Luxury brands turn to eCommerce, the number of divorce filings shoots up, female health care professionals receive a surprising International Women’s Day gift and online ancestor worshipping during this Qingmingjie.
The epidemic recovery pace in China has picked up, with the number of newly-infected dropping fast (the vast majority from imported cases) and China’s National Health Commission announcing it is safe enough for citizens to stop wearing masks outdoor. In addition, 95% of manufacturing laborers are back to work along with 80% of the corporate workforce and 60% of small and medium enterprises (SMEs).
As China continues its slow recovery, what has our PHD China Insights team uncovered this week?
Business
Automobile manufacturing industry production rate reached 85%, with 173 auto factories out of China’s 203 being fully back to normal, but in automobile dealerships, the rate is only 48.08%.
52% of China’s manufacturers expect a negative impact on business to last to mid Q2, a survey by market research company Kantar stated. That said, 73% of them believe that this year they will be able to reach between 80% to 100% of their annual business goals.
China’s national consumer price index (CPI) rose by 5.3% YOY between January and February 2020, with food prices surging by 21.9% and non-food 0.9.
Foreign trade volume in the same period was USD 589.7 billion, representing a drop of 9.6% YOY.
China’s total retail sales fell 20.5% YOY), but eCommerce sales rose by 3% in the first two months of 2020.
Omnichannel sales in February increased 29% YOY to RMB 3.12 billion.
75,000 people found a temporary job as couriers in the delivery service company Meituan including gym trainers, factory workers and small and microentrepreneurs.
China is estimated to generate 50% of global annual face mask production, with a forecasted output of RMB 13.1 billion (+28% YOY) for 2020.
To help the local industries and increase consumption, the government of Nanjing plans to release vouchers worth RMB 318 million across different categories including real estate, travel and household appliances. The vouchers will be redeemable within a limited period of time which should motivate consumers to use them quickly and lift some of the burdens on struggling businesses.
Brands
Some luxury brands are turning to eCommerce in hope to mitigate the sharp sales decline. Prada launched a Tmall Flagship store on 14 Mar and their sister brand MiuMiu is expected to follow soon.
IKEA finally launched their Alibaba-platform Tmall store on 10 March, along with their first Taobao Livestreaming session that attracted over 400,000 viewers. On the first day, the Swedish home-style brand attracted over 1.55 million online shoppers and sold out a significant number of value-priced items.
Brands in the beauty category such as Perfect Diary and Lancome managed to maintain stable sales on their Tmall flagship stores through January and February (RMB 441 million and RMB 203 million respectively), compared to the same period last year. Their March sales are doing even better, with Perfect Diary selling merchandise worth RMB 256 million (+29% YOY), Lancome RMB 193 million (+110% YOY) and Estee Lauder RMB 225 million (+135% YOY).
eCommerce skincare product sales in China during the International Women’s Day were led by skincare beauty sets (25.2% of total sales, +109% YOY), beauty essence (19.6% of total sales, +144% YOY) and face cream (13% of total sales, +100% YOY).
Another category did well in eCommerce during the first two months of 2020 was food and beverages, with the snack brand Three Squirrels recording RMB 1.28 billion in sales only in January. Compared to March 2019, the brand sales on Tmall rose from RMB 308 million to RMB 368 million (+19% YOY).
Jack Ma, the founder of the eCommerce company Alibaba, sent out a personalized message to all China’s medical female staff for the International Women’s Day, expressing his gratitude for their effort in fighting the epidemic and informing them that their Alibaba-platform monthly personal credit line would be doubled, interest-free for the next three years.
Taobao has launched a mobile game called Taobao Life 淘宝人生 as a way to attract China’s Generation Z. Users can customize their 3D characters and complete daily challenges to earn points, which are then used to buy virtual clothes and accessories based on real branded items. The game also has a social component that allows users to take pictures with each other’s avatars and post them to a feed (where they can be liked and commented on).
Consumers
Self Isolation Divorces: According to the courts of Sichuan and Guangdong provinces, the number of divorce filings has significantly increased compared to the same year, with the ratio between newly married and divorced reaching 6:4, compared to 7:3 in the same period in 2019.
More people sleep for at least 8 hours. According to the China Sleep Research Society, the number of people who sleep at least 8 hours has increased by 20%, but the quality of sleep has decreased, with at least extra 30 minutes needed to fall asleep. 50% of the surveyed consumers are considering to invest in better quality bedding to improve sleeping quality and overall health.
Games by Tencent have managed to attract new eyeballs, with the number of daily active iOS users (DAUs) for their Majiang and Peacekeeper Elite increasing by 520% and 125% respectively between January and March 2020.
Most (55%) of online consumer discussions during this period of the crisis were about food – primarily snacks (40%)!
Culture
Tomb Sweeping Day (Qingmingjie) should be conducted online due to the epidemic concerns as recommended by the Chinese government. They are urging citizens to mark the day of respect for departed family members who through digital means rather than through family visits to their ancestors’ tombs. China’s Ministry of Civil Affairs released an official notice urging cities to “promote Internet funeral and internet services like online offerings and remote farewells”.
With the country slowly returning to normal, what are the changes in behaviour that are likely to stay long term?
- Fresh produce eCommerce live streaming by farmers. China’s farmers who suddenly found themselves cut off from produce distribution channels are increasingly discovering the power of social commerce and now create their own content to reach their consumers directly with the help of online platforms such as Kuaishou, JD.com, Pinduoduo and Alibaba’s Taobao Livestreaming. Some of these rural KOLs include Sanya’s mayor who managed to sell 30,000 kg of mangos from his hometown Jinhuang, Zhong Haihui from Hunan who calls his audience “his babies”, Li Ziqi who seems to live in a fairytale rural Sichuan and Dianxi Xiaoge from Yunnan who shows traditional countryside cooking and farming to her 4 million followers on Weibo.
- 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 the 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: China’s National Health Commission, China’s Ministry of Industry and Information Technology, China’s National Bureau of Statistics, Kantar, Pacific Security, Ant Financial, Tmall, Bloomberg, Apptopia, ECDataway, 5iz-China, Content Commerce Insider, China Sleep Research Society
Visit our WeChat to view last week’s advice and detail on the recommendations for managing communications during this period.
Thanks to the PHD China Strategic Insights team for contributing to this article.
We are providing a weekly update on the impact and implications for this current health crisis. If you have questions or suggestions, please feel free to email us at:
Mark Bowling – CSO PHD China [email protected] or Vladimir Prostran – Group Director Strategic Insights PHD China [email protected]
