Four coronavirus-driven Chinese consumer trends that will last even after the epidemic has subsided

The outbreak has hastened the transition to e-commerce and accelerated the use of artificial intelligence and robotics
People are flocking to local stores and pickup points instead of patronising centralised shopping areas and are showing more interest in food safety and health

Ying SongandSumeet Saksena

Published: 1:00am, 4 Mar 2020

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Given the strict limits on movement put in place in China to control the spread of the coronavirus, many consumers are hunkering down at home. Most public consumption locations, such as shopping centres, department stores, restaurants, cinemas and sports arenas, have been closed.

This has brought about a drastic reduction in overall commercial activity compared to the same period last year – a nearly 25 per cent drop in retail sales during the first week of the crisis and more than 40 per cent in the second week. Based on the impact of severe acute respiratory syndrome on China’s retail market in 2003, it’s estimated that total retail sales in the first quarter of 2020 may drop around 5 per cent.

There have also been changes in the kind of items people are buying and how they’re buying them. Current spending is mainly on physical goods, while spending on services, such as entertainment, health care and education has largely stopped. In addition, consumers are focused on food supplies and other necessities. Optional goods, like clothing, cars, home appliances and electronics, have essentially become unsellable.

Presumably, general consumption will pick up again once the immediate crisis has passed, but several important changes are likely to persist in the long term.

People shop in a supermarket in Beijing on February 2. During the coronavirus epidemic, Chinese consumers have been largely buying essential goods, with spending on services like entertainment and education in decline. Photo: EPA-EFE

First, China will see even more online shopping. While the country is already an established leader in e-commerce, as people have stayed at home during the coronavirus epidemic, demand for online shopping has become even more critical.

Major platforms, for example, are offering a large volume of agricultural products shipped directly to homes, reducing shoppers’ exposure to infection.

According to public data, e-sales on Jingdong to Home jumped 470 per cent year on year during the Lunar New Year week, with frozen food sales soaring by almost 800 per cent.

Online retailer Pinduoduo has even set up a special section for “anti-epidemic agricultural products”, such as selenium-rich sweet potatoes from Hainan, oranges from Chongqing, passion fruit from Jiangxi and chestnut oil from the northeast.

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The epidemic is likely to spur even faster growth in China’s digital economy, especially among older people and rural residents.

This, in turn, could lead to new patterns of online consumption based on changes in users’ age range, location and other demographics.

The result could be even more vigorous development of the “omnichannel model” – seamless online and in-person purchasing and delivery – and enhanced innovation in consumer marketing methods.

Second, there will be accelerated use of artificial intelligence and robotics. Critical to the government’s epidemic control programme has been limiting movement and contact between people. But since e-commerce providers still rely heavily on traditional manual delivery, it is difficult to achieve zero exposure.

In response, some technology companies have accelerated their use of automated delivery services. For example, Alibaba opened an unstaffed supermarket in Wuhan’s Huoshenshan hospital that received more than 200 customers on the first day. Online retailer JD.com has been using delivery robots to distribute medical materials in Hubei province.

And Baidu, China’s leader in driverless technology, has deployed a range of unstaffed vehicles for various uses in the epidemic area.

Baidu can now test its self-driving cars with passengers in Beijing

As the epidemic promotes the use of AI, big data and robotics to ramp up unstaffed services, consumers, producers and marketers will come to more quickly understand their vast potential in all walks of life. This is likely to accelerate the development of such technology, especially in the marketing and distribution of consumer goods.

Third, we are seeing a renewed emphasis on local community commerce as shoppers seek to limit travel. This is driving consumers away from centralised shopping areas toward outlets closer to home, making local communities a key node for businesses to connect with consumers.

Community supermarkets, convenience stores and online merchandise pickup points are playing an increasingly important role in the delivery of essential goods. This is particularly pronounced in the areas most seriously affected by the epidemic, where e-commerce retailers often haven’t been allowed to deliver directly to residents’ homes.

During the first two weeks of the epidemic response, for example, business at Suning local mini-stores increased more than 400 per cent over the same period last year, while online ordering of food to be delivered or picked up at their stores jumped more than 650 per cent.

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Since many restaurants have closed, Suning launched the Ten Thousand Households programme, inviting restaurants to use its online ordering and store delivery platforms to provide lower-contact food and drink services. At present, nearly 100 well-known restaurants have signed up, and average daily orders have increased by over 50 per cent.

These opportunities are not lost on the government, which will almost certainly boost both short- and long-term investment in community commercial complexes, health service centres and the like, while accelerating the implementation of smart community technologies. This is likely to transform the basic geography of Chinese commerce in the long term.

A motorcycle courier wearing a protective face mask makes a grocery delivery on the first day of work after the extended Lunar New Year break in Shanghai on February 10, 2020. Photo: Bloomberg

Finally, we can expect increased food safety awareness. Since both the current coronavirus and the 2003 Sars outbreaks are believed to have originated in poorly regulated traditional food purchase points like “wet markets”, many Chinese consumers have begun reflecting deeply on food safety and health issues.

Going forward, increased health awareness is likely to become the trend. This could especially benefit enterprises that use blockchain, big data and other new technologies to exercise stronger oversight of food production, as well as health and wellness industries overall.

Dr Ying Song is an associate professor in economics at Chongqing Technology and Business University. Dr Sumeet Saksena is a senior fellow at the East-West Center in Honolulu, Hawaii. Lei Ye, a CTBU graduate student, also contributed to this article

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