How are consumers shopping in China post coronavirus lockdown?

Like the rest of the world, China is also witnessing some shifts in its consumer preferences post the coronavirus crisis. These shifts can be seen in what people are buying and how are they making these purchases?

China has been witnessing a positive trend towards consumption since it opened up after the coronavirus lockdown. Data on online platforms like JD and others show a massive spike in the consumption year-on-year (YOY), JD ran a promotion recently and on the first day the transaction jumped 74% YOY. This is a positive news for China and shows a strong recovery of consumer confidence, which some term as "revenge consumption". As China crawls back to its pre-covid levels of consumer confidence, some shifts in consumption pattern deserves some thought.

Online shopping has attracted lot of consumers and mostly people who were earlier reluctant to use these platforms. One of the reasons online sales catapult after coronavirus pandemic hit china was the timing of the pandemic. It was when the Chinese new year was going on and people could not buy stuff from local stores, so they had to turn to online stores to hoard essentials. JD delivered more than 160,000 tons of staple items and necessities on its own platform. The mature e-commerce ecosystem of China made it possible to deliver necessities to the vast Chinese population across the length and breadth of the mainland. China's total retail sales of consumer goods has clocked RMB 10.68 trillion ($1.5 trillion) in the first four months of this year. If we compare year on year data, it is a decrease of 16.2% from previous year, while online retail sales increased 8.6% year on year to RMB 2.56 trillion ($360 billion). This piece of data is significantly important to demonstrate the migration of retail sales from offline to online since lockdown. This pandemic and the combined lockdown leapfrogged China's online retail, at least two years into the future.

Younger members of the family took the mantle upon themselves to buy for the family. This has come to reflect the younger generation's affinity towards technology and online commerce. They moved from buying for themselves to buying for the whole family and this shift, as expected, has come into groceries. Data suggests younger people did not use to buy groceries and essentials earlier but that changed since the lockdown. More than 70% of consumers born after 1995 have shifted to buying for the whole family. This also suggests the reverse migration during Chinese new year led to many younger members going back to their provinces and helping their elder family member by arranging for them through online apps and educating them about its use. This has massively increased the penetration and supply chain of online retail commerce in lower tier markets. Awareness to protect the family has also increased, this can be seen by the massive spike in purchase of disposable gloves and cleaning products by the younger lot.

Livestreaming and social e-commerce has increased interest and curiosity of buyers. In the lockdown period, people use social media and stay on the web much more than usual. This also leads to a much higher interaction with their favourite brands and influencers, leading to impulse buying on the part of the consumers, due to the fear of the not finding the sale offer later. Many brands are getting onto this trend and using celebrities to livestream sale offers. For example, a Canadian brand PORTS did a nine-hour livestream on JD live. Over 1.3 million customers visited the livestream and sales surpassed RMB 10 million ($1.4 million) on the same day. Consumers are also supporting farmers and small businesses through social e-commerce and direct buying, out of their self interest in community building through business. Under a community group buying initiative, consumers brought over 225 tons of agricultural produce from Wuhan.

Hedge is the new buzzword in Chinese consumers mind these days. Hedge is a value protection that people seek during uncertainty and Gold is the perfect example of it. When all the assets are on a free fall, people go back to buying and hoarding gold, in the form of gold bar, jewellery or paper. Same way people are flocking to buying insurance as they are uncertain about their future. Number of people buying insurance grew by 109% year on year, while the number of inquiries increased by 65%. People are buying insurance for their health as well as their valuables.

The new normal has forced people to move away from certain products by virtue of lifestyle changes, since masks have become necessary to wear in public, sales of cosmetic products have decreased example lipsticks, face cream etc. whereas consumption of protective and medical equipment have gone up. People have moved towards eating fresh food more than earlier due to growing consciousness about their health.

Conclusion:

While the pandemic has shifted consumer preferences in china, the shift towards online is positive and demand is turning out to be robust. While this may be good news for online e-commerce platforms but its yet to be seen if it sustains. The pandemic and resulting lockdown have leapfrogged the online retail by at least two years and have added to the already growing infrastructure in lower tier cities. This coronavirus pandemic saw the penetration of online shopping increase and younger generation educating the elder lot of the benefits of online shopping. The new social e-commerce and livestreaming sales are attracting many Chinese consumers and brand are tapping onto this new concept.