Getting consumption back on track key to recovery

Updated: Mar 6, 2023 By Wang Yajin China Daily Print
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After experiencing a fall in consumption in 2022, boosting domestic demand and stimulating consumption have become top priorities for economic development this year. As the COVID-19 prevention and control measures have been optimized, the economic recovery is expected to accelerate in 2023, and market confidence will gradually rebound, leading to a steady growth of consumption.

However, given the following factors, we cannot blindly believe that "revenge" consumption will necessarily materialize.

First, the relationship between economic recovery and a retail spending rebound must be clarified. To promote consumption, it is necessary to enhance household confidence in consumption, and the recovery of buying and shopping confidence is based on the recovery of the real economy. Economic recovery must come before any consumption rebound. Although the COVID-19 control measures have been optimized, there are still many uncertainties. The real recovery of the economy requires multiple factors to resonate and requires a certain process and time.

Second, consumers' basic needs have not changed. There has been a lot of discussion about whether "revenge" consumption will occur after the optimization of COVID-19 control measures. However, at present, only a few cities have experienced a brief "revenge" consumption. One of the main reasons for this is that during the pandemic, consumer needs were only temporarily suppressed, but did not fundamentally change. Behind various hot consumption scenarios is the natural release of consumers' basic needs. After the optimization of COVID-19 control measures, household consumption confidence and willingness to shop and spend still need a certain amount of time to recover.

Third, the pandemic has to some extent changed consumers' lives and consumption habits, shaping new consumption patterns that are bound to affect the direction and future development of related industries. However, companies need to consider whether the new consumption habits and needs arising from the pandemic will continue in the post-pandemic period.

Taking the United States as an example, during the pandemic, various anti-COVID-19 measures like social distancing were taken across the country, which influenced people's daily lives and reshaped their shopping and buying patterns. Many consumers began to shift toward virtual shopping and online fitness. After the pandemic, consumer purchases of daily fresh foods and beverages have returned to offline channels, but many have continued with online fitness, giving rise to sustained business models.

Currently, the development of e-commerce shopping in China is relatively mature, and the pandemic has further expanded the population of online shoppers. After the pandemic, online shopping is expected to become the mainstream shopping channel. If offline businesses want to attract more consumers, they need to provide comprehensive experiences that include dining, entertainment and social interactions. In addition to online shopping, companies need to further observe to what extent consumers can maintain other consumption habits formed during the pandemic.

Given these factors, policies need to continue to send positive signals to companies, giving them and consumers long-lasting confidence. The recovery and expansion of consumption should be given priority, with stronger measures taken to increase consumption scenarios, enhance consumers' ability to make purchases and eliminate unfavorable factors that deter shopping, thereby fully unleashing consumption potential.

From the aspects of clothing, food, housing, and transportation, consumption trends in 2023 will have the following characteristics.

In terms of clothing, during the pandemic, people often stayed at home for long durations because of social distancing, and their dress habits tended to be simple and comfortable. The pandemic has caused many people to embrace a slower pace of life and focus on the importance of health and family. Against this backdrop, new consumer trends such as outdoor sports like camping, hiking, and sport-themed parks are expected to emerge in the post-pandemic period. As outdoor sports become a trendy lifestyle rather than just a professional hobby, sportswear, yoga clothes, and other related products are expected to be favored by more consumers.

In terms of foods and beverages, a new consumption trend will emerge in the field of yangsheng (healthcare and life nurturing), as an increasing number of young people are paying more attention to their health and wellness.

According to research and analysis institute Zhiwei Data, among young people who now focus on yangsheng, post-'95s account for the highest proportion at 37 percent, while post-'00s make up 32 percent, surpassing the post-'90s. More and more young people are starting to pay attention to balanced nutrition and regular meals, customized vitamins and dietary supplements. This trend will impact the future consumption market. Previously, health products were mainly aimed at middle-aged and elderly people, but in the future, more attention of relevant businesses will be paid to young consumers.

In terms of housing, the COVID-19-induced model of work-while-traveling is expected to continue, which will to some extent change people's household consumption patterns.

During the pandemic, many people worked at home and began to realize that working online is feasible. As a result, more people are changing their work and study styles. According to a survey conducted by market research company Pollfish in 2021, among surveyed US employees who can fully work remotely, 65 percent were willing to take a 5 percent pay cut in exchange for the opportunity to work at home. In the post-pandemic period, working at home is expected to become the norm for some companies, and how to work and socialize effectively at home will give rise to new consumer trends.

Regarding travel, after adjustments to pandemic prevention and control measures, the national tourism market has shown a gradual recovery trend, and it is expected that the services and tourism sectors will enjoy a significant rebound in 2023.In addition, niche travel destinations will become increasingly popular among consumers. Consumers will also seek more involved travel experiences that integrate entertainment, sports and learning. As Generation Z (those born in the mid- and late-1990s and in the 2000s) becomes the main force in the consumer market, various travel platforms must also consider how to win the favor of young consumers.

Furthermore, there is a growing number of "mobile offices" worldwide, some of which are specifically designed for young freelancers. In the future, office workers will embrace a more flexible work and lifestyle, and the "nomadic work and lifestyle" will become an important trend, giving rise to new buying patterns.

In times of increased uncertainty, such as during the pandemic period, we have seen the rise of many paid knowledge industries. In the post-pandemic period, whether this trend will continue is also worth heeding.

In addition to new consumer trends in clothing, food, housing and transportation, the overall trend of consumption in 2023 has another important feature: the "polarization" trend of development, with one being consumers embracing the extreme cost-effectiveness style in making a purchase, and the other being embracing luxuries.

Recently, McKinsey conducted a survey of Chinese consumers, which showed that 58 percent of respondents in urban households hoped to "save money for emergencies" — the highest level since 2014.

During the pandemic, consumers' purchasing power declined, and their consumption behavior became more conservative and rational. In the post-pandemic period, there will be a certain degree of "downgrading" in consumption, and consumers will be more inclined to choose practical and cost-effective brands.

However, consumers who are willing to spend more will still choose stronger brands and will still pay for luxury goods.

In the global luxury retail market, the strong performance of the Chinese market has always attracted the attention of relevant businesses. According to data from consulting company Bain & Company, in 2020, global luxury goods' sales shrank 23 percent, but luxury goods consumption in China surged 45 percent. In 2021, sales growth of the Chinese luxury goods market slowed, but it was still as high as 36 percent.

However, products with mid-range quality, performance and price are relatively difficult to win loyalty among consumers.

In this context, for companies to achieve sustainable development, they must pay attention to brand building, and have a sustainable and clear brand positioning and value proposition. A report on last year's Single's Day shopping gala emphasized that it is hard to acquire customers through promotional pricing strategy and companies instead need to focus on branding and product quality to support long-term development. It said strong brands can better survive in today's fierce competition. Previously, new types of consumer goods have won many investment opportunities. But going forward, investors will focus more on companies' ability to build a brand.

The writer is a professor of marketing and sales at China Europe International Business School.

The views don't necessarily reflect those of China Daily.

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