Most in China think that the worst is behind them. Yet that sentiment remains tempered by concerns about the spread of the virus in the rest of the world, in addition to asymptomatic cases and a second wave of COVID-19 infections driven by imported cases. Although 90% of China’s imported cases can be attributed to returning Chinese passport holders, with more than one third of the world’s population now in lockdown, Chinese are clearly worried about the spread of the virus overseas.
These concerns have seen China close its borders for foreigners, greatly reduce flights into Chinese airports, and again close indoor tourist attractions and the 600 cinemas that had recently reopened. That aside, the trajectory of China remains one of the most promising right now with just 6% of consumers pessimistic, on the back of the promise of stronger macro policies from Beijing. China’s manufacturing activity expanded in March, defying expectations of a contraction and people are starting to book more holidays, albeit mostly in their province.
As we’ve noted over the past couple of months, the pandemic has fundamentally changed Chinese consumer behaviour: how they are researching brands and products, what they are buying, and where they are buying it. Many of these drastic changes are unlikely to be short-lived and companies should be thinking about altering their go-to-market strategies to accommodate these changes. But before even starting this, businesses should ensure that they are keeping their customers and partners in China up to date with regular communications.
There is lot of news in China – some of it fake – about the rest of the world melting down. If your business is exporting to China, there may be some Chinese customers and partners concerned about whether your product supply is stable and will reach them during these times of uncertainty. In addition to doing everything you can to ensure that your products can still get to your customers, you should also be keeping them in the loop about your situation.
One of the best performing businesses during the height of the outbreak in China was Hema supermarkets. Part of this success can be put down to three promises that the retailer made as soon as the crisis began. They pledged to customers that they 1. Wouldn’t shut; 2. Wouldn’t raise prices; and 3. Would do their best to ensure that they’d have enough supplies. Hema acted fast with some clever initiatives to help keep those promises. These included using unemployed restaurant staff to assist with the spike in grocery delivery, negotiating favourable supply terms with suppliers, devising contactless delivery solutions and even using the city bus in Wuhan to deliver groceries. As a result, Hema has been rewarded with more loyalty than ever before.
Foreign brands would be wise to make similar pledges to their Chinese customers – both B2B and B2C – if they can fulfil them. In communicating with people in China, brands shouldn’t fret about not being able to meet Chinese partners and customers face to face – it’s unlikely they’ll want to meet in person for a while given the risk of imported cases. Video calling has become an accepted way of communicating, so make the most of it to stay present with your connections in China. Act fast, communicate clearly, and communicate regularly. Then focus on the strategic work – China Skinny can assist with that.
Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
China Pledges Stronger Macro Policies to Offset Economic Impact of COVID-19: A package of macro policies and measures will be introduced, and China will appropriately raise the fiscal deficit ratio. “As the world economy is being put in a haze by the pandemic, China has voiced its stance on making efforts to stabilize the world economy,” says Zhang Yansheng, chief researcher of the China Centre for International Economic Exchanges.
The World Shuts Down: Map Shows 3 Billion People Are Now Under Coronavirus Lockdown: By mid last week, after India went into lockdown, more than a third of humanity is now living in containment due to the coronavirus as illustrated on the map.
Global Surveys of Consumer Sentiment During the Coronavirus Crisis: McKinsey’s research into consumer sediment has found notable variations between countries, but found consumer optimism typically higher at the start and end stages of the coronavirus curve. From the survey taken around 20-23 March, 48% of Chinese consumers are optimistic – feeling the economy will rebound within 2-3 months and grow just as strong or stronger than before COVID-19 – versus 13% in Italy, 19% Spain, 23% UK and 39% in the US. Just 6% of Chinese consumers are pessimistic – feeling there will be a lasting negative impact on the economy – versus 33% in Italy, 36% Spain, 24% UK and 16% in the US.
To Slow Virus, China Bars Entry by Almost All Foreigners: Beijing has blocked foreigners with Chinese residency or visas from entering China to stem the risk of imported cases. It has also halted most international flights, making it hard for citizens to return. Chinese airlines are only allowed to maintain one route to any specific country and no more than one flight per week. Foreign airlines can only fly one route to China weekly. This will impact people coming to China, but also make it more challenging for imports that are air-freighted.
Chinese Consumers Urged to Splurge as Economy Begins Path to Normality: Electronics stores, coffee chains and even local authorities in China are slashing prices and handing out millions of dollars worth of discount coupons to kick start China’s economy. Suning is handing out ¥620 million ($88 million) worth of vouchers, Alibaba is giving away 10 million discount coupons for 10,000 retailers and JD will give out ¥1.5 billion ($212 million) of coupons. The railway authority has cut ticket prices by as much as 45% and local governments from Hebei, Zhejiang and Guangxi are giving out vouchers for tourist attractions, cinemas and shops.
What Do Young Chinese Think About Social Credit? It’s Complicated: China’s emerging social credit system should be understood not as a single unified system but as a package or policy framework combining many different policies. A mixture of cultural factors, concerns about safety and trust as well as censorship account for higher approval rates of policies associated with “building social credit” in China.
Making Sense of China’s Deafening ‘Fanquan’ Echo Chambers: Fandom has always been an aspirational pursuit, in which idols represent a gateway to a better world of beauty, talent, wealth, and success. So why have so many fan circles drifted away from that ideal and into fierce feuding? The descent often begins with members’ choices to cut themselves off from anything that runs counter to their preferred fantasies about their idol. Rather than welcoming a diversity of views and fandoms, fanquan are passionate about sealing out any ideas or words that diverge from in-group ‘canon’.
New Taobao ‘C2M’ App Takes Aim at Pinduoduo: Alibaba’s Taobao is aggressively expanding its direct-to-customer selling platform for bargain-seeking consumers, further escalating its already contentious competition with rival Pinduoduo. The new C2M app topped downloads on Apple’s China store. The defining feature of a C2M model is highly competitive pricing brought about by connecting factories with consumer insights, such as preferences, location, and behaviour. The model has become popular in China, particularly in lower-tier cities, where buyers tend to be more price sensitive.
Delving Into the Decline in China Mobile Phone Accounts: China Mobile, the world’s largest carrier, reported its first net decline since starting to report monthly data in 2000, losing by more than 8 million subscribers. China Unicom fell by 7.8 million and China Telecom lost 5.6 million. The three operators have a combined subscriber base of 1.6 billion. Some believe the fall is attributable to migrant workers not returning to their workplace residence, so are cancelling their work connections. Others believe it largely has to do with the dwindling of the so called “water army”, a group of Internet ghostwriters paid to post online comments with particular purpose, who are being hit by the real-name registration system for mobile users required since 2016.
Food & Beverage
The Journey to Reopening: Real Stories from Chinese Business Owners: Interesting and honest insights from the ground, with experiences shared by a restaurant owner, bar owner and gym owner, including the differences between local government policies and how they have made changes to survive in the journey to recovery post-lockdown.
All Stung Out: China’s Bee Industry Crisis, Explained: 4 min vid: The COVID-19 pandemic has been devastating for China’s 200K-300K commercial beekeepers who move five times and travel 3,000km a year, but with the lockdown, beekeepers were unable to move their colonies to new food sources. Sadly, China’s bee industry crisis spans far deeper than the virus, with Chinese farmers using four times more pesticides than the world average, many of them using neonicotinoids – banned in EU – which are potential bee killers. One third of the plants consumed in China depend on bee pollination.
Chinese Eye Short Trips for April’s Tomb-Sweeping Holiday as Virus Worries Subside: Bookings for railway and tourist attraction tickets for early April’s Tomb Sweeping long weekend more than doubled in the week ended March 23 from a week earlier according to Fliggy. Most bookings were to places within the same province. People in Shanghai splurged the most on their travel itineraries, followed by residents of Hangzhou, Nanjing, Beijing, Suzhou, and Ningbo. High-end hotel packages, theme parks for families, and nature tours were most popular among travel products.
