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Zibo: Profile of a Consumer Market

1.  Economic Overview and Development Planning

Located in central Shandong province, Zibo has a population of over 4.5 million and ranks among the country’s top 50 cities with the greatest comprehensive strength. Zibo is a transportation hub in Shandong province with a convenient transport network consisting of the Qingdao-Jinan Railway, Jinan-Qingdao Expressway and National Highway 309 that run in an east-west direction, and Zibo-Dongying Railway, Zibo-Badou Railway, Binzhou-Laiwu Expressway, National Highway 205 and Provincial Highway 803 that run in a south-north direction. Downtown Zibo is 70 km away from the Jinan international airport and 210 km away from the Qingdao port in the east. It is among the country’s first batch of science and technology pilot cities, and an important R&D base for the ceramic, chemical, pharmaceutical, silk and metallurgy industries in Shandong province. It has also been designated the city for demonstrating the nation’s achievement in intellectual property protection. In 2014, Zibo’s GDP amounted to Rmb403 billion and its per capita GDP was Rmb87,531. Manufacturing is a significant component of the local economy, carving out a 56% share in the GDP, while the service sector makes up about 40% of the GDP.

Chart: Zibo’s GDP in recent years
Chart: Zibo’s GDP in recent years

Zibo is one of the industrial cities in the Bohai Rim region, and is reputed as ‘a capital of ceramics’ as well as ‘a city of petrochemicals’. In 2014, there were 3,021 industrial enterprises above a designated scale, and their principal operating income amounted to Rmb1,142.8 billion. Total output from high-tech industries for the whole year made up 30.7% of the total industrial output of enterprises above a designated scale, up 1.1 percentage point over the output at the beginning of the year. Backed by a manufacturing history of over 100 years, the city now boasts petrochemicals, pharmaceuticals and new materials as its pillar industries with advantages. Other traditional industries, like machinery, textiles and garments, metallurgy, building materials and light industries have also flourished. In particular, the production volumes in the sectors of crude oil processing, oxidized aluminium, as well as small and medium-sized electrical machinery, rank high in the country.

Zibo is rich in resources, with over 50 types of mineral ores discovered to date. Among these, the reserves of bauxite, refractory clay, chemical limestone, ceramic clay, coal and iron are massive and of good quality, making Zibo a major producer of these minerals in Shandong province. In addition, Zibo has abundant resources of petroleum and natural gas in the north. The city also possesses plentiful water resources, as the Yi River originates from its southern mountainous region and the Yellow River flows across its northern territory.

Zibo’s service sector has registered impressive growth in recent years. The leading players of its commercial and trade circulation industry include Zibo Commercial Building, Liqun Shopping Plaza, Inzone Shopping Mall and Jindi Shopping Plaza which together form the core business district in downtown Zibo. World-renowned brands such as Wal-Mart, Aeon and Tesco have opened for business here one after another. Zibo has also witnessed the proliferation of large-scale specialised wholesale markets. In the whole of Zibo, there are 24 commodity trading markets achieving an annual transaction volume of over Rmb1 billion, with five of them having an annual transaction volume of over Rmb3 billion each and ranking among the top 30 markets in Shandong province. A number of modern commercial outlets are also up and running, including the China Fortune Ceramic City, China Ceramics Science Town (陶瓷科技城), Yiwu Small Commodities Market and Macalline. Meanwhile, Zichuan Building Material Market, Zichuan Garment City and Qilu Chemical Mall, as well as the sofa market, fabrics market and stainless steel market in Zhoucun are well-known not only in northern China but also nationwide.

In addition, emphasis has been placed on planning and developing a batch of regional logistics parks and industry clusters, including Zibo Commercial and Trade Logistics Park, Luzhong Highway-Railway Jintai Logistics Park, Qilu Modern Logistics Port, Zibo (Luzhong) Modern International Logistics Centre and Luzhong International Bonded Logistics Centre. These facilities have not only enhanced the quality of logistics services, but will also further the goal of building a modern logistics ‘dry port’ in central Shandong. Meanwhile, the cultural and tourism sectors in Zibo have continued on fast-track expansion. In the city, a total of 48 key sight-seeing spots have been opened up, while 38 star-grade hotels and 109 travel agents are in service.

