Changing Consumer Behaviors in the Age of “New Normal”
The Covid-19 outbreak caught everyone off guard – lockdown policies, supply chain disruption, retailer shut-downs, social-distancing…people were not used to spending most of their work time (and free time) at home and going shopping with masks and goggles on. With the Covid-19 vaccine still in research phrase and no ultimate cure developed, governments have been trying to keep the delicate balance between controlling the infection rate and restoring business activities. The consumer market, at the same time, is facing changes and uncertainty, and equally lots of opportunities for brands and retailers.
The goal of this article is to analyze our observation upon how the Covid-19 has altered consumer behaviors, and whether or not these newly-formed habits will have further effect on the local and global market for the long run. The age of “the New Normal” has arrived, and the willingness and speed to adapt is a good indicator of a brand’s well-being in the following decades.
#1 Prudent “Revenge” Spenders
During the pandemic, consumers have become less optimistic about their personal income and the overall national economic outlook. Such worries are clearly reflected in their tightening budget on retail spending. According to the National State Council Information Office of China, the total turnover in the nation from the consumer goods sector in the first six months of 2020 has dropped by 11.4% compared to the last year.
More than one third of the global consumers surveyed said they would make more rational purchase decisions in the future. Many will also try to save and spend more on long-term financial investments. More than 40% of the consumers said they will make thorough price comparison before making the final purchase. Overall, consumers in China and India showed more optimism for the economics’ outlook than their counterparts in Asia, North America and Western Europe.
On the other hand, following the stabilization of the virus situation, “revenge spending” is picking up. Starting from June, the Global Consumer Confidence Index has slightly bounced back after falling to the bottom. In August, the consumer index stood at 41.4, up 0.5 from the previous month (although there is still a 7.2 gap from January). During this year’s 618 Online Shopping Festival in China, the sales turnover of the first 88 minutes of the campaign is already equivalent to last year’s campaign’s total sales revenue.
By overlapping two seemingly contradictory consumer behaviors “rational purchase” and “revenge spending”, in the future, we will see consumers who engage in rational “revenge” spending, who will buy less for show-offs but more for the true value of the product, which indeed is a sign of “upgraded level of consumption”.
#2 Digital-savvy shoppers
The lockdown has to a large extend hindered the possibility for brick-and-mortar shopping, and many consumers are forced into utilizing online channels for buying goods – if they have not been doing that already. On a global scale, the sales percentage of consumer goods from online channel has increased by more than 40%, from 8.8% in 2019 to around 12.5% this April, indicating clearly the trend of “digital retailing”. Besides online shopping, services adopted for keeping personal distance such as grocery delivery, drive-thru, curbside pickup have together formed an omni-channel retail landscape. The strict boundary of online and offline retail has also been blurred.
While some of these approaches are mainly motivated by the special situation of Covid-19 and will disappear once things get back to normal, some approaches will develop into new consumer habits that persist even after the outbreak. Many elderly people and people from smaller cities and remote areas have tried the Internet-focused lifestyle for the first time and will keep enjoying the convenience. This online sales & marketing boom will also give an edge to many local brands who play better along the local digital scene – this we will discuss in more depth later.
One interesting example is Live Streaming, an emerging online marketing and communication method that lately has gained much attention. Live Streaming is hosted by KOLs or Brand Ambassadors and it is a real-time audio-visual footage that allows the hosts to introduce in details about product functions, product selling point and any other questions the audience have in mind (and thus typed out on the screen for the host to see and answer on the spot). Live Streaming, with its highly interactive nature and unique way of presentation, has helped to solve many pain points of online shopping. It is estimated that live shows this year will generate 500 billion RMB (around 71.4 billion USD) for Alibaba’s Taobao platform alone. Other social media and shopping platforms such as the Red Book and Pinduoduo also adopted live streaming this year.
#3 Recovering sales, with some forerunners
During the economic downturn caused by the epidemic, consumers in general are cutting their shopping budget, and the retail sector has got a hard hit. However, some product categories, catering to the special needs of the special time, have gained a surge in popularity. Good examples are home-wear and leisure sports-wear, slippers, and eye masks and sunglasses which can be used as facial protection.
