Could Beijing’s Second Wave of COVID-19 Affect Consumer Sentiment?

New outbreaks of COVID-19 have been reported as countries are emerging from lockdown measures — even in countries that acted swiftly and resolutely in the earliest stages of the pandemic. The new outbreak in Beijing grew to 106 cases on June 15, with 29 communities in the sprawling Chinese capital back in lockdown. Health officials confirmed another 27 COVID-19 cases on June 16 — a smaller increase but still a worrying sign after Beijing enjoyed almost two months without a single new infection. Plus, Beijing implemented some of the strictest preventative measures in China since the virus was first detected in Wuhan, some 700 miles away.

Prior to the new outbreak, China was on its way to a promising recovery, with shopping malls and boutiques reopened to eager shoppers emerging from months of lockdown. Now, however, the outbreak has cast a shadow on Beijing’s recovery, and the potential impact of Beijing once again going into full lockdown would have devastating effects for global luxury brands counting on Beijing’s recovery, as well as China’s overall economy.

Morning Consult, a global data intelligence company, recently released a new report, Chinese Consumer Activity In The Wake Of Covid-19. They conducted a survey among 2,000 Chinese adults to gauge their perceptions of COVID-19 as a health risk in China, and globally, and how it’s shaping consumer demands and spending habits. Below, four key insights from the report.

  1. Health risks in China are perceived as relatively minimal, but concern about the virus and economic consequences remain. 

According to the survey, only a small share (16 percent) of Chinese adults continue to see the coronavirus as a severe health risk in China. However, general concern about the virus remains: 82 percent say they are at least somewhat concerned about an outbreak. Moreover, half of the adults believe the pandemic will negatively impact their job and finances in the next six months. Given this, consumers will most likely lean toward more conservative consumption strategies. This means fewer impulse purchases and premature and hedonic consumption as well as.  COVID-19 is a wake-up call for a lot of Chinese consumers to shift from their free-spending lifestyle. The “Revenge Spending” that brands have been waiting for might be replaced by “Revenge Saving.” Accessible luxury brands and second-hand markets are likely to benefit from the recovery.

  1. The pandemic is shaping consumer demands in a number of spaces. 

The report pointed out that retail has been particularly hard hit, as Chinese adults say they’re spending less on luxury brand items, clothing, and beauty products. However, there are also consumer areas that are poised to pick up in the wake of COVID-19, particularly healthy food, streaming video services, and products promoting relaxation. The ongoing pandemic adds pressure on consumers as they are exposed to the constant stream of virus news. Therefore, many are looking for the product and experiences that could provide stress release and comfort, even just a distraction from daily life. It would be a good time for brands to think about the consumer experiences they could provide, whether it is online or in-store.

  1. Products made in China are more preferred in the wake of COVID-19

The report states that since the spread of the COVID-19 has mostly been contained in China, 35 percent of the Chinese adults spent more on the products made in China, while 28 percent of them choose to spend less on products made in the US. Part of the reason could be that the factories of a lot of international brands were forced to close due to the pandemic. Even for the brands that still manufacture products, there has been a significant slowdown in logistics. It now takes much longer time for them to ship and deliver products, not to mention that shipping officials in China are now prioritizing essentials like medical supplies. As a matter of fact, even before COVID-19 hit, the role of Chinese overseas spending was in flux — the virus crisis simply has sped up the process of “buying domestic.”

  1. Prospects for tourism outside China remain dim even with stay-at-home measures lifting

According to the report, just 10 percent of Chinese adults say they’re “very” likely to travel outside of China now that the stay-at-home orders have been lifted. There is also a perception that health risks abound internationally. Moreover, nature parks are the most appealing travel destinations. The report further points out that 74 percent of Chinese adults say COVID-19 is a severe health risk in the United States — notably higher than any other region — with the next highest being Europe (44 percent). All this adds up to an unwillingness to travel abroad. Brands need to adapt to reach homebound shoppers and develop its domestic strategy.

With the threat of a second outbreak looming overhead, Chinese consumers are prioritizing their health and wellbeing. They are most likely to choose to spend less and delay travel plans. It might be a challenge for retailers, but the buying power of Chinese consumers remains massive. Brands should think about making timely adjustments, whether it’s to develop online communities, build better consumer experiences, or tackle logistical challenges. The ones that adapt well will be the winner after COVID-19.

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