Under Zibo’s Overall Urban Planning (2011-2020), the city centre of Zibo will be developed with Zhangdian District as the core, and the four urban districts of Zichuan, Boshan, Zhoucun and Linzi as the sub-cores. Zhangdian District will serve as the political, economic and cultural centre of Zibo, focusing on the development of the service sector and high-tech industries as well. While Zichuan District will devote to the development of logistics industry and modern manufacturing industry, Boshan District will place its emphasis on tourism and modern manufacturing industry, with electrical and mechanical equipment, pottery and glass, and new materials as its pillar industries. Meanwhile, Zhoucun District will concentrate on the commercial and trade circulation industry, while strengthening its light textile industry, whereas Linzi District will focus on petrochemical and bio-engineering industries, while stepping up the development of Qi culture to build up an internationally renowned petrochemical industrial base and Qi tourism city.

2.  Zibo’s Consumer Market

2.1  Growth in Retail Sales

Zibo’s total retail sales of consumer goods reached Rmb174 billion in 2014, up 12.4% year-on-year. Among retail sales of enterprises above a designated scale, food, drinks, tobacco and alcoholic products recorded a growth of 7.3%, clothing, footwear and headwear as well as knit and woven products 7.7%, furniture 13.4 %, Chinese and western medicine 17.9%, electrical and mechanical products and equipment 27.5%, petroleum and related products 21.9%, and automobiles 10.9%.

Chart: Retail sales of consumer goods
Chart: Retail sales of consumer goods

Between 2007 and 2013, urban household’s ownership of most consumer goods in Zibo showed an upward trend, including products generally affordable to the middle class, such as computers and mobile phones. Ownership of family cars has also risen steadily in recent years.

Table: Average Ownership of Consumer Durables Per 100 Urban Households at Year-end
Table: Average Ownership of Consumer Durables Per 100 Urban Households at Year-end

2.2  Per Capita Disposable Income and Consumption Expenditure

In 2014, the per capita disposable income of urban household in Zibo was Rmb33,534. Of the per capita total income of urban households, salaries averaged Rmb24,545, up 9.2%. The per capita consumption expenditure was Rmb19,904, of which Rmb6,316 (or 31.7%) was attributable to food.

Chart: Per capita disposable income and consumption expenditure of urban households in Zibo
Chart: Per capita disposable income and consumption expenditure of urban households in Zibo

3.  Characteristics of Zibo’s Consumer Market

3.1  Population Structure

Zibo’s permanent population in 2013 was 4.593 million, an increase of 168,000 or 3.8% as compared with 2005.

According to China’s sixth population census, there were 1.524 million households totalling 4.276 million people in the city in 2010, with an average of 2.81 members in each household, 0.2 persons fewer than the 3.01 persons in 2000.

Of the city’s permanent population, 50.2% were male,, people aged 0-14 accounted for 14.6% of the total population, 15-64 accounted for 75.4%, while the rest were aged 65 and above.11.4% of the population have university / tertiary education or above, 55.9% have high school education, and the rest have primary school education or below.

3.2  Characteristics of Consumers

Zibo is an active industrial and commercial city, and its people are rather cautious in spending. The general public of Zibo are very pragmatic and they attach great importance to practical values when buying. With its sound economic background, the city has a higher ratio of middle class and affluent people than other cities in the province, and these people form the principal group of upmarket consumption.

Compared with other cities of similar grade, consumers in Zibo do not have a very high brand loyalty. Their choice for clothing, cosmetics and other daily-use articles is easily influenced by advertising and publicity. Given the right incentive, Zibo consumers will accept and approve new brands more readily than their peers in neighbouring cities.

The city of Zibo is more open and receptive. People tend to choose products based on word-of-mouth recommendation or personal experience. They are more easily attracted to advertisements and sales promotions. In the choice of shopping venues, white-collar workers and employees of government organs and institutions prefer patronising big shopping malls. As an important industrial city in Shandong, Zibo has a large number of big manufacturing enterprises, and the employees of these enterprises have become a significant consumer group and an important clientele for festivals, holidays and discount seasons of large shopping malls.