Some categories have had a quicker recovery than the others. Beauty and personal care category was also hit at the beginning of the outbreak, but recovered rather quickly in the past few months. Consumers’ needs for this category were partly driven by certain skin symptoms after wearing masks for a long time – allergies, sensitive skins and negligence of sun exposure, and as a result, skincare functions such as anti-acne and allergy-proof become hot concepts, and natural ingredients are preferred than the chemical ones. A number of Chinese domestic cosmetics have gained a larger market share by utilizing digital channels and offering good prices. Statistics from VIP.com shows that local brands have taken half of the seats in the top 10 sales ranking with the presence of Marubi, Winona, Chando, Unifon and Perfect Diary.
Besides beauty and personal care, other categories such as baby-care, fitness, kitchen and home appliance and self-examining medical suits (blood pressure meters etc.) have also become trendy due to prolonged time of social distancing.
#4. Multi-facet judgment on brands
People’s vulnerability towards the virus has heightened their general awareness for hygiene and health condition, the same time prompted them to contemplate on the relationship among nature, human and the society. This sharpened awareness and contemplation were demonstrated in consumers’ pre-evaluation process when making a purchase.
After the outbreak of the epidemic, at least 40% of Chinese consumers want to make sure that the product has all the necessary sanitary conditions before proceeding to a purchase. Other deeds initiated by the brand, such as actions to ensure employee safety, promotion of sustainability awareness and demonstration of corporate responsibility will all play a part in consumers’ purchasing journey.
What used to be simple in the past – the “just advertise your product and deliver quality” kind of golden rule for brand PR is no longer omnipotent today, at least not alone. In the time of Covid-19 and in the years to come, corporates and brands need to establish a good image in multiple dimensions. This is especially true if they want to attract the younger generation – millennials and Gen Z, as those are the ones who put more weight on a brand’s sustainability and more willing to pay for this consciousness.
#5 Locals are getting (even more) popular
If we look at the China market, the signs are not all that disheartening – actually one of the uniqueness of the market is its enthusiasm, backed by the country’s overall effective coping of the virus and fast-recovering economics status. In August, the international market research firm Ipsos released their Consumer Confidence Index for various countries, among which China’s index reached 72.9, ranking world top one. On the other hand, people’s enthusiasm towards the overall image of the country also seems to be on the rise – people are generally satisfied with how the Chinese government reacted to the virus, in comparison with some governments’ deeds elsewhere.
The combination of these two “confidence” have led to increasing sales in domestic goods, reflecting consumers’ heightened trust and acceptance level. Data from JD.com shows that for the first quarter of 2020, the turnover of domestic grocery food category has increased by 156%, domestic baking raw materials by more than 1000%, and computer office goods by 109%. By May, among the 500 best-selling shops (accumulated sales turnover above 100 million RMB), local brands account for more than 70%, reaching total number 318.
Although the increasing popularity of local brands has always been a closely-watched trend starting from the beginning of 2010s, Covid-19 has indeed accelerated its process. The brands’ quick engagement with the local social media and digital platforms has set an example for international brands.
#6. Welcoming newcomers
The epidemic has hindered consumers from getting access to products/brands they are familiar with, and under such circumstance many of them went for new brands as alternatives. According to a McKinsey report, in China, more than 75% of the consumers surveyed said they had tried new brands in the past three months. While the experiment might have started out of desperation, more than 60% of the consumers gave positive feedback to the new experience and said they would continue using the new brands even after the outbreak.
This open-mindedness and the light-capital nature of E-commerce have joined hands to create card-shifting market opportunities for some of the market challengers. We see a surging popularity for some unique and innovative niche products, even better if they are digital-based.
Aventura is a China focused venture builder and market partner. Aventura offers holistic solutions to launch, manage and grow businesses in China, drawing upon competences across marketing, sales, e-commerce, and logistics. Founded in 2011, the Group’s client base comprises a wide range of multinationals, international consumer brands, startups and investors. Aventura is headquartered in Shanghai, with additional representation in Hong Kong and Stockholm.