Wang Jianlin: Promoting Experience Consumption
According to the 12th Five Year Development Plan of the central government, the total consumer expenditure of China will grow from Rmb 15 trillion to Rmb 30 trillion from 2011 to 2015, i.e. the size will be doubled in five years, equivalent to an annual growth rate of over 15%. The rate is much faster than the GDP growth. What will be the stimulus for growth of such scale? It would be demanding if the country continues to rely on consumption of traditional patterns. We will need to create new consumption themes to achieve robust growth. In my opinion, experience consumption will be a key area to develop in order to achieve this goal.
I. The Definition of Experience Consumption
There are two broad categories of consumption: physical consumption and experience consumption. Physical consumption is shopping, as what we see in a typical commercial nowadays: a young couple with a few shopping bags in their hands, looking happy. Experience consumption could be further classified into broad sense and narrow sense. In the broad sense, it includes consumption of cultural experience, holiday trips, sports and entertainment etc. In the narrow sense, it refers to consumption of sensory experience in the shopping mall, e.g. watching a movie, playing electronic games, working out, and dining etc.
II. Characteristics of Experience Consumption
1. Discretionary consumption
Experience consumption is discretionary, e.g. watching a movie, working out, ice-skating etc.; these are not necessities to our everyday life, such as the three meals of a day, and household consumption, which people will need however financially constrained they are . Compared to consumption of necessities, experience consumption is the consumption of a higher form.
2. Middle class forms the major part of the consumer group
By income classification, experience consumption is primarily dominated by the middle class; by age groups, it’s fashion-oriented consumption of the young people. Experience consumers should have both financial strength and time surplus. Adequate financial situation is the pre-condition for experience consumption; these people can afford a movie that costs tens of Rmb, or a gym membership of a few thousand Rmb, or a Karaoke session in the shopping mall. All these fashionable life styles require strong financial standing.
3. Fast growing consumption
The growth of experience consumption in China has outpaced not only the GDP growth, but also the growth of total consumer expenditure of the society. The GDP growth in China over the last 10 years has been over 9%, and the annual growth of the total consumer expenditure has surpassed 15%; however, both rate came in short of the growth rate in experience consumption. For example, movie consumption in China has seen annual growth of over 40% in the last five years; dining has experienced an annual growth of over 25% in the last 10 years, the total annual revenue of the restaurant sector is over Rmb 3 trillion, more than those of the automobile and ship building sectors.
4. Not marginalized by online shopping
Online shopping has become a norm as the internet matures. As early as 20 years ago, there were views from the US that the generalization of online shopping would mean the end of traditional sales channels; the views are largely agreed to in China nowadays. However, these people have mistakenly taken consumption as merely shopping. In our view, firstly, online shopping will never completely replace traditional sales channels. People don’t buy high-end luxuries and jewelries online, but only simple, low-priced goods. Secondly, as much as online shopping has been growing fast, the consumption market has been keeping the pace as well. Online shopping emerged in the US over twenty years ago, while in the total consumption amount of almost 10 trillion US dollars, online shopping is still not the mainstream. Thirdly, experience consumption is even less dispensable by online shopping. People can’t eat by a click of the mouse. They don’t have access to the latest movies on line, not to say the sensory pleasure brought by digital movies and IMAX. People don’t get working out or singing Karaoke by online shopping. The definition of experience consumption entails that you only get the stimuli of sensation and the pleasure through real experience on site.
III. How to Bring Forth the Development of Experience Consumption
1. Allow more shops for experience consumption business
In the design of Wanda Plazas, there is specific requirement that the weight for experience consumption should be over 50%. Food and restaurant business is assigned with special significance; there are food streets and over 30 restaurant businesses in every Wanda Plaza. There is a Chinese saying that food is of utmost importance to people. I firmly believe that what makes a shopping mall successful is not the shops for physical shopping, but the food and restaurant business. The more a plaza promotes food and restaurants, the more popular the plaza is.