As a retail analyst in China, Roger is passionate about becoming an expert in what consumers want and why, with extensive experience working with sales and marketing teams at domestic and international brands.
With Covid-19 spreading across China, market activities are disrupted on many levels. Consumers are compelled to use online services for daily shopping, putting many industries under pressure. The government has made a strong proactive stance to deal with the virus and limit its spread to the extent any government could.
Implications of the residential lockdowns
Consumers are uneasy about the virus and are becoming extremely aware of hygiene and improving their immunity. Therefore, consumers are focusing their shopping on necessities such as fresh groceries. In the meantime, the lockdown of residential areas has kept consumers at home, resulting in moving their shopping needs online.
Lockdowns have had a direct hit on the transportation and travel industry (including hotels, resorts, and tourist spots). The reduction in travel has also had an impact on physical retailers and foodservice. Likewise, the limited logistics of goods and movement of people has caused the delay of online deliveries, product shortages, and has extended the time it takes for stock to be refilled.
The evolving grocery retail landscape
Before the outbreak, nearly a third of older Chinese consumers said they use social media to connect with family and friends. Similarly, according to Mintel research on the eating habits of Chinese consumers over age 55, this cohort relied on WeChat Moments to get information about healthy food. However, interest in using social media to connect with others and learn new things does not extend to online shopping. For seniors, complicated interfaces are barriers to trying online shopping. If companies and brands used friendly and simplified portals such as WeChat for elders to make purchases, it could result in increased engagement and adoption.
During the outbreak, a grocer stayed open by creating a WeChat group for local communities where it highlighted the products that were available via pictures and videos. The grocer encouraged local seniors to purchase products via this WeChat group. The products are then delivered every morning and stored on shelves outside each community for self-collection. More consumers gravitate towards more farm foods as they are perceived to be safer than those from the grocery store. Farmers with products in local supermarkets have been using WeChat to reach potential consumers. Fresh grocery buyers, and especially older generations can group together to bundle products for a cheaper unit price. Mintel research suggests that older consumers place a great emphasis on value for money; as a result, group buying has become more prevalent during this outbreak.
Bulk buying replaces daily shopping
Before the outbreak, many consumers shopped daily buying only what they needed for the next few days.
During the outbreak, following the advice to stay at home, shopping frequencies, and the amount bought per visit, have changed as locals seek to avoid unnecessary outings. In particular, the market is seeing significant increases in basket sizes for fresh groceries, with shoppers much more likely to buy for the full week ahead. It is likely we will see this form a new habit among a proportion of shoppers even after the outbreak ends, leading to a change in shopping habits for the long term. This will result in a ripple effect on buying patterns and demand for larger pack sizes.
What’s next?
The outbreak is teaching consumers about the importance of hygiene and food safety. Technologies that allow consumers visibility over product sourcing and manufacturing could become more sought after as manufacturers seek to reassure consumers of product safety.
Consumers purchasing as much as possible with less frequency has become the norm now for grocery shopping. However, once the outbreak is over, consumers will likely resume purchasing essential items in regular quantities.
Finally, the outbreak has exposed older consumers to the benefits of local O2O (online-to-offline) models, utilising social media tools like WeChat to purchase as a community. Companies and brands should seek to keep this momentum going once normalcy resumes by tailoring offerings to this consumer segment.