Pragmatic and receptive to new products

As far as the consumption of clothing, food, housing and transportation is concerned, the people of Zibo are inclined to choose clothing items that are both pragmatic and good looking. As this is the case, some shopping streets for brand-name clothing always draw in a higher consumer flow than specialty counters at shopping malls. In respect of price range, most people tend to choose mid- to high-end domestic brands. Purchases of upmarket clothing are only for meeting business needs or for festivals and celebrations.

Zibo is one of the birthplaces of Shandong cuisine, and the people of Zibo always have high expectations of their food and drink. Capitalising on the economic development of Zibo in recent years, its people not only look for enjoyable, tasty food, but also begin to pay attention to nourishment and health. Trendy without weight gain is the new requirement of some young consumers for choosing food. People are also increasingly demanding about dining ambience. With the influx of new types of restaurants, those incorporating leisure and dining setting have become more appealing to consumers. Many people frequent coffee shops and pubs as part of their daily life.

In terms of housing, the price of real estate in Zibo is relatively stable, and price rises are more gradual than those of Qingdao and Jinan. As a result, the people of Zibo have less pressure in housing expenditure and housing loan repayment. For decoration and renovation, people not only look for pragmatic functions, but are also receptive to new styles and trendy home accessories.

Rapid growth in spending for enhancement purpose

The people of Zibo gradually devote a larger share of their expenditure to non-basic needs. As far as the income permits, most people are willing to spend on items for enhancement purposes. The proportion of expenditure on entertainment and leisure is rising year by year. Leisure activities are becoming more diversified. Apart from reading, watching TV and going online at home, frequenting movie theatres, fitness centres and pubs are also the major options. For electronic and digital products, consumers in the 20 and 35 age group are more demanding on the function, performance and appearance of the products, and the renewal and replacement rates are high among them.

People have a strong desire to travel during festivals and holidays. Some short tours are highly popular, serving as a great stimulus to the city’s tourism and leisure industry. Consumers also have strong purchasing power for jewellery, antiques and cosmetics, and many consumers have a habit of buying these goods periodically during the change of seasons or festivals.

Festival consumption: a strong pull

As the pillar industries of Zibo are production and manufacturing, peak and low seasons in its consumer market are less defined than other tourist cities of the province such as Qingdao, Yantai and Tai’an. Fluctuation in Zibo’s consumer market is triggered by festivals and celebrations. During Spring Festival, National Day, Mid-Autumn Festival and Labour Day (1 May) long weekend, business operators usually introduce some special offers as a sales promotion. Some Chinese and foreign festivals, such as Valentine’s Day, Christmas, Mother’s Day and Children Festival, have become more popular in recent years. Thanks to the promotional initiatives of business operators, intensive consumption is evident during these periods.

Rising consumption of luxury goods

Following the opening of major commercial facilities, such as Intime City and Maoye Plaza, some luxury goods have begun to enter the Zibo market, satisfying the demands of some consumers for luxury goods. However, as the product mix is still limited, many consumers turn to other more developed cities. Since Zibo is geographically close to Jinan and Qingdao, it is convenient to go to these neighbouring cities by car or by high-speed rail,so many people from Zibo will shop there for upmarket luxury goods.

4.  Profiles of Zibo’s Major Commercial Districts

The commercial and industrial sectors of Zibo are well developed, and the commercial development of Zhangdian District, where the municipal government office is situated, has been particularly robust in recent years. There are four mature, fully equipped commercial districts in the city, namely People’s Park, Zibo Commercial Building, Intime City and Yiwu Small Commodities Market. Besides, Garment City inside Zichuan next to Zhangdian is also a big and well-established commercial district.

Picture: Zibo’s Major Commercial Districts
Picture: Zibo’s Major Commercial Districts

People’s Park: shopping and leisure centre

Developed around People’s Park, this commercial district is the most prominent shopping and leisure centre in the urban area of Zibo. In this district there are Maoye Plaza, Wangfujing Shopping Street, Inzone Shopping Plaza and Rongbaozhai Building. With a gross floor area of 115,000 sqm, Zibo Maoye Plaza is a large shopping centre offering international brand-name products, trendy general merchandise, leisure catering, children’s playground facilities, luxury cinemas, entertainment facilities, bespoke furniture, general supermarket and home appliance stores. It has drawn in more than 400 popular brand names, including Starbucks and Pizza Hut, as well as over 20 international first-line brands.

