Consumer spending bounces back, businesses re-consider their go-to-market approach, government offers subsidies for auto purchases, travel industry is concerned about long term impact…
With the Wuhan hospital famously built within 10 days now being closed due to all patients being discharged, unlike many other countries, China is entering a stage of recovery. However, the long term impact on the economy is yet to be seen, with financial consulting company Nomura forecasting 5% growth for China’s economy in 2020, under the condition that there is no second wave of infections.
With regular life still slowly getting back to normal, what has our PHD China Insights team uncovered this week?
60% of business executives in China predict go-to-market redesign (refocus on online channels, reduce offline spending) as the key long term response to the COVID-19 epidemic.
46% of business executives in China are concerned that industry trends will shift due to changed consumer behavior, while 35% of them said they are worried about procurement and distribution as their key partners recover
A significant shift to digital health care services is expected to be seen in the next five years, with telemedicine heading the expected growth (164%), followed by long term illness management (98%), digital records (80%), self-diagnosis apps (52%) and on-demand services (33%).
The loss to China’s tourism industry, estimated by China’s Tourism Academy, due to the epidemic outbreak will reach RMB 3 trillion in 2020
- 42% of travel businesses in China claim the COVID-19 crisis has affected their cash flow
- 39% of travel businesses in China expect an expansive rebound once the crisis is over, while 44% are cautiously positive and expect their business to increase only slightly
- 65% of travel businesses expect the industry will need three to six months for sales to recover to the pre-crisis levels
- 32% of Chinese travelers do not plan to travel immediately after the crisis ends, while 19% will stick to their pre-crisis plans.
- 56% of them will travel within 1 to 3 months after the crisis and primarily domestically (52%)
Suppressed by the crisis, spending in some categories is bouncing back, with 400,000 of “animal eye shadow” units being sold on Taobao Livestream during three day promotion for International Women’s Day. Some home cleaning and appliance categories did well too: steam mops saw 380% sales growth YOY, while toaster sales jumping by 1500% YOY.
Sales for the International Women’s Day increased 100% YOY on Alibaba’s B2C eCommerce platform Tmall, Taobao Livestreaming grew 264% YOY and that the day with the strongest recent sales pushed growth by 650% YOY.
90% of bookstores were forced to close during the epidemic with no income, according to a survey by Bookstore Line, and 37% of them had enough capital to sustain them for only one month without being open.
China’s national television network CCTV saw their ratings reach 15.03 (compared to 8 in August, 2019). Due to the interest of different audience segments in the crisis outbreak, the network saw increase of young audience by 84%
Support for the auto industry. Local governments in China are launching policies to boost automobile sales through issuing more registration plates and subsidies, led by Guangdong. The city of Foshan is currently offering an RMB 2000 – 5000 subsidy for new car owners with China VI emission standards
The total O2O market in China will reach value of RMB 2.95 trillion in 2020 with “to home” segment expecting to double, according to research company Kantar. This is being led by medicine (+260%), grocery – fresh foods (+179%) and grocery – FMCG (+130%).
Except for Hunan province where the impact of COVID-19 has been the most severe, delivery services in other regions are all back in business. Cainiao, a global delivery network of eCommerce behemoth Alibaba, has reported a return to pre-crisis level.
Other two businesses also owned by Alibaba, food delivery service Eleme and O2O retail chain Freshippo (Hema Xiansheng), also claim a return to pre-crisis levels.
60% of restaurants in China have reported return of their business operations to normal, with over 200,000 of them applying for delivery service Eleme.
With the country slowly returning to normal, what are the changes of the consumer behaviour that are likely to stay long term?
- Online education. While learning online was not foreign to Chinese consumers before the COVID-19 epidemic hit the country, the crisis has definitely pushed many students to turn to the online services to ensure their education is not disrupted. The government and school regulations demand face to face presence of students which is why online video education is not likely to be completely embraced by these institutions long term, but its convenience is likely to impact the private education industry with students expecting to be given an opportunity to interact with teachers remotely
- Fresh food eCommerce enters mainstream. While Chinese consumers were offered online farm-to-table shopping long before the crisis, it is during the outbreak when most of them tried and accepted online purchases of fresh vegetables and fruit. Due to the convenience and newly built trust, these new habits are likely to stay and will lead to the significant growth of the fresh food O2O industry.
- Wearing face masks when serving food to customers. Most Chinese consumers are now aware that a significant number of diseases are transmitted through physical contact and therefore expect their servers to continue wearing face masks as a guarantee of food safety and good service.
Sources: CSM, Bain & Company, Fliggy, China Tourism Academy, Kantar, Alibaba, Bloomberg, Tmall, Travel Daily, Ziru, Xinjingbao, Bookstore Line.
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Thanks to the PHD China Strategic Insights team for contributing to this article.
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