Turbulent times accelerate change. Given that China is a couple of months ahead of Europe and North America in the Covid-19 pandemic, we are starting to see how longer-term changes may play out globally. We asked our expert Chinese research associate, Weiwei Yang, to write about how the crisis is changing the behaviour and needs of consumers in China. Here’s the insight.
Like with many other countries, the Covid-19 outbreak has had a significant impact in China. Trends seen before the outbreak are accelerating. Unsurprisingly, behaviour change necessitated by a lockdown and social distancing has remained where that change introduced an efficiency or added benefit for the consumer. However, the behaviour reverted where it was inconvenient or added little value.
Continued Growth Of E-Commerce
Pre-Covid, e-commerce was a massive industry in China with expectations to grow to over 1300 billion USD by 2024. The pandemic has only accelerated this growth, particularly for grocery shopping Apps, vertical e-business platforms and community-based WeChat ordering systems.
An older generation that skewed towards slower adoption of online shopping forcibly learnt to adopt the technology. Many of this generation, having seen the convenience benefit, will continue to use the shopping Apps that they relied upon during lockdown. Despite the gradual recovery, many consumers still express concerns about venturing out. They feel safer continuing with online shopping.
Aside from online grocery, the growth of e-commerce is particularly significant in healthcare. According to a tracking study, out of the top 10 online shopping Apps with the most significant increase in active members, seven are fresh food stores, and three are e-pharmacies, with the top spot being an online pharmacy. In another Chinese study, one of the key ‘new’ consumer pandemic experiences was consulting with doctors and/or booking hospital appointments online, with 72% of people saying they will continue to use such online healthcare services in the future.
Slow Recovery Of Offline Shopping
Since the end of the epidemic peak, the offline shopping market has been gradually recovering, particularly during Golden Week in May, when offline saw a spike in stimulation. However, there are apparent differences between sectors. Retail convenience stores and pharmacies have retained their sales uplift due to many restaurants and cafes not being open and the continued need for medicines.
The sales of fashion stores and shopping malls dropped by 90% during the epidemic peak, and although 95% have already reopened, the customer flow is 20% lower compared to the pre-pandemic period. A fascinating McKinsey article and “Fast Forward China” podcast shares many insights including how the Chinese consumer – especially in their 20s and 30s – have reigned in spending and are making more financially astute decisions.
Unprecedented Attention To Health And Wellbeing
The pandemic has heightened awareness in health and wellbeing, reflected in their shopping behaviour. For example, during the post-pandemic recovery, Chinese consumers bought 25-50% more dairy products and fresh vegetables. Since the pandemic, consumers’ overall spending on services is relatively low. Still, there is substantial demand for going to the gym or health preservation leisure clubs, and a local Chinese survey suggests that over half of the respondents have made a plan for exercising or weight loss.
Brand Switching And Growth In Domestic Brand Loyalty
The lockdown motivated many Chinese consumers to try new stores and brands due to reasons including i) poor quality of products offered by their preferred suppliers, ii) long distances to their preferred stores, iii) out of stock goods and iv) concerns about the risk of infection. It resulted in new loyalty to stores and brands, especially those with online shopping platforms and those offering efficient delivery services.
With regards to brand origin, it is worth noting that the pandemic has significantly boosted Chinese consumers’ preference for domestic-made products. This trend was evident before the outbreak, with Chinese consumers starting to trust domestic brands to deliver high quality, innovative products. However, this growth in domestic brands has accelerated due for two reasons. Some overseas brands having to cease trading in China during the outbreak and increased awareness of domestic brands due to e-commerce live-streaming, predominantly on Chinese live-streaming platforms such as Taobao. Moreover, many famous Chinese brands made significant charitable donations during the pandemic, widely perceived to contribute to the country’s successful battle against the pandemic, which triggered people’s patriotism.
New Business Opportunities
Apart from a thriving healthcare industry – including not only pharmaceutical and supplement products but also health and fitness services – other significant opportunities include online communication platforms for education, training and office industries. A local study suggests that nearly 40% of people have used online communication tools for studying, training and/or working, and almost 70% of them would be happy to continue with such tools after the pandemic.
Having experienced the pandemic, approximately a quarter of consumers have started to consider purchasing private health insurance for peace of mind, 40% are interested in buying financial management or investment products as an additional source of income, and nearly 20% have plans of buying properties or private vehicles.
In summary, the outbreak of Covid-19 has significantly changed Chinese consumers’ shopping behaviours, which is reflected by not only where and what they buy, but also how they perceive brands. Despite the negative impact it has caused to China’s economy, the pandemic has introduced valuable new business opportunities in many sectors, which present interesting innovation growth possibilities. Should you wish to discover more, or to conduct research in China, we’d love to hear from you.
Thank you to Weiwei Yang for the invaluable insight.