Wangfujing Shopping Street and Inzone mall in the district are also highly popular shopping venues, whereas Rongbaozhai is one of the few leading art works exchange and collectors’ markets in the province. On the whole, People’s Park is a comprehensive commercial district of urban Zibo that incorporates shopping, leisure and cultural facilities and appeals to all consumer classes. Apart from numerous shops and stores, there are also Zibo People’s Hospital and more than a dozen upmarket office buildings. White-collar and salaried class working here have formed a sizable consumer base for the district.

Zibo Commercial Building: prime location for large shopping malls

With the long-standing Zibo Commercial Building as its centre, this commercial district spans Jinjing Avenue and serves Liuquan Road as well. It is an urban district with the highest density of shopping malls. In addition to Zibo Commercial Building, various comprehensive shopping malls are found here, including Liqun Shopping Plaza, Zhenhua Commercial Building and Meida Department Store. Food Street, the most popular shopping street in Zibo, is another attraction of the district. Major home appliance stores, such as Gome and Suning, also run their business here. With a massive consumer base, this commercial district, together with People’s Park commercial district, are referred to as the ‘golden and silver commercial districts’ of urban Zibo.

As a long-established urban shopping centre, Zibo Commercial Building has been a major mid- to high-end consumption venue with an irreplaceable position in the eyes of Zibo consumers ever since the days when department stores dominated the retail scene. Following the subsequent entry of Zhenhua Commercial Building, Liqun Shopping Plaza and others into urban Zibo, this commercial district gradually grew to its current size.

The district is linked to the People’s Park commercial district by the Food Street, and the two complement each other in commercial operation. The most significant feature of this district is its concentration of comprehensive shopping malls. Promotion activities with deep discounts are often launched in the district during festivals and celebrations, attracting consumers from all parts of the city to shop for mid- to high-end clothing and home appliances. Consumers of this district mainly come from the nearby residential areas and other districts and counties of Zibo. It is also the prime shopping venue for mid- to high-end consumption for consumers from other cities.

Intime City: regional commercial district serving upmarket residential areas

Located at the Zibo High-tech Industrial Development Zone, Intime City is the Intime Retail (Group) Company’s first major commercial project in Shandong region under its national strategic layout plan. With a gross floor area of 256,000 sqm, it is a one-stop comprehensive shopping centre covering a full range of commercial formats, with shopping, catering, entertainment, leisure, business, cultural, art and experience-based functions.

At present, business operations in Intime City include Intime Department Store, a cinema, supermarket, real-ice rink, fitness centre and karaoke bar. There are also fast-fashion brands H&M, Uniqlo and the like. Catering brands include KFC, Pizza Hut, Starbucks, Burger King, Honeymoon Dessert and a number of other new comers to the Zibo market.

In terms of positioning, Intime City is targeted at mid- to high-end consumption, serving the upmarket communities of Zhongrun’s Overseas Chinese City, Shengshi Mingyuan (盛世名苑), Mingshang International, etc. Its consumers are mainly the residents of the mature communities in the neighbourhood, as well as senior-level white-collar workers of the hi-tech zone. With the increase in traffic volume brought along by the main east-west running thoroughfare, Lutai Avenue, the consumption in this commercial district has been boosted.

Yiwu Small Commodities Market: Low- to mid-end retail and wholesale centre

Yiwu Small Commodities Market is currently the largest modern wholesale trading market of the highest grade in central Shandong. Involving a total investment in excess of Rmb1 billion, the project covers a planned area of over 460,000 sqm, 60% of which is devoted to commercial operation. Phase one of the Zibo Yiwu Small Commodities Market (wholesale section) has more than 2,000 premises.

The principal product categories of the commodities market include garments, knitwear, bedding, toys, stationery and sporting goods, tourist handicrafts, gifts and accessories, hardware and electrical appliances, electronic watches and clocks, cosmetics, bags and luggage, daily-use articles, furniture, non-staple food, teas, footwear, etc. Targeting low- to mid-end consumption, this commercial district caters for the daily living and production needs of all consumer classes. Its consumers mainly come from the small- and medium-sized industrial and commercial enterprises in the neighbouring cities and residents of the nearby areas in the province.

Content provided by Picture: HKTDC Research
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