The top five sectors with the highest growth rate in China remained unchanged in 2010-2019, including holidays (CAGR 18%), transportation (16.4%), over-the-counter drugs and pharmaceuticals (13.6%), catering services (13.1%), and personal finance and housing (12.9%).

Although the growth of most industries has gradually declined due to the slowdown of overall consumer spending growth, the beauty and personal care industry has maintained its growth trend since 2017, with an increase of 9.2% in 2019.

Spending fell in the first quarter as industries such as holidays and catering services require consumers to leave home and are likely to flock. Total consumer spending is expected to shrink by 5.6% by 2020.

Research shows that most consumer goods industries are gradually recovering, including dining out, clothing, beauty and personal care, as well as non-essential industries such as leisure and entertainment.

In the long run, China’s total consumer spending is expected to return to its pre-covid-19 level in 2021 and continue to grow at a compound annual growth rate of 7.3% from 2021 to 2024.

CIW annual subscribers can download the report here.

8 Strategic segments of China’s online consumers

1. Digitalization

COVID-19 has also accelerated digitization of the traditionally less digitized part of the Chinese economy, such as areas requiring physical interactions, and B2B.

Before COVID-19, China was already a digital leader in consumer-facing areas— accounting for 45 percent of global e-commerce transactions while mobile payments penetration was three times higher than that of the US, according to McKinsey.

Based on McKinsey’s mobile surveys of Chinese consumers, about 55 percent are likely to continue buying more groceries online after the peak of the crisis.

Nike’s first-quarter digital sales in China increased 30% yoy after the company launched home workouts via its mobile app while real estate platform Beike said agent-facilitated property viewings on its virtual reality showroom in February increased by almost 35 times compared with the previous month.

2. Declining global exposure

20% of companies surveyed by AmCham China believe COVID-19 may accelerate “decoupling”.

A paper published in February by the European Union Chamber of Commerce highlighted how diversification is now at the top of the agenda for many European companies in China. Global trade and investment has slowed sharply, and the movement of people has become highly restricted.

3. Rising competitive intensity

In China, the top decile of companies capture about 90% of total economic profit, while the ratio is about 70% for the rest of the world, according to McKinsey’s analysis of the world’s top 5,000 companies.

Alibaba’s Freshippo supermarkets surmounted supply constraints and met soaring online orders for fruit. Foxconn’s agility allowed it to switch factory operations to mask production, protecting employees, and enabling the resumption of production earlier than competitors.

4. Consumers come of age

China’s affluent younger generation had never experienced a domestic economic downturn prior to COVID-19. The virus has forced them to think harder about spending, saving, and trade-offs in purchasing behavior.

One survey showed 42% of young consumers intend to save more as a result of the virus. Consumer lending has also declined, while four out of five Chinese consumers intend to purchase more insurance products post-crisis.

China’s post-90s start personal finance management 10 years earlier than their parents

5. Private and social sectors step up

According to McKinsey, the private sector and leading technology companies are playing a more significant role, making large socioeconomic contributions amid the emergence of powerful social institutions that have donated millions to recovery efforts.

CIW Annual Subscribers can download the 158-page report here. 

Among them, the number of college students is over 2.9 million. At present, only four regions haven’t opened colleges or universities, namely Beijing, Hebei, Hubei, and Heilongjiang.

The returned students also include:

• Senior middle school: 21.615 million from all provinces
• Vocational college: 3.27 million from 24 provinces
• Junior middle school: 31.48 million from 29 provinces
• Primary schools: 43.84 million from 21 provinces
• Kindergarten: 4.58 million from 8 provinces

Postponed or canceled purchase due to Covid-19: China vs. US vs. UK

These coupons are for all people in Wuhan. WeChat real-name verified users can enter the corresponding mini program to collect the coupon.

At the same time, there are 1.8 billion yuan (US$254.63 million) worth of business coupons issued by online platforms. The first phase started at 12:00 p.m. on April 19 and will last for six weeks until May 31 2020. And, the second phase will start on 1 June 2020.

One coupon can be collected at a time, with a face value of 10 yuan, 20 yuan, 50 yuan, and 80 yuan. The first phase will have 30 million yuan coupons, redeemable from 20th April onwards.

The Wuhan consumption voucher received by consumers through the WeChat mini program is applicable to the merchants who use WeChat merchant payment settlement. However, merchants who use the personal WeChat payment code, will not accept those vouchers.

According to Hangzhou Municipal Bureau of Commerce, the city’s fifth round of e-consumption coupons was issued at 8pm of 20 April, with a total of 1.5 million digital card packages. Each has a total value of 50 yuan, including 5 general consumption coupons with a value of 10 yuan each and 10 yuan further subsidy for every 40 yuan consumption.

As of 24:00 on April 16, 321 million yuan (US$45.41 mn) of Hangzhou government subsidies had been claimed in the first four rounds of coupon campaigns driving a total consumption of 3.422 billion yuan (US$484.05 bn).

As of 20 April 2020, cities in Guangdong province have issued 1 billion yuan worth of e-coupons.

Update (5 Jun): Since the worst of the Covid-19 outbreak in China, the country has issued over RMB5.6 billion ($788 million) in such incentives.

China GDP declined by 6.8% in Q1 2020

Chinese technology companies such as Alibaba, Tencent, and Baidu have long been technically ready for their staff to work outside the office. But, remote working to the majority workforces in China remains new and uncomfortable.

As China continues to fight the coronavirus, remote working is no longer an option but a necessity for many. Communication and collaboration platforms are essential to remote workers; Alibaba’s DingTalk, a.k.a. Dingding in the Chinese version, has seen a spike in demand in China.

It has surpassed social messaging apps in popularity on Apple’s App Store for the first time as companies tell employees to work remotely due to the novel coronavirus epidemic.

DingTalk responded quickly to release free solutions for workers staying home including contacts management, attendance, video conferencing, cloud drive, group streaming, task coordination, and etc. It even offers a beauty touch-up for those who do not have time to dress up before making a video call.

DingTalk has set up a special 24-hour team as the number of users rose to about 200 million, according to Daily Economic News. The interests over both DingTalk and WeChat Work (separate app from Tencent that integrates with consumer app WeChat) have skyrocketed as indicated by the search data from Baidu:

Enterprise version of WeChat, or WeChat Work launched in 2016, has also seen fast growth over the past two weeks. It allows up to 300 people to join video calls while DingTalk allows up to 16 people. Tencent also offers Tencent Docs for online document collaborations while Alibaba offers Yuque (technically by Ant Financial team but used by all Alibaba teams).

Huawei also promoted their teamwork platform WeLink and Kingsoft’s WPS office software suite also has some popularity in China for their collaborative online work. Both provide their services for free. WeLink is more focused on security considering the nature of Huawei’s business.

Feishu, a team collaboration software from ByteDance, is also offering SMEs the business version for free for three years.

NASDAQ listed Zoom Video Communications is benefiting from the coronavirus outbreak. And, it also wants to help Chinese businesses:

But, the dedicated domain doesn’t have a fully localized Chinese page. Even the sign-up page is in English. Nonetheless, Zoom has some level of awareness in China; some MNC and technology companies like ByteDance use Zoom.

Baidu is also offering its solution Baidu Hi; but, it doesn’t seem to be seriously promoted at the moment. DingTalk is a winner; and, WeChat Work and Feiyu both saw some traction.

Continue reading Acquire, convert, and retain customers through WeChat Ads + WeChat Work or check out Rocky’s China Digital Trends podasts via Apple Podcasts, Google Podcasts, Google Play  or Spotify.