Written by While the countries of the world have reopened or are reopening, the Chinese government continues to maintain a hard line, the so-called “zero-covid policy” to keep contagions under control. The continuous closures, systematic tests and in general the unpredictability of the future have demoralized Chinese consumers, leading to one of the worst years from an economic point of view for the Country of the Dragon.
As Chinese consumer confidence continues to decline, how should international brands react at a difficult time like this?
Let’s first see what is happening. According to data from Ipsos , Chinese consumer confidence posted a score of 69.8 in October 2022, a further drop of 0.8 from last month. The score dropped to the same level as in January 2020, when COVID hit hard for the first time in Wuhan.
Despite this, China still ranks first among global consumers. In fact, consumer confidence dropped dramatically around the world with an average of 45.6 points. China, although not in its worst moment, still holds the first position (69.8), followed by Saudi Arabia (69.5) and India (64.3). These are the only three countries with a score above 60.
Australia (53.0), the United States (50.9) and Brazil (50.4) are above the 50-point threshold, showing a somewhat neutral economic outlook; while the European countries seem the most pessimistic in general. The energy crisis, rising production costs, inflation, the war in Ukraine and serious concerns about global stability have in fact affected consumers dramatically.
Consumption trend
Even in terms of consumption, the data in China are not excellent. During this year’s “Golden week” (first week of October) 422 million people traveled within the country, a further drop of 18% compared to last year. Tourism revenue also fell by 26%, which means less than half the pre-covid level in 2019.
Many Chinese families have chosen the “journey” without leaving the city (going to nearby parks or campsites) to avoid the risk of running into in locks and closures generated by the current policy.
Even if the zero covid policy were to end, it is unlikely that a “revenge shopping” mechanism will be triggered as it did in 2020. In this scenario, the Chinese have turned to a more rational lifestyle, trying to save more money to face future uncertainty.
It’s not an easy time even for the big international brands: GUCCI (-30.9%), COACH outlet (-22.38 %), Charles Keith (-18.41%), Saint Laurent (-30.32%). MICHAEL KORS was the only brand to grow in the Top10 ranking.
In this gray scenario, what can brands do to remain under the attention of Chinese consumers?
First of all, understand what still stimulates purchases. Chinese consumers have developed global perspectives according to a study by Accenture and multidimensional, shifting their focus from instant gratification to happiness and long-term value.
Among the biggest changes in courses were identified:
- Me economy : the shift from a collectivist society to one that is increasingly individualistic and focused on the needs of the individual;
- Read more : Since the outbreak of COVID-19, Chinese people have been rigorously reexamining their needs, paying more attention to the value of the things they buy and making multifaceted comparisons to identify the most suitable items across multiple brands and channels. By comparing and researching products on social media, Chinese consumers are now emphasizing the sense of meaning and originality these products convey;
- Enjoy life : with the middle-class growth Chinese now spend their free time in various ways – with family, exercising, exploring the world – one thing is clear: they love their free time. This has led to an increase in the use of digital platforms to save time and a greater appreciation of shopping experiences rather than advertising;
- Tech is good: Chinese consumers have a strong desire to try new things. They are open and positively inclined to use digital technologies, as evidenced by their adoption of a variety of smart devices ranging from smartphones to smart homes;
- Green and sustainability : Chinese consumers are increasingly aware of the impact of their individual behaviors on society and the environment, as well as the importance of sustainable development. Environmental protection is now “cool” and trendy and people are willing to devote energy and money to delivering on their promises of sustainability. At the same time, hope that the protection of the environment does not depend only on the behavior of individuals. They want a social response and expect government and business to play a greater role in achieving a win-win situation that drives both affordability and sustainability.
Conclusion
It is time for brands to carefully review their overall investments and strategy in China. Consumers are more careful and rational in their purchases, quality more than quantity, they prefer experience to advertising and brands that are attentive to the environment and sustainability.
A new China in which the growth of the middle class and zero-covid policies have created a fertile ground for more informed choices, and equally aware should be the strategies of brands to approach the market.
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