Health & Beauty
Health to be Top of Mind for China’s Beauty Product Consumers: COVID-19 is expected to accelerate the “healthy beauty” trend, which will be shown in numerous ways within the beauty and personal care sector. Brands may focus on healthy ingredients, for example, as well as products that suggest a healthy lifestyle with beauty as part of that lifestyle.
China to Postpone ‘Gaokao’ College Entrance Exams Due to Coronavirus: China will postpone the annual national “gaokao” university entrance examinations by one month to July 7 and 8 due to the coronavirus outbreak, state television reported yesterday.
Investments & Property
Chinese TV Series About the Gritty Realities of Buying a Home Clocks up 4 Billion Online Views: Chinese TV series I Will Find You a Better Home recorded more than four billion views online, with daily peaks above 300 million, making it the most popular TV show in China over the past three years. Set in Shanghai, the show portrays the travails of urban living for families who are linked by their transactions with an estate agency. It pulls no punches in exposing the grief that comes with home purchases. Besides portraying marriage and family woes through the lens of home purchases, the show was also praised by property agents for uncovering the inner workings of the property industry. House sales are pointing to a tentative recovery after collapsing, with the first 17 days of March up about 8.5 times the same period a month earlier.
Every crisis drives the need for creative solutions to solve newfound issues. COVID-19 has provided many examples where businesses have been forced to re-think their go-to-market strategy. The most agile businesses, who have done what they can to look after their employees and customers, are likely to come out ahead when this is all over. Some brands have created short term solutions to address immediate challenges such as the Shanghai Fashion Week which is livestreaming the entire event. Other brands have implemented structural change to help ensure longer-term sustainability.
At China Skinny, we’ve been closely following and strategizing initiatives that businesses can take to ‘make lemonade’ from the lemons that have been dealt from the virus. One of our favourite case studies is Les Mills International from New Zealand, led in China by Jane Jiang. We hope you find some applicable insights from how they have adapted to the COVID-19 environment.
Les Mills International works with 140,000 fitness instructors and 20,000 clubs worldwide to deliver “the world’s best workouts” and is New Zealand’s largest exporter of music. The company had been experiencing strong growth in China on the back of the fitness boom.
Yet in late January when China went into COVID-19 lockdown, the gym industry was one of the hardest hit. Even as measures have eased, gym-goers haven’t rushed back to their circuits and workouts. With a business model reliant on the sustainability of fitness clubs, Les Mills’ China office could have rightfully gone into meltdown. But it didn’t.
Les Mills’ customer-focus is evident, with its first focus during the outbreak to reach out to its clubs and instructor customers. They did what they could to understand their challenges and show they cared, sending messages and offering flexibility around licensing.
Beyond its core business, the outbreak provided an opportunity for Les Mills to accelerate the digital initiatives that it had been exploring since Jane took the helm. One initiative was an online training program which launched in February. Locked into their apartments and going a little stir-crazy, instructors were all over the new program to expand their repertoire. Prior to the outbreak, Les Mills’ upskilled about 1,000 instructors at their quarterly events. With their online training, they streamed to 2,800 folk in one session. Not only did this allow them to reach more instructors – including some beyond their five target cities, but lower costs to serve which led to profits being 2.5 times higher. Instructors found new benefits from the interactive online programs, such as allowing them to go back and watch them many times. 73% of those participating said they’d love to have both online and offline programs going forward.
Another part of Les Mills’ digital initiative involved launching a WeChat Mini Program to expand its reach. This provided free workouts and other content, allowing Chinese consumers cooped up in their apartments to stay fit and sane. Part of that sanity came from Les Mills’ kid’s programs – 15 minute workouts for 4-14 year olds. With parents already struggling to juggle working from home with kids there too, the program gave parents a small break. As we know, anything in China that shows a little love to the precious only child/children, is well received. Users were offered prizes to regularly check in and post photos which increased engagement further.
The move is Les Mills’ first foray into the direct to consumer (D2C) model in China. Last week they launched paid livestream classes which has seen around 1,500 people pay ¥90 ($13) to watch four interactive classes. This leaves the company well placed to take advantage of the steep uptick of both in-home exercising and livestreaming. The saleable packages also provide opportunities for multilevel marketing (MLM) to Les Mills’ existing community, allowing them to expand their own offering with complementary services that are on trend right now. Similarly, online promotions at Chinese New Year and Valentine’s Day saw online sales of equipment in February equal all of 2019’s sales.
In addition, Les Mills has also used the outbreak to accelerate its partnership discussions with Alibaba. This includes providing content on 5-6 of Alibaba’s channels such as Youku (China’s Youtube) and Alibaba’s productivity app Dingtalk. Although Dingtalk is predominantly work-focused, Alibaba realises the benefits of people take a break from their day job to exert some energy. Les Mills workouts were viewed and practiced over half of million times within one week through the partnership with Alibaba.
Keeping teams engaged over periods of outbreaks and uncertainty has been challenging for most businesses, and this was further exasperated by the enforced remote working in China. Yet Jane’s leadership and clear direction during the crisis, with increased health and safety precautions in place, paid taxis to and from work, and assurance that there would be no layoffs in the foreseeable future has seen the team “never be so united and engaged.”
Gyms are now starting to open again in China, although it will be some time before they are back to the crowded hives of activity that they were before the outbreak. Nevertheless, Les Mills is likely to emerge stronger than it was before, with complementary digital channels, more profitable systems and new avenues to grow their revenue and customer-base.
The one thing Jane wishes she’d done differently is “build the D2C online platforms a year ago,” which would have enabled Les Mills to expand their penetration as soon as the outbreak happened. “Crisis in Chinese means danger and opportunity. Resilience and confidence are the best friends accompanying us to seek opportunities when crisis is inevitable,” says Jane.
Les Mills illustrates that even businesses in the most impacted industries can come out ahead during these challenging times. The lessons aren’t just about succeeding in times of crisis, but also finding time to explore other marketing, sales and training channels during normal periods.
Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
China Hands Out Vouchers to Spur Virus-Hit Consumption: Cities such as Ningbo, Jinan and Nanjing are issuing vouchers to spur consumption back to life. By last Thursday, Nanjing had giving out ¥318 million ($45 million) worth of vouchers to its residents. People are invited to participate in lotteries for e-vouchers which can be used in restaurants, gymnasiums, bookshops as well as tourist spots, helping the service sector bounce back. More than 1.6 million residents had registered for the vouchers by Thursday. China has also touted ¥50 trillion ($7 trillion) for infrastructure spend to bring life back to the economy, but just ¥7.5 trillion ($1 trillion) is currently scheduled for 2020.
China Gets a Glimpse of Life on the Other Side of Coronavirus: With no new locally transmitted infections for some days in row, China provides a glimpse of what might await other countries once the worst of the epidemic has passed. Things are still a little stilted with office buildings, shopping malls and other public places still requiring people to be registered and their temperatures recorded. Several areas require people to show a “green” reading though a smartphone app called Health Code, through WeChat or Alipay. Nightclubs are back open again with their face masked mixologists and livestreamers. Here are some personal accounts of 24-hours in post-lockdown Shanghai. Local authorities are still urging diners to change their chopstick habits and stopping dipping them in communal dishes during the pandemic.
China’s Xinjiang Reopens All Elementary, High Schools as Epidemic Wanes: Xinjiang became the first province to start schools again on Monday following no new cases of coronavirus infection for 34 days. Tencent has rolled out a new health tracking code for students as more are likely to return soon.
