200 Million Trendsetters: China’s Millennials are Shaping the Global Economy

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GGV Capital Jan 14, 2016

By Hans Tung and Jixun Foo

China has about 200 million people aged 15–24, compared to about 40 million Americans in the same age group. Some 277 million[1] of China’s young people are already online — and they’re the most mobile-connected generation in history.

We recently analyzed just how mobile-crazy and tech-savvy China’s youth are — and what their behaviors mean for global companies trying to sell them products and services. We poured over data about young people aged 15–24 in China and uncovered some surprising things about their wants, behaviors, and viewpoints, especially in comparison to their parents. The findings should interest startups and established companies in every sector — from tech and entertainment, to automotive, education, finance, restaurants, and retail — as they seek ways to engage this massive demographic.

First, we found that China’s young people spend a crazy amount of time online each week — an average of 27 hours.[2] That’s compared to 21.7 hours a week American millennials spend online. And the vast majority of Chinese millennials use their mobile phones to access the Internet, instead of laptops or tablets. Half of Chinese millennials check their phones at least every 15 minutes.[3] So the first rule of thumb when trying to reach China’s millennials? Be mobile first — forget the PC.

But Chinese youth aren’t just screen addicts. They’re a unique consumer market with three distinct characteristics: they’re open to trying all manner of mobile apps; they embrace the homebody, or “zhai”, culture and thus spend lots of time online; and, because they spend so much time online, have a far more global outlook and desire to travel than older generations. (The global mindset may seem typical of young people in Western countries, but it’s new in China, where previous generations lived in a far more insular country.) So the second rule of thumb when trying to connect with Chinese millennials is to keep their unique behavior — mobile, open-minded, and global, yet homebodies at heart — in mind.

Mobile Minded

China’s millennials are embracing new lifestyles that are radically changing the way they consume content, communicate, shop, and eat. Combined with being always-connected to the mobile internet, Chinese millennials are very willing to try new native mobile apps and websites, presenting untold opportunity for mobile-first startups.

One example of how Chinese millennials are using mobile apps for every aspect of their lives — and are far more open minded than their parents — is Baobao, a mobile app that lets people share their private feelings with strangers online. Baobao offers a more intimate setting than the much larger messaging apps QQ from Tencent or Momo. In only a couple years, Baobao has grown to 10 million regular users, showing how fast a startup can can grow if it taps into the new open mindset of Chinese millennials correctly.

Homebodies

Chinese millennials may seem a lot like young people anywhere — willing to try new things and interested in global ideas. But in one respect, they’re very different than Western youth; they like to stay home. Partially due to the high density and intense pace of many Chinese urban centers, and the lack of offline entertainment options in many inland cities, Chinese youth don’t mind staying home to watch videos, play video games, or socialize online. As such, China’s millennials are often known as “zhai”, which can most closely be translated as “homebody”, and businesses that target their needs are part of the “zhai economy”.

One study found[4] 51% of Chinese millennials watch at least one hour of online video, and 40% play at least one hour of video games, each day. That’s on top of time spent on social media, web surfing, and online shopping. Because Chinese young people like to stay home, a whole industry has sprung up to deliver them restaurant meals, groceries, and all manner of goods. Already, the online food delivery industry is worth over $2.4B per year in China — springing up from nothing just a few years ago — with 50% of all orders coming from millennials.[5] Some 60% of Chinese millennials shop online at least once a month[6] and they turn to friends to get purchase recommendations; 32% value their friends’ opinions the most, compared to just 19% who value a brand name.[7] This new breed of consumer increasingly turns online both for recommendations and research as well as to purchase.

Global Outlook

The good news for non-Chinese companies hoping to capture part of China’s millennial market is that this group also has a very international outlook. Partly because they spend so much time online, Chinese youth have learned a lot about the wider world and want to travel overseas; some 40% of overseas trips[8] are taken by people under the age of 30. This interest in “seeing the world” spills over into Chinese millennials’ spending and consumption habits. They aren’t just spending money at home, but also making purchases and using web services from non-Chinese companies. These are the users who are trying services from Airbnb, Tujia, Didi, and Uber when they travel in China and overseas.

Global brands are extremely popular with Chinese millennials, as are apps to learn English. Companies that tap into Chinese millennials’ desire to travel and experience new cultures will rise to the top in years to come. The most popular online video site in China, Youku Tudou, offers twelve thousand licensed episode of US TV — and most of its viewers are millennials.[9]

One company that’s already tapping into the global mindset of millennials is Xiaohongshu, a mobile shopping app for women to discover, share, and purchase global fashion and beauty products. This year, in its second year of operation and only its first year to experiment with mobile commerce, Xiaohongshu will join the $100 million revenue club. This shows how quickly startups can grow when they well serve the interests of this demographic.

Trendsetters

The massive Chinese millennial generation aren’t just blind consumers, they’re trendsetters. The way they behave, the values they hold important, and how they buy products and services is a harbinger for how future generations will act. Companies that want to sell into the Chinese millennial market should not just bombard them with marketing messages, but instead take time to listen, watch, and analyze their behaviors. What Chinese millennials want now, consumers all over the world will want in the near future.

Disclosure: GGV Capital made investments in Airbnb, Baobao, Xiaohongshu, Tujia, Didi, and Youku Tudou. Jenny Lee is on the board of Baobao, Hans Tung is on the board of Xiaohongshu, and Jixun Foo is on the board of Tujia and Youku Tudou, where he helped engineer the terms of its sale to Alibaba, another GGV portfolio company.

Data Sources:
[1] China Internet Network Information Center, GGV Capital
[2] China Internet Network Information Center, GGV Capital
[3] Qihoo360, GGV Capital
[4] Qihoo360, GGV Capital
[5] Enfodesk, GGV Capital
[6] Yuntuwang, People’s Daily, GGV Capital
[7] GGV Capital
[8] Phoenix Media, GGV Capital
[9] Youku Tudou


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