COVID-19 continues to have a huge impact on the world, however with many lock downs gradually being relaxed, many businesses are now looking forward towards recovery. Undoubtedly an organizational shift has occurred, and there is a ‘new normal’ for the way business will be conducted. In China, the coronavirus has fast-tracked key consumer trends, which may serve as an indication for businesses across the world.
Increase in use of digital platforms
China, in recent history, has been a leader in the application of digital business-to-consumer channels. Amid the Coronavirus, employers mandated employees to work from home, schools transitioned to online teaching, and brick and mortar stores were rendered needless. Online channels were the only way brands and retailers could maintain a connection with consumers, as such there was a sharp increase in e-commerce transactions.
Post coronavirus, a recent study by Mckinsey shows that around 55% of consumers in China are likely to continue purchasing their groceries online, which reflects that buying behaviors have significantly changed. Due to risk of exposure and convenience, many businesses have found ways through which they can establish and maintain a connection with their customer base. For this reason, a greater level of trust and reliability has been developed between customers and digital transactions.
Decrease in spending on ‘unnecessary goods’
Chinese consumers are a powerful force, not only in China, but across the world. According to the Mckinsey China consumer report, on single’s day (China’s equivalent to black Friday) in 2019, total sales on all platforms reached a record breaking $58 billion, eclipsing the $7.2 billion generated on black Friday.
Tofugear’s Digital Consumer in Asia report 2020, which was conducted on consumers across more than 12 countries in Asia, during the time of the outbreak, revealed that mainland China’s consumer confidence remains among the highest in Asia. This study reflected that around 47% of consumers in China were feeling secure about their personal finances and more than 59% having a positive outlook on the Chinese economy over the next 12 months. This reflects a huge contrast with neighboring South Korea where only 22% of consumers have a positive outlook and 14 % of consumers in Japan.
This serves as a strong indication that although consumer spending on ‘trivial goods’ had inevitably slowed during the peak of the outbreak; consumer confidence still remains quite strong as China leads the road to recovery.
Luxury goods in China
While many experts predicted a decline in the luxury goods sector, an analysis of past recessions reflects that the luxury sector is likely to rebound faster than most other industries. Of course, not all brands are immune to the harsh effects caused by the coronavirus, but those who are able to weather the storm are indicated to prosper, as China still remains one of the most important markets for luxury brands.
With many brands struggling in Europe and many other parts of the world, they now turn to China, as China spearheads the post-coronavirus recovery. Brands such as Prada, Armani and Cartier have all turned to the Chinese digital platform T-mall, in an effort to increase customer engagement during this period.
Within its opening week, the French luxury giant Hermès’ Guangzhou store sold $2.7 million worth of goods. This sizeable figure serves as a positive indication that Chinese customers are ready and willing to spend on the right products.
Larger focus on health and well-being in China
Over recent years one of the biggest trends of consumer behavior in China has been the growing awareness of the link between nutrition and health. Considering the severity of the outbreak of the Coronavirus, many Chinese consumers have shifted their spending priorities and are now adopting an even greater health-related outlook. According to Mckinsey, around 60% of consumers in China’s larger cities now ensure they look at the labels on foods they buy and try to avoid products which do not seem healthy. More than 50% of consumers indicated that natural and healthy ingredients are one of their primary buying factors.
Businesses have reacted to this, as stores on digital platforms such as Taobao and Tmall are selling nutritional supplement products at discounted prices; Starbucks and KFC have introduced plant-based meat alternatives; and Nestle launches its customizable superfood drink.
While COVID-19 has inevitably had an effect on markets across the world, it is evident that the Chinese consumers are hungry to spend and the Chinese market is on the path to recovery. It is important for businesses to carefully consider and monitor the trends in the Chinese market, especially for those looking to do business in China, as we now enter the ‘new normal’.