nutrition science as living standard and income improve. Keeping up with the trends and weight management are young people's new demands for food and drink. People are also setting higher standards for their dining environment. New-style restaurants that combine leisure with catering are doing brisk business. Going to cafes and bars has very much become a part of everyday life for many people.
As far as housing is concerned, property prices in Yantai are much lower than in nearby tourist cities like Qingdao, in spite of the rising trend. Thus, Yantai people's housing expenditure and mortgage payment burden are relatively small. People are also quite pragmatic about home furnishings. Purchase of electrical home appliances accounts for a big part of their housing decoration budget.
While public transport remains the main option for the majority of ordinary citizens, car ownership has seen explosive growth in Yantai in recent years. As of the end of 2014, car ownership in Yantai reached 1.84 million, exceeding that of Jinan (1.5 million) and trailing only Qingdao (2 million) in the province. Thanks to the rapid growth of car ownership, car-related expenses have become Yantai's biggest consumption expenditure item, other than housing.
Traditional department stores undergo transformation
Joy City and Wanda Plaza, which officially opened for business last year, successfully brought in famous international brands like H&M. Nationally-renowned catering enterprises also ventured into the city, prompting traditional department stores to continuously undergo transformation. Not only have national catering chains joined hands with department stores in the city, even famous domestic catering chains, like Sanheyuan (三合園), Brigh Catering and Yujia Denghuo (漁家燈火), are capitalising on the shopper traffic of large shopping malls to open branches and step up marketing promotions.
Keen on online shopping
Online retailing grossed Rmb21.8 billion last year, up 50.4%. Local e-commerce platforms like Sanzhangou (3zhangou.com) are doing good business. The city organised online group buy activities for cherries, sea cucumber, apples and other products last year, with total cherry sales alone amounting to Rmb95.6 million, up 458%. The e-commerce platform of Zhenhua Group (ec.zhenshang.com), the dedicated webpage of Yantai on Taobao (yantai.china.taobao.com), and other shopping websites integrated their online and offline resources to further tap the potential of their physical stores. They become consumers' hot favourites because of the new experience they offer in the range of commodities and services offered and in their marketing initiatives.
White collars have strong desire to spend
The average wage of white collar workers in Yantai ranks fifth or sixth in Shandong, but the price level of this city is among the highest in the province. Thus, although Yantai's ordinary white collar workers have a strong desire to spend, they only have limited ability and are typical middle-segment consumers. They mostly choose trendy mid-range clothing brands. International entry-level luxury brands like Zara are also quite popular. They choose first-line brands for high-usage consumer goods, like cosmetics and bags. Many young consumers buy online to save money. For jewellery, local companies like Xinhui and Fulai are welcomed by these consumers for their affordable prices. As far as the choice of shopping is concerned, middle-segment consumers are more inclined to patronise middle to high-end malls, like Wanda Plaza, Joy City and Zhenhua Shopping Mall.
Demand for luxuries on the rise
At present, the ability of Yantai residents to spend on top brands and luxury goods leads similar cities but is lower than in first-tier cities. Entrepreneurs and senior executives aged between 30 and 45 pay greater attention to quality and brands and some of them are beginning to recognise the brand concept of the luxury goods they bought. Most of them have experience in travelling and shopping abroad and their consumption level is steadily rising. International top luxury brands like Prada, Louis Vuitton, Mont Blanc and Porsche have established their presence in Yantai in recent years. These high-end luxury goods are mostly sold in Zhenhua Commercial Building, Joy City, Wanda Plaza and Guihe Baihong Aristocratic Store. The arrival of these luxury brands shows their confidence in Yantai's consumption potential for luxury goods.
4. Profiles of Yantai’s Major Commercial Districts
Yantai now has five major commercial districts, including South Avenue, Railway Station - Haigang Road, Sanzhan - Qingnian Road, Yanda and Yingchun Avenue. Among them, South Avenue is most upmarket and most popular. Yanda and Railway Station - Haigang Road are improving and developing rapidly. Sanzhan - Qingnian Road is already well-established and its rate of growth is slowing. Yingchun Avenue in Laishan District is gradually becoming an emerging commercial district thanks to the relocation of government offices and policy support from the government.
As the most important traffic artery in Zhifu District, the main urban area of Yantai, South Avenue was the earliest commercial district of the city and has always been the leader of consumption trends in the course of its development spanning more than two decades. It is the busiest, biggest and most diversified commercial district of Yantai.
South Avenue is lined by malls, but the ones with the strongest competitive edge are those under the Zhenhua Group, as well as the recently-completed Wanda Plaza. The Zhenhua Group has Zhenhua Commercial Building, Zhenhua Shopping Mall and Zhenhua International Plaza on this street, with a total business floor space of over 500,000 sqm. Zhenhua Commercial Building, the most upmarket and largest of these, houses Louis Vuitton, Gucci and other top luxury brands. It is a high-end shopping complex in Yantai. Zhenhua Shopping Mall and Zhenhua International Plaza are middle to high-end malls selling mainly clothing. They have undergone transformation in recent years by bringing in other business modes, such as catering and entertainment.
Wanda Plaza was opened for business at the end of 2014 and is the first signature store of Wanda Commercial Properties in Yantai. Other large retailers on South Avenue include Inzone Mall and Wal-Mart.
