Editor’s Note: Elaine Jiang is Aptos’ regional director for China. In the second part of this exclusive Q&A series, Elaine discusses how China’s consumer behaviours are changing post-COVID-19, which trends are here to stay, and how retailers are adapting to these new habits.
Now that several weeks have passed since most lockdown restrictions were lifted, do you see a newfound optimism and consumer confidence?
EJ: I would say yes. Chinese people are generally quite optimistic about the future. McKinsey recently reported that China’s consumer confidence has steadily increased since the country started to emerge from quarantine. People have strong positive intent about online purchasing and, according to the consulting company, sales of some non-essential categories such as reading materials and consumer electronics have been recovering. Still, Chinese consumers are quite cautious with spending. People are perceptibly concerned about the global situation and more conservative in their buying than they were before COVID-19. The pandemic has made it apparent that globalization is real and international markets are extremely dependent upon one another. Until the outbreak is over globally, or at least well under control, I think a sense of prudent spending will remain.
Did the pandemic change China’s consumer behaviours, and which trends are here to stay?
EJ: Yes, the pandemic has deeply affected the way we live, work and act as consumers. During the lockdown, we started to pursue healthier lifestyles (fresh food, home-made meals, more exercise) and, as analysts report, this lifestyle adjustment is probably here to stay. Also, many of us realized that virtual meetings and training are actually possible and, in most cases, quite effective. I think that new ‘customer personas’ were born out of the outbreak, due to consumers who are healthier, more focused on well-being, and more digital. Also, the natural instinct to help others during the crisis has amplified a sense of ‘social care and consciousness.’ This will likely result in more consumers placing a greater preference on brands that promote social values and are more ethical and sustainable. In return, forward-looking retailers may rethink the way they produce, their ability to recycle, their working conditions, and their overall impact on the environment and the broader society.
Are sectors like travel and hospitality, which were hit the hardest by COVID-19, now rebounding?
EJ: Sectors such as travel and hospitality are starting to rebound and they are also introducing new and evolving operational models and ways to engage consumers. Interestingly, after the lockdown restrictions were lifted, we saw a good recovery of domestic travel. We had one of our main holidays in May and while international travel is obviously low because of restrictions, many people have taken the opportunity to travel within China. China Daily reported that during the May Day holiday, the tourism market recovered to 50 percent of the level from the same period last year, with a total of 115 million domestic tourists and revenue of 47.56 billion yuan ($6.69 billion). Road trips are seen as low risk and at this time are quite affordable, with many hotels doing promotions, publishing coupons, and encouraging travelling through livestreaming. An example of this is the CEO of travel service provider CTrip personally promoting hotels and accommodations via WeChat.
How are apparel and luxury sales performing?
EJ: Apparel and luxury sales are also steadily recovering: the online channel is still playing a prominent role in this phase. What we can observe is that companies which have invested in omnichannel strategies and in providing compelling experiences across touchpoints – from stores to e-commerce and to their social channels – are now in a better position to succeed and outperform competitors. In luxury, there has been a pent-up demand after lockdown with long queues in front of several stores, such as Chanel and Gucci. Hermes’ Guangzhou location had a turnover of 2.7 million dollars when the store, the second-largest in the country, reopened for business. Hermes’ single-day turnover is the highest a boutique in China has ever seen, according to statistics.
How would you explain these record sales? Are these cases of revenge shopping?
EJ: I do think there is an element of revenge buying as many consumers missed the gratification of shopping during lockdown and now feel the necessity to “treat themselves” after the stress generated by the outbreak. In addition to that, for some brands, rumours spread on social media about a possible increase in pricing, which led many people to speed up their buying and “investment” in the product. Importantly, many luxury brands are also generating strong sales results through the heavy use of social media and livestream selling. Burberry, during its livestream event in collaboration with Tmall, sold out its spring/summer accessory collection in about one hour.
Why is livestreaming so popular in fashion and luxury and will its popularity stick in the future?
EJ: I believe that livestreaming will continue to increase in popularity. Recently, I read a report from Forrester that stated “transparency and trust underlie the explosive growth of livestreaming commerce in China.” Livestreaming adds identity to shopping. It’s a way to combine personal interaction and entertainment with commerce. In some cases, we can watch ‘Key Opinion Leaders’ broadcasting from stores and posing questions to sales assistants (How does it fit? Can you tell me more about materials? How much does it cost?). In other cases, the sales assistants themselves try on the clothes and interact with viewers. In both situations, customers feel they are exposed to good advice and that they are part of a community that shares their same tastes, lifestyle, and values.
How are the retailers you talk to adapting to the new shopping habits you just described?
EJ: While the retail industry was severely impacted by COVID-19, the brands I talk to are determined to turn the challenges generated by the pandemic into opportunities to change for the better. They acknowledge that they need to concentrate their efforts in building their brand and engaging their customers through meaningful products and services. The ability to convey responsible and hopeful messages and to establish authentic and more intimate interactions with their shoppers will make a difference. Also, they are accelerating their approach to digital and reassessing the entire customer journey to the last mile. The approach to digitalization needs to be pervasive: it is not only about sales and communicating with customers. Behind the scenes, digitalization can help speed up product development and buying, establish new fulfillment methods, and generally create more integrated and responsive supply chains.
Interested in hearing more insight on COVID-19’s impact on China’s retailers? Read our previous Q&A with Elaine Jiang that discusses how China’s retailers managed through the COVID-19 crisis and how they adjusted their strategies as stores reopened.
You can also visit our Collaborative Conversations about Coronavirus resource page to watch our latest broadcast, which features more lessons and insights from Chinese retailers on the path to recovery.