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Recently, CCTV Market Research (CTR) released the latest report on the development trend of China's media market, advertising market and consumer market. Among them, the "2020 China Consumer Market Report" (Hereinafter referred to as the "Report") disclosed by Yu Jian, general manager of Kantar Worldpanel in the Greater China Region, has attracted a great deal of attention.
Along with the epidemic that broke out at the beginning of this year, China's consumer market has set off a series of drastic changes, and the impact can be seen in two areas. In regards to the consumption amount, China’s total retail sales of consumer goods lost 2.2 trillion RMB in the first half of the year, and the lost in the urban fast-moving consumer goods alone is estimated to be as high as 44 billion RMB; On the consumption structure side, whether its product categories, purchasing channels or values preferences, all have fluctuated, and those impact will inevitably continue into the post-epidemic era.
Under the uncertainties of COVID-19, where is the Chinese consumption market headed? This question is of great significance to all brands and this article will shine some light on it.
01. Consumption is polarized and mid-range brands are declining
To be honest, all brands on the market are competing for the same object, the consumer's wallet. However, the sudden outbreak of the epidemic has more or less reconstructed people's consumption preferences, and hot categories have begun to appear alongside the epidemic.
During the epidemic, consumers' health awareness has increased significantly, enabling categories such as hand sanitizers, disinfectants, and wet tissues to achieve a year-on-year growth of over 10%. In addition, people are no longer avoiding high-calorie foods such as carbonated drinks, cheese and ice cream due to long-term home quarantine.
With the extra time cooking at home, sales of condiments such as ketchup, oyster sauce and spices etc. got a significant boost.
According to the "Report", as many as 31% of the 121 FMCG categories had a growth rate of over 10% while 21% of the categories saw a significant decrease caused by the epidemic. The sudden stagnation of gatherings has adversely affected categories such as juice, energy drinks, and red wine. In addition, staying at home has caused the sales of lipstick and base makeup to shrink significantly.
The impact of the epidemic on consumer behavior is long-term and far-reaching. Not only is it reflected in the consumer categories, but also in the prices.
In the beverage industry, the boundaries between high-end stores and value stores has become clear cut. Not only is this trend reflected in the beverage industry, but also in coffee, bottled water, sausage and adult milk powder products. The charm of the China market is that both ends can prosper together. That being said, consumers are flocking to either end of the market, leaving mid-range products in the cold.
02. Channel restructured, the rapid rise of new settings
Channels have been hit even harder by the epidemic than consumer categories. Consumer purchasing channels has begun to shift to smaller and more sophisticated stores, while convenience stores and new retailers has become the choice for people.
In addition, online channel has become the main channel during the pandemic. For example, the quarantine of an entire complex has forced consumers to become new fans of online fresh food platforms. Prior to this, online fresh food platforms have always been ineffective in consumer education, and the Chinese people’s habit of buying fresh agricultural products through the offline market has never been challenged. However, due to the pandemic, JD fresh food delivery business has seen a month-on-month increase of 370% compared to before. Platforms such as Miss Fresh also saw similar increases.
Data from CTR also supports this trend. Overseas shopping, gifts and supermarkets have seen a decline of 7% to 56% under the epidemic while online retail and mini marts rose between 12% to 161%.
But the trend is not absolute. For example, Shanghai’s Costco warehouse, the largest membership-based warehouse store chain based in the United States, does not seem to be affected by the epidemic. Its fourth store in China just opened in Hangzhou on August 3. It proves that although the impact of the epidemic on the channel is far-reaching, there are exceptions. As Yu Jian said: "The sense of value and experience is still the key of development for big businesses."
03. Changes in consumer value drivesthe rise of emerging categories
Any event that influence the society will eventually shake people's inherent values and trigger interesting changes. Just as SARS in 2003 was generally regarded as the starting for the development of e-commerce in China, because it was this crisis that allowed people to realize the unique value of online shopping.
Similar changes have also reappeared in this year's epidemic, and this time the changes are more focused on the level of value. For example, people began to re-examine the value of family in a crisis, the wellbeing of family members are just as important as self-preservation. Because of this, up to 78% of consumers have agree with the concept of "protecting family members", and this new concept has also expanded sales opportunities for many brands.
Meanwhile, CTR report mentioned that other value changes are also happening. 74% of consumers began to seek happiness and excitement in life and 76% of people began to attach importance to physical exercises. The proportion of supporters of environmental protection has increased by 13% compared with last year. COVID-19 has made 63% of consumers seriously consider reducing unnecessary expenses.
Huge changes at the value level often reveal obvious market opportunities. CTR's "Report" shows that in the first half of this year, due to people's preference for natural and organic products, the sales of organic room temperature milk increased by 8% year-on-year. 41% of consumers started buying protein drinks while 81% of consumers are willing to pay a higher premium for sustainable products.
It is worth noting that these impacts on value will last for a long time, long after the pandemic, and it’s a trend that all brands should follow. Adaptation to the changes in product categories, channels, values, and consumption behavior preferences of the Chinese consumers after the pandemic may directly determine the rise and fall of enterprises in the increasingly fierce market.
Sources: Brand-vista offical wechat account