What investors need to know about the ‘little sisters’ army of young women powering China’s consumption growth story

Zhang Shidong
·5-min read

An army of young women dubbed the “little sisters” is fast becoming a driving force of spending in China, boosting the fortunes of companies selling everything from beer and liquor to streaming TV shows and cosmetics.

They are well-educated, and are delaying or just skipping marriage and motherhood, giving them more money and the confidence to spend. Meanwhile these “little sisters” see themselves reflected in popular TV shows – like the summer hit Sisters Who Make Waves – that encourage them to kick back and splurge on themselves. As such, “little sisters” are an increasingly important segment of China’s female consumers, who among all age groups account for three out of four purchases in the world’s most populated country, according to a report by Frost and Sullivan.

“The rising power of well-educated city women in their 20s to 40s is now a hit genre in mainland TV series and entertainment shows,” said Wendy Liu, a Hong Kong-based strategist at UBS Group and author of a new note on what she calls the “little sisters” economy.

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“Collectively, their rising disposable income and aspirations for the ‘good life’ have had a strong impact on demand for cosmetics, duty-free, health care, and mobile games/internet content. More importantly, the ‘little sister’ economy may impact spending by families and children across the spectrum” of e-commerce and entertainment etc,” she said.

These “little sisters” will lead to booms in sectors spanning from make-up and athleisure to food, beverages and home appliances, according to UBS and HSBC Holdings, which also has put out a new report on the growing spending power of Chinese women.

“Women are also increasingly working, having a greater say in household spending decisions, and spending more on themselves,” said Herald van der Linde, head of equity strategy at HSBC in Hong Kong. “Clearly women are becoming very relevant and important consumers.”

Their power is believed to be at least part of the reason behind share surges in such companies as Proya Cosmetics, which has jumped 110 per cent this year in Shanghai, and China Tourism Group Duty Free, the nation’s biggest operator of the duty-free shops, which has surged 148 per cent.

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And their power is not simply in the traditionally women-dominated niche sectors, like cosmetics.

Women already account for 60 per cent of China’s 4.6 trillion yuan (US$662.7 billion) catering market, according to Industrial Securities, while beer consumption by women increased a whopping 27 per cent in July from a year earlier, data by Wanlian Securities showed.

They are even taking a liking to baijiu, the potent Chinese liquor that has long been the domain of male consumers. Women bought a third of Kweichow Moutai’s high-end flagship liquors that were sold on Tmall, the e-commerce platform by Alibaba Group – which owns the South China Morning Post – on the midyear promotional day in June. That was an increase of 12 per cent from a year earlier.

Money managers have been jumping on the bandwagon.

Shenzhen-based Bosera Fund Management launched the nation’s first mutual fund that focuses on the theme of women consumption in June. Called the Bosera Female Consumption Theme Mixed Fund, it has gained almost 2 per cent in net asset value since its inception by the end of June.

Households are shrinking in China, and women are marrying later, if at all, amplifying their buying power. Photo: Bloomberg
Households are shrinking in China, and women are marrying later, if at all, amplifying their buying power. Photo: Bloomberg

Aier Eye Hospital Group, and Hong Kong-listed Tencent Holdings, gaming giant NetEase and Alibaba are among women-themed stocks that analysts see benefiting from the hot trend. US-traded New Oriental Education and Technology Group, live streaming firm Bilibili and online apparel retailer Vipshop Holdings are also getting a “little sisters” boost.

Changing behaviours are leading to women having higher incomes and decision power, according to HSBC. Chinese households have an average of 3.03 people, with the wealthy provinces at 2.78 and the developing areas at 3.10, HSBC data showed. Japan has the smallest households of 2.33 people on average in Asia.

“That means more income for each household, with fewer people in it, leaving consumers better off and able to ‘trade up’ on items, from beer to sports clothing,” said van der Linde at HSBC. “This is particularly the case in China, with the rise of ‘empty-nesters’– couples with adult children residing elsewhere – who have money to spend.”

The growing power of women consumers comes as China is digging its way out of the turmoil of the coronavirus. While economic growth turned positive in the second quarter, retail sales contracted for a fifth straight month in June, with cinemas limiting the number of film viewers and big gatherings still banned.

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The recent move by the government to loosen control over duty-free franchise licenses will further spur female consumption, making luxury goods exempt from taxes and therefore cheaper, according to Orient Securities. Sales at the duty-free shop on Hainan island surged by almost 150 per cent in May, it said.

The brokerage recommends China Tourism Group Duty Free as well as department store operator Wangfujing Group and Gree Real Estate, the two Shanghai-listed companies that have won the licenses recently to start duty-free shops.

“Women are playing multi roles in social life and they are also the leading consumers in pursuit of better brands, designs, experiences, services and even environmental protection,” said JD.com in a report. “Women are playing a more and more important role in consumption upgrade.”

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