The Government Says Most Of Us Can Stop Wearing Masks Outdoors Now: If you’re at home or if you’re outdoors and in well-ventilated spaces where there aren’t a lot of people, you don’t need to be wearing a face mask according a document on China’s National Health Commission website.
Homebody Economy Gains Steam amid Epidemic: 92% of consumers expressed confidence in China’s victory over the outbreak according to a Nielsen survey. According to the survey, their confidence mainly came from the Chinese government’s appropriate preventive and control measures, as well as its timely and transparent disclosure of information. The majority of consumers have a positive attitude and welcome their colourful home life – they shop online, work and study at home while staying healthy and leveraging technology. 89% say they will be more willing to buy daily necessities / fresh products online once the pandemic is over. 80% would pay attention to eating healthily even after the epidemic is over. 75% say they will spend more on sports / fitness in the future, while 60% will increase spending on regular medical examinations.
Delivery Technology Is Keeping Chinese Cities Afloat Through Coronavirus: Although fears and concerns about the disease ran high in China, residents were quick to come to terms with the lockdown and have leveraged digital technology to organize and collaborate with suppliers. Two factors have contributed to this remarkable show of resilience: 1. Digitally enabled delivery systems; and 2. Consumer comfort with the online world – 71% of Chinese consumers had transacted online at some point as of last year. As western countries emerge from the coronavirus epidemic, their governments, cities, and businesses should look at how China’s digital advantages have helped it respond to the logistic challenges presented by the crisis.
To Learn About Pandemic Abroad, Chinese Sift Through Fake News: While COVID-19 has largely been brought under control in China, fake news about the coronavirus ravaging foreign countries is spreading online at an alarming rate. More than three dozen public accounts were found to be spreading fake news, many were publishing nearly identical articles, with the only differences being the country’s name and a few minor details. On the subject of fake news, the video we shared last week about Italians singing the Chinese anthem from their balconies – tweeted by senior Chinese officials and CGTN – was fabricated according to independent Italian online newspaper Linkiesta. Thank you to our eagle-eyed reader who picked that up.
Call Me By Your Nickname: Inside China’s Nicknaming Phenomenon: Chinese consumers have been creating simplified versions of foreign brand names for decades, with a catchy nickname indispensable to China’s consumer culture. More and more brands have started inventing nicknames for themselves. China’s nicknaming could bring disarray to brands that have historically strictly controlled their image. Although nicknaming probably won’t save a brand in China, when done well it does reward a label with a more intimate connection to its audience and organic social buzz.
How Chinese Millennials Are Remaking the Mall: A refocusing on what really makes China’s young consumers tick is driving the transformation of Chinese retail. The symbols for status and success have shifted. Consumers are no longer concerned with just convenience, brands, or bling; they instead seek social confirmation through knowledge about culture or quality, in addition to authenticity and uniqueness in their products. And all of this must come with a seamless online-to-offline connection and sharing on social media.
9 Best Practice Tips for B2B Marketing on WeChat: WeChat has become one of the most effective tools to reach B2B customers. Understanding how best to use it is also relevant to B2C-focused companies who need to reach and engage retailers, distributors, agents and other partners.
Food & Beverage
Coronavirus Prompts Dietary Changes Among Chinese Consumers: Only one in every five Chinese consumers have maintained their ordinary diets during the coronavirus outbreak, with half changing it substantially according to an OW survey. Fresh fruit and vegetable purchases have seen a significant spike, with 37% and 40% increasing their consumption in each category. Eggs and dairy has increased 35 and 33% respectively. Rice, pasta and noodle buying has also increased among a good number of respondents, resulting in the largest net overall uptick among product categories, yet 55% of these sales is put down to stockpiling. Frozen and chilled products are also up among 43% of consumers, with 57% filling up freezers to counter supply-chain disruption. Oddly, tinned food purchases have remained virtually steady.
China’s Farmers Fear Food Shortages After Coronavirus Restrictions: Chinese farmers face a daunting planting season as they grapple with a shortage of labour, seed and fertilizer following the coronavirus lockdown. A Qufu Normal University survey of village officials in 1,636 counties found that 60% of respondents were pessimistic or very pessimistic about the planting season.
Trip.com Q1 Revenues to Plunge by Half on Suspended Travel: Trip.com – formerly cTrip – was looking rosy in Q4, with 10% growth driven by international travel and lower tier cities. That growth stopped in Q1 due to the coronavirus. Work resumption since 10 Feb has driven business travel demand up while leisure travellers remain cautious about trips, though pent-up demand is high. China Tourism Academy expects full-year 2020 revenue from tourism to drop by ¥1.18 trillion ($167.72 billion) — a 21% decline.
Chinese Students Flee UK After ‘Maskaphobia’ Triggered Racist Attacks: Chinese students at UK universities are “fleeing back to China” amid concerns about the British government’s handling of the spread of the virus and an increase in racist attacks triggered by so-called maskaphobia. Many in the Chinese student community believed they would now be safer in China than in the UK, and their families were begging them to return. “I think people are very suspicious about the [UK] government measures. Here, until now, we’ve seen some soft measures calling for people to wash their hands. As a Chinese student you expect more draconian measures.”
Volvo Back to ‘Normal’ in China as it Shuts EU and US Car Plants: Volvo has closed its US plant and was the last carmaker to cease product in Europe, but its “factories and dealerships in China are operating close to pre-shutdown levels” according to CEO Hakan Samuelsson. [paywall]
China’s economic data for January and February was released on Monday and it wasn’t pretty. Retail sales were down 20.5% from a year earlier, following 8% growth in December. Fixed-asset investment dropped 24.5%, property development investment sunk 16.3%, government-driven infrastructure investment plunged 30.3% and value-added industrial output fell 13.5%.
The numbers confirm how much the economy has been hurting, yet unlike most other major economies, it seems that the worst may be behind us. There were 16 new coronavirus infections on Sunday, 12 of which “imported cases” – although most of those were returning Chinese citizens, including all of Beijing’s 31 imported cases.
The continued containment has seen a notable change of gear in China. At a personal level, there are signs that confidence is returning, such as people getting back to enjoying public places and even taking off their face masks there to converse with their friends and family with a degree of normalcy. At a macro level, China has made the bold announcement that its largest trade expo – the Canton Fair – will still be going ahead in April. Given the current global situation, China’s 14-day quarantine and reduction in available flights, it appears to be more of a symbolic gesture broadcasting that China is open for business again. Whereas it wasn’t long ago that China had an acute shortage of face masks and health professionals, it is now sending medical supplies and experts to countries such as Iran, South Korea, Japan, Spain, Africa, the US and Italy – which saw Italians belting out the Chinese national anthem and thanking China from their balconies.
It wasn’t long ago when people in China weren’t allowed to dine out in many cities. The country is now urging officials to dine out and shop to boost consumption, even though diners need to be spaced out. While many consumers are still cautious about wandering through shopping malls, ecommerce has seen a clear uptick in sales since the beginning of March, with a strong performance on Alibaba’s March 8th shopping festival. Online shopping is a bellwether that consumers’ survival phase is fading and an appetite to consume is returning.
Chinese consumers’ attention is shifting away from issues directly related to the pandemic. The share of attention focused on medicine and healthcare has dropped from 48% to 38% over the past few weeks. Whereas attention to sports and fitness has grown from 28% to 38% as Chinese consumers get back to their everyday life, according to Publicis analysis.
A couple of weeks ago we noted that “in the medium term Chinese consumers may actually be more resilient than their peers in other markets.” It is now looking more probable that China, although it has had a terrible Q1, is likely to again lead consumer spending growth for much of 2020.
