Chinese Consumer Behavior In The "New Normal" and Its Implications for Marketers
There’s no question that COVID-19 has radically changed all of our lives — how we live, shop, work and interact. It also impacted consumer behaviors, attitude, and some of their life priorities may shift.
As a brand owner, how can you understand the impact of the pandemic on your customers and markets both today and tomorrow? What are the opportunities and the new realities you need to embrace as marketer?
This article combines latest data released by CTR Market Research and my own observations from inside of China to answer these questions.
Changes in Consumer Behaviors
1. Transition to digital
As consumers are being asked to practice social distancing, e-commerce orders for groceries and other essentials have become a survival tool for the Chinese consumers. During the outbreak, the consumers’ shopping behaviors moved completely from offline to online.
Shopping malls were replaced by online e-commerce such as Taobao, JD, and Pinduoduo; grocery stores were replaced by online grocery and food delivery, and online live-streaming and video platforms became the primary places for entertainment.
According to a report released by Taobao, the number of transactions done through Taobao live streaming was doubled during coronavirus outbreak compared to the same period last year.
2. Consumers tend to make new plans and try new lifestyles
In the long run, the pandemic forced consumers to re-adjust their plans for the future and 73.5% of the consumers surveyed by CTR Market Research said that they will try new habits and lifestyles.
According to a survey by McKinsey &Co, 14% of consumers said that they won’t go back to the shops they usually go and 6% of consumers don’t plan to shop the same brand they used to purchase.
This is a great opportunity for new brands and businesses to enter the market that can potentially make people’s lives better.
3. Consumer demands shift from “I want” to “I need”
The quarantine life decreased people’s demand for non-essentials, people’s consumption behaviors shifted from “I want” to “I need”. It also stimulates increased demand for home living products.
National Statistics of China show that the online sales of daily food necessities in Feb increased by 26.4% and 7.5% respectively, while apparel products decreased by 18.1%.
Data from CTR also indicated a reduced willingness to spend on trendy products, only 3% of consumers in the survey say they will purchase trendy products.
However, people expressed strong needs for health-related products and services with nearly 50% say they will spend more on the gym when the pandemic is over.
Key Industry Insights
How does the new consumer behaviors affect the industries? We found 4 industries experienced the strongest impact:
Food & Beverage
During the coronavirus outbreak, people’s demand for food products such as instant noodles, rice, and milk increased significantly with a 9.7% increase. After the outbreak prime time, the demand for healthy food continued to increase by 25%-50%.
The beauty industry was also affected heavily with a decrease of 14.1%, according to National Statistics. Because people use fewer beauty products such as lipstick, foundation, and sunscreen. Interestingly, eye make-up sales stay high during this period.
Consumers also became more resilient to shopping for discounts especially during online shopping festivals due to the overall decreased demand.
Brands are exploring different digital marketing channels such as WeChat mini-program and trying various ways such as live streaming, bidding and group discount to stimulate consumption.
Though China’s passenger auto market experienced a significant decrease in sales (78%) during the virus outbreak in February, it is expected the demand will go up soon as people start to consider purchasing cars as a safe option to travel.
The demand will further aggregate the competition of auto brands to compete with safety, intelligence, technology, and quality features.
According to data from Mobtech, short video platforms such as Kuaishou and Douyin became the major place people get information, shopping, and create content. The DAU (daily active users) far exceeded video platforms such as Iyiqi and Tencent.
It is expected that the live streaming platforms will continue to be the major channels brands connect with their customers to stimulate consumption. Check out “Top 30 live streaming platforms in China.”
What is the indication for marketers?
To the extent new consumer behaviors become permanent, they will fundamentally shift demand for various goods and services. On one hand, consumer spending is dramatically curtailed and people will be more logical when making purchasing decision, on the other hand, the profound online population opens door for business who focus on online sales model.
Overall, I found 3 major implications for marketers.
1. The best time for new brands to enter the market
This could be either the best time or the worst time to enter the market.
While many less competitive brands are driven out of the market due to coronavirus, this is the best time for new businesses who have a clear differentiation and unique values align with the current consumer demands to enter the market.
However, this could also be the worst time for businesses that don’t have a clear strategy and is not ready for long-term competition as the pandemic accelerate the online competition.
2. Importance of building “private traffic”
Online traffic became more expensive than ever during and after COVID-19. Brands traditionally rely on offline traffic became panic but those who already established a good foundation for private traffic are found more prepared. But what is “private traffic”?
The term “private traffic” refers to the closed channels or private fan community that is specifically owned by a brand or individual.
In the western market, brands use email marketing or websites to reach and retain customers. Neither of these is effective tools in China.
In China, there is no better platform like WeChat to build “private traffic”. With tools like WeChat mini-program, WeChat official account, and WeChat group, brands can attract traffic, cultivate customers' affinity and convert customers into sales all in one platform.
Building private traffic not only allows the brand to less rely on offline traffic but also divert some traffic and fees away from external e-commerce platforms such as Taobao and JD.
I’ll cover more about how to use WeChat to build “private traffic” in my next blog.
3. Have a focused digital marketing strategy
When online media became more expensive, it is extremely important to have a targeted digital marketing strategy that focuses on your target niche. Just because your competitors are on Douyin, doesn’t mean you have to be there.
Brands need to have a clear digital marketing strategy that aligns with their budget, niche and long-term business strategy to get the most ROIs from their marketing campaigns.
In addition, different media platforms have their own rules and policies for businesses in different industries. Media platforms owned by BAT (Baidu, Alibaba, Tencent) have particularly strict ad policies. Make sure to speak to media experts in China before you make any media plans.
China’s consumers’ market is changing rapidly every day, this article only gives you a grasp of what the market landscape is like after COVID-19. To succeed in the market, it is important to find a reliable local marketing partner that has the right experiences and resources.
Talk to us today to find out how we can help your business in China.