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How Chinese Consumer Behavior Will Change After the Coronavirus

Since the outbreak, mobility in China has been quite restrictive, from the shutting down of public transportation to the temporary closures of stores, restaurants, and other highly-populated locations.

 

As the number of people staying home increases, the retail industry in China – along with everywhere else in the world – has been taking a huge hit. Retail sales dropped 25% in the first week of the outbreak and jumped to 40% by the second week. Analysts estimate that the total retail sales for Q1 of 2020 may be plummeting roughly 5% (based on what happened with China in 2003 with SARS).

 

Fewer people are going out. As a result, there has been a shift in the things that people are spending their money on. With a greater focus on more physical goods such as food and other essentials, items such as cars, home appliances, and electronics are hardly considered. Also, money spent on services like entertainment and education has halted as well.

 

While things may return to normal as the crisis passes, we can expect to see the following Chinese consumer behaviors remaining the same long term.

 

Increased Online Shopping

With a 1.94 trillion USD e-commerce market, there’s been no doubt that China has stood as the leader in the e-commerce space. However, since the coronavirus epidemic, this demand to shop online has grown, with online platforms now offering shipment of agricultural items.

 

Based on public data, JD’s e-sales for frozen food sky-rocketed up 800% year-over-year during the Lunar New Year week. 

 

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Increased Local Commerce

With more and more limitations on travel, local community stores will see an uptick in foot traffic, as consumers stay away from stores filled with a lot of people. Local supermarkets and convenience stores serve a crucial role in holding essential goods. In fact, during the first few weeks of the outbreak, Suning mini-stores business increased 400%.

 

Increased Awareness for Food & Health 

Because the COVID-19 virus – as well as the 2003 SARS outbreak – is believed to have originated from a food-related animal, we can expect to see Chinese consumers becoming more conscious of food and health safety. 

 

According to a report by McKinsey, Chinese consumers had already been increasing their spending on categories related to health and lifestyle, with 60% of consumers in large cities reportedly checking the ingredients of packaged foods before purchase. 

 

Increased Use of AI & Robotics

The lack of movement and contact with people has pushed many tech companies to focus on building out more automated delivery and unstaffed services. Since the outbreak, both consumers and producers have begun to realize the potential of technology. As the crisis passes, the development of these technologies in relation to the distribution of consumer goods will only advance.

 

 

Final Thoughts

AI technology has been a vital part of preventing further spread. Since the 2003 SARS outbreak, big data and predictive analytics tools have come a long way. Besides helping us monitor health risks, it also provides businesses with the ability to look ahead, reduce markdowns, and thereby maximize their margins. 

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