For many businesses around the globe, the next few months are likely to be very challenging. Aside from the obvious drop in revenue, there will be a slew of other challenges. If employees are working remotely, and potentially juggling kids studying at home, productivity is likely to decrease and exporting to China may seem like a periphery need. Business continuity should be the priority for them. Yet those who have the capacity to invest in growing their awareness and preference in China are likely to be rewarded with the strength of the Chinese consumer market. The market is bouncing back and there is likely to be less competition from other foreign brands who may not have adapted to new behavioural trends in China following the coronavirus. 抓住机遇 – Zhuā zhù jīyù – Seize the opportunity. Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
Tracy Dai’s Tour of Shanghai Public Places as the Coronavirus Improves: 3 min warming video of how people are starting to enjoy public spaces again. 197 of Shanghai’s parks reopened last weekend and up to 335 parks by Friday. Chinese consumers’ interactions are coming more relaxed with some even taking off face masks.
Global Pandemic Real Time Monitor: Real time data on the COVID-19 global pandemic, complete with an interactive global map of the spread.
China Seizes a New Role in the World: “The 2009 financial crisis was a decisive moment emboldening Beijing and altering global perceptions of relative power between U.S. and China,” says Ely Ratner, former deputy national security advisor under Vice President Joe Biden. “I worry now we’re at risk of another decisive moment for US-China competition as Trump administration badly mishandles coronavirus.” Bloomberg has referred to China as a ‘safe haven’ as the country continues to stabilise amid global uncertainty.
Jack Ma is Shipping Coronavirus Test Kits and Masks to the US: Jack Ma has joined Twitter, announcing that he is donating 500,000 testing kits and 1 million masks to the United States in his first tweet.
Divorce Applications Spike After Coronavirus Quarantines: Significant interruptions to their routines, economic stresses, and increased risk of anxiety and depression are seeing a record-high number of divorce requests in some Chinese cities. “When couples spend day and night together, it’s hard to gloss over or hide marriage problems. This news didn’t strike me as a surprise,” wrote one Weibo user.
How Damo Academy’s AI System Detects Coronavirus Cases: Alibaba Group’s research and innovation institute DAMO Academy developed an AI-enabled system that could diagnose Covid-19 in 20 seconds with 96% accuracy. The AI system identifies the novel virus through computed tomography chest scans. The algorithm has been trained with data and CT scans from more than 5,000 confirmed coronavirus cases so far and taps into deep learning to study patterns of infection.
A Deeper Dive into Chinese Consumer Lingo – Consumer Mindset: Common terms used in communications by brands, including what works, what doesn’t, and what they mean for brands.
Is China’s Ecommerce Industry Already Bouncing Back After Coronavirus Epidemic?: There has been a noticeable shift in perspective over the last few weeks in China with a clear uptick in sales since the beginning of March. Many brands are seeing strong year-on-year growth over 2019. Over the worst of the outbreak, fashion sales slumped while cosmetics and food and beverage remained strong.
Livestream Selling a Boon During Outbreak: Report: 60% to 80% of the purchases made through livestreams on video platforms Douyin, Kuaishou, and Bilibili exceeded ¥200 ($28) during 17-23 February. Around 85% of orders on Taobao Live were over ¥200. The conversion rate was 56%, higher than 50% from regular buyers. Livestream users on Douyin, Kuaishou and Bilibili ranged from 120 to 190 minutes/day, versus 52-109 minutes for viewers of other video content. Livestream accounted for 28% of Douyin’s total traffic during the week, up from 24% six weeks earlier.
Pinduoduo Announces Fourth Quarter and Fiscal Year 2019 Results: Sales on PDD grew 113% to ¥471.6 billion ($67.3 billion) last year. Active monthly users of the app in Q4 grew to 482 million, 77% more than a year earlier, with active buyers (including those who come through the app and social networks) growing 40% to 585 million. Annual spending per active buyer grew 53% in 2019 to ¥1,720 ($247).
Ikea to Sell Through Third Party for First Time on Tmall in China: As another indication of how brands need to take a unique approach to China, the world’s biggest furniture retailer has started selling its products through a third party for the first time in its 77-year history, as it hopes to reach more consumers in China.
Food & Beverage
SIAL China 2020 Postponed Until September: Asia’s largest Food Innovation Exhibition has been postponed until late September with a new venue.
Is China Ready for Western-Style Sauces and Dressings?: There aren’t rows of Western-style seasoning products like BBQ sauces or salad dressings on the shelves of Chinese supermarkets. This is due to flavour and a lack of acquaintance with such products with much of this coming down to R&D and education.
The True Face of China’s Plastic Surgery Clinics: Since 2018, 28-year-old visual artist Lu Yufan has gone for consultations at more than 10 different plastic surgery clinics in Beijing, Tianjin, and South Korea, documenting her experience, but never booking a procedure. As she expected, nearly every consultant gave her the same advice. Lu believes the recent shift in beauty standards in China — with younger influencers abandoning an “internet celebrity face” in favour of more diverse styles — underlines the fact that plastic surgery is ultimately just a fashion trend, with faces coming in and out of style like flare jeans or crop tops.
Property & Investments
Coronavirus: Real Estate Agents In China Embrace Virtual House Tours: Virtual Reality has become an increasingly critical supplement to the traditional home-buying experience, allowing agents to create virtual real estate tours for clients. In February, realtors and buyers initiated an average of nearly 350,000 virtual house viewings per day, about 35 times the previous month’s number. Online real estate platform Beike created an online property sales office and held its first virtual open house on 22 February. Within 10 minutes of opening, it had convinced more than 1,068 clients to make property purchases. The platform now offers virtual tours of more than 3.3 million listings in over 120 cities across China.
SIAL China, ‘Asia’s largest Food Innovation Exhibition’ has been officially postponed until 28-30 September 2020 and will now be hosted at Shanghai’s National Exhibition Conference Centre – the same venue as CIIE – due to impact of the coronavirus.
Although the official SIAL website had not updated their dates from 13-15 May and venue as the the New International Expo Centre at the time of publishing this article, communications have been sent to exhibitors from Nicolas Trentesaux, SIAL Managing Director and Elaine Chia, CEO Comexposium Asia Pacific updating the news.
The decision to postpone the event followed a survey with exhibitors which yielded an “overwhelming response rate, and very clear preference, with 97% of respondents expressing a strong desire to postpone to September.”
SIAL is now working on the plans for the new date and location.
The situation continues to improve in China with no new cases outside of Hubei Province for two days on Monday and the lowest infection rates in China since 20 January. President Xi Jinping visited Wuhan yesterday in a major show of confidence that China has turned the corner on the coronavirus.
Mid last week, President Xi chaired a meeting focusing on China stabilizing economic and social development. The meeting underscored “unleashing consumption that had been suppressed by the outbreak and strengthening new and upgraded consumption to compensate the lost consumption on goods and services during the outbreak.”
This focus is good news for brands selling in China. Beijing is likely to have supportive regulations that will stoke consumer spending, with many predicting large stimulus measures to help push things along.
When consumer spending returns to normal, it is unlikely that behaviour will revert back to exactly the way things were. Chinese consumers have been through a lot since late January. The unprecedented measures to contain the virus, the uncertainty and weeks spent just in their homes have provided many consumers with time to reflect and also altered behaviours – some which may stick.
As we noted last week, ecommerce is likely to be one of the biggest beneficiaries due to more older consumers and lower-tier residents adopting online shopping channels when all of the other options had closed. Getting users on board and familiar with platforms is often the biggest challenge for laggard users. Similarly, more Chinese are consuming media, entertainment and gaming online. Consumers are likely to be more addicted to gaming than ever, and astute brands should explore opportunities to incorporate this into their marketing strategies.