Since South Avenue is designated as a ‘financial street’ in Yantai's city planning, it is a place where the Yantai branches of banks are located. Also found here are many star-grade hotels and office blocks, which bring a steady flow of customers to this commercial district. In addition to residents and white-collar workers in the neighbourhood, this place also attracts many high-income families from other counties and cities, as well as tourists.
Yanda (Yantai University)
Yanda is a commercial district developed on the strength of Yantai University, Shandong Institute of Business and Technology, Binzhou Medical University and other institutions of higher learning and mainly includes New World Department Store, Kanghui Commercial City (康惠商貿城), “Own the World City” pedestrian walk, City Crossing and other commercial projects. There are nearly 1,300 shops of various sizes in this district, with a business scope covering clothing, catering, daily merchandise, pharmaceuticals, leisure, recreation, as well as cultural and creative industries. A development pattern covering the whole service industry chain, with high-end commercial complexes including City Crossing and New World Department Store as the lead player, Y+Living, “Own the World City” pedestrian walk and other mass consumption carriers as pointers and Kanghui Commercial City and Xianglong City Plaza (祥隆城市廣場) as carriers, is taking shape. People can satisfy their needs in all aspects of life here.
New World Department Store houses famous brands like Starbucks, Haagen Dazs, Pizza Hut and Burger King. Sunshine Club on the second floor of Kanghui Commercial City, which boasts an investment of over Rmb50 million, is hailed as the best of its kind in Shandong. Xianglong City Plaza is at the stage of foundation construction. Towers 1 and 2 of City Crossing were topped out in July 2015. Development of the commercial district is making swift headway.
Students and staff members of nearby institutions of higher learning were the main consumer groups in this commercial district in the past. Although the place attracted many people, the consumption profile was predominantly middle to low end. It began to undergo a major transformation following the entry of New World Department Store and Kanghui Commercial City, with the completion of middle to high-end residential projects in the neighbourhood assuring this district with sufficient middle to high-end consumer groups.
Sanzhan - Qingnian Road
The Sanzhan commercial district, which started off as the Sanzhan Wholesale Market, was one of the first commercial districts of Yantai. Situated next to the railway station, long-distance coach station and port passenger terminal, heavy pedestrian flow has fuelled the prosperity of this district. Representative businesses in this district include the Sanzhan Wholesale Market, Parkson shopping centre, RT-Mart supermarket and Paris of the Orient (東方巴黎) pedestrian walk. It extends in all directions from the Sanzhan Wholesale Market and Qingnian Road Paris of the Orient pedestrian walk. Wholesaling is the main business in this district. Suning, Five Stars and other electrical appliance dealers have their presence here. The Sanzhan Wholesale Market deals in a wide variety of goods, including clothing, tea, fruit, digital products, furniture, home appliances, food and drinks, lighting and leather goods. It is a famous place for commodity wholesaling in Yantai.
Parkson and RT-Mart are just across the street from Sanzhan Wholesale Market. Before the arrival of Wanda Plaza and Joy City, Parkson was the first shopping centre in Yantai to bring in catering, entertainment and other new business modes to attract white-collar and young consumer groups.
For some time, the Sanzhan-Qingnian Road was Yantai's busiest commercial district thanks to its ideal geographical location. However, development is slow due to its sluggish upgrade and the impact of emerging shopping malls. The area may see its former glory again after the completion of the upgrade and transformation of the Sanzhan Market and the redevelopment of the Shenli District.
Railway Station - Haigang Road
The Railway Station-Haigang Road commercial district is situated next to Yantai Railway Station and South Avenue and was once part of the South Avenue commercial district. Following the completion and opening of COFCO Joy City in July 2014, the place has become a prime commercial district in its own right. Commercial facilities in this area mainly include COFCO Joy City, 1st Buy Plaza, Railway Station Yiwu commodities city and Haigang home furnishing city.
COFCO Joy City is the main attraction of this district. Yantai Joy City is no doubt the main carrier of all shopping centres in Yantai. With a total business space of 220,000 sqm, the project has three basement levels and six levels above ground and covers the six major business modes of shopping, catering, leisure and entertainment, culture, education and lifestyle services, with 60% of its brand portfolio entering Yantai for the first time. Joy City is a weathervane for consumption trends in Yantai. It is the busiest shopping mall in the city, with young people and middle-class families forming the mainstay of its consumer base.
People have high hopes for Laishan District as a new urban centre in Yantai. Yingchun Avenue in the busiest section of Laishan has become a place most frequented by Laishan residents. At present, Aeon shopping centre, the Laishan branch of Zhenhua Commercial Building, Inzone Mall and New World City Landmarks are the only shopping complexes on Yingchun Avenue. Among them, Aeon is the most popular commercial centre in Laishan District. Late comers, Zhenhua Commercial Building and Inzone Mall, are increasing their regional coverage.
The new commercial district of Yingchun Avenue is taking shape as the ‘Second South Avenue’ in Laishan District. In addition to mature establishments, like Aeon, Inzone and Zhenhua, construction of urban complexes, such as Wuchai Metropolis, Powerlong Plaza and Meilian International Times Square (美聯國際時代廣場), is underway. Yingchun Avenue will soon see an era of commercial complexes.