On June 3rd, the Beijing municipality government announced that it is going to issue electronic vouchers (e-voucher) to boost its consumer market recovery. Beijing is far from the only Chinese city government promoting e-vouchers, though, as most cities and provinces are rolling out initiatives to boost consumer confidence and ensure that shoppers return to retail stores.
The South China Morning Post reports that the city of Jiaxing in Zhejiang province is distributing 200 million yuan ($28.2 million) worth of digital consumer coupons, of which 150 million yuan can be redeemed through WeChat Pay. Meanwhile, according to Quartz, the city of Hangzhou, which is also in Zhejiang province, is releasing 1.68 billion yuan ($237 million) in coupons, and Nanjing in Jiangsu province has allocated 318 million yuan for them.
Even though there’s fine print limiting the number of e-vouchers a person can receive and the discounts and deals aren’t that high, retailers still expect these electronic coupons to boost consumption. And amid dire economic forecasts and the uncertainty that’s defining our times, comparable endeavors could have a temporary stabilizing effect on global retail. Sales and promotions are not long-term strategies, but they could keep brands and local economies afloat until we design more suitable tools.
Let’s look at why these short-term, government-released e-vouchers are a good strategy for driving success even in the West.
Stimulus checks versus coupons
In March, Congress passed a $2 trillion aid package aimed at relieving American households and the economy in general. The program provided payments of up to $1,200 to individuals or $2,400 for married couples and included an extra $500 for qualifying dependents.
According to Kellogg’s Scott R. Baker and fellow researchers, the recipients spent at least a third of their checks within 10 days of receiving these funds. The research also shows that a bigger chunk of this spending, compared to relief spending during past recessions, was primarily devoted to grocery shopping, takeout food, rent payments, and utility bills.
The Wall Street Journal rightfully points out that “the one-time cash distribution won’t boost economic output.” E-vouchers and coupons are a better short-term stimulus plan because they impact different industries by encouraging consumption across all sectors. Conversely, stimulus checks promote a drastic change in consumption patterns (one prioritizing utilities and rent) while they halt spending on more expensive consumer goods. That jeopardizes potential rebounds for hard-hit industries like tourism, automobiles, manufacturing, and even textiles.
Spending versus saving
While the vast majority of American taxpayers are spending their stimulus checks on essential monthly expenses, wealthier taxpayers are likely to save or invest their money rather than spend it on non-essentials. Accordingly, consumption doesn’t get stimulated, and retail continues to suffer.
We can see this phenomenon in Japan, where all residents of the country received checks of 100,000 yen ($936) as part of the country’s economic stimulus plan to help counter the effects of COVID-19. According to the Mainichi, a recent online poll showed that 25 percent of respondents planned to “save” their cash handouts, 13 percent will use the money on “investments,” and 8 percent will “pay taxes.”
Shan Weijian, a Chinese private-equity investor, said in an interview published on WeChat that cash subsidies like the ones offered by the Trump administration or some European countries aren’t the most effective way to correct the economy. “Cash subsidies have a limited stimulus effect on consumption,” he stated, while also pointing out that wealthier consumers will deposit their cash subsidies instead of using the funds for shopping.
Changing the retail experience by creating excitement
Alizila, the news hub for Alibaba Group, highlights how China’s e-vouchers are being allocated on a first-come-first-serve basis — a tactic that builds excitement for retail. This positive engagement leads “families and friends to set alarms and reminders as they try to outpace one another in a real-time lottery system to claim these digital rewards,” according to Alizila’s Daniel Rosenberg.
In the age of COVID-19, when retail sector survival is highly dependent on customer engagement, generating excitement through “experiences” is the best way forward. Jack Ma’s New Retail model is based on the concept of enhanced consumer experiences, and Western retailers need to foster this kind of experimentation if they want to survive the current environment.
E-vouchers aren’t just an efficient way to boost consumption — they’re also a key New Retail strategy that should be incorporated into most marketing plans. Digital vouchers boost consumer engagement and sales conversion rates while also building loyalty. They also come at a lower price point than physical coupons, so cash-strapped retailers can incorporate them into their marketing strategies without adding economic pressure.