When everything is back to normal and the kids are back to school, we expect that there will be two main threads of consumer behaviour. The first will be those who have had a bad case of cabin fever, cooped up in the apartment, and will embrace the newfound freedom – dining out more, travelling more, and being more social than ever. The other group will be those who have had become more connected to their homes: the home cooking, the family time, the in-home fitness regimes. These consumers will spend more on making their homes special, purchasing new smart appliances, furniture and even art.
China Skinny is observing other trends forming which we expect will last far beyond the virus. Consumers’ wider focus on health will reward brands even more than usual who position themselves well as clean, natural and wellness-related. At a deeper level, the publicised success of integrating Western medicine with traditional Chinese medicine (TCM) may shift perceptions around products that incorporate TCM characteristics into their proposition. With the positive coronavirus outlook, coupled with Beijing’s commitment to driving consumption, brands should start strategizing about how they can make the most of the new opportunities and ensure they are factoring in new behaviour trends. Contact China Skinny about how best to do this. Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
Case Studies: How Brands Are Incorporating Gaming Into China Marketing Strategies: The coronavirus has seen gaming users soar since late January, and astute brands from lipstick to luxury cars are using clever initiatives to reach China’s 600 million gamers.
Kerr Shan’s Video: Long Queues are Returning Despite the Coronavirus: 6 min video: Despite the coronavirus seeing many people avoid crowded public places, people are waiting in queues for over an hour for traditional seasonal food qingtuan.
China May Have ‘No New Coronavirus Cases’ Outside Hubei Epicentre by Mid-March: Analysis of the infections trend has seen daily infections in places other than Hubei almost drop to zero since late February. The analysis expects Chinese cities other than Wuhan to be basically free of new coronavirus patients by the middle of March. The hope is that Wuhan won’t have daily new cases by late March, with the main concerns now outside of China. In January and February, imports to China dropped just 4% – much lower than analysts predicted. Exports didn’t fare so well, falling 17.2%. Alibaba’s delivery arm – Cainiao, Ele.me and Hema/Freshippo – have returned to full staffing.
China Inc Thinks Outside the Box as Coronavirus Keeps Consumers at Home: Chinese businesses are adding more vending machines selling everything from milk to sanitiser. Companies like Luckin Coffee are adding sanitiser to its suite of delivery products.
Unmanned Kiosks Provide Free Supplies for Unnamed Heroes: 2 min vid: The food delivery people, postmen, sanitation workers, and others who have kept cities going during the outbreak are often passed without getting a second glance. To acknowledge their work, eight department stores in Shanghai set up unmanned kiosks, providing free food, water and daily necessities for these unnamed heroes.
Lego Commits to China Expansion as Revenue Climbs: Last week, Lego announced that it will open 150 new stores this year, mostly in China, to meet the country’s growing demand for its toy bricks. Most Lego stores in China are open again following the virus.
With ‘Pink Yuan’ Ads, China Wakes Up to the World’s Biggest Gay Economy: China’s gay economy is worth $300 billion to $500 billion annually, reaching some 70 million people. An online Alibaba advert showing a man bringing his partner back to his family to celebrate the Lunar New Year went viral across China. This is part of a growing trend, largely led by technology firms targeting millennials aged 23 to 38 and gay and trans consumers, but the inclusivity also makes it memorable for others. The government often censors news, television shows and films that touch on LGBT+ issues in the name of “family values” while media companies self-censor. 2018’s Oscar-winning biopic “Bohemian Rhapsody” had ten scenes scraped in China. Gay dating app Blued has succeeded in China because it brings together a minority community without activism.
Fewer in US Regard China Favourably or as Leading Economy: A new Gallup poll finds Americans’ favourable rating of China has declined further in the past year, sinking to a record-tying low only matched in 1997 and 2000. 33% of Americans currently have a favourable opinion of China, a 20-percentage-point decline since 2018 and an eight-point drop in the past year. For the first time in more than a decade, the majority of Americans polled regard the US – rather than China – as the world’s leading economic power. The poll was conducted at the height of the coronavirus outbreak, 3-16 February.
How Livestreaming Drives Retail and Ecommerce Success: 5 min video: Livestreaming creates a live, interactive, mobile and social shopping experience. 4,000 livestream hosts are just on Taobao, generating 150,000 hours of content and selling over 600,000 products on a daily basis. The audience for live-streaming apps has jumped 35% since the outbreak.
These Chinese Companies Use English Brands and Domains Only: There is a misconception that corporate China only buys pinyin domains, whereas many use English domains and branding such as large startups Keep, VIPKid and Fiture.
Food & Beverage
Carrefour China Achieves its First Quarterly Profit in Seven Years: Carrefour China has improved its operating efficiency through the digital transformation of its stores and the accelerated integration with the Suning ecosystem. Since Suning acquired Carrefour, its management team has focused on consumer needs and strengthening marketing, operations and membership management. The business was integrated into the Suning FMCG’s supply chain, strengthening the range and supply of merchandise. This digital transformation has seen the 209-strong store network deliver goods to customers living within 3km of a store within one hour, and for those within 10km of a store within half a day.
New Freshippo (Hema) Store Formats Cater to Different Consumer Needs: While the original supermarket concept remains at the heart of most Freshippo (Hema) locations, the chain has introduced new shopping experiences including everything from convenience stores and breakfast pick-up stations, to a shopping mall. Five new formats were launched last year.
Sugar Reduction in Teas Taking Over Cheese Teas: Healthy, low-calorie and low-sugar are trending for new-style tea drinks. Over the past 10 months, 50% of consumers have chosen less or no sugar when purchasing tea according to tea brand Nayuki. Sales of sugar-free tea was higher than the brand’s popular cheese tea over the past 10 months.
Majority of Over 50,000 Recovered COVID-19 Patients in China Receive TCM Treatment: Official: Compared with those only treated with traditional Chinese medicine (TCM) or Western medicine, an expert team confirmed that the integrated treatment of TCM and Western medicine can more quickly improve the symptoms. 92.5% coronavirus patients treated in China have received TCM treatment.
L’Oreal Sales Revenue Hits 15-Year High: L’Oreal saw sales revenue of its Chinese business swell by 35% in 2019. The company has been negatively impacted by the coronavirus, although it expects the rebound will be noticeable once the outbreak ends. Beauty companies are getting creative in dealing with the outbreak, with a series of livestreaming sessions on how to create beauty while wearing surgical masks attracting 8.2 million viewers on Taobao Live, leading to a 150% month-over-month sales increase of eyeshadow palettes. Since the outbreak, Alibaba’s beauty category sales have dropped by 30% year-on-year, yet beauty brand advertising has only decreased by 14% with brands continuing to deliver evolving marketing campaigns.
Australian Universities Let Chinese Students Get Around a Travel Ban. Critics Warn it Could Spread the Coronavirus: To circumvent Australia’s ban on arrivals who have been in mainland China within the previous 14 days, some students travelled to a third country for two weeks in self-quarantine before entering Australia. In some cases, universities have provided financial assistance for students to make those trips. Western Sydney University offered students A$1,500 ($993) to offset expenses if they transit, with the University of Melbourne offering grants of up to A$7,500 ($4,950). ANU said all affected students would be able to seek A$5,000 ($3,300) for costs incurred due to the travel ban if they remain enrolled after 3 June. The University of Sydney had made online supported learning for 800 courses and deferred the start of the semester for a small number of courses at business school. Around 14,000 of its students from China remain overseas.
There are signs that the long, cold coronavirus winter may be subsiding as the green shoots of spring appear, as many Chinese commentators have so eloquently put it. Since 20 February, the number of railway passenger trips has picked up with an average daily increase of 60,000 as Chinese return to work. Normal services have returned to hospitals in cities like Shanghai, and even Wuhan reportedly has a surplus of hospital beds. China’s top container ports have unclogged their backlog as virus curbs ease. An Alibaba research unit survey of nearly 24,000 Chinese micro, small and medium enterprise respondents found 66% expressed optimism about business opportunities for the remainder of the year.
It seems the outbreak of the novel coronavirus may have peaked in late February, and is expected to level off in late April. Even state media has changed its tack on how they are covering the outbreak – there is less news of infections and more about how people are spending the time cooped up in their homes.
Cinemas are opening again, although movie-goers are only able to sit in non-adjacent seats in every other row. Similarly, restaurants are open, but with some steps before sitting more separation between diners – as this video will attest. As of last Thursday, 85% of Starbucks’ 4,292 China locations were operating again. Commuters are back in their cars, seeing Shanghai roads “almost as busy as they were before the coronavirus outbreak.” However, people have been slower to get back to public transport with 63% less Shanghai metro users than normal. Those riding the subway have seen slower queues as passengers’ temperatures are scanned, all standing a metre apart – the “distance of warmth and care” as Beijing has labelled it. Chinese are even starting to consider travelling again, with a 138% increase in flight searches on Elong over early-April’s Qingming Festival holiday period.
Yet as things appear to be showing more promise in China, ironically, there may even be a greater impact in the rest of the world with 73 countries and territories now having cases as of yesterday. For the past week, there have been more new infections outside of China than in it. Some of the impacts we’ve seen in China, are starting to be felt everywhere, with supermarkets cleared of supplies, Paris’s Louvre museum being shut, and announcements such as Shopify cancelling its early-May annual conference in Toronto, Nestle halting international travel for staff and Twitter not participating in the legendary festival SXSW, to name a few.
Few governments globally have the levers that the Chinese Government has to minimise the spread of the virus. In addition, the widespread adoption of smartphone apps and different privacy regulations has seen a lot of data about people – such as their travel history and the people they have been in close contact with, coupled with their self-declared health status, feeding some advanced AI algorithms. The output has led to an app that calculates an individual’s risk levels – red, orange or green – where people with red levels are unable to enter public places such as subway stations, restaurants or shopping malls for at least 14 days.
The red-orange-green app is only one piece of China’s tech story though. Although the teeming crowds of China do nothing to halt the spread, the country’s tech infrastructure allows people to consume with less fear of contracting the virus. With ecommerce penetration greater than 20%, consumers can conveniently buy everything they need and have it delivered quickly without leaving the safe confines of their apartment. If they do venture out, there is barely a single location in China where you have to pay with cash or by touching a payment terminal, rather mobile payments or increasingly facial payments keep it cleaner. Apps for everything from reserving a spot in the queue to food delivery don’t just make life more convenient in China, but also make it safer during these unique times.
The impact of the virus on the world won’t be good for China, or anyone. But China is less reliant on exports than they’ve ever been and Beijing will be doing everything it can to stoke the domestic economy, particularly through consumer spending. So in the medium term Chinese consumers may actually be more resilient than their peers in other markets. Click/tap here to see this week’s most important China market and marketing news.
This week’s China market and marketing news:
5 Charts: The Coronavirus’ Impact on the Retail Industry: Five charts illustrating how the coronavirus has impacted retail behaviour – particularly products, shopper ages and city tiers – changes that are likely to stay with us once things are back to normal in China.
Sheryl Shen’s Tour of a Shanghai Shopping Mall and Hot Pot Restaurant During the Coronavirus Outbreak: Sheryl’s 2.5 minute video captures the general vibe in Shanghai at present, taken in a shopping mall and her favourite hot pot restaurant at 7pm on Tuesday 3 March. The video compares footage taken in the same locations two weeks earlier and the steps taken before dining in a public place.
Research Paper Predicts Outbreak Will Level Off in Late April: The coronavirus outbreak in China peaked in late February and will level off in late April, according to new research headed by respiratory scientist Zhong Nanshan. If the implementation of control measures had been delayed for five days, the outbreak in China would have tripled in size.
China’s Coronavirus Outbreak: A View From The Ground: The outbreak saw American travel writer Mitch Blatt stuck in a Nanjing Hotel where he blogged daily. He has observed someone being kicked out of a Starbucks for not wearing a mask—a fate he nearly experienced himself when he was questioned why he wasn’t wearing his mask while drinking his coffee, something he is still unsure how to do. The issue with the face mask regulation is that there were almost none available anywhere in China – and overseas as well. Blatt knows people “who are basically stuck inside because they don’t have any face masks.” Production of masks has since ramped up, with a daily output of 116 million last Saturday – 12 times what it was on 1 Feb.
How Big Data is Dividing the Public in China’s Coronavirus Fight – Green, Yellow, Red: Cutting-edge technologies and old-fashioned surveillance are being used to decide who can and who can’t go back to work. People with QR codes coloured in red are not allowed to enter public venues such as subway stations, restaurants or shopping malls for at least 14 days. Among the 7.6 million Hangzhou residents who had obtained the digital health certification by February 17, 93% were marked “green”, while 4%, or about 335,000 people, got the red code. By 24 Feb, 98.2% of people in Zhejiang province were “green”.
A Guide to Chinese Consumer Lingo For Brands: Common terms used by Chinese consumers and brands, including analysis of the meanings behind those words and what they mean for brands.
China Has More Billionaires than US and India Combined: A boom in tech valuations and strong stock markets in China, the US and India has pushed the number of global billionaires to a record high of 2,816. In 2019, China created 182 billionaires, three times the number as those in the US according to Hurun. China’s richest, Jack Ma, climbed a place to become the world’s 21st richest person with a net worth of $45 billion, closely followed by Tencent’s Pony Ma at $44 billion.
What is Taobao: 1:41 video explaining China’s biggest online shopping destination with more than 2 billion listings of products and services. The interactive, entertaining and personalised platform goes beyond just product listings, keeping users online for 30 minutes/day on average.
Food & Beverage
How China Got Milk: On 8 Feb, the National Health Commission suggested consuming at least 300 grams of milk products a day as one of its dietary recommendations for fending off the coronavirus. A week later, in addition to staples like hand sanitizer and face masks, a Shanghai cab company was giving its drivers milk rations. With this in mind, the online sales results of the dairy category were surprising. 150 years ago, cow’s milk was practically unheard of in most of China.
How About Fresh Veggies and Meat When You Get Gas? Sinopec Offers New Touch-Free Service Amid Coronavirus Fears: Playing to changing needs since the outbreak, convenience stores at gas stations in Beijing, Hangzhou, and Guangxi province are delivering app-ordered groceries to car trunks, with no contact. Sinopec has 27,000 convenience stores across its 30,000 gas stations.
Shenzhen Could Be the First City in China to Ban Eating Dog Meat!: In response to the coronavirus, Shenzhen could be the first city in China to ban eating wildlife including dog, cat, snakes, turtles and bat meat. According to the Humane Society, 10 million dogs and 4 million cats are killed annually for meat in China.
Riding the Douyin/TikTok Wave: How 15 Minutes Can Grow Your Audience: The Douyin Challenge feature is a great way for cultural destinations to generate positive word-of-mouth recommendations via user-generated content. Providing a hashtag essentially gamifies the post for users to compete to see who can get the most post views. Where TikTok campaigns connect solely to internal hashtags, Douyin hashtags cross onto other platforms such as Weibo thereby greatly expanding the potential reach of trends.
China’s Coronavirus-Hit Airlines are Showing Signs of Recovery: Last week’s scheduled airline capacity within China was up more than 25% – by 1.3 million seats on 7,923 flights from the week earlier, thanks to a rebound in domestic capacity. Air China appeared the most optimistic, as it added back 306,000 seats, almost double its capacity from the previous week. Nevertheless, flights are going cheap, with the cost of some one-way tickets from Shanghai to Chongqing (1,400km) going for less than a cup of coffee at Starbucks. Scheduled international capacity continues to decline, however, with China’s ranking dropping from 3rd to 28th in 6 weeks – just behind Austria. The number of seats dropped by 25,000 from the previous week to 422,000, with 10,000 lost for Japan alone.
Spring Ahead for Suffering Tourism Sector?: Ctrip estimated last week that more than 300 famous tourist sites are once again accepting visitors, a more than ten-fold rise from a week earlier. Searches for flights on Tongcheng Elong have jumped, with searches for flights during the Qing Ming Festival from April 4 to 6, up 138% from a week ago earlier. Searches for flights during the Labour Day holiday from May 1 to May 5 rose 84%.
NASA Images Show a Decrease in China’s Pollution Related to Coronavirus Shutdown: From January 1 to 20 the images show higher levels of nitrogen dioxide over China – a yellow-brown gas emitted from motor vehicles, power plants, and industrial facilities. But from February 10 to 25, traces of the gas are hardly visible.
Why Stores in Beijing and Shanghai are Empty – and It’s Not Just Because Coronavirus Has Hit Luxury Fashion: The average age of luxury consumers in China is 15 to 20 years younger than in the US or Europe. Luxury goods makers typically spend 35% more on marketing-per-customer in China than in the West.
It has now been over a month since the city of Wuhan was locked down and the world learned about the coronavirus COVID-19. As the extraordinary measures continue in Wuhan and other cities such as Harbin, and cases outside of China accelerate, the risk is far from over. Yet there are some positive signs that much of China is returning to relative normality – albeit wearing face masks.
On Sunday, 24 provincial-level regions, including Beijing and Shanghai, reported no new cases. Whilst more than 100 million internal migrant workers are yet to return to their jobs, many regions are easing curbs and restoring workplaces. Some cities are going as far as flying, bussing and training workers back from their hometowns to get the wheels turning again. More than 90% of workers in Zhejiang province, and over 70% in Guangdong and Jiangsu are back on the tools. At a personal level, we are now allowed back in our Skinny HQ in Shanghai, except those who haven’t yet completed the 14-day self-quarantine. With most workers back, many of the key frustrations of foreign brands selling in China, such as stalled logistics and holdups at the ports, are likely to diminish daily.
The mass-closures of retailers also looks to be thawing. Apple has reopened more than half of its retail stores and Uniqlo has added 100, Lululemon has reopened stores, in addition to other retailer re-openings. As this video illustrates, plenty of people are leaving the confines of their apartment to get their shopping done. They’re all positive developments, but the telltale sign that everything is okay will be when China’s precious children are allowed back to school.
The Chinese word for crisis is 危机 (Wéijī) – the first character, 危, means ‘dangerous’, and the second character 机, ‘opportunity’. This holds true to crises inside and out of China. JD started selling online during SARS, Disney came into being during the Great Depression, and a host of other companies from Microsoft to GM began during challenging times. We’re yet to see if budding new enterprises will arise from the aftermath of the coronavirus, but we have seen a major new feature from WeChat start to ramp up – Channels.
People often ask us ‘what will be the next WeChat?’ Although short video isn’t a substitute for the omnipresent all-in-one app, it is certainly eroding time spent on WeChat and the subsequent advertising revenue. The parent company of Douyin, ByteDance, now earns more in advertising revenue than Tencent’s WeChat, QQ, gaming and other apps combined. Although WeChat has been moving into the commerce space, with sales on mini programs now half of JD’s turnover, tapping into the ever-more-popular short videos has been elusive.
The timing of WeChat Channels launch couldn’t have been more appropriate given the soaring popularity of short video for house-bound Chinese over the past month. While still in ‘testing’ stage, Channels may add a new dimension to integrated WeChat marketing channels and is worth considering while it’s still in its infancy. Never a better time to seize the opportunity? Go to Page 2 to see this week’s China news and highlights.
If you’re selling massage chairs in China, things are likely to be uncomfortably rosy at present. Online sales of chairs that mimic the hand motions of a massage therapist have shot up 436% from a year ago. From that chair, there’s a good chance your customers are passing away the days indoors playing a lot more mobile games, flicking through short videos and watching about 42% more TV than they were a month ago.
While those selling massage chairs, air purifiers and disinfectant are likely to be seeing some of their biggest ever sales as a result of the coronavirus outbreak, the past four weeks haven’t been so positive for the majority of retailers. With more than half of China’s population facing varying forms of residential lockdowns most retailers have shuttered stores or reduced their opening hours. Those hoping to counter lost store sales with ecommerce are likely to be disappointed too.
Looking into consumer spending behaviour over the past few weeks paints a clear picture that most consumers aren’t yet back in the mood for making frivolous purchases. Rather, they have knuckled down in survival-mode. As we reported last week, JD’s sales spikes all came from staples such as rice, dairy, vegetables and meat, with few other categories warranting a mention. This has been confirmed by app behaviour which has seen a soaring usage of apps selling fresh produce, with consumers buying a week’s worth of vegetables and other household supplies at once.
Interestingly, food delivery apps have seen a drop in usage, as consumers cook meals for themselves, not wanting to take risks contracting the virus from chefs or delivery men, on top of having more time to prepare food than in their usual busy lives. To counter the limited stock availability on its fresh platforms, Alibaba and JD are supporting farmers so they’re not left with rotting fruit and vegetables, promoting a service where consumers can buy fresh goods directly from the farmers at cheap prices.
In its latest earning report, Alibaba mentioned the dip in ecommerce purchases as a result of the outbreak. It claimed “the demand is there, but the means of production have been affected,” however it seems consumers weren’t interested in buying non-essentials such as clothing and electronics during the height of the epidemic. Many listed products warn halfway through a product description that the seller will not ship orders for weeks, while orders that are shipped can get stuck in logistics company’s warehouses. Alibaba did note that it has gained many new customers from lower tier cities who have started using the service to buy produce online, which it expects will amount to more customers in the elusive lower tier cities in the longer term.
Consumer purchases and behaviour since the outbreak points to a populace who have been a little frazzled, and brands should take note. As we’ve suggested over the past couple of weeks, consumers are unlikely to respond positively to big promotions and flashy sales campaigns. Instead, it’s a good time build a further connection with the target audience over the digital channels they’re using, particularly as the cost of acquisition is less than half of what it normally costs.
There are a number of brands who have executed well, by recognising the current environment, reacting quickly, and connecting with their target audience at an emotional level. Local cosmetics brand Perfect Diary recognised that gaming has soared 38% on mini programs since the outbreak and released their Protect the Single Dog game ahead of their Valentine’s Day campaign as a way to ease the stress, while rewarding users with samples and coupons. Similarly, Lululemon identified that people aren’t going to gym or training outside but still want to stay fit and occupied, so they shared a list of trainers offering livestreaming or short video workouts. Food brands only need to look at the uplift of folk cooking at home, and provide some livestreamed recipes and cooking tips to help as an example of responding appropriately.
News that the number of new confirmed cases in China outside Hubei province has been dropping for 14 consecutive days, coupled with a general weariness of being cooped up, has seen the streets in most Chinese cities start to come back to life. Not quite to their normal vibrancy, but there are some positive signs that consumers will loosen their ‘survival’ stance over the next week or two as the hundreds of millions of returnees from Chinese New Year travels end their quarantine period and things settle. We’d suggest not waiting until then and start using this time to set the foundation for when spending bounces back. Go to Page 2 to see this week’s China news and highlights.
It’s incredible to think that the majority of China’s 1.4 billion people were housebound last week, and many continue to be so. For a large number, it is self-enforced. Most Chinese are already health-focused and the real time coronavirus updates whirling around social media haven’t inspired many to take a trip to the cinema or gym.
For 60 million others, the ‘house-arrest’ is involuntary. In a watered-down version of Wuhan’s shutdown, the wealthy cities of Hangzhou, Ningbo, Wenzhou and Taizhou in Zhejiang have issued household “passports” which allow just one person per residence to leave home every two days to get supplies. Similarly, many residents returning to cities like Shanghai and Beijing from their Lunar New Year trip home are having to ‘quarantine’ themselves for two weeks before returning to the office. Companies must apply to their local government to open, and for those operating, employees must wear masks and not sit too close to each other. Remote working continues to be the choice for most white collar workers.
How do Chinese consumers pass the time cooped up in their apartments? By entertaining themselves on their devices of course. China’s tech companies have seen a spike in usage, with ByteDance particularly quick and smart with their response. ByteDance’s short video app Douyin (Tiktok) was always going to do well during periods of confinement due to its addictive and entertaining nature. A pack of new KOLs have emerged on the platform as people seek knowledge and humour about the virus. Similarly, its AI-driven news and information source Toutiao is more popular than ever as people seek updates about the state of the nation’s health.
Not content with organic growth, ByteDance paid ¥630 million ($90 million) to distribute the Lost in Russia movie for free on its Douyin and Xigua platforms. Lost in Russia was likely to be a sensation at China’s box office, following on from the success of Lost in Thailand which grossed $200 million in China – the highest grossing movie of all time when it was released in 2012, and 2015 sequel Lost in Hong Kong, which also broke records grossing $255 million. Yet with China’s cinemas sitting empty during their usually-busiest week of the year over Chinese New Year, seven domestic premieres were postponed in what was a huge blow to the local industry. Not to leave the Chinese public hanging without their movie-premiere-fix, ByteDance swooped in with an arguably good deal, all in the name of acquiring users and adding prestige to its platforms. Some have likened it to the success of WeChat’s virtual hongbao (red envelope) campaign in Chinese NY 2014, which accelerated the rate of WeChat Pay adoption and had Jack Ma label the campaign a “Pearl Harbour attack” on Alibaba.
Douyin continues to win favour with Chinese consumers en masse. As of January this year – pre-coronavirus outbreak, 400 million were already using it daily. That is likely to have seen a large bump with the housebound nation glued to their screens and the Lost in Russia premiere.
Like most apps in China, Douyin has evolved into a sophisticated social commerce platform providing considerable opportunities as both a marketing and sales channel. Even after the virus has peaked, Chinese consumer behaviour will remain cautious for some time and online commerce will benefit as a result. With people relying heavily on social media for connection during these emotional times, social commerce will grow more than ever.
Last year, social commerce sales just on WeChat mini programs grew 160% to ¥800 billion ($114 billion). That’s over half of JD’s sales, reinforcing the legitimacy of the sales approach. Activity has increased over the past few weeks as brands such as Bestseller, launched and promoted mini programs to help counter the fall in physical retail.
To best capitalise on social commerce, brands should first understand each social channel, how they are being used, and how to best engage their users. Due to the rise of Douyin, we’ve put together an infographic to provide an overview about what people are doing on the platform. Like we noted last week, this unique period provides an opportunity to get the ship in order and engage consumers before everything returns back to the normal madness of business as usual. Digital channels are an area where many brands could do with a refresh, particularly as consumers are connecting more than ever from their apartments right now.
Happy Year of the Rat, although it hasn’t started off too cheerful in China. This year’s Lunar NY holiday won’t be remembered for the usual festivities of red envelopes, feasts, fireworks and badgering sons and daughters for not bringing home a potential spouse. Rather, people will look back on the eerie queues for face mask rations, the city-wide lockdowns, outlandish rumours, viral videos showing all sorts of protective plastic creations and China’s ability to build things phenomenally fast.
Since writing the first Weekly Skinny in 2012, we have not seen something that has had such a swift and significant impact in China as the coronavirus. Although some would argue the response in Wuhan could have been quicker, in the past two weeks China has taken unprecedented measures to contain the outbreak. It has pooled national medical teams and supplies to the hardest hit regions, built new hospitals, extended the Lunar NY holiday, postponed the opening dates for schools and businesses, and imposed travel restrictions. China’s leaders have acknowledged the outbreak is a “major test of China’s governance system and capacity,” and will use their unique powers to do everything they can to contain it.
A lot of comparisons have been made between the coronavirus and SARS. While there are many parallels, China learnt many things in 2003 and lot since. The country is much wealthier than it was 17 years ago with GDP almost nine times larger, affording it more resources to deal with the issue. It is also much more digitally connected – with over 1,000% more people online – allowing much faster dissemination of information. Notwithstanding, the number of coronavirus fatalities in China has surpassed that of SARS, although the overall global count is currently about half of what SARS was.
The interconnectivity between China and rest of the world will mean more of us will be impacted in the short term. When SARS hit, China accounted for around 5% of global trade. Now it is over 12%. Chinese travellers took less than 17 million trips in 2002, last year it was more than 150 million. A little over 100,000 Chinese studied abroad around the time of SARS; 17 years later it is almost 700,000. Tourism and Education are likely to be two of the sectors most impacted by trip cancellations, group travel bans, and countries’ travel bans. The goods trade may also see a dip as visitors and students get less exposure to foreign products, and as a result, are less likely to advocate them to their family, friends and colleagues back in the mainland.
Although most news around the coronavirus may portray doom and gloom for China, the medium-long term prospects remain unchanged. Brands should refrain from panicking. After the 1997 Asian Financial Crisis and 2003 SARS epidemic, China bounced back quickly. China’s GDP actually grew 10.0% in 2003, faster than the 9.1% in 2002. There was pent up demand when things settled, and positive emotions and spending followed. Well-marketed foreign goods could benefit from the outbreak, as the cleanliness, safety and healthiness of imported products is reinforced. Tourism, education and even migration may also rise as Chinese seek safer places to travel, study and live. There could be a rise in car sales as consumers look to avoid crowded public transport in the short term, which happened during SARS. We may even see a much needed bump in fertility rates and mum & baby products as cooped-up people look for things to do.
Chinese consumers respond well to brands and countries they don’t see as ‘fair weather friends’, as the much-praised decision by Canada to not follow the US travel ban will attest. Similarly, Japan has been applauded for its respectfulness, donating face masks accompanied with traditional poetry to describe their relationship with Chinese people: “when you say you don’t have clothes, we share ours with you.” Similarly, when reporting infections, the Japanese government did not reveal the nationality of the patients, saying “it has nothing to do with dealing with the situation.”
Brands that continue to respect and connect with Chinese consumers over this period are likely to benefit the most when things get back to normal. As we saw with the H7N9 virus in 2013, when China’s digital adoption had come of age, consumers rode out the storm online, researching, ordering and entertaining themselves on their devices with both positive and negative experiences going viral. This reiterates the importance of ensuring that your digital strategy is still relevant and optimised for China.
In the short term, Chinese stores are likely to continue checking shoppers’ temperatures and enforce masks. Food and ecommerce delivery will take a little longer and be ‘contactless‘ (meaning goods are left at a designated area rather than taken to the door), but online purchases will likely increase as a share overall. Above all, there remains hundreds of millions of affluent Chinese who will continue to consume.
Although the Skinny HQ in Shanghai is closed – as per the Shanghai government shutdown extension, our team is working remotely to assist you to adapt and sell more in China. Please don’t hesitate to email us to discuss what we can do and how we do it. In the meantime, stay well and don’t forget to wash your hands! Go to Page 2 to see this week’s China news and highlights.